NEO – Is Euroland on Verge of Disintegration?

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Quite a photo of Merkel here

by F. William Engdahl,  … with New Eastern Outlook, Moscow

Currency wars are looming behind the scenes

[ Editor’s Note: Mr. Engdahl takes us behind the EU economic curtain for a peek at what a hollowed-out Swiss cheese it all is. The banksters and deep state actors have already looted the Union by promoting expenditures that enriched them but impoverished those left with a long-term debt that can never be paid off.

We see this with how the EU bank default laws now state that for all banks going under in the future, not only will the bond holders take the hit, where many of them are modest income retirees who thought their money was safe, but also bank depositors will have their accounts cleaned out.

Austerity has been a total fraud, as it has driven GDP down in the affected countries, making any chance of economic improvement requiring a dive to the very bottom first, and then finally a bump back up. Here, of course, is where the multinationals come in to buy assets at fire-sale prices. It’s the “pump and dump” game, with its endless variations.

Brexit is front and center in the ongoing internal war to put the debt-stone around a targeted country’s neck. The EU wants a €50 billion payout from London for its share of EU debt obligations. However, Mrs. May has effectively stated where the EU can stick that.

So we will be seeing not only a soap opera of endless showdowns, but new economic and trade blocks being sought to give its members a structural competitive edge over others, particularly in the future currency wars, which will not only be going on globally, but regionally as well.

This mess is far from being straightened out, and my guess would be that any major solution would be pig in a poke, where the current financial morass would be repackaged into a new one, but called a solution. We have all been here beforeJim W. Dean ]

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–  First published  …  April 20,  2017

The decision last year by a majority of British voters to exit the European Union was more than a simple vote of the people. The Brexit campaign was promoted and financed by the most influential banks of the City of London and by the British Royal House. Far from the end of Britain, Brexit is far more likely to be the beginning of the end of the disastrous Euro single currency experiment.

Even German banks have required creative accounting to keep them afloat

Since the global financial crisis of 2008 little significant has been done by Brussels or the governments of the 19 member Eurozone countries to bring the largest banks of the Eurozone into a healthy stability. On the contrary, even venerable mega-banks like Germany’s Deutsche Bank are teetering on the brink.

In Italy the world’s oldest bank, Monte Paschi di Siena, is on state life-support. That is but the tip of an iceberg of Italian bank bad debts. Today in total Italy’s banks hold Italy’s banks hold €360 billion of bad loans or 20% of Italy’s GDP, which is double the total five years ago.

It gets worse. Italy is the fourth largest economy in the EU. Its economy is in dismal shape so bank bad loans grow. State debt is almost as high as that of Greece, at 135% of GDP. Now, since the 2013 Cyprus bank crisis, the EU has passed a stringent new bank “bail-in” law, largely under German pressure.

It stipulates that in event of a new banking crisis, a taxpayer bailout is prohibited until bank bond-holders and, if necessary as in Cyprus, its bank depositors, first “bail-in” or take the loss. In Italy, most holders of bank bonds are ordinary Italian citizens, with some €200 billion worth, who were told bank bonds were a secure investment. No more.

German Austerity Medicine Killing Patient

A major problem is that the Eurozone economies have been forced to impose the wrong medicine to deal with the 2008 financial and economic crisis. The Eurozone crisis has been wrongly  seen as states spending too wildly and labor costs rising too high.

So, under again German pressure, the Eurozone countries in crisis such as Greece, have been forced to impose draconian austerity, slash pensions, cut wages. The result has been even worse economic recession and rising unemployment, rising bank bad loans.

By 2015 Greece’s GDP had declined by more than 26%, Spain’s GDP by almost 6%, Portugal by 7%, and Italy’s GDP by almost 10% compared with 2008.

Austerity is never a solution to a state economic crisis. The example of the German economic crisis that erupted in 1931 in depression, unemployment and a banking crisis as a consequence of the severe austerity policies of Chancellor Heinrich Brüning ought to be clear enough to German authorities whose historical memory seems to have amnesia today.

Across the Eurozone more than 19 million workers are jobless. Greece, Italy, Portugal and Spain have a total of an unprecedented 11  million  unemployed  workers. In France and Italy unemployment is over 13% of the labor force. In Spain it is 20%, and in Greece a staggering 25%. This is all the state of economic affairs more than 8 years after the 2008 crisis.

In short there has been no economic recovery in Euroland. Since 2009 the European Central Bank (ECB), the bank of the Euro, has made unprecedented moves to try to stabilize the banking crisis. They have only postponed not improved the situation.

Today as a result of ECB buying of mortgage bonds, corporate bonds, state bonds, and asset-backed securities, the ECB balance sheet is more than €1.5 trillion. The ECB, whose President is Italian Mario Draghi, has held interest rates in an unprecedented negative interest rates around -0.4% since June, 2014.  The ECB has made clear that negative central bank interest rates will remain “for some time.”

This is leading some to try to convince voters to go to a cashless society as India did last year with catastrophic consequences and as Sweden, not a Euro country, has largely done. If banks begin to charge their customers a fee for using customers’ deposits, an incredible thought for most, people would simply “take the money and run,” into gold or other safe assets, or cash.

The ECB negative interest rates are a sign of desperation to put it mildly. With interest rates on bonds across the Eurozone so low, many insurance companies are facing severe liquidity problems meeting their future obligations unless Eurozone interest rates return to more normal levels. Yet were the ECB to end its negative interest rate policy and its quantitative easing so-called, the debt crisis of many banks would explode from Greece to Italy to France to even Germany.

A Coming Currency War?

The juggling can only go on so long until the bubble pops

So, to put it gently, the Eurozone is a ticking debt time bomb ready to blow at the slightest new shock or crisis. We may well see that shock in the next two years, once Britain has completed its exit from the EU. Already the new Administration of Donald Trump in Washington has signaled a potential launch of currency war against the Euro.

On January 31, US Trade Czar Peter Navarro accused Germany of using a “grossly undervalued euro to exploit” the US and Germany’s EU partners. Navarro went on to call Germany, the core of the Eurozone economies, a de facto “currency manipulator.” Navarro has stated, “While the euro freely floats in international currency markets, this system deflates the German currency from where it would be if the German Deutschmark were still in existence.”

Britain with the vast financial resources of the City of London, once free from the shackles of the EU membership, could well join with Washington in a full-scale covert currency war to bring down the Euro, something that would have devastating consequences for the Eurozone economies. Britain’s Pound is the third largest global payments currency after the dollar and the Euro.

If Britain, free from the restraints of the EU can bring down the Euro, the Pound could become a major gainer–currency war with Britain on the side of Washington against the fragile Eurozone with their Italian, Greek, Spanish and other problems.

Already British Prime Minister Theresa May is in discussions with the Trump Administration about forging a bilateral US-UK trade agreement and some in influential UK circles are talking of inviting the USA to become an associate member of the British Commonwealth. For the US dollar and Wall Street banks, wounding the rival to the dollar as central bank reserve currency is a very tempting thought. Now with Britain and the City of London soon to be free of EU restraints, the temptation might become reality.

All of this is because of the dysfunctional nature of the entire Eurozone project, a supranational currency with no democratic elected authorities to control abuses. The half-way dissolution of national sovereignty that the Maastricht Treaty introduced with the European Monetary System back in the 1990s, has left the EU with the worst combination in event of future crisis.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook.”

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Jim W. Dean is managing editor of Veterans Today wearing many hats from day to day operations, development, writing and editing articles.

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He has been writing, speaking and doing public relations, television, consulting and now multimedia work for a variety of American heritage, historical, military, veterans and Intel platforms. Jim's only film appearance was in the PBS Looking for Lincoln documentary with Prof. Henry Lewis Gates, and he has guest lectured at the Army Command and General Staff School at Fort Gordon.

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18 COMMENTS

  1. The article is good and worse at the same time. In 2011 the french public budget accountants informed their president that in 2014 France will be bancrupt. So the French invaded Lybia and the foreign legion guards the oil fields. In favour of TOTAL the French government took profit and avoided the bancrupty. We do now Marine le-Pen wil win the elections, Macron is leading. The Brits left the EU not by financial, buit by political reasons, they had enough, they do not accept the insane EU Bolsheviks in Brussels anymore. A major role was the enforcement to take refugees on demand. A currency war by Trump would useless, because the US$ superiority is based on the US military threat worldwide. The US want to invade Europe again? The Trotzky follower Draghi already use the same communist tactic as the FED, printing money without to work for it, a great failure, a desaster for the commons worldwide and a blessing for the banks and the rich, as long as the interest rates were higher. Here is the worse part of the article. The European banks took higher risks to get any profitable return at low interestrates, so their portfolios/assets are miserable. For example, let us use the example Germany. Germany has in total more than 2.000 Billion Euros public debt. At the moment the tax revenue generates a budget surplus of 30 Billion by year. Germany pays at the moment 0 interest. If the interest-rates would be by a realistic 5% as per year, Germany would have to pay 100 Billion Euros

    • as per year, means the budget would have a lack of 70 Billion. To finish austerity means that Mr. Draghi has to print the money-demand of the southern Euro-States. No private people buy Greece, Portugal, Spain, Italy at 2,5%. At 15% we will find buyers, but those states would be bancrupt with those interest levels. So the cheap money is caused by the tax-power of Germany. They EU losers suck Germany dry. They already robbed the Germans, as in a war again. The failure of the Euroland was created at the beginning. But as always the establishment tries to stay in power as long as possible, using all measures.

  2. Don’t know what happened to my comment yesterday so I’ll try it again.
    I’m not so sure the disintegration of the EU is all part of the plan, in fact it appears the RKM and other powers that be may be in a bit of a panic.How much will it affect us here in the states is yet an unknown as America has its own problems which are cause for great concern.
    The nation’s debt is $20 trillion with outstanding future debt of two to three times that much. The Fed is now begging to raise rates which is going to lead to strong market reactions. Worse still are the bubbles that have been building up since 2008: the stock market, the auto bubble, the student loan debt and of course the unemployment rate in which the government conceals with rosy numbers made up entirely on a whim.
    The auto market is beginning to deflate, with dealership’s inventories at 70 day levels, not seen since the 2008 housing bubble crash. Deep discounts of $3,700 or more off already reduced sticker prices are having little effect. Another key indicator is the default rate on car loans which has climbed dramatically along with the sharp rise of sub prime auto loan defaults sending even used car prices tumbling. Many Americans car loans are now under water as the value of their vehicles has diminished under 80+ month car loans.

    • To make matters worse is the student loan debt and the rate at which defaults are beginning to pile up. With a loan debt of $1 trillion + and low paying jobs, young people are not purchasing first time homes, making it difficult for current home owners to move up to a larger, nicer home thus deflating the market. They do not have the income to purchase a new car, truck or hybrid vehicle which is adding salt to the wound. After all it’s very difficult to purchase a new car working at Dollar General.
      In short the auto bubble is at a point just as the housing bubble was just before it popped in 2008. This is going to be the next bubble to pop and along with the over inflated Stock market bubble created by the Fed’s QE, the calamity facing America may soon come to pass.
      As far as banking in concerned, hold on to your hats folks as depositors in the U.S. are going to be facing the same circumstances. It will be a bail in, not bail out as banks will be allowed to confiscate depositors savings, checking and other accounts to re capitolize.

  3. The reason why mr. Engdahl is so well appreciated in Europe, admired and respected, is because he, as an Ivy League patriot American, took a lot of effort and time and basically dedicated his life to stop observing European international relations through US-UK prism and matrix. The special relationship has been causing the great ordeal of pain for many Europeans and many throughout the world. Mr. Engdahl had/has the courage to call it as it is. It nourishes the giant economic deals for the two which flourish and get for themselves tripple As+ in credit ratings, they get for themselves Alpha cities and top global indexes etc, while the rest gradually perish, of this for them notoriously toxic relationship. EU is a sideshow to that project, and while many European leaders have the courage to reform the EU (some get elected but not in majority), the US-UK only look how to sink it, something of their own creation. What I would like to start seeing is that EU leaders take a step back from this notorious axis US-UK and start to make decisions for themselves. EU is not the problem, NATO is.

  4. I am afraid the reason why the ruling crime families allowed, if not engineered Brexit is that the EU is about to be sunken like a retired ship.

  5. The EU was destined to collapse even if the UK stayed. The UK going, nations resisting Germany demands to take useless people and France potentially voting for Le Pen is accelerating the collapse as the EU commissariat fiddles while the EU burns.

  6. You can only have a New World Order after you have destroyed the current world. People will beg for the KM to restore their wealth at 60 cents on the Dollar. Problem, Reaction, Solution.

  7. If there is truth and substance to the analyses presented in this article then what Trumps says and claims he wants to do could be the “straw that breaks the camel’s back”: namely to spend and spend like Reagan, couple this spending with tax cuts, and at the same time pursue an “America First” trade policy will be the catalyst that causes the weak and flimsy European economy and Euro to collapse in a huge stock market crash and 1930’s panic.
    Congress in 1930 enacted Smoot-Hawley trade restrictions. Trump would repeat.
    In the meantime what do the stock market charts reveal? A massive top or “head” formation as a result of unprecedented easy money and near zero interest rates since 2009.
    In previous times crashes have been ameliorated with easy money from central banks. Today,that is part of the problem; not the cure.
    Germany and Japan loom as the safe havens; but what will happen to Berlin if all its neighbours implode?
    The answer: PRAY.

  8. Does anyone believe this impending financial crisis over there won’t effect banks and bank accounts over here? Who even knows the true massive U.S. debt? Who is trying to solve this problem? The whores in Congress and liar Trump? These corrupt expletives deleted are engaged in business as usual blowing money like it was going out of style. Recently there has been talk of negative interest rates here also. Do you know what that means? It means you, the customer, pays the bank for money deposited in the bank instead of the bank paying you to use your money! What if everyone decides to take money out of the banks at once? This will cause a massive crisis that will make 1929 look like a cake walk. The U.S. is on the edge right now this instant and things could collapse at any instant. Do you think anyone of the whores in Congress is smart enough to get us out of this impending crisis right here in our back yard? I do not know the answer but I am certain they do not know it either. What I do know is no government can continue to borrow and print money forever without serious consequences for everyone in the system. All anarchy is going to break loose at some point in time and that point will likely be sooner than later.

  9. The British Government under Prime Minister Churchill had signed away, as a price for USA joining the European Theatre of World War II, the Foreign Affairs AND Defence Participation for One Hundred Years in 1943. Plus a War Repayment of £140 Million.

    Great Britain doesn’t have a Foreign Policy of it’s own for it’s own interests to be a priority. Notice it’s FM going to the G7 recently and making a fool of himself with a lone voice (US Tillerson bailed thru absence) calling for military strikes in Syria for Assad’s ‘gas attacks’ & ‘Assad Must Go’ age-old mantras seeming very odd to a layman.

    Nothing odd about it throughout history ever since the end of WWII. Never has ‘Great Britain’ EVER sided against American interests in any UNO or even at a school level dispute. This is because it simply can’t… Iraq War is blamed for Blair to have actively assisted Bush but he didn’t have any choice, did he??
    .
    .

    • Gordon Brown negotiated a settlement for the £140 Million annual payment for ‘War Reparations of World War II’ thinking that it would free UK from American slavery that will last upto 2043.

      Americans took the money but the first two conditions were left in place, named, “Special Relationship”. Nothing special in a one-way traffic. (too many events to list for the poodle to even think about being a lion. Atleast not until 2043)

      Brexit is the foundation stone for the coming independence of UK Government from American slavery. World dominations are always planned two or three decades ahead.

      Get ready for the malicious British Way of “divide & rule” strategy being used, in the financial markets after Brexit, with a Three Centuries Headway of the Empire Days Experience being unleashed on the global financial markets in the next decade or so, once Brexit is history.

  10. This whole Babylonian Money Trickery creating worthless paper money out of thin air is nothing but a scam and a racket to loot all countries worldwide and bring it under contract of the banking families and nothing left for others. Togehter with corrupted Justice system and religous madness it will bring only war, because war means get rid of people who has the rights to property. With this coloured toilet paper from people believe it is worth anything (like a kind of religion) only comes missery, destruction and death. The whole system only lives from collapsing every now and then.

  11. A comment on the cashless society. This week in the UK a tax tribunal ruled that property tax had to be paid on ATM outside premises separately to the premises.
    The effect of this is likely to be the removal of thousands of currently free to use ATMs making it much more difficult, in some places all the bank branches are now shut, to get hold of cash.
    Part of the masterplan?

  12. America with Trump is desperate, dangerous and insecure, and becomes increasingly desperate and insecure making it more opaque. So in the shade and government are a group of irresponsible, incompetent, greedy, immoral thieves who steal everything they see. America breaks down, the European Union breaks down, the axis of evil breaks down. In Europe, current unspoken robbery and stealing as much resources as possible before collapse, and China is now the strongest alliance with Russia in terms of Syria and North Korea.

  13. I know that most if not all Americans observe Europe through British eyes or British binoculars, they are even mostly opinionated by them on Europe, I can understand that, both share the same language, interest and alliances and it is natural and logical. But Europe is so much more than Britain, and if you accept the premise that Britain is the cornerstone of all European disintegrations past and present then you will have easier understanding about what EU or EU wannabe is all about. Britain for some reason I cannot understand wishes nothing good for Europe, neither in currency neither in economy neither in arms neither in ethnicity. British establishment loves when nations fight each other for their score and European history is full of such examples. British interest are mainly Five eyes, Arab monarchies, Ex Commonwealth, neocolonialism etc. Europe or god forbid united Europe is last on their list.

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