Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
The financial collapse has come to threaten the international position of the Anglo-American oligarchy. As my former boss and economics editor Chris White wrote yesterday:
The foundations of the United States international position as a whole were threatened in perhaps the most profound way ever. I could not begin to take on the idea of thinking about what the world would look like if the US between the summer of 2008 and the winter of 2010 went through the same kind of process the former Soviet Union did.


On the day that a new American President was inaugurated, the Lords of the City of London decided to quietly announce in their newspaper of record, the Financial Times, that there are about to be major shifts in policies and practices.

On Monday the UK government declared total war on the economic crisis, and not a moment too soon. A long phony war ended abruptly with the financial system’s near-meltdown in October. Now, in the next phase of the crisis, the government is thankfully using a full arsenal of ammunition.

The October intervention was designed in haste but succeeded in staving off a collapse of the banks. What it failed to do was to restart lending. The credit crunch has now worsened to the point where the real economy is harming the banks, not just the other way around. . . .

The government must immediately get to grips with the banks’ balance sheets and make sure that its remedies are indeed large enough. It must stand ready to recapitalise banks further, even to the point of full public ownership of banks that turn out to be insolvent.

Even a perfect bank rescue will not by itself end the crisis; the problems have spread too widely. It can, however, ease the credit crunch and help fiscal and monetary policy revive the real economy. Letting the Bank of England trade corporate securities gives it a tool later to engage in quantitative easing if further interests rate cuts are not enough. In total war, full mobilisation is the only way. (Emphasis mine)


This is the EDITORIAL of the Financial Times ?!?!? My God, the world has shifted on its axis. The fine "gentlemen" of the City of London have actually been forced to look over the edge of the precipice into the fiery furnace of the abyss, and now realize they must allow the real economy to be rebuilt. Because, as the FT editors write, "the real economy is harming the banks." The plebes have been so impoverished, they've stopped buying! Worse, they've stopped borrowing, too!


The key to understanding this radical shift in the oligarchy’s thinking is to realize that this is not just about economics, or saving their financial power. This is about world domination and the continued existence of Anglo-American power.

The expectation was the trillions of dollars and pounds thrown at the crises since October would stabilize Wall Street and the City of London, allowing equity markets to bounce back, and markedly improving the banking situation.

But these crises are much, much worse than 1929, because the shadow banking system had been allowed to create assets that were completely fictitious (as Michael Lewis described in his Portfolio article last month). We’re talking about assets – trillions of dollars of financial derivatives, especially the credit default swaps explained by Lewis - that were not just inflated, but completely fake. Derivatives had grown to some $160 trillion – how could that ever be bailed out? Oh, but they tried, and now are forced to admit that it can’t be done.  

So, the equity markets did not bounce back. The banking situation has actually gotten worse, as the collateral damage done to the real economy has become so severe that it is actually curtailed demand for credit; i.e., "the real economy is harming the banks." Wall Street and the City of London are now in worse shape than they were in October. So now, in desperation, they are willing to jettison the very tenets of their economic theology. So, suddenly, there are calls from everywhere for nationalizing the banks.

As Jerome notes, Sterling has collapsed to a 25-year low against the dollar. The financial giants of the City of London have become almost worthless. Britain is reportedly two days away from running out of natural gas. In other words, the country is BANKRUPT. Not just one or two or three banks, but the entire effing country. Which threatens to dislodge Britain from the league world powers. Why, Argentina could conceivably become more powerful than Perfidious Albion in just a few short years!

Even worse, the same financial follies have also destroyed the United States. Russia’s recent stoppage of natural gas shipments to Europe may suddenly have caused the Lords in London to realize that the financial collapse of Wall Street and the City of London opens to door to the emergence of several other Great Powers, such as China, or India, or Brazil (did you know that the largest machine tool builder, now, in the U.S. is actually the Brazilian company Romi?), or Russia. Good Lord, even those inscrutable Japanese might break out of their shell!

No, this is about much more than the financial collapse now. This has become a desperate struggle by the oligarchy to maintain basic control of the world economy and its resources. This has become a fight for existence itself.

by NBBooks on Thu Jan 22nd, 2009 at 09:53:18 AM EST
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I noted a while back that we would be seeing epiphanies of the existing system with increasing frequency, but this is in a class by itself!  This would be the most hilarious comment to date, were the implications not so dire.  Instead it serves to highlight the extent to which narcissistic self absorption has enveloped the elite responsible for presenting an "all-is-well" image to the public.  It is as though when Toto tugs back the curtain the wizard is not some pathetic old man but rather is some repulsive, uncaring alien creature.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 22nd, 2009 at 06:07:37 PM EST
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