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Economic Collapse Blog (Link)
(November 18, 2011)
A lot of people were puzzled about what German Chancellor
Angela Merkel meant when she recently stated that the ultimate solution to the
financial crisis in the EU would �mean more Europe, not less Europe�. Well, now
we are finding out. A leaked internal German government memo entitled �The
Future of the EU: Required Integration Policy Improvements for the Creation of a
Stability Union� actually proposes the creation of a �European Monetary Fund� which would be given the power to run the economies of troubled European
nations. This �stability union� would be quickly followed by the creation of a
full-fledged �political union�. Essentially, this leaked memo proposes the
creation of a �European Superstate� which will be crammed down the throats of
the rest of Europe whether they like it or not. National sovereignty would be a
thing of the past and European bureaucrats would run everything. Of course this
will never be accepted by the people of Europe until they feel the bitter pain
of the coming financial collapse, but we are starting to see that there is
already a clear plan for what the Germans wish to implement in the aftermath of
the coming crisis.
A lot of people have just assumed that if there is a massive
financial collapse in Europe and the euro crashes that it will mean that end of
the euro and potentially the breakup of the EU. But that is not what the Germans
have planned at all.
An article
in the Telegraph has posted details about the leaked internal German
government memo mentioned above. It really is startling to see that a
full-fledged �political union� in Europe is being discussed at the highest
levels of the German government....
The six-page memo, by the German foreign office, argues that Europe�s
economic powerhouses should be able to intervene in how beleaguered eurozone
countries are run.
The confidential blueprint sets out Germany�s plan to tackle the
eurozone debt crisis by creating a �stability union� that will be
�immediately followed by moves �on the way towards a political union�.
It will prompt fears that Germany�s euro crisis plans could result in
a European super-state with spending and tax plans set in Brussels.
Can you imagine what Europe would look like under such a plan? National
sovereignty would be a thing of the past.
Another article
in the Telegraph says that the leaked memo proposes that immediately a
�European Monetary Fund� should be set up that would have the power to take
over and run the economies of European nations that get into too much debt.
But according to the memo this would just be an intermediate step toward a
full �political union�....
The six-page German foreign ministry paper sets out plans for the
creation of a European Monetary Fund with a transfer of sovereignty away
from member states.
The fund will have the power to take ailing countries into
receivership and run their economies. Even more controversially, the
document, entitled The future of the EU: required integration policy
improvements for the creation of a Stability Union, declares that the treaty
changes are a first stage �in which the EU will develop into a political
union�. �The debate on the way towards a political union must begin as soon
as the course toward stability union is charted,� it concludes.
As the crisis in Europe has gotten worse, the Germans have become more
aggressive about throwing their weight around. At this point, German Chancellor
Angela Merkel is the most important politician in Europe and she has been taking
the lead in responding to this financial crisis.
As I have written about
previously, there have been persistent rumors that French President Nicolas
Sarkozy and German Chancellor Angela Merkel have been �secretly plotting� to
create a �new eurozone� that will fundamentally change the way that Europe is
run.
For example, the following is from
an article that recently came out in the Telegraph....
France is drawing up plans to create a breakaway organisation of
eurozone countries with its own treaty, parliament and headquarters � a move
that could significantly undermine the existing European Union.
That same article also talked about the goals that France and Germany are
hoping to achieve through all of this....
France and Germany are understood to want to strengthen the union
between eurozone countries with new taxes and legal measures to stop nations
borrowing and spending too much in future.
Of course it is important to note that there is no way that the people of
Europe are going to go for any of this right now.
But after feeling the pain of a massive financial collapse for a while will
they change their minds?
What is clear is that the status quo is not going to last much longer.
Something has got to change. Unfortunately, Germany and France seem determined
to push the rest of Europe in the direction of creating a European Superstate.
If you want to get a really good idea of what is happening in Europe right
now, just check out
this video of a recent speech by Nigel Farage on the floor of the European
Parliament on November 16th, 2011. Trust me, it is worth the couple of minutes
that it takes
to watch it.
But before fundamental structural changes take place in Europe, we are going
to see an absolutely crippling financial collapse first. With each passing day,
there are more signs that things are rapidly unraveling. The following are just
a few of the noteworthy news items from Europe that have come out over the past
week....
- In Italy there were
violent clashes between protesters and police after Mario Monti unveiled his
new austerity program. To get an idea of how crazy things are getting over in
Italy, just check out
this video.
- Just like what happened when austerity was implemented in Greece, it looks
like Italy is now headed down the road toward a major recession. Industrial
orders in Italy for the month of September
declined by 8.5 percent. That is really, really bad news.
- The EFSF has already been forced to buy up huge numbers
of its own bonds. That essentially means that the EFSF is already a bad
joke.
- Dozens of big banks all over Europe have been downgraded in recent weeks.
Even German banks are getting downgraded now. The other day, Moody�s downgraded
the ratings
of 10 major German banks.
An increasing number of people that work in the financial world are starting
to get really freaked out about everything that is going on.
The following is what Mark Mobius, head of the emerging markets desk at
Templeton Asset Management,
had to say recently....
�There is definitely going to be another financial crisis around the
corner, because we haven�t solved any of the things that caused the previous
crisis.�
Willem Buiter, the chief economist of Citigroup, believes that if something
is not done quickly, there will be a financial collapse in Europe
in very short order....
�Time is running out fast. I think we have maybe a few months -- it
could be weeks, it could be days -- before there is a material risk of a
fundamentally unnecessary default by a country like Spain or Italy which
would be a financial catastrophe dragging the European banking system and
North America with it. So they have to act now.�
Ann Barnhardt of Barnhardt Capital Management actually shut down her entire
firm because she could no longer guarantee that the money her clients were
putting into the futures and options markets would be safe. Posted below are
extended excerpts from
the open letter that she recently released to the public. Normally I would
not post such extended excerpts, but in this case I believe that they are
warranted. What Barnhardt has written should be a huge wake up call for all of
us. It is refreshing (and a bit frightening) to get an honest assessment of the
corruption in the financial world from someone that has made a good living in
that world. The following is how she began
her letter....
It is with regret and unflinching moral certainty that I announce
that Barnhardt Capital Management has ceased operations. After six years of
operating as an independent introducing brokerage, and eight years of
employment as a broker before that, I found myself, this morning, for the
first time since I was 20 years old, watching the futures and options
markets open not as a participant, but as a mere spectator.
The reason for my decision to pull the plug was excruciatingly
simple: I could no longer tell my clients that their monies and
positions were safe in the futures and options markets � because they are
not. And this goes not just for my clients, but for every futures
and options account in the United States. The entire system has been utterly
destroyed by the MF Global collapse. Given this sad reality, I could not in
good conscience take one more step as a commodity broker, soliciting trades
that I knew were unsafe or holding funds that I knew to be in jeopardy.
So how did the MF Global collapse wreck the system? Barnhardt
went on to explain this....
The futures markets are very highly-leveraged and thus require an
exceptionally firm base upon which to function. That base was the sacrosanct
segregation of customer funds from clearing firm capital, with additional
emergency financial backing provided by the exchanges themselves. Up until a
few weeks ago, that base existed, and had worked flawlessly. Firms came and
went, with some imploding in spectacular fashion. Whenever a firm failure
happened, the customer funds were intact and the exchanges would step in to
backstop everything and keep customers 100% liquid � even as their clearing
firm collapsed and was quickly replaced by another firm within the system.
Everything changed just a few short weeks ago. A firm, led by a crony
of the Obama regime, stole all of the non-margined cash held by customers of
his firm. Let�s not sugar-coat this or make this crime seem �complex� and
�abstract� by drowning ourselves in six-dollar words and uber-technical
jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon
Corzine, and knowing the abject lawlessness and contempt for humanity of the
Marxist Obama regime and its cronies, this is not really a surprise. What
was a surprise was the reaction of the exchanges and regulators. Their
reaction has been to take a bad situation and make it orders of magnitude
worse. Specifically, they froze customers out of their accounts WHILE THE
MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This
is unfathomable. The risk exposure precedent that has been set is completely
intolerable and has destroyed the entire industry paradigm. No informed
person can continue to engage these markets, and no moral person can
continue to broker or facilitate customer engagement in what is now a
massive game of Russian Roulette.
Even more frightening, Barnhardt says that the MF Global collapse is just the
�tip of the iceberg� and that more collapses like this
are about to happen....
I have learned over the last week that MF Global is almost certainly
the mere tip of the iceberg. There is massive industry-wide exposure to
European sovereign junk debt. While other firms may not be as heavily
leveraged as Corzine had MFG leveraged, and it is now thought that MFG�s
leverage may have been in excess of 100:1, they are still suicidally
leveraged and will likely stand massive, unmeetable collateral calls in the
coming days and weeks as Europe inevitably collapses. I now suspect that the
reason the Chicago Mercantile Exchange did not immediately step in to
backstop the MFG implosion was because they knew and know that if they
backstopped MFG, they would then be expected to backstop all of the other
firms in the system when the failures began to cascade � and there simply
isn�t that much money in the entire system. In short, the problem is
a SYSTEMIC problem, not merely isolated to one firm.
So what does Barnhardt say that we should all do? She is actually
recommending that everyone should completely abandon the futures and options
markets....
And so, to the very unpleasant crux of the matter. The
futures and options markets are no longer viable. It is my recommendation
that ALL customers withdraw from all of the markets as soon as possible so
that they have the best chance of protecting themselves and their equity.
The system is no longer functioning with integrity and is suicidally
risk-laden. The rule of law is non-existent, instead replaced with godless,
criminal political cronyism.
Remember, a few weeks ago I warned you all that a massive
derivatives crisis is coming. Anyone that plays around with derivatives at
this point is playing with fire. Barnhardt says that she will never reopen her
firm until Barack Obama is removed from office and fundamental reforms to the
financial system
have been implemented....
Finally, I will not, under any circumstance, consider reforming and
re-opening Barnhardt Capital Management, or any other iteration of a
brokerage business, until Barack Obama has been removed from office AND the
government of the United States has been sufficiently reformed and
repopulated so as to engender my total and complete confidence in the
government, its adherence to and enforcement of the rule of law, and in its
competent and just regulatory oversight of any commodities markets that may
reform. So long as the government remains criminal, it would serve no
purpose whatsoever to attempt to rebuild the futures industry or my firm,
because in a lawless environment, the same thievery and fraud would simply
happen again, and the criminals would go unpunished, sheltered by the
criminal oligarchy.
We are on the verge of a financial crisis that could potentially be just as
bad (or even worse) than the financial crisis of 2008.
Right now, 2012 is shaping up as a very, very bad year.
As I have written about
previously, when European leaders proposed that private Greek bondholders
should take a �50% haircut�, they massively undermined faith in the European
financial system.
Now panic and fear are in the air and it is unlikely that financial markets
will be calmed any time soon.
Already, there are early signs of the kind of massive credit crunch that
almost brought about �the end of the world� in financial markets back in 2008.
For example, a
CNBC article that was posted on Friday reported that the flow of credit in
Europe is seriously drying up....
Fear over European banks� exposure to risky government debt stalked
markets and harried bank executives on Friday, as unsecured lending between
banks evaporated and the cost of secured loans rose.
And as a recent article posted
on Zero Hedge discussed, a similar thing is starting to happen in the United
States....
The entire dollar funding market is now at levels not seen since the
Lehman collapse and is effectively frozen. Only this time it is much, much
worse as never before has the global central bank cadre been assumed and
implied to be backstopping the global liquidity cascade. Ex-out the implied
backstop by the monetary authorities, and liquidity is now locked up more
than ever in the history of capital markets.
So what should we do about this?
We should take action and get prepared for what is coming.
Unfortunately, an increasing number of Americans seem to be �checking out� instead. According to a recent Gallup poll, alcohol consumption in the United
States
has hit a 25 year high. More than one out of every ten Americans over the
age of 12
is on prescription antidepressants, and most American families spend endless
hours staring at the television in an attempt to escape the pain and the
frustration that they constantly feel.
Hopefully by working together we can help more Americans (and more Europeans
as well) to wake up, to get off their couches, and to take action in a positive
way.
Time is running out and the
economic crisis is rapidly getting worse.
We don�t have any time to waste. �
Economic Crisis ~
Europe ~ New World Order |