Info summarized from: The collapsing euro and its implications, by Alasdair Macleod ..shared with thanks.. via thefreeonline
There’s lots of speculation nowadays about the fall of the US Dollar and consequently the US Empire. But that’s a far off scenario compared to the imminent European catastrophe.
a) Right now the EU’s economy is teetering on the edge of a financial and economic catastrophe, due to exercising its political agendas despite any economic mayhem created.
“The financial consequences stem partly from bank exposure to Russian entities, but far more important is the effect of soaring producer and consumer prices on the entire Eurozone financial structure. The euro system has depended on redistributing wealth from Germany and the fiscally conservative northern states to bail out the poorer south using suppressed interest rates. That scheme is now kaput”.
Now that Eurozone Inflation (CPI) is rising at 8.6% and Germany’s producer prices are up 33.6%, either interest rates must rise smartly or the euro crashes.
Germany is in big trouble and can no longer guarantee more debt, while the ‘PIGS’ countries, (Portugal, Italy, Greece and Spain) are stuck in debt traps. Yet even more debt needs to be issued because the outlook for budget deficits in these nations is simply dire, made worse by a Eurozone economy on the verge of an energy induced meltdown.
And the imminent forced increase in interest rates may trigger that meltdown.
b) The EU financial system is forced to give away money by lending it at MINUS 1% interest, and maintain various economic juggling scams to stave off monetary collapse. That means doling out countless billions that can never be paid back.
One of the biggest tricks is hiding gigantic ballooning debts by making them disappear in the EU’s TARGET2 settlement system.
[iii] See Evergreening in the euro area; Steinkamp, Tornell and Westermann, working paper No. 113 July 2018, which describes how zombie companies are being kept afloat and how their loans end up as Target2 collateral.
TARGET2 is the big, modern, cheap digital EU system for paying and receiving and all sorts of transactions, processing hundreds of billions of euros every day.
A simplified idea of the scam is that they dump the debts in TARGET2 after re-qualifying them as collateral (guarantee assets) as funds for new loans, and bingo, the commercial banks that issued them become solvent again.
[iv] See Hans Werner Sinn’s description of the public debate, when he first pointed out that the liabilities faced by the Bundesbank on TARGET2’s failure were to be decided by its capital key. https://www.hanswernersinn.de/en/controversies/TargetDebate
We’re talking HUGE numbers:
“the greatest debtors, Italy, Spain, Greece, and Portugal have combined TARGET2 debts of €1,255bn. But the most rapid deterioration for its size is in Greece’s negative balance, more than tripling from €25.7bn at end-2019 to €106bn in April. Spain’s deficit is also increasing at a worrying pace, up from €392.4bn to €505bn, and Italy’s from €439.4bn to €597b”.
Continue reading “Coming Collapse of the Euro and Banks..When How Why? What it means for us?”
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