Creating more debt won't solve the economic crisis
World banks are trying to solve the financial crisis the same way they caused it 鈥� by creating more debt.
World banks are trying to solve the financial crisis the same way they caused it 鈥� by creating more debt.
Readers who expect an early end to this Great Correction are going to be disappointed. There is no sign of it reaching its conclusion anytime soon. Just the contrary鈥here鈥檚 no end in sight.
The Great Correction seems to be going along just as you鈥檇 expect. Or, just as we鈥檇 expect.
Here鈥檚 the latest from Reuters:
And guess what? The Great Correction is having the same effect in Europe. Here鈥檚 The Wall Street Journal:
In some ways the situation in Europe is worse than in the US, depending on where you are. Youth unemployment is up as high as 50% in some areas. Even in supposedly strong economies it is around 20%.
And, oh yes, you want yield? How about a 10-year note from Portugal? It comes with a yield of 17%.
Portugal鈥檚 economy is shrinking at a 5% annual rate. Italy, Spain, Greece and Ireland are not in much better shape.
So what do the euro-crats do? Same thing as the US-crats. They give the banks money, hoping the nice bankers will spread it around.
Last month, the European Central Bank provided 489 billion euros in 3-year loans. 鈥淪uper Mario鈥� Draghi 鈥� formerly head of the bank of Italy, now head of the ECB 鈥� keeps the banks from going bust鈥nd begs them to keep the governments from going bust.
The banks needed about 230 billion to refinance loans coming due in the first quarter of this year. They got the money from the ECB.
What a show! Draghi, Monti, Papademos and all the other 鈥榯echnocrats鈥� now managing the crisis are the very same guys who created the crisis. They worked for Goldman, ran central banks, and helped organizations such as the IMF and the World Bank make a mess of the world鈥檚 financial system.
Now, they鈥檙e solving the crisis the same way they caused it 鈥� by creating more debt. The banks can鈥檛 pay their bills so the central bank lends them money. Governments can鈥檛 pay their bills either, so the central bank lends them money so they can lend it to the government.
The ECB says it will give away more money on February 28th. Goldman Sachs is advising other banks to take the loot. As much as $1 trillion could be given out.
Let鈥檚 see, how does this work? You are deeply in debt. So, the bankers lend you money so you can continue making payments. You go even deeper in debt鈥nd the bankers lend you more money so you can keep making payments鈥�
鈥nd so on鈥�
Where does this end? We don鈥檛 know.
Whee!
Bill Bonner
听蹿辞谤 The Daily Reckoning