German banks were obstacles to the spread of the Anglo disease, so their destruction was part of the game plan;
Sounds a bit conspiracy theoryish. Surely they adopted the anglo disease when they started investing in dodgy US derivatives?
See also: How the ECB's fig leaf has completely withered away | Anatole Kaletsky: Economic view - Times Online
However, if we look at the facts, the transatlantic difference is less clear. In fact, the ECB is printing money even faster than the Fed is. It is also supporting fiscal policy more explicitly through debt monetisation and taking much bigger risks with its credibility and solvency. The first point is illustrated in the chart. Since mid-2007, central banks have expanded their total liabilities (the broadest definition of what it means to print money in the modern world) by $1.2 trillion in the US and by $1.5 trilllion in euroland. Given that GDP is 12 per cent bigger in the US than in the eurozone, this means that the ECB's printing presses have actually been running 50 per cent faster than the Fed's.
I agree to that; then again, they could do so after some loosening of rules. (Where the looseners of rules might have been dupes seduced by the Anglo finance propagandists themselves.) *Lunatic*, n. One whose delusions are out of fashion.
Investment banks could not compete with such rates and could not sell bonds and other products to German companies. So they got the Landesbank public status to be labelled as unfair competition, and to be dismantled.
Thus the Landesbanken could no longer loan cheaply, as their own funding cost increased, and they then lost markets to investment banks. Forced to go look for other sources of income, they went to invest their (more expensive) money into riskier stuff.
Thus, to open German markets to investment banks (mostly US and mostly based in London), a cheap and reliable source of funding for the German economy was eliminated. In the long run, we're all dead. John Maynard Keynes
It seems that Globalisation is something of a one way street where the imperial power is never the loser...
Bingo. But what exactly is the imperial power? I would submit that in the US it is not in DC.
As for Jerome's conspiracy, don't dismiss it too quickly. Consider, the Landesbank deregulation came well after the first rounds of UK deregulation under Dame Maggie had failed to produce the advertised results and Garn-St. Germain had utterly destroyed the US thrift industry, and it was contemporaneous with the greatest cave-in to libertarian speculative finance theory ever, namely Gramm-Leach-Bliley (There were a few of us at the time who warned what would happen, but most of us were hicks from the US Midwest, so what did we know?). Now that all of those theories have generated nothing but epic fail and the destruction of local sources of capital for the benefit of major banking houses, we know that the Austro-Chicago "brain trust" that sold this snake oil was in fact shilling for the Ueberklass. I doubt there was a unified conspiracy of Dan Brownian proportions, but there were a lot of people who all belonged to the same country clubs and who were all working toward the same goal, namely controlling as much of the money supply as possible to the detriment of those of us who didn't belong to those country clubs.
As for the condition of the European banks, I honestly don't see how they can be worse off than the US banks, given the latter remain wholly addicted to the various forms of fraudulent financing they've ginned up over the last quarter-century.
The former is supporting sovereign fiscal deficits, which may or may not be a good idea depending on circumstances. The latter is bailing out the people who used to hold the ShitpileTM at the expense of the full faith and credit of your currency. I am not sure I can see any possible scenario in which that is a good idea.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
... the risk is on the asset side.
If the assets are sovereign debt, they can certainly be used to drain reserves out of the system again should the finance sector (unexpectedly) get back on its feet. It is a straightforward technical operation that central banks worked out long ago.
If the "assets" are notional valuations of chickenshit that could only be sold at a fraction of their book value, and which, indeed, the Central Bank dare not sale in order to avoid pressure to value them closer to market value ... then there is the possibility that normal monetary policy will run down their genuine income generating assets and facing a trade-off between pursuit of monetary policy and sacrifice of policy independence, if they have to go cap in hand to the fiscal authority for funding of the central banking system itself. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
If the "assets" are notional valuations of chickenshit that could only be sold at a fraction of their book value, and which, indeed, the Central Bank dare not sale in order to avoid pressure to value them closer to market value ... then there is the possibility that normal monetary policy will run down their genuine income generating assets and facing a trade-off between pursuit of monetary policy and sacrifice of policy independence, if they have to go cap in hand to the fiscal authority for funding of the central banking system itself.
Just as the damage to the financial sector done by the bubble is realized when the bubble pops, the damage presently being done to the Fed balance sheets during the recession will be realized when the recession passes.
Which could of course be one to four years from now. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
