FacebookTwitterGoogle+RedditEmail

The $600 Billion Ripoff

by MIKE WHITNEY

European Central Bank president Mario Draghi is either a liar or a fool.  Either way, he should be canned immediately before he dumps more money into an EU banking system sinkhole.

What’s all the fuss about? Here’s a clip from Bloomberg that explains what’s going on:

“The European Central Bank said overnight deposits from the region’s financial institutions increased to an all-time high. Euro-area banks parked 452 billion euros ($591 billion) with the Frankfurt-based ECB yesterday, the most since the euro’s introduction in 1999 and up from the previous record of 412 billion euros a day earlier.

The ECB last week lent 523 banks a record 489 billion euros for three years to keep credit flowing to the 17-nation euro economy during the sovereign debt crisis. It lent the money at its benchmark rate of 1 percent. Banks are depositing excess cash back with the ECB at the overnight rate of 0.25 percent, incurring a loss rather than lending it at a better rate.

Barclays Capital estimates the three-year loans injected 193 billion euros of new money into the system, with 296 billion euros accounted for by maturing loans. Since the three-year loans started on Dec. 22, overnight deposits have jumped by 187 billion euros, suggesting banks are parking almost all the additional liquidity back with the ECB.” (“ECB Says Banks Increased Overnight Deposits to All-Time High”, Bloomberg)

Notice how the Long-Term Refinancing Operation (LTRO) was supposed “to keep credit flowing to the 17-nation euro economy during the sovereign debt crisis”?

How does that work when the banks are stashing every penny they borrow in an account at the ECB?

Like all central bankers, Draghi likes to talk about “the transmission of monetary policy”. So, tell me, how does hoarding hundreds of billions of dollars lead to another credit expansion? How does that even promote interbank lending let alone improve the broader economy?

It doesn’t; which means that Draghi either didn’t understand how bad-off the banks really were, or he lied about the LTRO to get his dodgy bank buddies a big-honking bailout. Either way, he should get the boot.

Here’s what you are not going to read in the newspapers. This is not a sovereign debt crisis. That’s baloney. Government debt has always been guaranteed. Until now. The decision NOT to guarantee government debt was a political decision, not an economic one. Governments’ always underwrite their debt because governments represent the collective interests of the people. And with sovereignty comes certain perks, like printing one’s own money if need-be. So, if a government like Italy gets into a jam and needs to either weaken its currency or lower interest rates; it can do-so by either printing more money or buying its own bonds to keep rates low. That means, there’s always some risk of inflation, but never any risk of default. And, that’s what matters, because investors don’t buy gov. debt to get rich; they buy it because it’s safe.

The scamsters at the ECB refuse to guarantee government debt because it’s not in their interests. What they want is a bigger share of the economy to go to big finance and corporate elites. And the easiest way to achieve that is by allowing bond yields to rise enough so the politicians can be blackmailed into doing whatever the banksters want. And we know what they want. They want more for themselves and less for everyone else.

This is Draghi’s game. He’s giving away the farm to his bankster friends and giving working people the finger.

Try to wrap your mind around the amount Draghi gave away just last week; nearly $600 billion! Apart from TARP, this is the biggest heist on record, and yet, people still can’t figure out what’s going on. I’ll tell you what’s going on. The people are getting fleeced bigtime. How much more do you need to know?

This is no “debt crisis”. That’s a diversion to make people think the problem lies with the states. But the only thing the states can be blamed for is surrendering the control of their own currency, which was a very big mistake indeed. There’s no way that one can protect one’s labor force or public assets, if they don’t control their own currency. That’s the big lesson of the present crisis.

But this was a bond bubble, pure and simple; brought on by easy lending, unregulated capital flows, and poor risk management. And now the bubble has popped, which is why the banks are sinking fast. They bought this crap (bonds) from Greece, Portugal etc. to make a few more bucks and failed to see the risks. And, they got burned. So what? That’s capitalism, right? “You pays your money and you takes your chances”. No whining.

But banks and bondholders are not allowed to lose money anymore, right? Even if they’re the ones who inflated bond prices to begin with, and even if they’re the one’s whose balance sheets are presently underwater due to their own stupidity. So, we have to change the whole system to accommodate them, which is why their agents–like Draghi–occupy all the positions of power, so reckless speculators won’t have to suffer the consequences of their poor choices.

This is what we’re up against; a small group of obscenely rich people who have totally rigged the system and who are grabbing more and more of the wealth for themselves while they preach austerity to everyone else.

Even so, it’s pretty amazing when people get ripped-off for $600B and it doesn’t even make the headlines.

 

More articles by:

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

July 26, 2017
John W. Whitehead
Policing for Profit: Jeff Sessions & Co.’s Thinly Veiled Plot to Rob Us Blind
Pete Dolack
Trump’s Re-Negotiation Proposal Will Make NAFTA Worse
George Capaccio
“Beauty of Our Weapons” in the War on Yemen
Ramzy Baroud
Fear and Trepidation in Tel Aviv: Is Israel Losing the Syrian War?
John McMurtry
Brexit Counter-Revolution Still in Motion
Ted Rall
The Democrats Are A Lost Cause
Tom Gill
Is Macron Already Faltering?
Ed Kemmick
Empty Charges Erode Trust in Montana Elections
Rev. William Alberts
Fake News? Or Fake Faith?
James Heddle
The Ethics and Politics of Nuclear Waste are Being Tested in Southern California
Binoy Kampmark
Slaying in Minneapolis: Justine Damond, Shooting Cultures and Race
Jeff Berg
Jonesing for Real Change
Jesse Jackson
The ‘Voter Fraud’ Commission Itself is Fraudulent
July 25, 2017
Paul Street
A Suggestion for Bernie: On Crimes Detectable and Not
David W. Pear
Venezuela on the Edge of Civil War
John Grant
Uruguay Tells US Drug War to Take a Hike
Charles Pierson
Like Climate Change? You’ll Love the Langevin Amendment
Linda Ford
Feminism Co-opted
Andrew Stewart
Any Regrets About Not Supporting Clinton Last Summer?
Aidan O'Brien
Painting the Irish Titanic Pink
Rob Seimetz
Attitudes Towards Pets vs Attitudes Towards the Natural World
Medea Benjamin
A Global Movement to Confront Drone Warfare
Norman Solomon
When Barbara Lee Doesn’t Speak for Me
William Hawes
What Divides America From the World (and Each Other)
Veteran Intelligence Professionals for Sanity
Was the “Russian Hack” an Inside Job?
Chandra Muzaffar
The Bilateral Relationship that Matters
Binoy Kampmark
John McCain: Cancer as Combatant
July 24, 2017
Patrick Cockburn
A Shameful Silence: Where is the Outrage Over the Slaughter of Civilians in Mosul?
Robert Hunziker
Extremely Nasty Climate Wake-Up
Ron Jacobs
Dylan and Woody: Goin’ Down the Road Feelin’ Bad
Dan Glazebrook
Quantitative Easing: the Most Opaque Transfer of Wealth in History
Ellen Brown
Saving Illinois: Getting More Bang for the State’s Bucks
Richard Hardigan
The Media is Misleading the Public on the Al-Asqa Mosque Situation
Matthew Stevenson
Travels in Trump’s America: Memphis, Little Rock, Fayetteville and Bentonville
Ruth Fowler
Fire at Grenfell
Ezra Kronfeld
The Rights of Sex Workers: Where is the Movement to Legalize Prostitution
Mark Weisbrot
What Venezuela Needs: Negotiation Not Regime Change
Binoy Kampmark
From Spicy to the Mooch: A Farewell to Sean Spicer
Wim Laven
Progress Report, Donald Trump: Failing
Weekend Edition
July 21, 2017
Friday - Sunday
Kevin Zeese
Green Party Growing Pains; Our Own Crisis of Democracy
Jeffrey St. Clair
Red State, Blue State; Green State, Deep State
Paul Street
“Inclusive Capitalism,” Nancy Pelosi, and the Dying Planet
Anthony DiMaggio
Higher Education Fallacies: What’s Behind Rising Conservative Distrust of Learning?
Andrew Levine
Why Republicans Won’t Dump Trump Anytime Soon
Michael Colby
Ben & Jerry’s Has No Clothes
FacebookTwitterGoogle+RedditEmail