Europe: From the Subprime to the Breakdown

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 10, 2012

The storm that began in the U.S. five years ago, swept governments, banks and mortgage financiers.

The outbreak of the subprime mortgage crisis in the U.S. arrives to its fifth year with a legacy that includes a global economic crisis that seems endless: the almost certain breakdown of the euro, and in the case of Greece, Spain, and most likely France, Portugal and Italy , among others, the need to seek bailouts from the European Union.

After five years, Greece is no longer owned by its people, but by bankers. The country experienced a total collapse since the alarm bells went off on August 9, 2008. The same has happened to Spain, that went from a growth rate of 4% to a negative one which is expected to be 1.5% in 2012. As it happened in other sovereign debt stricken countries, Spain lost half of its stock market value — not that it really means anything in the real world — and corporate profits, depending on who you ask, have seen dramatic losses or dramatic gains.

Almost all Euro zone countries have seen their ability to request loans erased or deeply eroded, given their loss of reputation as trustworthy borrowers. That fact has also made it more expensive for nations to pay for the already existing debt, which turned attention to their leaders. In response to the fiscal challenge, governments simply decided to continue business as usual, that is, borrowing more money at higher interest rates, in order to finance the gigantic welfare systems they do proudly own.  Through the years, the deficit has grown, and so has the debt and the interests on it. The sovereign debt bubble, to use a familiar term, is that much closer to burst, given countries like Spain’s inability to make the payment on its debt, while continue to borrow.

The negative of the European governments to act in accordance with the best interests of their people, resulted in more unemployment, more debt, less production, and less sovereignty. In the Euro zone, most countries have been downgraded by the banker created rating agencies, such as Fitch and Moody’s which resulted in the increase of borrowing costs.

The risk premium, index of investor confidence in the sovereign debt of a country is measured by the spread between ten-year national bond and the German for the same period, went from complete anonymity to becoming the essential indicator for all economies. In August 2007 the risk premium of Spain, for example, which is the measure of the extra costs demanded by investors for buying Spanish sovereign debt compared to Germany, was 12 basis points, compared to the 630 points it has now.

Even though the subprime crisis was rooted in the United States, where all kinds of schemes were created to defraud borrowers, lenders, families and investment funds, the shock waves rapidly arrived in Europe, where big banks had invested themselves — knowingly and otherwise — in the same fraudulent financial products stained with the subprime lending scam. One of the triggers of the crisis in Europe was the temporary suspension of the liquid value of three funds owned by BNP Paribas on August 9, 2007. This move was a direct consequence of the subprime mortgage debacle in the U.S., where investing firms used customer money to gamble, while their risk was minimum. From every $100 that was put at risk, $97 belonged to pension funds, credit unions , retirement accounts and average investors. Only $3 came out of the pockets of those who risked their customers’ assets.

In most cases, unregulated U.S. financial institutions diversified the risks of subprime mortgage loans through securitization, transferring them to other banks in the credit derivatives market. Derivatives are themselves a form of artificially created ‘financial products’ with little or no value. The lack of transparency and little clarity in the terms of the derivative contracts make this financial instrument the most attractive, but also the riskiest one. In the case of the crisis of 2008, investors only got to know the risk and not the promised high returns in their investments. That is how many individuals, companies and organizations saw their monies simply disappear. Someone had simply ran away with their money.

The supposed harmless securitizations involved the transformation of an asset or a non-negotiable right to payment (eg. a mortgage) into homogeneous debt securities or bonds, standardized and open to negotiation on organized securities markets. Financial institutions took on the risk for two reasons. First, because it was not their money the one at risk, but that of investors. Second, because they knew that government would come to the rescue, as it has now happened. The immediate impossibility to know the total value of these toxic assets and who was exposed to them launched even worse tsunami waves that deepened the crisis to levels never seen before.

The contagion in financial markets collapsed and worked as the perfect excuse for the European Central Bank (ECB), U.S. Federal Reserve and other central banks to take initiate the largest transfer of wealth ever seen in history. Not only had the banks ran away with investors’ money, but they were also about to receive the largest taxpayer funded bailouts ever — which are still ongoing — even though they were the only ones to blame for the collapse of the existing system. Total bailout cash has now reached $1 trillion and this money has mostly been given to selected people in governments as well as international banking institutions. It is important to note that some calculations set the fraudulent derivative market value at $1 quadrillion.

Right at the beginning of the crisis, and in one transaction alone, the European Central Bank gave away 94.841 million euros, one third more than the 69,300 million euros injected on 12 September 2001, a day after the attacks in New York. This move meant little or nothing as the connections in a globalized economy began to reveal that the problems were just about to get worse. The storm started by some U.S. mortgage financing firms became a gale that has so far crushed governments like Greece, Italy and France, mortgage financing giants Fannie Mae and Freddie Mac and investment banks like Bear Stearns and Wall Street’s Lehman Brothers. Those two banks along with many others were literally absorbed and digested by bigger banks, that with taxpayer money, healed all losses they would have and still were left with much more cash to pay fat bonuses to their corporate leaders.

The crisis has gotten to a point where it has mathematically bankrupted almost all if not all developed countries — even though their leaders say otherwise — due to the impossibility for those nations to pay off their debts. Their implosion is just a matter of time. With Spain, France and Italy being unable to meet their obligations and not willing to seek sane fiscal and monetary policies, the break up of the Euro zone is all but imminent. As mentioned in previous articles, the length of time that will pass until the full collapse occurs is in the hands of the banking institutions who originally caused the crisis.

The financial crisis of confidence and credit has led to recession after another in the developed world and has slowed the growth in emerging markets like Brazil or China, but mostly has jeopardized the survival of the single European currency. The effects of the crisis remain to be seen in those regions of the world, where their economies have begun to contract already.

No More ‘Miraculous’ Obama

The Holy President highlights his petty list of achievement that is way short than the one he filled with empty promises four years ago. The American dream has gone from owning a home to renting

By Erica Werner
Associated Press
February 21, 2012

This time around, President Barack Obama’s message can sound decidedly down-to-earth.

Four years after winning the White House, Obama is dealing with a different economic and political reality as he seeks re-election. He’s focused less on a lofty vision for overcoming divisions and remaking Washington, and more on the most basic building blocks of middle-class economic security: a job, a house, a college education for the kids, health care, money for retirement.

What Obama describes as the American Dream can seem a spare, fundamental aspiration, tailored for a campaign that looks to be fought over who is best equipped to safeguard the interests of middle-class Americans.

The question is whether it will convince, even as Mitt Romney and the other GOP presidential hopefuls mount a counter-argument that the president has made the American Dream harder, not easier, to achieve. And Obama must overcome the grinding realities many voters confront daily, even with the economy showing signs of life: no jobs, mortgages they can’t pay, dwindling retirement funds and college savings.

The president is betting that if he shows voters he understands their yearning for economic stability and security, they’ll reward him over Republicans he’s casting as just watching out for the rich – even though he hasn’t succeeded in fully reviving the economy so far.

“If you’re willing to put in the work, the idea is that you should be able to raise a family and own a home; not go bankrupt because you got sick, because you’ve got some health insurance that helps you deal with those difficult times; that you can send your kids to college; that you can put some money away for retirement,” Obama said recently in Cedar Rapids, Iowa.

“That’s all most people want,” he said. “Folks don’t have unrealistic ambitions. They do believe that if they work hard they should be able to achieve that small measure of an American Dream.”

The goals can seem almost humdrum in comparison with some of the rhetoric from Obama’s 2008 White House campaign. But the message sounds made for the times, with the country emerging haltingly from recession, the income gap widening and unemployment stuck above 8 percent.

“He can’t run on change because he’s the incumbent, and he can’t paint too rosy a scenario because things aren’t that rosy,” said John Geer, professor of political science at Vanderbilt University. “He’s got to come up with a theme that appeals to voters, especially middle-class voters, alleviates their fears and gives them reason to believe the future will be better.”

The message also creates an implicit contrast with the portrait Democrats are trying to create of front-runner Romney as preoccupied with the concerns of the rich. But Romney is answering Obama’s message head-on, seeking a careful balance between sounding optimistic about the nation’s future and accusing Obama of destroying the American Dream.

Read Full Article…

Obama Tax Hikes will hit Retirees, Middle Class, Veterans, Medicare…

Associated Press
September 19, 2011

WASHINGTON (AP) — It’s not just millionaires who’d pay more under President Barack Obama’s latest plan to combat the deficit.

Air travelers, federal workers, military retirees, wealthier Medicare beneficiaries and people taking out new mortgages are among those who would pay more than $130 billion in government revenues raised through new or increased fees.

Airline passengers would see their federal security fees double from $5 to $10 for a nonstop round-trip flight and triple to $15 by 2017, raising $25 billion over the coming decade. Federal workers would face an additional 1.2 percentage point deduction from their paychecks to contribute $21 billion more for their pensions over the same period. Military retirees would pay a $200 fee upon turning 65 to have the government pay their out-of-pocket Medicare expenses. They’d also pay more for non-generic prescription drugs.

And it’ll cost corporate jet owners a new $100 fee for each flight.

The fees aren’t taxes. They’re charged to people who use government services or receive benefits such as taxpayer-subsidized health care, and they typically defray the government’s cost of providing a service. The fee on corporate jets and other private passenger planes, for example, would raise about $1 billion a year to help finance the cost of air traffic control. Recreational flyers won’t have to pay.

Many of Obama’s proposals are retreads from earlier budget proposals, including those submitted by his predecessors. Most have been rejected year after year. Some ideas, like requiring wealthier veterans to pay more for their health care, stir up opposition from powerful interest groups. Others, like the bigger security fee for flyers, seem too close to a ticket tax increase.

Administration budget documents describe the fees as savings.

But unlike Obama’s tax proposals, the new fees aren’t necessarily dead on arrival with Republicans. A group led by Vice President Joe Biden had tentatively agreed to increase the airline security fee before talks between the White House and Congress collapsed in June. The Biden-led group was also weighing an increase in pension contributions by federal workers, an idea that has riled organized labor and other Democratic-friendly interest groups.

“Why (would) the administration … propose a Social Security payroll tax holiday in its jobs bill, but simultaneously suggest a tax increase for middle-class federal workers?” asked Joseph Beaudoin, president of the National Active and Retired Federal Employees Association.

Another new fee would increase by one-tenth of a percentage point the fee that mortgage giants Fannie Mae and Freddie Mac charge lenders to guarantee repayment of new mortgage loans. The administration says the fee increase would add $15 a month to the monthly cost of an average new mortgage. Even without existing mortgages being affected, the fee increase would raise $28 billion over 10 years.

Some of the fees tilt toward the arcane. There’s a plan to save $3 million a year by developing an electronic records system for hazardous waste shipments. Another would produce $7 million more a year by giving the federal government a 50 percent share of receipts from geothermal leases on federal lands instead of 25 percent, with the remainder going to the states.

Another proposal would charge $4 an acre on non-producing oil and gas leases on federal lands, raising $1 billion over a decade. The idea is to prod energy companies to get their leases into production or give them up and allow others to develop them.

Derivatives Markets will continue to operate without oversight

3M and Cargill are on the list of corporations that asked to be exempted from recently passed laws.

AP

Treasury Secretary Timothy Geithner has decided to let companies continue to trade certain contracts used to guard against swings in currency values outside regulators’ view.

New rules require that many such trades happen more transparently, on exchanges where regulators can see them. But Geithner is exempting certain contracts used by companies to hedge currency rates.

The new financial overhaul law authorized Geithner to carve out such an exemption to stricter regulation.

Business groups argue that tighter oversight of such contracts would be costly and unnecessary. But critics, including some regulators, counter that the whole market for financial contracts called over-the-counter derivatives should face stricter supervision.

The value of derivatives hinges on an underlying investment, such as currencies, stocks or mortgages. Speculators who used over-the-counter derivatives helped fuel the 2008 financial crisis.

Sen. Carl Levin, who pushed for tighter regulation after the crisis, said Geithner’s decision might open the door for lax oversight in the future.

Treasury’s top markets official said the contracts already include many of the safeguards the new rules impose. Investors can find information on the price for each contract, for example. Some of the contracts are traded on electronic platforms, which are less likely to freeze up after an unexpected financial shock.

Imposing new rules would mean “introducing an additional process into what is a very well-functioning market today, and you would be putting more steps into the settlement process,” said Mary Miller, assistant Treasury secretary for financial markets.

Miller argued that even with the exemption, the market will become more transparent. Companies will have to report the contracts in real time, after they make a trade. The information will go to central databanks that regulators can see.

Still, the contracts, called foreign-exchange swaps, wouldn’t be subject to other requirements that experts say would make them more transparent.

The contracts that Geithner carved out account for about $30 trillion of the $600 trillion global market for over-the-counter derivatives, Treasury said. The new, tougher rules will apply to currency swaps, options and other contracts used for similar purposes.

Multinational corporations such as Cargill and 3M argued for the exemption. They said the new rules would have raised their costs, thereby limiting their ability to grow and create jobs.

Advocates of tighter regulation say closer oversight is needed at each stage of the process — before, during and after a trade. They say the exemptions will make some types of trades harder to oversee.

Michael Greenberger, a former official with the Commodity Futures Trading Commission, which is responsible for policing much of the derivatives market, disputed Treasury’s main defense of the exemption — that the contracts expire so fast that they don’t pose serious risks to the financial system.

“Within the next 60 months, there will be a systemic break in this market, said Greenberger, now a law professor at the University of Maryland.

The decision technically is a proposal. Treasury will accept public comments for 30 days before finalizing the exemption.

EU Dictators to Control National Budgets

Sovereign Independent

As reported in today’s Irish Independent, the EU will be given first option on whether to approve of Irish fiscal policy thus opening

If the theory of Super States is adopted globally, the countries will effectively loose independence, sovereignty, identity and liberty.

the way for another €3 billion of cuts in spending, no doubt in public services we all pay our taxes into. This is of course dictatorship in its most basic form.

When a nation state is no longer in control of its own finances, which have been handed over to an unelected cabal of appointed lackeys, then the nation state no longer exists. This is exactly the position which Ireland and every nation in the EU face today. Let’s be clear, there are no longer nation states. Taking over a nation’s finances is only the start. When we no longer have individual countries, with individual cultures, as they are rapidly being mixed into a standardised ‘brand’, the result will be that in a generation or two from now, we will no longer have any distinction between individual sovereign states which could be classed as cultural identity whatsoever.

This is not only undesirable to the native peoples of the nations of Europe but it is also detrimental to world culture as a whole. I would envisage a day when travelling abroad, if still permitted, will be no more of a cultural experience than travelling through ‘one size fits all’ airports and staying in brand name hotels. Every ‘experience’ will be standardised.

Sticking with financial control, why is it that our ‘elected’ representatives have sold us off to these pirates of finance whereby they have allowed an unelected, private organisation to dictate terms and conditions over and above our national governments as to what they will and will not plan for in their own fiscal policy to benefit the people of their nations? When did outside forces have any right to interfere with the internal finances of a nation state? Haven’t we witnessed many times in history the ‘economic sanctions’ imposed on nations? How about the recent example of Iraq which was spuriously, and ultimately dishonestly, accused of having weapons of mass destruction? The result of these economic sanctions was mass starvation and death of hundreds of thousands of innocent Iraqis.

I’m not saying it’ll come to that in Europe but at the same time when these criminals, and let’s not mince our words here, they are criminals, when they are allowed to impose what amount to economic sanctions on our country then we are in for extremely hard times ahead with the eventual result being mass poverty across Europe.

What then for the EU?

It clearly will not have worked as it was supposed to so why would we still want to be part of it?

Why would any nation want to be part of a criminal organisation which has gone out of its way to impoverish the ordinary peoples of what were once independent nation states whilst at the same time destroying cultural identity?

The powers that be insisted and repeated their lies that the single European currency would solve all of our financial troubles forever. That has obviously not worked either and indeed has brought us closer to the brink of utter catastrophe in terms of our financial security.

But of course, that was always the intention of the European Union. Its job was always to amalgamate all the nations of Europe under their control so that when the time was right, like now, they could collapse every nation in the Union to achieve their ultimate goal of bringing into being the single European Soviet Union Superstate. This was finally achieved after the illegal and blatantly fraudulent 2nd Lisbon Referendum in which the Irish people were robbed of the last elements of national sovereignty thus plunging the other members of the EU into the new European Soviet Bloc with all rights and rules being dictated from Brussels.

The European Parliament was overnight given the status of a National Superstate, with all the powers of a government over the 500 million people of Europe, with only 27 unelected Commissars deciding our fate.

Whilst those politicians pushing for a ‘YES’ vote in the bogus referendum celebrated a victory before the first vote was counted, they never told the people that they had effectively sold them into slavery to a foreign power, namely the European Union; a European Union that have steadfastly refused to submit its own accounts for scrutiny, to any one of the nation states funding it, for over 15 YEARS!

Why have we allowed, what is obviously a corrupt organisation, to take over our lives to the extent that they decide how our tax money is to be spent? No doubt a lot of it will be going into the grubby paws of these very same commissars who are dictating that we the people need to cut back on everything from energy consumption to foreign holidays and even what foods we will eventually have to eat as GMO crops are rolled out across the continent.

I was never asked about any of this in my entire life and certainly never voted for any of it.

If you voted ‘YES’ for the Lisbon Referendum are you happy with the results so far?

Do you have one of those mystical jobs that were promised by every major political party at the time?

Do you still have the job you had then or are you one of the close half a million officially unemployed people in a country of approximately 4 million people with a workforce of less than 2 million?

That’s a 25% unemployment rate folks!

Do you have the security we were promised even though what security they were talking about was never discussed?

Financial security is the bedrock of any civilised society. This doesn’t necessarily mean monetary security. That is simply a red herring and a fraud in itself being perpetrated on humanity since the first banker lent to the first borrower thousands of years ago.

No, ‘financial’ security comes in many shapes and forms. The main concerns for human beings since the beginning of time have been firstly, shelter whereby we need some form of a home to protect us from the elements and to raise our families. The second basic element is of course good healthy food combined with clean water. Some kind of health security is also essential although good healthy food and clean water go a long way to preventing any health problems in themselves.

Every person in this country could now be living in a home, perhaps not the ideal home, but a home nevertheless, if the wads of cash given to private corrupt banks had simply been given to the people via payment of mortgages and personal debt to the extent that the country could have started with clean slate so to speak whereby we could then have started creating our own independent monetary system in whichever form that took.

Why then have we borrowed billions from private banks simply to hand it over to other private banks which the taxpayers of Ireland have to pay for and who will now have to live in poverty for generations?

Why are our politicians not on trial for ECONOMIC TERRORISM and TREASON?

At this stage in the game it is probably too late for any intelligent debate from any intelligent political figure because let’s face it, they are extremely hard to find despite the claims of the establishment that we pay politicians so much money to attract the best minds in the country to the political process.

Does anyone seriously think that we have the best minds in politics? If that were indeed the case we wouldn’t be in the mess we’re in would we?

It’s about time the public woke up to the fact that they have been duped all their lives and in generations prior to that. It’s a bitter pill to swallow and it does take an element of personal courage to admit, not only to yourself that you have been conned, but also to tell other people that they’ve been conned too.

Firstly they will ridicule you, secondly they’ll shun you until eventually something will happen to them personally which will dispel any doubts in their minds that something is seriously wrong in society, not only in Ireland, but across the globe. When innocent human beings are being blown to bits in an illegal war which has been proven to have been started using lies and deception, one would like to think that that time cannot be far off. I won’t hold my breath though. The current ‘crop’ of ‘human beings’ seem incapable of empathy for their fellow man whatever the dreadful circumstances the victims find themselves in. We have in effect been utterly desensitized to the suffering of others with the ‘self’ being the most important being it seems in most people’s lives.

In terms of people finally accepting that we are all in serious trouble, let’s hope that it’s not the day they turn up at Tesco’s to find the shelves empty and starvation becomes a real possibility. This is not wild ‘conspiracy theory’. This is exactly how things were in the Soviet Union when millions, just over half a century ago, were allowed to starve to death by Stalin and his cronies whilst they lived in absolute luxury in a land of plenty for them.

The new European Soviet Superstate is riddled with so called ‘ex’ Soviet Communist Party members who were active in Eastern Europe right up to the day they became part of the European Union.

I don’t want to live in the Soviet Union or in, as the UN has pointed, the state we should all try to emulate, the People’s Republic of China.

Every human being in the EU and around the world has a basic right to live their lives free of restriction so far as they do no harm to any fellow human being or their property. This is the basis of common law which the vast majority of people adhere to. We don’t need ‘Big Brother’ diktats from anyone telling us what we can and can’t do, what licenses we need for this or that and how many children we’re ‘allowed’ to have.

I’m sick of it all and it’s about time that the entire human race extricated its head from the sand and got off its knees. We do not owe our lives to any state whether real or created. We are not slaves to be bought and sold at the whim of unelected bureaucrats in a puppet government far removed from any nation state.

Responsibility comes at a price but ultimately it must be a price worth paying if the alternative is so bleak.