The German Constitutional Court is scheduled to hear the arguments in the issue of the constitutionality of the ECB providing unconditional funding for the bailouts of European sovereigns plagued with financial problems. The main issue really becomes this: Can the ECB consign German citizens to be the paymasters for the entire European project without their DIRECT CONSENT–or what the highly regarded Otmar Issing rightly called “taxation without representation” in an FT op-ed piece several months ago? Germany’s Constitutional Court sits in Karlsruhe and decides major issues of law impinging on the legality of the BASIC LAW. Previously, the court has held that the sovereignty of the people resides in the Bundestag but has warned that the transfer of German wealth and property to an outside foreign body has its limits without direct consent of the people. Where does the demands of the European Union conflict with the sovereignty of the citizens in determination of German rights?
Posts Tagged ‘Europe’
For the last three years, this blog has made the point that a moral drama playing out on the global financial stage. The U.S. Tea Party was based on a concept of liquidating the assets of large debtors and letting the pain be absorbed by the financial system and those who have saved and played by the rules of capitalism will be rewarded. The moral precepts of the “original” Tea Party supporters may have been correct but the timing of favoring system-wide asset liquidation had long passed and the fallout would have led to economic collapse and possible political upheaval. The U.S. could not handle the massive unemployment from a forced deleveraging. While I am opposed to moral hazard in principle, the enforcement of punishing debtors at the expense of the entire system is absurd.
Notes From Underground: #Irony … Carmen Reinhart Says “Do Not Take Size As An Indicator of Importance”; Harry Rheems DiesMarch 21, 2013
Okay, you must have some fun amongst the idiocy of the Eurocrats. It seems that the best intentions of last Friday night’s decision to sacrifice the pawns in the game have done exactly what I thought the ill-conceived plans would accomplish. For 10 billion euros of bailout capital the fallout has been large drops in equity values. The capital losses are small compared to embarrassment facing the European policy makers. In a Bloomberg article by James Neuger, “Europe Plays I-Didn’t-Do-It Blame Game on Cypriot Deposit Levy,” it seems that German FM Schaeuble, France’s FM Moscovici, Spain’s FM Guidnos and even Finland’s FM Urpilainen all claim that they were opposed to taxing the guaranteed deposits of under a 100,000 euros. They all seem to point to the ECB and IMF as wanting the “bail-in.” This is a classic example of what my friend Andy Schreiber used to say: “Success Has Many Fathers, Failure Is But An Orphan.” The Cypriot situation is a situation that punches way above its weight. Carmen Reinhart, an economist I cite regularly on financial repression, silenced the talking heads on CNBC when she claimed that, “Do not take size as an indicator of importance.”
Click on the image to watch Yra discuss the ECB meeting with Rick Sanely
Or, a review of why Draghi was the Financial Times’ “Person of the Year.” Here are two blogs, which are reflective of the week that was. We still find relevance in this week as it sets the table going forward as we look to 2013.
The Greek debt issue will be resolved for the moment–as we have maintained for months. What is 31 BILLION EUROS among friends? Now that the Catalan independence parties have won a resounding victory in the Spanish region of Catalonia, the political waters of Europe have become murkier. It will be doubtful that Catalonia will actually secede from the Spanish polity but the mere threat will mean that Brussels will have to become more involved in pushing billions of more euros into the Spanish coffers. The Catalans are angry because they send far more euros to Madrid than they receive back in Barcelona. According to the most recent data from 2009, Catalonia had sent 16.4 billion euros more to the Spanish Treasury than flowed back to the region.
First and foremost, a happy Thanksgiving to all the readers of NOTES FROM UNDERGROUND. The growth in readership and the high level of discourse is something I am very grateful and certainly thankful for in full measure. As much energy as I expend in formulating the blog, it is worth the effort because it helps anchor my thoughts about the impact of the global political economy. It is certainly the definition of a give-get. So again, thanks to all my readers.
Yes, the U.S. Presidential election is finally here. After the POLITICAL-INFO COMPLEX has spent the $6 billion on various political campaigns, we are left wondering why anyone would contribute money to feed the monster and prolong our agony. I know the answer and the “road to political hell is not paved with good intentions.” There are so many polls predicting a very tight race that I care not for the popular predictions. As an investor/trader I am much more concerned about the outliers. First, the most significant result would be for the Democrats to retake the house. The 2010 Republicans claiming the majority in the House by such a wide margin was not predicted. If the Democrats were to undo 2010 it would mean a landslide victory for President Obama as well as the continued control of the Senate. The triple crown for the Democrats would be a negative for the markets as there would be no movement on the “fiscal cliff” as the Democratic leadership would be empowered with a mandate.
Monday night the BOJ will announce its newest and latest effort to stimulate the economy and most importantly try to undertake some genuine measures to weaken the YEN. The Japanese economy is suffering under the weight of an overvalued YEN. The YEN was only a minor problem when the global economy was experiencing strong growth but with the BRICs slowing and EUROPE on the cusp of a major recession, the Japanese policy makers have to confront the YEN head on–time is not on their side. The time for the BOJ and Ministry of Finance is now for the market is wanting to be SHORT YEN so if the Japanese policy makers can seize the day and invoke some type of foreign bond buying scheme the currency markets will do the heavy lifting for the BOJ/MOF.