Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Germany Loses to Italy, Again

Politics / Eurozone Debt Crisis Jul 10, 2012 - 05:21 AM GMT

By: John_Browne

Politics

June was not a particularly good month for Germany. First, she suffered a loss to Italy in the semi-finals of the European Cup soccer tournament. Then, she suffered a more significant blow when Italy's Prime Minister, Mario Monti, extracted important concessions from German Chancellor Angela Merkel at the European Summit. A loss on the soccer pitch can put a dent in the national ego. But a loss on the field of finance can be far more serious.


The deal made by Merkel puts at risk Germany's hard-won financial treasure and could earn her the permanent ire of her people. After months of resistance, many have wondered why Merkel finally gave in. Some believe that she was persuaded by the exposure of German banks to Eurozone sovereign debt. Others credit the warnings of the Bank for International Settlements (BIS) that may have persuaded leaders of Eurozone nations to yield sovereignty in return for financial support. But whatever the motivation, Merkel is moving into dangerous political waters.

Poll after poll makes it perfectly clear that the German people have no interest in exposing their hard-earned savings to the ravages of unending bailouts and currency debasement. In addition, the German Constitutional Court has backed popular opinion in its opposition to Germany accepting 'undemocratic' EU control over the German people. Indeed, the Court has postponed its approval of German participation in the key European Stabilization Mechanism rescue fund.

German leaders, however, have been seeking to translate their country's economic power into political power over the entire Eurozone.

For the German people, the purchasing power of their painstakingly accrued national savings is not worth sacrificing for the advantages of economic empire. To this end, Germany has stood alone within the EU in a massive, but seldom reported, struggle for a sound currency. In this, Merkel has faced a phalanx of nations that, dominated by the Anglo-American led Keynesians, have fought for a debased euro currency. Up to now, Germany had succeeded in establishing the European Central Bank (ECB) as a sound money central bank.

These factors explain Germany's reluctance to give in to appeals for funding from troubled Eurozone countries which wanted cash but were unwilling to surrender any national sovereignty. The recent price of this stand has been a Europe in recession.

In order to keep alive the Franco-Germanic ideal of a European Union, German banks have become 'stuffed' with billions of euros worth of the questionable debt of fellow Eurozone nations. Germany therefore has an interest in protecting these debts. On this, the Bank of International Settlements last month issued a strong, revealing and important statement. It held that, "central banks are being cornered into prolonging monetary stimulus as governments drag their feet," adding that these stimuli are merely "palliatives and have their limits." The BIS then warned that, "As the benefits of extraordinary monetary easing shrink and become less certain, the risks of expanding central bank balance sheets [currently standing at $18 trillion] are likely to grow."

In short, the BIS told intransigent leaders that, to avoid the unpleasant repercussions of possible massive civil unrest and broadening poverty within their societies, they must surrender some of their sovereignty in exchange for funding. Our suspicion is that undisclosed assurances of such a move by southern PIGS countries may have been given to Merkel.

The result was that certain Eurozone bailout funds were authorized to recapitalize Eurozone banks directly. Of course, this includes German banks. However, the numbers are most probably far too small to enable a banking recovery in Europe. For example, the roughly $600 billion in combined Eurozone rescue fund commitments is dwarfed by the $3 trillion of toxic assets held by Spanish and Italian banks. On the other hand, the disclosed agreement does pave the way towards pan-European banking controls. This may indicate the initial steps of sovereignty surrender playing directly into German hands.

If Merkel is successful in selling the new package to her parliament and voters, and provided that a covert agreement was in fact reached on a progressive surrender of sovereignty to Germany, the new package could succeed. Absent these two critical conditions, last week's agreement should not be seen as anything less than a victory for the printing press.

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, John Browne, and other Euro Pacific commentators delivered to your inbox every Monday!

Pre-order a copy of Peter Schiff's new book, The Real Crash: America's Coming Bankruptcy - How to Save Yourself and Your Country, and save yourself 35% off!

By John Browne

Euro Pacific Capital
http://www.europac.net/

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John_Browne Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in