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May 1st, 2012 at 1:40 pm
Read this on a Charles Hugh Smith post:
European banks do not have enough money for deposit redemptions (people withdrawing their cash from the banks) and the only way to get it is to have the European Central Bank (ECB) print money out of thin air thereby devaluing every euro, thereby destroying purchasing power (you get your money but it buys less).
And what collateral are the banks providing for these loans? The sovereign debt of countries that are insolvent. Why not sell the bonds to raise the capital that is rightfully owed to depositors so that they could receive their money at par? Why then bond prices would tumble and governments would be forced to borrow at much higher interest rates. But borrow from whom? Insolvent banks that must have money printed to give depositors their money back at a fraction of its worth from when they deposited it. Not due to market forces which indicate their labor is worth less but because everybody just wants what's rightfully theirs.
So to summarize this, the ECB prints money to buy the bonds of insolvent banks which are backed by the bonds of insolvent nations. The result of which is insolvent nations or in reality the people thereof are not only poorer, they are now responsible for paying back money that was their property to begin with… at interest.