The second domino to fall in the growing European debt charade, Spain’s banks were formally bailed out last week with a $125 billion loan paid for through the European Financial Stability Facility (EFSF) , a financial agglomeration of European states established for the express purpose of bailing each other out. The “perpetual bailout” model works so well, in fact, that Spain is funding its own bailout , even though it has effectively been priced out of the bond markets (i.e. investors are demanding so much return that Spain can’t afford to borrow and therefore can’t sell enough bonds to finance its operations).
Italy, which is next on the chopping block, is also funding the Spanish bailout to the tune of approximately $24 billion . Italy’s debt to GDP ratio is actually worse than Spain’s, holding recently at nearly 130%. Even worse, to pull off the bailout magic, Italy must sell bonds of its own (on which it is currently paying a record high of 6.8%) and then lose money on the loan by turning the same money over to Spain at a rate of 3%. Spain is also not required to make any payments on the loan for the first five years. This fantastic and glorious stupidity is made possible by simply demanding that Spain and Italy both mutually destroy themselves in order to temporarily save the face of whichever country is currently in the crosshairs. After all, as we are now finding out, unlike the American Constitution, the Eurozone actually is a suicide pact .
All of this nonsense is effectively the equivalent of Peter, who is facing bankruptcy and cannot afford his shiny new Ferrari, getting together with his other neighbors to hold up Paul at gunpoint and demanding that Paul finance his Ferrari. Unfortunately, Paul doesn’t have the money, so the neighbors force him to borrow $100,000 from John, who charges an interest of $6,000. To sweeten the deal, the neighbors then force Paul to lend his borrowed $100,000 to Peter for a fee of $3,000. The end result is that Peter is screwed because he still can’t afford his Ferrari (and now owes not only the cost of the Ferrari but also the cost of the $100,000 “loan”), Paul is screwed because he is now out $3,000 and gets absolutely nothing in return, and John is screwed because he is never, ever going to see his $100,000 ever again.
As soon as the neighbors head back home, they simply declare victory, rinse and repeat.
The global fractional reserve banking scam is a massive Ponzi scheme and cannot possibly sustain itself forever without a continual stream of newly printed cash. Europe does not have anywhere near enough money in circulation to stave off an economic collapse forever. As member countries continue to fall, Europe will deplete all of its ‘firewall’ bailout funds (and idiots like Paul Krugman will continue to claim that the economy is stalled because governments aren’t borrowing enough money ).
Europe seems to be as least mildly aware that the “debt piling” solution is only short term, at best. That’s the reason why they’re trying to drag Germany into Eurobonds – bonds which would be issued to the whole Eurozone rather than to individual, failing countries. Germany has resisted thus far, refusing to be the pesudo-responsible citizen forced to cosign for a new car loan to the drunk redneck down the street whose house is in foreclosure.
Now, with the Greek elections having finally come to a close (until the next round of elections in August…) in which the pro-austerity New Democracy party narrowly edged out the leftist radicals (Syriza) and neo-Nazis, the Euro may actually be in even worse shape than before. While Greece is now more likely to remain within the Eurozone for the immediate future, nothing positive can come from this election because the Greeks have elected the very same people who put them in the position they’re currently in. They have voted to maintain the status quo, which ultimately seems to mean perpetual bailouts, shoddy tax collection, the risk of electricity outages due to lack of funding, and generally an economy in which well-dressed citizens are eating out of garbage cans.
In other words, the Greeks took the easiest way out – they elected to simply continue piling on more and more debt, building the house of cards another few levels higher. Nothing will change (for now), because Greece will continue to drag on the rest of Europe, preferring to showcase itself as the ‘bailout queen’ of the evening. This cannot possibly last – at some point, Europe is going to run out of money to bail out Greece, Spain, Italy, Portugal, and the rest. A single currency union devoid of social unity is a disaster waiting to happen as the world is currently discovering.
The good news in all of this is that the Greek elections will stall the major consequences of financial ‘reset’ for a little while longer. The massive snowball we’ve been rolling uphill for the last several decades won’t collapse on us tomorrow. But, it will eventually become too heavy and unwieldy and when it does, it’s going to roll back down a hill that is even steeper than the one we’re on today. So, congratulations – by refusing to eat our spinach today and instead partying on pizza, M&Ms, Mountain Dew, and Gyros (Euros?), our eventual hospital stay will be even longer and more drawn out when that financial heart attack finally arrives.
So, as Europe continues to push for even larger government intervention and continued bailouts, the fact of the matter becomes patently clear: government is not now, nor ever has been the long term solution to any problem. Government is the problem.
Only by returning the liberties and freedoms to the People, from whom they’ve been routinely stolen, can the world ever hope to enjoy long term stability again.
In love of liberty,
The Bulletproof Patriot