LTRO: Criminal Political Behaviour by Merkozy with Van Rompuy as the Marionette

Wednesday, 29 February 2012 |

John A Morrison

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Think about it, as LTRO triggers on the leap day TODAY, why is the Central Bank being forced to do this against its will? The European monetary transmission mechanism doesn't have an IMF-Equivalent; so not only is the euro a political mishmash at the concept level its a stool (sic) on two legs at the practical institutional level.

EU Money supply is at rock bottom, the pump at the 'heart' of European money supply is on life support.

That 'life support' is LTRO from the Central Bank, right? The Central Bank should be independent right? It shouldn't be pumping up the very thing that it is chartered to control, that is perversity by definition right?

So the obvious solution is to add another institutional leg to the EU stool as Keynes advised at Bretton Woods for the world system & has been proven to work (of sorts) for 60 years or more! The obvious solution is that EU political power should create an EU-IMF? The IMF is already piecemeal involved as a partner in Greece, Portugal and Ireland! The other partners in the IMF dont like the way the EU is going about this one bit; listen to Geithner or Osborne or ask yourself why David Cameron visits Stockholm but has nothing to say to Rehn or Juncker?

The easy proposition for Juncker, Rehn, Barosso and Van Rompuy, which Osborne must be suggesting in the ante-rooms of the Justus Lipsius (stay with me!) Why not add another cylinder to the EU monetary engine in the form of a Stabilisation Bank?

If the system is financially or physically unconstrained we all know a twelve cylinder engine is better (in the sense it provides more oomph) than a four cylinder one, right? One basic conclusion to the mathematics of systems is that if you are physically unconstrained, adding another cog-wheel to a system of flows increases the velocity of transmission and makes the stable stock more efficient (to summarize quickly)! So why wont the European power nexus create a stabilisation bank by merging the other puny banks the European commission already owns as a foundation for the balance sheet of the new institution?

I will tell you why I think they wont do the obvious!

Van Rompuy has the support now of Merkel and Sarkozy for a second term even though a 5 year old could tell you he personally almost single handedly wrecked the European economic system in the spring of 2010 as a result of telling lies! Why is this happening? Because Merkozy know he is an idiot and they can control him like a marionette. What has that got to do with not doing the obvious which is creating a European Stabilisation Bank (ESB) to allow the Central Bank to retain and maintain Monetary integrity and independence?

Well, Germany and France don't want to do the right thing for European citizens because if they created an ESB then the IMF would HAVE to have a shareholding. If the IMF had a shareholding that would give the US, Sweden and worst of all the United Kingdom an equity stake in the institutional backstop of the euro. It would be tantamount to admission (of what we all know already) that the euro has failed. So Merkozy is compromising the ECB, propping up useless bankers & keeping an idiot in place at the apex of power in the EU just to avoid doing the right thing (an EU-IMF, a stabilisation bank); all because Merkozy hates Britain & the US (& Sweden) or as a diplomat said to me yesterday;-

'Merkozy has some love for them but not that much';

That is criminal political behaviour, Van Rompuy is their weakest point, he should be impeached, you have the evidence! Merkozy is on a one-track monorail (I know a Mono Rail is one track); that is POWER, POWER, POWER; that is all that matters, its almost medieval, the Greeks can starve in bus-shelters and the Irish can vote against the fiscal compact to unlink themselves from Europe and float off into the Atlantic but all Merkozy cares about is 'domination' POWER!

Van Rompuy, Barroso, Rehn and Juncker, with their snearing bumbling jokes are complicit in this, when it is their duty to represent ALL European citizens, they are lickspittle lackeys of the dominatrix Chancellor and the weasel President. Throw the lot of them out.

LTRO will fail, mark my words and we will be back in another crisis this year when the LTRO bubble unwinds, if I can see it, then they can see it, they are playing games, re-arranging deck-chairs, they live in a solipsistic private language and to hang with the rest of us!

REFERENCES on asymptotix

Asymptotix presents European Stabilisation Bank Proposal Booklet : http://www.asymptotix.eu/content/asymptotix-presents-european-stabilisation-bank-proposal-booklet

The Logic of a European Stabilisation Bank on asymptotix : http://www.asymptotix.eu/category/tags/stabilisation-bank

The issue of Central Bank independence on asymptotix : http://www.asymptotix.eu/category/topics/central-bank-independence

LTRO analysis on asymptotix : http://www.asymptotix.eu/category/topics/ltro

View the discussion thread.

Comments

Submitted by John A Morrison on Friday, 2 March 2012.

Reflection on 3 key events in EU Political Economy:

Institutional Simplification : The Inevitability of a European Stabilisation Bank

On reflection there have been three key, momentous events in the Political Economy of the EU this week, these are;-

LTRO2
The signing of the Fiscal Compact and the UK abstention
The constitutional necessity of an Irish referendum on the Fiscal Compact

Thus the Fiscal Compact as a political institutional framework or structure, critically managed by the European Commission and supervised by The European Court of Justice, is DOA; a non-starter, no matter who signed it today. It entails LTRO2, it compromises the Central Bank; identification of which and reaction to which is only just beginning. David Cameron was correct to lead the UK to abstain, again they got it right in UK-PERM-REP-BXL! The UK is to be congratulated. The result of the Irish referendum will surely be “NO”. I can already see the logic of the “NO” side campaign beginning to deploy arguments preferring the IMF as bailout counterparty; it looks as if that is the way Spain is going tonight, trashing the Fiscal Compact, hours after signing it. The Fiscal Compact is a farce upon arrival; a fantasy of Merkelian machination and Sarkozian face saving, dead in the water.

A rational “NO” from the Irish, coupled to UK abstention and Spanish ridicule, amplified by further examination of the manner in which LTRO destroys the credibility of the Central Bank and of the currency by the 4^th Estate and the academics in the coming months will surely lead to a consensus conclusion that the Fiscal Compact governed by the Commission and a politically compromised Central Bank is democratically totally unacceptable to European citizens.

This conclusion then would entail that the only possible sustainable European institutional configuration to govern the fiscal constraints of EU stability and growth & provide backstop support to stability in the downturn is a European Stabilisation Bank (ESB). An ESB is effectively the EFSF morphed into the ESM writ large. There is a paraphernalia of EU institutions in EU Economic Governance developing now when the institutional configuration should be simplified; the baroque edifices being dreamed up by Eurocrats, seemingly only to maintain them in flipcharts (& pompous employment) alienates the ordinary citizen and obfuscates transparency which is anathema to good governance.

The only possible solution and inevitable at that, in my view; is an ESB; an EU-IMF, independent of the Commission (which is largely discredited in economic Governance terms, lets face it, HvR saw to that and there is nothing Olli can do, poor soul, to claw his way back – Juncker is jumping at just the moment of maximum despair!). The ESB would subsume most of the functions of the totally discredited and now unheard of DG-ECFIN (which notionally Olli heads but with a “dotted line”); the ESB would consolidate the balance sheets of the now pointless looking and orphaned EBRD and EIB. Most of all an ESB would re-facilitate the independence of the ECB and allow it to manage money supply in the context of ECB backstop activities in the downturn, thus providing credibility through clarity to the currency. The partnership between the ECB and an ESB would not need much of an MoU would it? But most of all an ESB would be independent of Paris, Berlin, London but most of all Brussels! Indeed an ESB would be the most sensible locus for the responsibilities of the ESRB; a committee is no place for that key function, it needs to be in a banking institution, engaged directly with capital markets.

Do us a favour, Ireland vote resoundingly “NO”, “Nein”, “Non”; it's a dead duck which no-one in their right mind who does five minutes thinking about it would want anyway, a compromise to flatter Merkozy and that alone!

UPDATE: FROM ZEROHEDGE

European Banks Now Face Huge Margin Calls As ECB Collateral Crumbles

Schadenfreude

MOI?