Stage Two of Europe’s Credit Crisis: An Internal Bank and Sovereign Debt Crisis Combined

Published on Global, by Bob Chapman, July 20, 2010.

The crisis affecting Europe is nothing new. It goes back three years and the beginning of the credit crisis, 60% of the subprime CDOs, collateralized debt obligations, had been sold to European institutions. These were the mortgage bonds, which contained a variety of toxic waste, which the rating agencies, S&P, Moody’s and Fitch, in collusion with banks and brokerage houses, had sold as AAA bonds, when in fact their ratings should have been considerably lower. The holders of these bonds in many instances became insolvent and had to be bailed out by capital injections from central banks, most of the funds were lent by the Federal Reserve. 

These debt problems, as in the US, have never been resolved. Those companies and institutions have over the past three years been allowed to keep two sets of books … //

… We believe the austerity program will work long term, but in the interim Europe not only faces a giant debt to service, but also could easily fall into depression. If this happens the profits needed to help banks recover won’t be there. The bottom line is Europe’s banks, like those in the US and UK, are in a box and they cannot get out. Almost all of them are insolvent and no matter what they do there is no easy way out. Now you can understand why another war is being prepared. It is to be a major distraction from these terrible economic and financial problems.

If Europe thinks for one second that devaluing the euro deliberately is going to solve their problems they are mistaken. Their goods may be 15% cheaper, but if other economies are in a tailspin, they are not going to be able to be buyers. The US and the UK are good examples.

The ECB has been progressively facilitating the purchase of state bonds to cut budget deficits, which is really no solution to the problem. The big floaters of these bonds have been those in the deepest of trouble, who cannot pay the interest and principal. Again, European banks that are insolvent continue to create money out of thin air as all within the fractional banking system do. The easy money still flows, as again the day of reckoning is thrown into the future. Every bank in Europe is probably going under. There is no way for these debts to be repaid. The game being played in Europe is different than that being played in the US and UK, but in the end they are all going under.

Stage two of the credit crisis is well underway having been kicked off by our elitists in Wall Street, banking and Washington. You might call this blow back from the delaying tactics used over the past almost three years. As you can see, policymakers do not have things under control. Greece is failing and the exposure of the other PIIGS brought a new dimension to the frailty of the world financial system. (full text).

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