How to Break Up with the Financial System

By DAISY LUTHER | ORGANIC PREPPER | MARCH 26, 2013

Breaking up is hard to do, especially when it is with a tracking service like a financial institution.

Sometimes you can make a clean break and other times you have to remain “just friends”.

The US government actually has a name for people who have no bank accounts – they call these folks “the unbanked”.  The FDIC defines the unbanked as “those without an account at a bank or other financial institution and are considered to be outside the mainstream for one reason or another.”  Another term is “the underbanked” – “people or businesses that have poor access to mainstream financial services normally offered by retail banks. The underbanked can be characterized by a strong reliance on non-traditional forms of finance and micro-finance often associated with disadvantaged and the poor, such as check cashers, loan sharks and pawnbrokers.

According to the government, the above scenarios are crisis situations which must be rectified for “your own good”.  There is legislation on the table in many states to set up banking facilities for the unbanked and underbanked.  The assumption is that most folks who do not deal with a bank are too poor to do so.  This could be true in many cases: high minimum balances, bad credit history, NSFs, and account fees can all preclude having a bank account for those in difficult financial straits.

However, the government has a couple more reasons to insist that everyone should have a bank account:

1.)   Ease of confiscation

We need only to look at the horrible situation in Cyprus to see how bank accounts are like all-you-can-steal-buffets for the powers that be.  A suggested theft TAX of up to 20% of the money in Cypriot bank accounts may be levied in order for the country to meet it’s staggering debts in the terms of the proposed EU bailout.  The banks of Cyprus are loaded with the money of residents and businesses of other countries that have used them as a tax haven.  The banks have been closed for several days and frantic customers are left to withdraw the maximum daily balances from ATM machines in an attempt to salvage what they can.  Many people fear the banks will never reopen their doors.

Think it can’t happen here?  I wonder if the people of Iceland, Greece, Ireland, Hungary, Argentina, Spain, and Portugal thought that too.

2.)  Surveillance

The second reason that “everyone should have access to banking services” is the digital trail that it leaves.  Every dime you receive and spend out of these accounts is part of an intricate system of surveillance.  When your money goes into a bank – any bank – Big Brother knows about it.  It’s a simple matter of compiling information via your social security number (or other federally- assigned number) to find out how much you make, how much you have, and where it comes from.  This can be used to prosecute you for tax purposes, to locate you through where your pay comes from, and to follow your personal money trail for a variety of different reasons.

It can also be used to track your spending – Big Brother can find out that you spent $2000 at a gun store, that you purchased online from a prepper supply website or that you bought some books with “questionable” content in order to paint you as a threat.

Unbanking

So, in this day and age, is it possible to get by completely without a bank account?

It’s tough.  Most work places prefer to pay through direct deposit.  Many landlords, mortgage companies and finance companies do business through direct debit.  You’re going to pay some steep fees if this is the route that you choose to go.  For some, it might be worth it, particularly if you only have a few transactions in a month.

Here are some places you can cash checks for a fee:

  • Check cashing depots
  • Some retailers like Walmart, 7-11, and some grocery stores (the number of these is dropping rapidly)
  • Pawn shops
  • The issuing bank will sometimes cash a check drawn from one of their accounts for a non-account holder
  • Some prepaid credit card accounts will accept a direct deposit (in my opinion, this is nearly as unsafe as having your money in a bank account)
  • Through a friend or family member’s account (also risky – for both you and the account holder)

Here are some ways you can pay bills without a bank account:

  • In person, with cash, cashier’s checks, or money orders
  • Through the mail, with cashier’s checks or money orders
  • Online, with prepaid credit cards
  • Through a kiosk using a prepaid credit card
  • At a check-cashing depot or retailer

Underbanking

Your next option is underbanking.  For some people this may be the most realistic way to break up with their bank – it’s the “just friends” version.  If you have a lot of transactions that go through your account every month, it isn’t necessarily practical to get rid of your account.  Keep in mind that all of the above methods of unbanking still have a component of financial tracking.  The checks and bills still have your personal information tied to them in most cases.

When you underbank, you still have an account.  Set this up with the lowest possible fee and the lowest possible required balance.  Shop around to find the best deal.  Consider a credit union or community bank instead of one of the big mega-banks.  They are slightly safer, emphasis on slightly.

Your paychecks from work can be directly deposited, which will make your employer happy.  Employers rarely want to do something outside the norm, and if everyone else gets their pay directly deposited, writing a check for you will make you stand out – the opposite of what you want to do.  As well, any other checks you receive, like refunds, tax returns, etc., can be processed through this account.

The goal here is to keep as little money as possible in this account.  Banks are no longer the safest place to keep your money, and the .00001% of interest you will accrue is just not worthwhile.

Immediately upon payday:

  • Pay all your bills online or through a kiosk out of this account – rent, utilities, credit card payments (hopefully you don’t have those)
  • Buy necessities like groceries if you need to reduce the amount in the account for withdrawal purposes
  • Calculate the amount of payments that will be coming out of your account between now and your next pay (rent/mortgage, car payment, insurance)
  • Remove all money except that required for impending debits and your minimum balance.  Get it in cash.

Avoid Financial Surveillance

The government wants everyone to have a bank account for another reason besides quick accessibility for the purpose of thievery.  Big Brother wants to know what you earn, what you spend, and where you spend it.  Every penny you spend could one day be used against you, as more and more things become illegal in the police state that is taking over the western world.

Use your bank account as little as possible if you’ve chosen to underbank:

  • Buy stuff with cash
  • Skip registering your belongings by serial number for warranty purposes
  • For heaven’s sakes, don’t get one of those “customer loyalty” cards that track every purchase you make and provide you with “rewards” or “points”
  • Buy from places that don’t track you, like yard sales, Craigslist, farmer’s markets, roadside stands, your brother’s friend’s sister’s boyfriend
  • Work for cash: this is another suggestion that won’t work for everybody, but if you can do some odd jobs for cash, even if you make slightly less money doing so, this is money that can’t be tracked.

Think about how your purchases tell a story about you that you might rather keep to yourself.  Are you buying lots of farm equipment, soil amendments and seeds?  Are you buying ammo every week?  Are you stocking away large quantities of food or medical supplies?  Have you recently purchased 2,347 books on different guerrilla warfare tactics?  OPSEC is more than just keeping your mouth shut about your prepperly ways.

Ditch the Dollar

Although you require some fiat currency to function in today’s society, as well as some in an emergency fund,  consider using other forms of currency whenever possible.  The following suggestions won’t work for everyone, but some folks may be able to ditch the dollar in the following ways:

  • Engage in the barter system: trade goods and services with like-minded people.
  • Keep precious metals like gold and silver in a fireproof safe for your “savings account”
  • Immediately convert  fiat currency into tangible goods: food, ammo, home defense items, tools, etc.
  • Work towards self-sufficiency – if you buy less, you can earn less: grow your food, repair your own home or vehicle, do things manually instead of using expensive equipment, lessen your dependency on the grid
  • Simplify – this goes hand in hand with self sufficiency: find your entertainment from library books and online resources, skip eating out, take a walk instead of joining a gym – the less you feel you need, the less money you will have to earn.

The decision to unbank or underbank is unique to every individual.  The further away you can get from “the system” the more privacy and security you will have.  The suggestions above are not meant to be comprehensive – they’re meant to get you thinking about how you can disengage.  As always, your suggestions in the comments can greatly benefit others!

Understand History To Understand The Current Markets

Bob Chapman
International Forecaster
August 20, 2011

The Fed has been behind all the failings of the markets, Europe now a disaster waiting to happen, about leveraged speculation and counterparty risk, now we have an escalating debt crisis, the perpetual creation of money is the theft of the value of labor due to the inflation that is caused.

Every professional has their own method of analyzing markets, finance and economies, and some do well coming up with the direction of social and political issues as well. The other 97% miss one-half to two-thirds of the time. That is not very good and one asks why? The answer is simple they really haven’t studied history as well as they should have.

Some believe that the crisis in Europe is the heart of today’s problems. It certainly is a strong integral part, but not the primary causation. The 3-year old finance bubble was created by the Federal Reserve, which began the situation starting in 1993. We saw the dotcom boom, which they could have stopped in its tracks. All they had to do is raise margin requirements from 50% to 60% temporarily. After that collapse in mid-March 2000, they decided rather than purge the systems, as they as well should have done in 1990-92, they created another bubble in real estate. They have been trying to recover from that bubble and other layover problems since we’d say 2000.

Yes you can blame Europe for its part, but the blame lies with the Bank of England, the European Central Bank, and the banks and personages, who control those entities. Those in England, Europe and in the US, who control business, finance and economics from behind the scenes, have played the parts they have in order to bring about world government. If you can perceive and accept that from an historical perspective, they you can understand what is really going on.

European banks are struggling with their fundings and credit is drying up. This is what happened in 2008. As a result Europe is a disaster waiting to happen. Europe is finally realizing this is all about debt. The socialists want it go away, just disappear but it does not happen that way. Debt and credit default swaps will in the end rule the day.

Few reflect back to 12 years ago when the Maastricht Treaty was being approved. The cornerstone was public debt that was not supposed to be more than 3% of GP. That did not last long. Then Italy and Greece, with the help of Goldman Sachs and JPMorgan helped these two basket cases qualify for the euro and euro zone by Mickey Mousing their balance sheets. We saw one interest rate fits all and we knew the euro was doomed before it got started. The condition of the euro zone and Europe is certainly terrible, but so are US debt problems. Policy decisions are bad, but not any worse than they are in the US.

We see pundits trying to separate sovereign debt from bank debt. They are one in the same, because the banks control the governments, and tell them what to do. Europe particularly France, was very upset last week when SoGen was rumored to be insolvent. The answer from those accused was rubbish. SoGen has a history of one of the most criminal banks in the world, so what is new. Just more criminality. SopGen and France are under pressure because they own loads of PIIG debt and are being asked to supply more funds to bail out their neighbors, a role they cannot fulfill without going under themselves. The situation France is in is three times worse what it was in 2008. Everyone expects France and Germany to bail out the bankrupts and that cannot happen. Neither the banks nor the governments can continue to do what they have been doing and at the same time control their financial systems and economies. Now you can understand why CDS credit default swaps trade above 180, when they traded at 80 in 2008. We feel that if the six countries in trouble are not allowed to default it will take the other nations under as well. There is much at stake here. Not only the insolvency but also the breakup of the euro zone and the euro and the dream of using them as a template for a new world order.

In addition it is very significant CDS for Brazil jumped from 35 to 152 as did Mexico, which is an indirect result of what is going on in Europe, UK and the mortgage bond market and by cutting back 30% on loans to small and medium sized businesses. Although they are very leveraged in their other operations, such trading and global leveraged speculation include great counterparty risk. This time exposure is somewhat different but the exposure in the theatre could be just as bad risk wise as it was in 2008. Generally speaking they are not long gold and silver bullion and shares, they are for the most part short. The venue that could be very dangerous is derivatives. The way these major banks and countries have become interconnected the danger always persists and once a fallout begins it could bring down all major banks and countries. Don’t let that fact escape you. They dodged the bullet in 2008, but they might not the next time. The carry trade is as large as it has ever been and the cost of borrowing is close to zero, again, encouraging taking on too much risk.

This past two weeks currency markets have seen large swings, especially in second and third tier countries. No one knows the size of carry trades affecting these countries. We have seen a number of countries quickly give up almost all of their dollar gains of the past several months and the Swiss and Japanese have spent billions of dollars trying to push down the value of their currencies, but to no avail. The euro and the dollar have stayed about the same, but we see the euro weaker due to ongoing financial problems, which contrary to conventional wisdom have not been solved. Throughout Europe not only has money been lent at very low rates, but also much of it is uncollectible. This broken European bubble will deflate for some time to some. It will affect all other sovereign debt negatively as well. These are the borrowers of part of that $16.1 trillion that was lent by the Fed over the last few years, which has never been paid back. European banks are buried in debt and the politicians, whom they own, will do their best to protect them. Unfortunately, there is no painless solution. The contagion is underway and the latest meeting to solve these problems was a failure. The latest European version of the issuance of quantitative easing to buy Italian and Spanish bonds will prove to be futile, just another attempt with taxpayer funds to bail out the banks. This possible “Black hole of Calcutta” at this point puts Europe in a worse position compared to the US, which is no piece of cake, and probably won’t far any better in the future. The working out of US problems will just take longer. As each day passes and in spite of the disinformation, confidence in Europe and the US falters and rightly so. The US has no periphery to support essentially Europe does and that is in favor of the US, but ultimately US problems are far more overwhelming.

The recent commitment of the Fed for zero interest rates for the next two years showed great weakness and will in time come back to haunt them. This was another reward for Wall Street speculators and another moldy bone thrown to the nations savers and elderly. There is no question Wall Street and banking, which own the Fed are desperate, to make such a commitment. The decision for QE 3 was made 15-months ago when we predicted it. We could see it coming and we know the decisions of the last 11 years and the pressure being exerted on the Fed will ultimately bring about its demise, and its days of looting the American public will be over. What the Fed and the ECB have done in greed and for their dream of world government is over. We are closing in on payback time, as desperate measures become more noticeable and a solution remains out of their reach. They will pay for what they have done to us.

Even though we expect at least a few more years of unrestrained leveraged speculation, it will then come to an end. It has become a crucial factor for monetary policy championed by both Sir Alan Greenspan and Ben Bernanke. Wall Street and baking love it, because their positions allow them to create inside information, which allows them to make money consistently with little or no risk. We also have the SEC and the CFTC perpetually looking the other way aiding and abetting their criminal behavior. If you add in that there are no limits to what they can do you essentially have an ongoing free for all. This is unrestrained finance via a policy of zero interest rates. This gives Wall Street and banking a license to steal.

All this has caused a bubble and that bubble is in the process of bursting, a product of fiscal and monetary stimulus. That is not only in the US, UK and Europe, but worldwide As a result confidence in the global system is being lost. De-leveraging of bullish bets in markets of bonds and stocks is underway. Ironically these speculators are short gold and silver and the shares. Short covering is in process with some even switching to the long side in the gold and silver bullion and share markets. How any economist could believe that leveraged speculation reduces risk is beyond us. Fortunately the other shoe has dropped and such theory has been disproved.

The result of all this is that we have an escalating debt crisis worldwide and now the experts in and out of government do not have any solutions as to how to rectify the situation. The sovereign debt crisis has been underway since the early 1970s. This experience shows you how long bad things can last. Before this is over trillions of dollars will be defaulted upon. The days of overwhelming stimulus to gain traction in the economy or economies is in the process of being ineffective. We like to call it the law of diminishing returns. The $2.3 to $2.5 trillion we project that the Fed will have to create in the coming fiscal year will at best produce GDP growth of zero. The minute the Fed and Congress stop feeding the system we will be looking at negative growth of 5%. We are headed toward crunch time and there is no avoiding it. Uncertainty and instability are America’s and the world’s next challenge. Currencies are going to react widely. Gold and silver will fly along with the gold and silver shares as a result of debt and falling economies accompanied by inflation. The big problem will not only be de-leveraging, but also the opaque derivative markets and the Exchange Traded Funds, many of which are leveraged. Yes, it will be a very rough ride, so you had best get ready for it. We never had a recovery and the trappings of growth are quickly falling away. Extending the time line for all these problems is coming to an end, but it probably will not be abrupt. There will be all kinds of terrible events, but it looks like the elitists are going to play this out over an extended time frame before they attempt to pull the plug. That means these problems could be extended out five or even ten more years on a degenerating basis. That also means we will continue to have limited wars for financial gain and distraction. The strategy has been and will continue to be to keep creating money and credit and allow inflow to reduce the size of the debt. These comments regarding debt quoting Bernanke and throwing money from helicopters and Greenspan’s admission that the US cannot be downgraded, because it can always print money are flippant and very unprofessional. What they have both done rather than allow the US government to default is to perpetually create money and credit to paper over the economy’s failure. This process increases inflation that quietly steals the value of purchasing power like a thief in the night. Both men can be classified as thieves for having done to the American people and others by stealing the fruits of their labor. This trick used by money masters and politicians for centuries is little understood by the public and most cannot understand how it works and the ultimate ramifications. These characters and others create additional debt, which is followed by other nation’s central banks, which has created a race to the bottom and eventually all nations cannot pay their debts and default. Eventually in order to prevent a collapse in the financial system a meeting is held such as was held at the Smithsonian talks in the early 1970s, or the Plaza Accord in 1985 and the Louvre Accord in 1987. All currencies are revalued and devalued and there is multilateral debt settlement. We believe that is how all this will come about.

Evidentially a deal has been made from behind the scenes to relieve the Fed of having to produce $850 billion in stimulus and that task has been delegated to Mr. Obama. The President, while calling for budget cuts, is calling for $850 billion for stimulus 3. Observing recent actions by Congress some idiotic excuse will be made up and like magic stimulus 3 will appear. We also suggest that the President will use the London rioting as a cause for such stimulus. Remember never let a crisis go to waste. It is sure to be sold in the behalf of preservation of order. We do not believe the powers behind government will get the desired results.

Admittedly, Ben Bernanke inherited a can of worms from Sir Alan Greenspan. Ben has been able to accumulate $3 trillion worth of an assortment of Treasuries, Agencies and CDS, and MBS’s, also known as toxic waste, over the past few years. Those moves decidedly have been negative for the rating of US government debt. The rating really should have been lowered five years ago during the Greenspan years and perhaps even sooner than that. Due to massive increases since 2006 by the Fed we now already are in a bubble.

The 12 person congressional debt commission, we like to refer to as the Obama Enabling Act, patterned after Adolph Hitler’s legislation of 1933, which allowed him to become dictator of Germany, supposedly will produce moderate spending cuts. Knowing that Standard and Poor’s has warned this “Star Chamber” proceeding, which bypasses Congress, that there are not substantial cuts in Social Security and Medicare, that S&P will again lower the US debt rating. Everyone seems to overlook that fact. That means that if there is not large Social Security and Medicare cuts and an increase in taxes, S&P will strike again, and the bond market will burst, and Mr. Bernanke’s house of cards will collapse. As we explained previously the debt extension could have been passed in 15 minutes, but it wasn’t because the powers behind government the Council on Foreign Relations, wanted to chop up SS and Medicare, and to put this panel in place. All is never what it seems to be.

Basel Banking Committee Ready to “Strangle” Economy

real-agenda.com

The World Financial Order is almost complete. New measures will keep bailout monies in banks’ coffers, increase interests on loans while reducing credit availability.

A group of un-elected regulators has come to an agreement on how to strangle the global economy even further, while presenting their package of measures as “saving” policies” for a coming financial crisis.  The Basel Committee on Banking Supervision -current owners-  established more rules to exercise tighter controls on banks and the very financial system they managed to break by design.

At the top of the list, Jean Claude Trichet, warns that the no implementation of these policies would let banks free to do anything they want -he himself is a banker- and that the new rules would secure bank reserves for difficult financial times.  The package of rules was adopted on Sunday, and it has a very clear goal: “To protect International Economies”.  This confirms the group’s intention to establish a global financial system headed by no other than themselves.  Such Order would abide by their rules no matter what effects such rules have over individual national economies.

According to their published document, banks will have to triple their cash reserves -from 2 to 7 percent- which in their minds would act as a cushion for difficult times or when banks invest in junk financial products.  That amount is in itself ridiculous, if one takes into account that banks’ investments in dubious financial products is many times larger than 7 percent.  What this measure will do is to give banks an excuse to increase interest rates on loans and reduce their loan spending programs.  The reduction in available credit will achieve a goal the bankers had yearned for and that could not accomplish through the failed cap & trade fraudulent scheme: to bring global economic activity to a halt.

“The agreements reached today are a fundamental strengthening of global capital standards,” said Jean-Claude Trichet, president of the European Central Bank and chairman of the banking supervision group.  Trichet commanded the group dismissing some bankers concerns that these new measures will require them to curtail credit, which in turn would cripple economic growth. He said the new rules would “contribute to long-term financial stability and growth will be substantial.”  Other bankers sided with Trichet, saying the modest effect on growth or borrowing would be a small price to pay for a less explosive financial system.

What these new rules would achieve -if anything- is the legalization of bad investments, as banks will not have to worry about how to pay for loses.  They will have large amounts of money from investors to cover their backs.  In addition, banks will continue to count on nation states to make up for any shortfalls, as more bailouts for troubled banks have not been taken off the table.  The new rules issued by the group that includes former Goldman Sachs executive Ben Bernanke, will be approved in November by the G-20 before they are handed over to individual countries before they become binding.  Nation-states will have until January 1, 2013 to adapt to the new rules.

“Banks will unarguably be safer institutions,” said Anders Kvist, representative of SEB, a bank that operates out of Stockholm.  Shouldn’t Nation-states have the prerogative to regulate banks operating in their territories?  Meanwhile, bankers continue to point out the new measures will reduce the amount of available credit for borrowers but were not bothered by the other side of the coin: Centralized Control.  That is what this is all about.

The Basel Committee on Banking Supervision, again, a group of un=elected bankers mandates banks to “protect themselves” when they invest in financial instruments of dubious origin.  How about letting banks operate freely and collapse if they have to, due to their irresponsible investment practices?  The new provisions, called a leverage ratio, will obligate banks to hold reserves against all their money at risk.  That is like the nanny global order telling their children not to pick their noses in public.

Of course, there are those to whom global financial regulation is never enough.  Some G-8 countries were pushing for an additional 2.5 percent increase, during “good times” of economic overheating. According to the document released by the group, the rules would be adopted gradually to give banks time to adjust.  Some of the measures will not take effect until 2019, with banks having to start raising cash in 2013.  Too little too late?

The Basel Regulators left the door open to imposing stricter rules on “important” banks, whose problems -irresponsibilities- can infect the whole financial system.  The banksters’ representatives in the US -The FED, FDIC- issued a common statement saying the agreement is a significant step towards reducing the occurrence of future financial crises.  Although Nation-states still have the ability to reject these new regulations and create and approve some of their own, the international financial order has been clear that failure to adopt their newest package of rules will be punishable with harsh changes in credit availability, large increases in interest rates and overall restrictions for financial aid.  Once the new polices are adopted they become binding and countries cannot abandon them.

In the meantime, the Basel group will allow banks to continue to receive government bailout money to raise capital through 2017.  Those banks that are not capable of raising enough cash may be obligated to merge or perish as part of the consolidation and control package the regulators have in mind.  Only in the US, it is estimated that some 400 banks are on the brink of failure.

Deutsche Bank in Frankfurt said it intends to sell shares for 9.8 billion euros to increase its reserves.  Other banks that will do the same include Société Générale -a bailed out bank- in France and Lloyds in Britain. The rules imposed by the Basel Group also include paying banks -with taxpayer money- to dispose of toxic assets such as derivatives.

As Predicted, Spain on the Brink of Collapse

The tentacles of the international banking cartel are about to envelop the fifth most important economy of the old continent

The Independent

European leaders meet in Brussels today amid growing fears that Spain, Europe’s fifth-largest economy, is preparing to ask for a

The horns of the depression are in Spain's rearview mirror. An aid package is in the works to rescue one more failed State.

bailout which would dwarf the €110bn (£90bn) rescue plan for Greece.

The Spanish government yesterday dismissed reports that it was already in discussions with the European Commission, International Monetary Fund and the US Treasury for a rescue package worth up to €250bn.

Officials in Madrid, Brussels and Paris were forced to deny that a Spanish bailout – which would take the European debt and euro crisis into a potentially dangerous new phase – was on the Brussels summit agenda.

“Spain is a country that is solvent, solid and strong, with international credibility,” said its Prime Minister, Jose Luis Rodriguez Zapatero. The European Commission spokesman said: “I can firmly deny [that a Spanish rescue is under discussion]. I can say that that story is rubbish.”

Brussels diplomats have been at pains to send out feel-good signals ahead of a summit in which Europe’s leaders are supposed to take the first steps towards more disciplined and co-ordinated, control of national finances. Those reforms are meant to restore confidence in the euro and underpin the €750m EU and IMF safety-net, created last month for euroland countries that lose the confidence of the financial markets.

However, it is proving hard to shake off persistent market fears about Spain, which, if it needed a lifeline, would swallow up a large part of the emergency fund. Worryingly for the EU, the doubts about Spain – whether real or driven by speculation – are eerily similar to the gradual seeping away of confidence that sent Greece into a financial death spiral in March and April. The Spanish government’s cost of borrowing hit a new record yesterday. The interest rate gap, or spread, between 10-year Spanish bonds and their German equivalents, rose by more than 0.10 of a point to 2.23 percentage points.

A senior Spanish banker, Francisco Gonzalez, chairman of the BBVA financial services group, confirmed that foreign private banks were now refusing to provide liquidity to their Spanish counterparts. “Financial markets have withdrawn their confidence in our country,” he said. “For most Spanish companies and entities, international capital markets are closed.”

As a result, the European Central Bank is said to have provided record amounts of liquidity to Spanish banks in recent days. The closure of bank-to-bank credit to Spanish institutions recalls to some market commentators the ripple of crisis through the global financial system after the fall of Lehman Brothers in the Autumn of 2008.

The IMF chief Dominique Strauss-Kahn is expected in Madrid tomorrow to see Mr Zapatero – but brushed off speculation of a crisis. “It’s a working visit,” he told reporters in Paris. “I am in France [today] – are there such rumours about France?”

Fears over Spain’s finances checked the recovery of the euro on money markets yesterday. The single currency lost much of the gains it had made in the past seven days.

One of the proposals on the table at the Brussels summit is public “stress tests” to force banks to reveal the state of their books. The Spanish government offered yesterday to open the books of its own private banks unilaterally to prove that they were sound.

Today’s summit in Brussels was intended to be a time for the EU leaders to catch their breath and discuss ways of restoring the euro’s long-term credibility. The threatened Spanish crisis may blow all that out of the water.

Despite an apparent rapprochement between Paris and Berlin this week, President Nicolas Sarkozy and Chancellor Angela Merkel remain deeply divided on how to prevent the currency and debt crisis from dumping Europe back into recession. Mr Sarkozy has agreed to drop his proposals for new institutional machinery for a political “government” of the euro by its 16 member states. Ms Merkel prefers to talk of a vague “governance” of the euro, and European state spending, by all 27 EU governments.

More fundamentally, Paris is deeply concerned that the austerity plans announced by Berlin last week could – on top of budget cuts in other countries – plunge Europe into crisis.

The French fears were echoed yesterday by the billionaire investor, George Soros, who warned that Europe would almost certainly face a recession next year which might generate “social unrest” and the kind of populist nationalism seen in the 1930s. “That’s the real danger of the present situation – that by imposing fiscal discipline at a time of insufficient demand and a weak banking system… you are actually… setting in motion a downward spiral,” he said.

The collapse of Spain’s housing boom has helped fuel a deep downturn which has sent unemployment spiralling to 20 per cent, the second worst in the EU. Mr Zapatero introduced a range of measures last month, including spending cuts of €15bn over two years and reductions in public sector wages and spending. Unions have called a general strike over labour reforms.

Greece may Collapse in August, Economist

CNBC

A restructuring of Greek debt could happen as soon as August, when the Balkan country is due to receive another tranche of funds

The collapse of the greeks may just have been delayed, not avoided.

from its lending agreement with the International Monetary Fund (IMF) and the European Union, according to Carl Weinberg.

“You can’t take a country that’s over-borrowed and make it more creditworthy by lending it more money,” he said. “They’re throwing Greece further and further and further in the hole by not addressing the problem directly and properly.”Asked when a Greek default could happen, Weinberg answered: “at High-Frequency, we are advising people to take their cell phones on their August vacation.” He said a Greek default would be “harsh” for the euro.

Greek officials did not respond to CNBC.com requests for comment.

On Thursday, Nassim Taleb, professor and author of the bestselling book “The Black Swan,” told CNBC that the economic situation today is drastically worse than a couple of years ago, and that the euro is doomed as a concept.

But famous investor Jim Rogers said now may be a time to buy the single European currency, as there are so many investors who are bearish about it that a rally may be in the making.

IMF and EU funds worth about 7.5 billion euros ($9 billion), crucial for Greece to be able to pay foreign debt, are due to be disbursed at the end of August, Weinberg said.

“Unless (Greeks) meet the quantified adjustment targets that they agreed to in the memorandum of understanding with the IMF, they won’t get this money,” he said, adding that his bet is that Greece will not meet the criteria.

EU Won’t Let Default Happen

Under the memorandum of understanding, performance criteria include ceilings on the budget deficit, cutting government and social security spending, as well as revamping key public companies.

However, other analysts say the implications of a Greek default on the euro zone’s financial institutions and economy are so great that the two institutions will disburse the funds even if the country does not fully meet the criteria.

“By alimenting Greece, we are also alimenting the European banking system,” Hans Redeker, global head of foreign exchange at BNP Paribas, told CNBC.

“It is going to be tried to be protected as long as possible, to be sure that this country is viable economically,” Redeker added.

A Greek debt restructuring, if it happens, would be an orderly one, to cause as little pain to the euro as possible, Weinberg said.

Watch the testimony from Economist Carl Weinberg.