Posted on 12/11/2010 3:37:38 PM PST by DeaconBenjamin
Between October 2008 and October 2010, the European Commission approved 4,589 billion euros, the equivalent of 45 years of Romanian GDP, of state support to banks. And this may not include all of the funding for financial institutions, because our overly generous Commission has not been too eager to count the cost of this policy. One thousand billion euros were spent in 2008 and 250 million in 2009. At the same time, the total for state support to all other sectors of the economy was only 73 billion (less than one sixtieth of the sum for banks).
The figure for state support includes grants, guarantees, asset relief and all forms of financial assistance offered to companies by public authorities, and sourced from public funds. And invariably decisions on sums to be spent in state support are taken far from public scrutiny, under conditions that are not competitive or transparent, by administrators that are not answerable to the general public. Without ever being consulted, European taxpayers have been dragooned into participating in the effort to rescue failing banks, and no questions have been asked about its legitimacy.
A state that throws our money into a black hole
But taxpayers are also citizens, and that means they have rights as well as obligations. Before rushing to the defence of banks on the verge of collapse and, in so doing, accepting liability for the risks associated in their shady dealings, citizens should make sure that their rights are protected, or at least ensure that there is some hope that their rights will be protected.
We agree to pay taxes because we recognise the need to provide funding for essential state systems: education, health care, law enforcement, the judiciary and defence. But if the financial sustainability of these systems is jeopardised, because the state has made it a priority to rescue failing banks, then we should no longer feel that the obligation to pay taxes still applies. We do not want to pay taxes to a state that simply throws our money into a black hole created by a financial system that is still guided by the slogan "greed is good."
Banks cannot and should not be protected
We contribute to social security systems because we expect that these systems will provide us with funds we will need if we become unemployed, or if we are unable to work, or if we fall sick, or if we need time off to have children, etc. These social services, which are financed from our contributions, are much more important than the need to save a financial system embroiled in a crisis of its own making, and which in any case will continue to skim off money from trading, currency deals, state support and all kinds of chicanery involving virtual money.
The banks and their creditors, and these include bond holders, should take responsibility for their bad investments. These people are risk analysis professionals, who know how to evaluate risk-benefit ratios and to take the necessary steps to minimise their exposure. They are constantly speculating on upward and downward trends, and if they assume positions where they may lose everything, they cannot and should not be protected.
Private individuals are another matter, because they do not have the same means as banks. And that is why we have enacted legislation to protect them from risk (as investors, savers, consumers and taxpayers).
"Too big to fail" did not intimidate Icelanders
States do not only owe debts to banks: they also owe a debt to their citizens. And the debt that is owed to citizens is more important, because citizens are in the majority. Just look at what has happened to Ireland — a country that refused to allow its banks to fail and bailed them out to the tune of 60 billion euro (thereby incurring a budget deficit of 32% of GDP). And what was the result of this initiative? The Irish state is now bankrupt and under the control of financiers, who are not accountable to the Irish people.
Compare Ireland’s fate with the situation in Iceland, which allowed its banks to go to the wall, and insisted that the banks’ creditors should take responsibility for their bad investments. The population in Iceland has not been as badly affected as the population in Ireland, even if it has suffered in the crisis.
Iceland even went as far as organising a referendum, so that its citizens could have their say on the rescue of the banks, and when it was put to a vote manipulative slogans like "too big to fail" did not intimidate the people. At the time Icelandic President, Olafur Grimsson, put it simply: "How can we oblige people to pay for mistakes made by banks?" And this is a good question, not just for presidents, but also for prime ministers and central bank governors, both in Romania and elsewhere.
Wow, I thought the issue in Europe was the survival of the Euro, not of the individual nation states.
The author is a professor of law at the University of Bucharest.
I don't know how it works in Europe but here in The United States we contribute to Socialist Security only because it is ripped from out paychecks before we even have a chance to cash it.
The unique thing about the Icelandic banks was that most of the deposits were from individuals and companies outside Iceland. The disappearance of this money was painful to others, but did not impact the Icelandic economy.
Now let’s look at the banks in the core European countries, France and Germany. All the big European companies keep their cash there. A failure in a few such banks would be immediately catastrophic; major corporations would be unable to meet short-term obligations such as payroll and rent, and would have to shut down operations forthwith. No government would stand for this.
Yes, just promise us a coffin free of charge.
Resolving the looming crisis requires thinking outside the box. In our history (prior to 1913), the survival of any particular bank, or all banks, was never a priority above the welfare of the People.
Allowing debt instruments and cupro-nickel tokens to become our only money was a reckless move, but the end is in sight.
The lurid rhetoric about "the end of everything" to describe the perfectly predictable end of (another) paper money system is ahistorical and stupid.
Six months after the banks collapse and the Fed is liquidated, we'll be up and running again with (hopefully) Constitutional money.
The dollar debts currently in existence are never going to be paid. The longer the inevitable is put off, the bigger and longer the crisis will be.
Where is our Andrew Jackson? Burn, baby, burn.
So?
Do you really believe that colored slips of paper and electronic ledger entries can act as money indefinitely?
What is there, in the history of the world and human nature, to make you believe this?
There is far too little education and discussion about the actual methodologies of the larger banks on this forum. Let’s pry the lid off this can of spiders.
You mean if I plug a couple of million in cash deposits into my Quickbooks, I'm not really a millionaire?
It says so right there in the balance box...
Maybe, maybe not.
However, I don’t think any country is going to volunteer to be the first place where fiat money collapses.
Did you happen to catch the thread here a little earlier about the banks not handing over precious metals on demand?
http://www.freerepublic.com/focus/f-chat/2641277/posts
There was another story here about the same thing a week or so ago.
IIRC, subject bank was USB in Sweden.
Why do some Republicans think the rich NY banksters like Goldman and AIG who participated in high risk bets and arbitrage on the housing bubble and ended up being bailed out by taxpayers and the Fed and China should get a tax cut? I’m not in that camp.
I believe a number of the head honchos that pulled the scams should be hanging from the gallows, not getting tax cuts. I totally favor ending the Bush tax cuts and starting to pay down the debt and paying for these two wars. No better time than now to get at it. I find it particularly outrageous to think Wall Street and the richest group in America needs another bailout.
No, it's better that you live for them. That way the interest gets paid.
Pretty soon, you can just xerox the money and fax it anywhere...
Then the government(s) involved should not stand for such a concentration of risk into one ill-accounted financial center.
A big bank that can walk into the houses of government and say “Bail us out or we take down the economy” should be treated as a financial extortionist and possibly terrorist, and dealt with appropriately. The first thing a government should do in that instance is take over the bank and remove all the officers of said bank, go through the books and determine exactly what the assets and liabilities are. This is effectively what we were doing during the S&L crisis of the late 80’s, and we got that cleared up relatively quickly. Sweden took over banks that were going to fail on them “with dire consequences” in the early 90’s, and they got the situation turned around in pretty short order.
What we have now are a bunch of extortionists pretending to be champions of “free markets” while they rob the taxpayers blind for private profit.
Reading “The Creature From Jekyll Island” reveals the fact that the banks run everything - not just the United States but the rest of the world, too. The whole system is designed to protect and fatten the banks, with taxing the people as the final bailout.
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