söndag 19 februari 2012

PIIGS debacle will highlight the risk aspect of sovereign states financing

In the old days the bond markets used to be the real safe haven for investors. Solid returns on risk free papers. The basic logic here is - anyone lending to a sovereign state will never lose money as there always is this wonderful resource to tap out. You know that aspect of a free market apparently everything hinges on – the taxpayer.

The taxpayer not only guarantees your investment as a bond investor it also guarantees all needs to save a financial sector in need via bailouts. And in this frenzy to privatize sure enough the financing of these sovereign states has been 100%last couple of decades via the private finace sector. This as in the US via the implementation of the FED and also in Europe via the so called Maastricht criteria whereby sovereign states not are allowed to create their own credit (without interest).

Instead all central banks merely act as lobbyist for the private commercial banks as it is to them they turn in order to finance their debt and in that process then all are charged with interest. Only issue here and now is that were in the midst of a process that ultimately will result in that the basic foundation making all of this possible – the taxpayer – start to or in many cases already has been more than tapped out. Tax payers in OECD countries are totally not only burdened with massive amounts of private debt but in addition to this they are all citizens of sovereign states all carrying what only can be described as utterly insane levels of debt.

In short the tax payer is no longer physically able to guarantee any further amounts of debt and thus as credit agencies downgrades the ratings for sovereign stated the interest burden of each country increases.

Enter austerity. But even here it is becoming evident that you can not in any way possible save your way out of a debt burden as the social costs and given the amounts of debt and the debt saturation currently at hand. Its also becoming evident the outright looting that is unfolding in front of our eyes as the private financial sector now with all means possible tries to grab all tangible assets worth mentioning from these debt burdened citisens as well as countries. These assets then are in all cases assets owned and already paired for by the taxpayers.

So the taxpayer that already paid for e.g. their utility company via tax funding is now as he as a taxpayer has been the guarantee for the private financial sectors excessive lending without any limit finding himself in a situation of being dumped upon all the debt as well as ripped of all his assets.

Given all of this the risk for sovereign states to involve the private financing industry in any aspect of their future financing will simply become political suicide. What this financial crisis thus has unveiled is the extent to witch the looting has been going on. As long as it quietly was made and then without any excesses these hidden costs has now and with the crises been brought out in bright daylight evident for all to see.

As sovereign states now one after the other, and as the tax payer will be unable to either carry any further debt and at the same time will revolt politically against them doing so, will default it will become evident for all in the private financing sector the actual risk in the bond markets.

And this now is a risk that will be highlighted to such extent e.g. via hiked interest rated that it will become evident for everybody, financing of a sovereign state cannot be made via the private finance sector.

So when all current debt will be cleared of by simple accounting methods (you cannot pay what is impossible to pay) and where more and more people will see the benefit of following Island example of simply refusing to pay the foreign banks and not allowing then to steal their recourses and wealth in bright day light, no body politically sane will look at the private financing industry for funding.

With this then sovereign states will start to implement one after the other financing solutions based on the principle they themselves create their own and interest free credit as a means to fund real infrastructure large scale project and thus getting their people in real work.

As the amount of interest paid for on the debt will be negligible well then the need for an income tax will be significantly reduced. At the same time with significantely reduced interest charges forcing the ecomomy in to a vortex of inflation ordinary peoples puchasing power will be maintained with a stable currency and at the same time as their savings will be protected.

The end result of all of this then will be people having real work and a prosperous economy as people with incomes will be able to use their income on consumption and savings as they are rebuilding their country infrastructure vice.

Now is the time to follow Jesus example and throw out the money changers out of the temple!

Bill Still

No More National Debt

Stephen Zarlenga
works with Rep. Kucinich on The American Monetary Act, designed to resolve the banking crisis. This clip from a longer film defines 3 steps: In addition to nationalizing the Fed. and removing the power of banks to
create money as debt out of thin air, the Act reminds us of the Constitution, Article I, Sec. 8, that states that our government has the sovereign power to issue money and spend it into circulation. Whatever you think about point 3 - the government could not possibly do any worse than the banks.


In the above Zarlenga discusses the FED relationship vs the Treasurie but rest assured the same kind of issues prevails relative how now central banks act in Europe. Listen here to what proffessor Hudson says at 06:30 about real choises and also at 09:30 about the Maastricht criteria and the ability of European Central Banks to act as Central banks:

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