The first article is written by Mike Carey of abc.net and is beautifully entitled "The Goldman Saching of Europe." The second piece by Michael Hudson of New Economic Perspectives is called "Europe's Transition From Social Democracy to Oligarchy." These articles are long but they are well worth the read if you want to know what is happening to economies now and what might happen to them in the future.
The Goldman Saching of Europe
By Mike Carey - abc.net
I don't want to sound alarmist but it looks like Goldman Sachs has taken over Europe. The continent has succumbed to the dictates of global finance, there was no choice. The bankers are holding us all to ransom and have done since the beginning of the GFC in 2008.
The German government's reaction to its disastrous bond auction a week or so ago, gives a big clue to the real multibillion dollar game being played out in boardrooms from New York to Frankfurt. The most powerful and resilient economy in Europe couldn't get a bid for 35% of its 10 year bonds on offer. Observers say it was a warning from bankers, on both sides of the Atlantic, do as we say or else!
Germany, through its Finance Minister Wolfgang Schaeuble, had been at the forefront demanding that banks share any sovereign bailout losses that eventuate from the European Stability Mechanism, to be up and running next year. The failed German bond auction was the bank's curt reply and Schaeuble backed down.
Right from the start of the European crisis, the banks have been pulling the strings. Remember when the former Greek Prime Minister, George Papandreou announced a plebiscite, to get popular buy-in for his austerity plan and the markets went bananas and he was excoriated. The markets and the banks, not the Greek people, passed judgement and he had to go.
Across the Ionian Sea, former Prime Minister, Silvio Berlusconi hadn't done enough to satisfy the self-serving screen jockeys and they turned their weapons, their bond traders, lap dog ratings agencies and share market speculators on Italy. Berlusconi was rumoured to be resigning and the bourse rallied. No, he wasn't going and it fell away again with a promise that it would rocket when he finally and inevitably bowed to massive financial pressure to resign. As night follows day, he was replaced by a euphemism, a technocrat. Nowhere was there much talk about voter's wishes or rights.
All this might have been ameliorated if not avoided had the Obama Administration brought the bankers to heel three years ago by jailing a dozen or so, now it's too late! But of course that was never going to happen when the President's own economic team was drawn from or had strong links with Goldman Sachs. With Summers, Rubin, Geithner and Emanuel it was Wall St. on the Potomac.
That's probably why, in 2008, Goldman Sachs was too big to prosecute. It received more subsidies and bailout funds than any other investment bank. How did Goldman Sachs thank the American people for their largesse? By using billions in taxpayer money to enrich itself and reward its top executives who received, it's reported, mind boggling wage increases and bonuses of $18 billion in 2009, $16 billion in 2010 and $10 billion in 2011.
At the same time, Goldman Sachs offloaded billions in worthless securities helping destroy the global economy. The firm misled investors about the true nature of this worthless junk and hid the fact that it was betting against these same securities. In just one such deal Goldman Sachs is reported to have raked in $2 billion.
Scroll back to 2002. Goldman Sachs covertly bought 2.3 billion Euros in Greek debt, converted it into yen and dollars, and then immediately sold it back to Greece at a supposed loss. Goldman Sachs had struck a secret deal with the then, free-market government to conceal its massive budget deficit. Goldman's confected loss was Greece's imaginary gain just to meet Europe's requirement that its deficit never surpass 3 % of GDP. Now, it's reported that Goldman made a $250 million fee on the deal and a motza on credit default swap insurance sold to Greek bond holders against the country going bust.
Apparently this only became known to Prime Minister, George Papandreou and his Socialist government when they came into office and investors demanded monster interest rates to lend more money to roll over this debt.
So who is going to save Europe, and by extension us?
Read the rest of the article here
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Europe's Transition From Social Democracy to OligarchyDer Krieg der Banken gegen das Volk.”The easiest way to understand Europe’s financial crisis is to look at the solutions being proposed to resolve it. They are a banker’s dream, a grab bag of giveaways that few voters would be likely to approve in a democratic referendum. Bank strategists learned not to risk submitting their plans to democratic vote after Icelanders twice refused in 2010-11 to approve their government’s capitulation to pay Britain and the Netherlands for losses run up by badly regulated Icelandic banks operating abroad. Lacking such a referendum, mass demonstrations were the only way for Greek voters to register their opposition to the €50 billion in privatization sell-offs demanded by the European Central Bank (ECB) in autumn 2011.The problem is that Greece lacks the ready money to redeem its debts and pay the interest charges. The ECB is demanding that it sell off public assets – land, water and sewer systems, ports and other assets in the public domain, and also cut back pensions and other payments to its population. The “bottom 99%” understandably are angry to be informed that the wealthiest layer of the population is largely responsible for the budget shortfall by stashing away a reported €45 billion of funds stashed away in Swiss banks alone. The idea of normal wage-earners being obliged to forfeit their pensions to pay for tax evaders – and for the general un-taxing of wealth since the regime of the colonels – makes most people understandably angry. For the ECB, EU and IMF “troika” to say that whatever the wealthy take, steal or evade paying must be made up by the population at large is not a politically neutral position. It comes down hard on the side of wealth that has been unfairly taken.A democratic tax policy would reinstate progressive taxation on income and property, and would enforce its collection – with penalties for evasion. Ever since the 19th century, democratic reformers have sought to free economies from waste, corruption and “unearned income.” But the ECB “troika” is imposing a regressive tax – one that can be imposed only by turning government policy-making over to a set of unelected “technocrats.”To call the administrators of so anti-democratic a policy “technocrats” seems to be a cynical scientific-sounding euphemism for financial lobbyists or bureaucrats deemed suitably tunnel-visioned to act as useful idiots on behalf of their sponsors. Their ideology is the same austerity philosophy that the IMF imposed on Third World debtors from the 1960s through the 1980s. Claiming to stabilize the balance of payments while introducing free markets, these officials sold off export sectors and basic infrastructure to creditor-nation buyers. The effect was to drive austerity-ridden economies even deeper into debt – to foreign bankers and their own domestic oligarchies.This is the treadmill on which Eurozone social democracies are now being placed. Under the political umbrella of financial emergency, wages and living standards are to be scaled back and political power shifted from elected government to technocrats governing on behalf of large banks and financial institutions. Public-sector labor is to be privatized – and de-unionized, while Social Security, pension plans and health insurance are scaled back.This is the basic playbook that corporate raiders follow when they empty out corporate pension plans to pay their financial backers in leveraged buyouts. It also is how the former Soviet Union’s economy was privatized after 1991, transferring public assets into the hands of kleptocrats, who worked with Western investment bankers to make the Russian and other stock exchanges the darlings of the global financial markets. Property taxes were scaled back while flat taxes were imposed on wages (a cumulative 59 percent in Latvia). Industry was dismantled as land and mineral rights were transferred to foreigners, economies driven into debt and skilled and unskilled labor alike was obliged to emigrate to find work.Pretending to be committed to price stability and free markets, bankers inflated a real estate bubble on credit. Rental income was capitalized into bank loans and paid out as interest. This was enormously profitable for bankers, but it left the Baltics and much of Central Europe debt strapped and in negative equity by 2008. Neoliberals applaud their plunging wage levels and shrinking GDP as a success story, because these countries shifted the tax burden onto employment rather than property or finance. Governments bailed out banks at taxpayer expense.