In the near future our banks will have to indulge another stress test. The question is why? Just let us have a look at some financial data, randomly chosen:
During the last rescue of European banks, the Netherlands funded € 26 billion. How often can we do that? Our financial limits are in sight. Our “national guarantees” to the IMF, the European Central Bank, and the European Emercengy Fundings have risen to over € 200.- billion. That is almost 50% of our GDP. The total European bonding is over € 700 billion, mostly lent to Italy and Spain.
In 2013, the European Central Bank is still buying European government bonds to keep the system afloat. By doing this, the bank gives away its political independance, as it is supporting governments who are rumbling with their national debts and inter-European financial agreements. It is clear that countries like Italy and Spain cannot pay back the short terms loans they’ve gotten from the Central European Banks in the past years. Portugal and Greece will not be able to execute all the economical reforms they promised, so in the next couple of years they will need more European funding. This way, the liability for national governments, and thus the European taxpayer, remains unclear. It doesn’t show itself on the national budgets. The 40 largest European banks still need € 70 billion to comply with the new Basel 3 standard. The remaining 125 midsize banks, however, still need in total € 225 billion.
In 2013, the FED still takes (by buying mortgage-backed loans and state bonds) $85 billion out of the market monthly in the US. The Fed’s balance-total has gone up 3.5 times since the beginning of the financial crisis and is now, in the fall of 2013, $3,500 billion. The total national debt of the United States in the fall of 2013 is already more than $ 16,700 billion! However, downsizing this federal buying program creates an immediate increase in the US interest rate, causing, in turn, a dollar flow from emerging markets to the US. That drives local currencies to go down in value, making export to the US cheaper, thus destroying US jobs. “Catch-22” is what they call that in US slang: no matter what you do, it is always wrong. The 2013 governmental “shutdown” and the recurring struggle concerning the debt ceiling may have tremendous consequences for the global economy in the years to come. There is no guarantee whatsoever that we will not see the meltdown of the US dollar (or the Euro) in the near future.
Japan, with a national debt of over 200% of the GNP, sees its financial institutions lending over $150 billion to countries like Brazil, instead of keeping the money in the domestic economy, just for a few interest points. Solitarily, from a company’s point of view, this is understandable, but somewhere, this chain of money streams and expanding debts has to be broken.
So what do we need a stress test for? The stress is still there! The global monetary system is holding us hostage, even after 5 years of the outbreak of the financial global crisis, and will be doing so for the next decade…there seems to be no way out. It’s amazing that our social, financial and political leaders still can sleep at night! The money used to pay the interest on the national debts, and squeezed out of the taxpayer in order to release the pressure on the banks, is destroying our economies. This simply cannot go on like this.
The question arises: “What do we do about it?”
I think we have to regain our civilian power. First in our own countries, then on a European level. By doing so, we will have to fight the established political and economical powers. We have to be aware that these regents are still around. Somehow, the establisment still has money enough. Let’s write off all the debts and let the shareholders of the banks bleed. Make the ‘system’ less important by allowing local alternative currencies. Support local credit unions. Take away the monopoly to create money by the national banks. Let’s stop reorganizing stuff. Lets go around the system! I will elaborate on these topics in later postings and in the meantime let see what is happening this week at the World Forum for Democracy in Strasbourg.