There is considerable doom in some quarters of an impending financial bubble. The first warning can be found here, where Joanne Nova discusses the looming derivative’s bomb. Here is a second column on a problem which, unfortunately, is above my pay grade. This is from the Citizen’s Electoral Council’s Craig Isherwood.
The CEC, with their e-mail post here:
European debt brinkmanship is Sword of Damocles over global financial system
The ongoing debt negotiations between Greece and the Eurofascists are like the mythological Sword of Damocles, a deadly blade suspended by a single hair above the heads of its potential victims—in this case, all of the nations in the global casino economy, including Australia.
If the EU Finance Ministers decide in Brussels next Monday to maintain their hard line against Greece, demanding a return to killer austerity and the abandoning of the Greek government’s plans to increase minimum wages and restore pensions—a “deep and immovable red line” that Greek Labour Minister Panos Skourletis insists will not be crossed—in return for loan extensions, the ‘Eurocrats’ may trigger a chain-reaction that blows themselves and the entire trans-Atlantic financial system out of existence—and Australia’s debt- and derivative-laden financial sector along with it.
Imagine a scenario in which the IMF/EU/ECB “Troika” refuse to negotiate with Greece, and instead clings to its demand that repayments of the ECB bail-out of Greece’s private banks be taken out of the hide of the Greek people; imagine then that the pro-sovereignty Syriza government of Greece calls the Troika’s bluff and defaults, removes itself from the Eurozone and perhaps the EU as well, and returns to using the Drachma. Even if you believe, as some in Europe purport to, that “contagion” from a Greek default could be contained, the Euro would be doomed the moment Greece walked out.
This is certainly weighing on the minds of leading bankers. Take Hung Tran, executive managing director of the Institute of International Finance (IIF), for example, who stated the case succinctly to London’s The Telegraph on 2 May, thus: “there’s a whole range of political ramifications in terms of market expectations if the euro proves to be reversible. The natural question is: who will be next?” Tran then voiced the fear that few, if any, of his peers had heretofore dared express: “If Greece exiting the euro area severely strains its relationship with the EU and the West, questions will arise about the alignment of Greece in terms of foreign policy, security policy and so on, and the whole cohesion of the western alliance would be put in doubt.” To those in Europe who favour sovereignty over subjugation and would prefer to avoid a third world war, this can only be good news; but that a key officer of the “bankers’ cartel” that comprises nearly 500 of the world’s largest financial institutions—including Australia’s Big Four, Macquarie, the Future Fund and others—would come out with this in public indicates just how close to panic the self-styled elite of world finance truly are.
Meanwhile in Australia…
Contrary to popular delusion, Australia’s banks are by no means the strongest in the world. They survived the GFC by luck and a government guarantee rather than by good management, and since mid-2008 our country’s net foreign debt has risen by over 44 per cent, from just under $600 billion to over $865 billion, $639 billion of it in the private sector. The biggest problem, though, is the banks’ off-balance sheet business (i.e. derivatives gambling). Under the guise of ‘hedging’ against the risks of current market conditions, Australia’s banks have been allowed to accumulate a $27.77 trillion pile of derivatives contracts, double the pre-GFC level. Among these are $6.77 trillion in foreign-exchange derivatives—an order of magnitude greater than the net foreign debt itself. Now ask yourself: what happens in the event of a Euro-panic if everyone holding such contracts tries to close them out at once, in the same direction? The world’s largest private banks, including ours, would implode virtually overnight. There is also the obvious question of what to do with potentially hundreds of trillions worldwide in Euro-denominated commodities contracts, bonds and derivatives if the Euro, one of the world’s major reserve currencies, ceases to exist.
It is not that the IIF bankers suddenly care for Greece’s plight; what has them so spooked is that for all of the Troika’s bluster, it is Greece, not the EU, that is negotiating from a position of strength. The Syriza-led government’s dedication to Greek sovereignty and refusal to toe the EU’s anti-Russia line has led naturally and very, very rapidly to Greece increasingly turning away from the doomed trans-Atlantic system and into alignment with the BRICS-led global renaissance now taking place. When Greek PM Alexis Tsipras travels to St Petersburg in June, he may indeed (as many have speculated) request financing from the BRICS New Development Bank if the EU decides at Monday’s meeting to shut Greece out in the cold, but paying off immediate debts is not the purpose of Greece’s contacts with Russia, China, Egypt and other non-EU countries; rather, as Energy Minister Panagiotis Lafazanis recently told Greek daily Kathemirini, Syriza intends that Greece, as the link between three continents, develop itself to become a major hub of China’s world-spanning ‘One Belt, One Road’ initiative, and to do so by “following an alternative strategy that is beyond the dogma of Euro-Atlantic subjugation”.
For so long as the rest of the EU member states continue to follow that dogma, they deny themselves the only course of action by which they themselves can become free nations once more. Australians face, and have always faced, that same choice: will we stand resolute as does impoverished, austerity-ravaged Greece, stare down the IMF, ECB, EU, London and Wall Street, and finally assume our rightful place in a new, just order of sovereign nations co-operating in a common purpose; or will Australians, with our vast territory, virtually unlimited resources and powerful, though idle, technical capability, continue to cower in submission to those who would destroy us, and risk destroying the world, to preserve their own power? If the EU gambles and loses on 11 May, that decision will be upon you sooner than you think.
I have read that pensioners have already started a run on Greek banks. The US recession is now in it’s 6th year, buoyed only by fudging the figures, which cannot go on much longer. The real US story is in the huge increase in food stamps and the huge reduction in the work force.
Australia probably wont fare well, following the previous Labor/Green’s own debt bomb, which they have failed to help draw down in proposed budget measures from last year.