Global Economic News
HSBC Official: Turn on the Money Presses
Nov. 24 (EIRNS)Describing the primary problem facing the global financial system as "a shortage of money," HBSC managing director of economics Stephen King, writing in his column in the London Independent today, asserts that the solution "has to be monetisation. The printing press has to be turned on."
"[T]he financial crisis is mutating.... It is fast becoming a crisis of liquidation.... we're edging toward a world of deflation," King says, adding that "the overall volume of lending is inevitably coming down" and that "companies, households and investors fear a shortage of cash. Any cash they've got, they hang on to. Any cash they need, they raise via the sale of other assets which can be swapped into money. Panic takes over."
That is a fair description of the reverse-leverage blowout now under way, which is centered in the multi-quadrillion-dollar derivatives market. The problem facing the derivatives speculators is that there is nowhere near enough money in the world for them to cash out their fictitious winnings. Whereas the obvious solution is to shut the derivatives markets down, King views the matter from the parasite's perspective, and demands that the central banks take charge and print as much money as necessary to cover the derivatives claims.
King admits that his policy could cause "hyperinflation, as Germany's Weimar Republic discovered in the 1920s and Zimbabwe has discovered today," but dismisses that danger by arguing that "these, though, are exceptional times" (unlike 1923?). King further states that "to make the policy credible," it "should not come from finance ministers but, instead, from the world's central bankers."
In effect, King is demanding that the central banks save the speculators by printing as much money as is necessary to save them, leaving it for the rest of the citizens to pick up the tab. This is a prescription for both a global bankers' dictatorship and savage, crushing austerity. No wonder HSBC is calling for a new Hjalmar Schacht (see "Brutish Empire Calls for a New Hjalmar Schacht," EIR, Nov. 28, 2008). The old fascists need a new Nazi to implement their plan.
Greece Kills Its Sick To Pay Public Debt
Nov. 28 (EIRNS)The Paris daily Le Figaro's correspondent in Greece reports today on the rapid destruction of the nation's health-care system; the health-insurance system was virtually shut down after the government decided to cut off all public funding one week ago.
Hospitals and pharmacies are running out of cash to operate. Hospitals, managing their Eu4 billion in debt, and having to pay for supplies, decided to reduce their service to a "minimum service." Several urgent medical interventions are delayed every day, since surgical suites sometimes lack such basic equipment as gloves and syringes. The companies leasing orthopedic equipment are facing over Eu700 million of unpaid debt. As a result, they decided to confiscate the equipment and remove it from the hospitals! U.S. Ambassador to Greece Daniel Speckhard threatened that U.S. pharmaceutical companies might leave Greece if they don't get paid.
The ugly truth is that the Greek government stole the money from the Health Ministry to repay part of Greece's public debt, one of the highest in Europe, at 93.8% of GDP! Other ministries, such as education and environment were also looted.
The entire health system is being taken apart. Greek doctors reportedly will launch a protest action soon, since, starting Dec. 1, they are obliged to have patients make immediate and total payment for their services.
World's Largest Shipbuilder Sees Orders Drop 57%
Nov. 23 (EIRNS)South Korea's Hyundai Heavy Industries Co., the world's largest shipbuilder, said Nov. 20 that its orders in October were down 57% from a year earlier.
The company said it did not receive any new orders for ships this month. Contracts for marine engines plunged 99% to $2 million last month, and those for construction equipment fell 35% to $169 million. Orders for offshore oil platforms more than doubled to $15 million.
South Korea, which is home to seven of the world's ten largest shipbuilders, has seen shipbuilding orders virtually disappear.
German Government in War with Private Banks
Nov. 28 (EIRNS)For reasons not entirely clear yet, the government of Germany has been driven into a state of warfare with the private banksthe most spectacular aspect of that being the Nov. 25 attacks by Chancellor Angela Merkel on the banks' credit boycott of Mittelstand firms, and her threat that if the banks don't change, the government and industry might consider founding a new bank for industrial investments.
The fact is that the banks, led by Deutsche Bank, actually do have some liquidity but do not wish to invest even a minimal portion of it, but rather carry to the European Central Bank in the range of Eu200-220 billion daily (sometimes on a one-week basis), thus enabling the ECB to continue bailing out the banks and their hedge funds. In an interview with the Süddeutsche Zeitung today, Wendelin Wiedeking, the CEO of Porsche, attacked this insane banking practice.
Therefore, the German government should found a new national bank, or expand the operation of the government-owned Kreditanstalt für Wiederaufbau, say goodbye to the EU's Maastricht Treaty monster, and supply that new bank with capital so that it can begin granting long-term loans at low interest to the Mittelstand.
Iceland Backs Down to IMF
Nov. 21 (EIRNS)Iceland was forced into an agreement with the International Monetary Fund at great cost, but still upheld the principle of bankruptcy proceedings. On Oct. 6, Iceland was the only country in the world to implement a law to take over management of the banks without taking responsibility for their debts.
In the Letter of Intent to the IMF, which is the basis for the agreement, the government on Nov. 17 explained what was done: "The strategy for intervening the banks was driven by the need to secure continued domestic operations and downsize the banking sector to a level consistent with the size of the economy. To achieve this objective each of the three banks was split into a new bank and an old bank. The new banks included the domestic operations funded by local depositors. The old banks included activities in foreign branches and subsidiaries, mainly funded through the issuance of bonds and foreign deposits. Derivatives were left in the old banks. In each of the three banks, the FME [similar to the U.S. FDICed.] replaced the board with a resolution committee and named a team of professional auditors from three of the major international auditing firms to be in charge of a preliminary assessment about asset quality. In this regard, appropriate loan provisions were made in the new banks, bringing loan values in line with expected market values."
The IMF loan was only approved after Iceland assumed responsibility for some additional debts of the banks. The British and Dutch governments demanded that Iceland's taxpayers pay the depositors' guarantee for the Iceland-owned banks on their territory, which normally each country pays. The U.K., the Netherlands, and Germany approved an additional US$6.3 billion loan to Iceland to finance that. This principle could, however, backfire on Britain, whose banks have many more customers abroad.
Iceland will now increase its state debt from 29% of GDP to 109%. However, because of the bankruptcy procedure, the country escapes most of the bank debt, which was ten times the GDP, minus remaining bank assets.
But the IMF loan to Iceland is premised on a loss of sovereignty that could force Iceland to pay much more in real terms.
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