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Today, we doff our caps to the folks at the European Central Bank. They’ve pulled off the perfect heist.
The euro-feds have opened the valves…turned on the spigots…and let nearly a half trillion euros worth of liquidity flow directly into the very same banks that have proven they can’t be trusted with a penny.
But that’s how a zombie system works. The living give. The monsters get.
And since, at this stage of the credit cycle, the living don’t have much to give, the feds turn on the printing presses.
Then, from whom does the money come?
Gotta come from someone, no?
That’s right… When you borrow it, it comes from the people who lend it. When you tax it, it comes from the taxpayers. But whom does it come from when you just print it up?
Well, at first it appears to come from no one. Nobody reaches in his pocket and finds fewer dollars. Nobody’s pocket has been picked. But how could that be? Nothing comes from nothing. You add a zero to a zero and you still have a zero.
And yet, the zombie banks now have 489 billion more euros in their vaults. That’s what it said in yesterday’s Financial Times.
“Banks snap up 489 billion euros in ECB loan offer.”
This money certainly seems real. The banks can lend it. Spend it. Toss it out the window or down the drain. They can light cigars with it. They can use it to wrap gold coins before sending them out as Christmas presents.
Let’s see, we saw an ad. Mercedes Benz CL class 2011-2012 autos are selling, in round numbers, for $100,000. With this money, you could buy about 6 million of them. Which is probably more or less what will happen to the money.
But what concerns us today is not where it goes but where it came from. Did it come from space? From another galaxy? No? Then, isn’t all wealth on earth owned by someone? Yes? Then, it must have come from some humans somewhere on Earth.
But who?
Here’s an answer: Each unit of currency represents a claim on resources. Now, there are enough new units to claim 6 million new Mercedes. We infer that people who had claims on them previously have less of a claim now, because there are only so many new Mercedes available. And since those claims arose from the value of the currency they earned and saved, we further infer that the value of the new money must have been stolen out of the value of the old money. What else can you call it but theft? People who had euros previously now have less purchasing power (at least theoretically). They never agreed to let their money be clipped. They never even knew what was happening to them.
But since we’re in a Great Correction…and since Europe is entering a recession…and since recessions and corrections are basically deflationary (prices fall as demand eases)… the old currency holders aren’t likely to notice…or raise a stink about it.
It may be larceny, but it’s grand larceny. Heck, it’s great larceny. The perfect heist. The poor victims don’t even know they are victims. They have as much money in their pockets and bank accounts on Friday as they had on Monday. And if prices rise slightly, not one in a hundred will blame the ECB.
Meanwhile, over in the USA, the criminal gangs can’t seem to get organized.
Late yesterday came a report that a deal had been struck to extend the payroll tax by 2 months. But a bigger problem is coming up. Just wait ’til next year. Here’s Bloomberg with a full report:
Payroll Tax Tiff Times 25 Awaits Congress in ‘Utter Dysfunction’
Dec. 22 (Bloomberg) — The brinksmanship in Congress over a payroll tax-cut extension may end up looking like a quaint disagreement by next December, when lawmakers must grapple with a fiscal policy debate at least 25 times more costly.
Unless Congress acts by the end of 2012, income tax cuts will expire, automatic reductions in defense and domestic spending will start and the alternative minimum tax will ensnare millions more taxpayers. The same Congress that can’t find a way to extend the widely supported payroll tax cut beyond Dec. 31 will be seeking to bridge long-held ideological differences.
“The prospects are bleak,” said Leonard Burman, a former Treasury Department official who teaches public affairs at Syracuse University in New York. “I’ve never seen such a high level of dysfunction in the 25 years or so that I’ve been paying attention to government.”
The year-end 2012 series of deadlines on tax and spending policy stems from Congress’s tendency to push problems into the future with temporary solutions. This year alone, lawmakers have flirted with a federal government shutdown three times, almost defaulted on the US debt for the first time in history and allowed aviation taxes to lapse for two weeks.
Trillions at Stake
The $4 trillion in expiring tax cuts and $1.2 trillion in potential spending cuts dwarf the $200 billion at stake in the current fight over the payroll tax cut and other provisions, including expanded unemployment insurance. Those items, if extended for another year, would expire at the end of 2012.
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The euro-feds have opened the valves…turned on the spigots…and let nearly a half trillion euros worth of liquidity flow directly into the very same banks that have proven they can’t be trusted with a penny.
But that’s how a zombie system works. The living give. The monsters get.
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Then, from whom does the money come?
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And yet, the zombie banks now have 489 billion more euros in their vaults. That’s what it said in yesterday’s Financial Times.
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This money certainly seems real. The banks can lend it. Spend it. Toss it out the window or down the drain. They can light cigars with it. They can use it to wrap gold coins before sending them out as Christmas presents.
Let’s see, we saw an ad. Mercedes Benz CL class 2011-2012 autos are selling, in round numbers, for $100,000. With this money, you could buy about 6 million of them. Which is probably more or less what will happen to the money.
But what concerns us today is not where it goes but where it came from. Did it come from space? From another galaxy? No? Then, isn’t all wealth on earth owned by someone? Yes? Then, it must have come from some humans somewhere on Earth.
But who?
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But since we’re in a Great Correction…and since Europe is entering a recession…and since recessions and corrections are basically deflationary (prices fall as demand eases)… the old currency holders aren’t likely to notice…or raise a stink about it.
It may be larceny, but it’s grand larceny. Heck, it’s great larceny. The perfect heist. The poor victims don’t even know they are victims. They have as much money in their pockets and bank accounts on Friday as they had on Monday. And if prices rise slightly, not one in a hundred will blame the ECB.
Meanwhile, over in the USA, the criminal gangs can’t seem to get organized.
Late yesterday came a report that a deal had been struck to extend the payroll tax by 2 months. But a bigger problem is coming up. Just wait ’til next year. Here’s Bloomberg with a full report:
Payroll Tax Tiff Times 25 Awaits Congress in ‘Utter Dysfunction’
Dec. 22 (Bloomberg) — The brinksmanship in Congress over a payroll tax-cut extension may end up looking like a quaint disagreement by next December, when lawmakers must grapple with a fiscal policy debate at least 25 times more costly.
Unless Congress acts by the end of 2012, income tax cuts will expire, automatic reductions in defense and domestic spending will start and the alternative minimum tax will ensnare millions more taxpayers. The same Congress that can’t find a way to extend the widely supported payroll tax cut beyond Dec. 31 will be seeking to bridge long-held ideological differences.
“The prospects are bleak,” said Leonard Burman, a former Treasury Department official who teaches public affairs at Syracuse University in New York. “I’ve never seen such a high level of dysfunction in the 25 years or so that I’ve been paying attention to government.”
The year-end 2012 series of deadlines on tax and spending policy stems from Congress’s tendency to push problems into the future with temporary solutions. This year alone, lawmakers have flirted with a federal government shutdown three times, almost defaulted on the US debt for the first time in history and allowed aviation taxes to lapse for two weeks.
Trillions at Stake
The $4 trillion in expiring tax cuts and $1.2 trillion in potential spending cuts dwarf the $200 billion at stake in the current fight over the payroll tax cut and other provisions, including expanded unemployment insurance. Those items, if extended for another year, would expire at the end of 2012.
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