Merkel & Schaeuble Stump for ECB Sovereign Debt Finance

Merkel Says Bailouts Here to Stay as Schaeuble Warns on ECB – Bloomberg.

Merkel and Schaeuble are preparing the German voters for additional ECB financing of sovereign debt. Today, she told crowds that “bailouts are here to stay” and that Greece deserves the support of the German people as long as the Greeks keep reforming their economy.

Her Finance Minster, Wolfgang Schaeuble, is preparing the German electorate for these bond purchases. He claims that the ESM is constitutional under German law. I am not sure whether or not the ESM is constitutional, but I do know that the German constitutional court will not rule against the ESM:

https://dareconomics.wordpress.com/2012/08/31/euro-crisis-faces-judgment-days-again/

Schaeuble also claims that the ECB will only act within its mandate. The ECB’s old mandate was a 2% inflation target. The ECB’s new mandate apparently includes stimulating credit creation in the Eurozone. At least, that is the excuse that Draghi is using to fire up the printing press:

https://dareconomics.wordpress.com/2012/07/31/transmission-problem-is-an-excuse-to-print-more-euros/

Merkel’s politicking does not stop at preparing the German voters for the inevitable monetization of PIIGs debt. She also places the blame for the Eurocrisis at the feet of the “markets.” From the article,

Markets can’t be allowed to destroy the fruits of people’s labor and governments can’t be put at their mercy through excess debt, the chancellor said.

Markets do not destroy the fruits of people’s labors; in this case, governments do. Excessive government spending distorts the economy in so many different ways, but its most pernicious effects are the destruction of labor markets and the eventual devaluation of the currency. Greece and Spain both have unemployment rates over 20% and that number skyrockets into the 50’s for those under 25.

In conclusion, this is Merkel’s political strategy to keep the Eurozone on the rails until she wins German elections in the autumn of 2013. First, keep the PIIGs barely alive by trickling money through their feeding tubes in exchange for harsh economic reforms that show the German voters that she is being “tough.”

Second, allow the ECB to finance sovereign markets under the ruse that this action is within its mandate as long as the PIIGs continue to be humiliated to appease German voters.

Third, the blame for the Eurocrisis must be shifted to those evil speculators rather than the politicians who spent too much money when times were good and who refuse to do the responsible thing now.

As long as nothing unexpected happens, this plan should work. Good luck, Frau Merkel.

 

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One thought on “Merkel & Schaeuble Stump for ECB Sovereign Debt Finance

  1. Um, the arbiter of finance throughout the trans-Atlantic economies is “the markets.” There, due diligence begins and ends. Indeed, this is a topic that has remained absent from the discussion ever since the systemically threatening blowout of the trans-Atlantic banking system began in 2007. I so disagree with any claim that, governments destroy the fruits of labor. Contrarily, I believe governments, rightly formed, secure the fruits of labor.

    Now, as per their “spending,” firstly, without the trillions upon trillions of taxpayer backed debt issued throughout the trans-Atlantic over the past few years, the banking system would have collapsed long ago. This, of course, says something about the dysfunctional relationship between governments and the financial system, a condition that has been built up for decades, the likes of which Alan Greenspan most emphatically was instrumental in rationalizing with more sophistry than you can shake a stick at, while at the same time allowing the chasm to immeasurably widen separating governments’ ultimate funding requirements — those conditions governments need in place in order to easily retire their debt — and those of the private sector, which, itself, under Greenspan had come to be dominated by the financial sector in a manner virtually assuring governments’ finances ultimately one day would be threatened.

    I’m no Keynesian. Rather I’m a Hamiltonian. That which Greenspan was put in place to rationalize was known by some from his very beginning as Fed chairman to ultimately threaten even that soft form of imperialism which is Keynesian economic theory, while at the same time destroying anything remotely Hamiltonian that would ensure the viability of government was never compromised. The casino economy Greenspan endlessly rationalized was made to destroy sovereign government’s power. And here we are. His accomplishment stares everyone squarely in the face and yet any blame government rightly should be assigned for this condition is that the likes of Greenspan was tolerated for even a minute. The only government “spending” we are right at this time to lament is the endless hours it spent listening to his bullshit, while continuing to do the same with his successor.

    That “out of control spending” the political right continuously rails against rather stands as the sure sign Greenspan should be sharing a prison cell with Madoff for bankrupting the nation with the Ponzi scheme his policy at the Fed both supported and nourished to such an incredible extreme as led to governments’ debt burden being put on a parabolic trajectory, this, itself, serving to feed the swindlers on Wall Street and the City of London who profited most handsomely from the arrangement, the very likes of whom to this day in fact require endless taxpayer bailout if they are to remain afloat. Our so-called “entitlements” liabilities are not the source of our threatened national bankruptcy. That deed was already done on Greenspan’s watch. These so-called unfunded liabilities stand as a symptom of that bankruptcy, not its cause.

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