By John Galt
December 21, 2011 – 07:30 ET
The constant drumbeat of reports out of governments and mainstream media sources from Europe and the United States is that the European Union and European Central Bank are working on solutions that will cure or at least alleviate the crisis threatening the region. Each morning there is the breakthrough story of a new facility or program to keep the union intact or maintain the integrity of the ECB while rumors swirl that the solutions enacted are nothing more than darts being thrown a board in the dark.
As this crisis has only worsened since it started some two years ago, the promises of austerity as a cure have been exposed as a hollow commitment by the member states and actually accelerating the problems of those nations forced to engage in the practice of mandatory contraction. The real threat then shifts from withdrawal of nations from the Eurozone which actually could have prevented the collapse of the union to a sudden implosion of the banking system starting a domino effect where nation after nation experiences bank runs, liquidity crises, and eventually an almost complete destruction of many nations’ financial systems. It has become apparent with rumors of the German government preparing to re-issue Deutschmarks that this line of thinking has crossed from the theoretical and into reality.
Two news stories highlight the projected severity of the pending collapse and how central banks are preparing the financial systems of their respective nations. The first newspaper report from the U.K. Daily Mail should have set off a clarion alert in everyone’s head as it is a direct statement of anticipation for what is coming over the horizon:
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The story is a warning, not a “precaution” as the headline states which is easy enough to discern when one reads the details from the Bank of England in the story:
The deputy governor of the Bank of England today warned the situation surrounding the single currency was ‘worrying’ and that the Bank was making preparations to support British banks, should the eurozone collapse.
A temporary loan facility has been introduced as a precaution, for use in the event of contagion from the eurozone crisis endangering UK institutions, Charlie Bean said in an interview on BBC Radio 4’s World at One.
‘UK banks don’t have very heavy exposures to the troubled parts of the eurozone, but we would have exposures to French and German banks, which have more significant exposures, so there could be linkages there,’ said Mr Bean.
‘In those circumstances, we would provide temporary loans to banks that are in difficulty. We have various facilities, and introduced a new one just a couple of weeks ago as a precaution. It’s not needed at the moment, but if we get into difficulty, we have got it there.’
Uh, if this is not necessary, and the Eurozone is probably going to survive the crisis, then why create facility in the first place? The Fed has already indicated its willingness to expand swap lines and probably has some secret programs of their own that they are refusing to discuss for the collapse, thus the question shifts from not if to when the implosion occurs.
The second story was published overnight by the China Post out of Taiwan about the creation of the TPPT (Taiwan Plunger Protection Team):
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In a movement considered “long overdue” by some analysts, the injection of government money into the tanking stock market to prop up stock prices has been given the green light, government officials announced yesterday.
Vice Premier Chen, the topmost government official charged with the country’s financial stability, however, insisted the fundamentals of the economy and the stock market are sound, expressing his hope for continued optimism among the people.
In a press conference at the Government Information Office yesterday evening, members of the management committee for the National Financial Stabilization Fund (國家金融安定基金) announced their decision to authorize the use of money from the funds to stabilize the market.
According to Chen, after his discussion with the fund’s management committee members, a resolution was adopted to authorize the fund’s executive secretary to implement measures to stabilize the stock market if and when it is necessary to do so.
Based on this story, the PPT here in the United States, the emergency facilities being planned in various European nations, and the various interventions planned Asian central banks, after the shattering of the Eurozone and corresponding recession and financial crisis, the new world economy will have an almost exclusive grip by governments and bankers that manages every aspect from individuals profits on investments to bank accounts of any sort. It also guarantees that inflation followed by hyperinflation will be the order of the day and the corresponding bull market which should emerge late next year will be one for the history books as the flow cheap liquidity will inflate a bubble of historic proportions around the world.