ECB – praag.org

Greece rejects austerity

Nearly 150 protesters rallied in the streets of Athens Monday just hours after the Greeks voted resoundingly to reject more austerity measures in exchange for another bailout from the country’s international lenders.

The triumph of the No camp in the Greek referendum means Athens will possibly default on its debt and run out of money because the European Central Bank will not lend the country any more cash. It will leave the EU, re-adopt its old currency, the drachma, according to a Barclays analysis.

Police said between 100 and 150 anarchist protesters had started throwing firebombs at riot police and setting trash cans on fire in the central Athens neighborhood of Exarcheia.

This is far from the place where celebrations are taking place by supporters of the “no” vote in Sunday’s referendum.

There was no indication that the violence was connected to the political campaigns involved in the vote.

The results of Sunday’s referendum — 61 percent voted “no,” compared with 39 percent for “yes” — left the country’s future in the European Union and its euro currency in tatters.

A total of 6.16 million Greeks voted in Sunday’s referendum, or 62.5 percent of eligible voters. The poll needed a minimum 40 percent turnout to be valid.

According to analysts, if Greece adopted national currency, it would automatically abandon the euro area.

The ECB is scheduled to meet tomorrow morning to decide on emergency liquidity assistance (ELA) policy. An outright suspension would effectively put the banking system into immediate resolution and would be a step closer to Eurozone exit.

All outstanding Greek bank ELA liquidity (and hence deposits) would become immediately due and payable to the Bank of Greece.

The maintenance of ELA at the existing level is the most likely outcome, at least until the European political reaction has materialized. This will in any case materially increase the pressure on the economy in coming days.

Switzerland stuns markets by giving up on currency peg

Bowing to the inevitable, Switzerland has ditched an increasingly expensive policy to limit the export-sapping rise of the Swiss franc — a decision that propelled the currency a whopping 30 percent higher against the euro within minutes.

Thursday’s decision by the Swiss National Bank, or SNB, to end its efforts to keep the euro from trading below 1.20 francs came amid mounting speculation that the European Central Bank will next week back a big stimulus program that will put more euros in circulation, which would further dilute their value.

That expectation has seen the euro face intense selling pressure in currency markets, particularly against the dollar. The euro has fallen to nine-year lows against the dollar and below its launch rate in 1999.

As the outlook for the euro has darkened, the cost for the Swiss central bank of defending the peg by buying euros or selling francs has risen. Though the timing of the Swiss decision proved a surprise, most foreign exchange experts thought the peg would have to be abandoned, just as previous such efforts had.

“Switzerland suddenly got a whole lot more expensive,” said Michael Hewson, senior market analyst at CMC Markets.

Many analysts thought the decision was inevitable in light of next week’s expected announcement by the ECB to break new ground in its efforts to inject life into the ailing 19-country eurozone economy. Its stimulus package is expected to be worth as much as 1 trillion euros ($1.17 trillion).

The peg, which was introduced in Sept. 2011, was an attempt to halt the rise of the franc — a traditional haven currency for investors — against the euro at a time when the eurozone debt crisis was at its height. The strong franc was then particularly problematic for Swiss exporters, who were forced to drastically cut prices to remain competitive.

Unsurprisingly, Thursday’s move prompted a painful 11 percent drop in Switzerland’s stock market as investors took fright at the worsening outlook for Switzerland’s traditional exporters, such as those selling chocolate or ski holidays.

Source: AP

Deficit spending and money printing: A German point of view

The leading macroeconomic Nobel-laureates, the central bankers as well as most politicians have reduced their economic judgment on how to get the economies in Europe and Japan back to sustainable growth on just two recipes: public investments in infrastructure to be financed by additional public debt and, second, an expansive money market policy based on printing more money and reducing interest rates to zero or even beyond zero to negative rates!

And if the capital markets don’t swallow additional public debt, then the Central Banks will step in eagerly as investors – regardless if this is in line with their statutes!

The expected results, backed by the leading macroeconomic wisdom, should be to kick-start economic growth, to induce private industry to invest and banks to lend to private investors, and thereby to reduce unemployment, and get deflationary tendencies back to an inflation rate that is now officially regarded as ideal if it oscillates around 2 % p.a. When and why this “two-percent” benchmark was introduced for the first time I can’t remember, but everybody today takes it for granted and repeats it like as an undisputed target of Central Bank’s money market policy. Included in this assumption is ever more public debt as the guarantor for lasting GDP-growth!

I never understood why macroeconomics should be regarded as an academic discipline if it is in practice reduced to these rather simple theories of how to handle a recession or even deflation! Maybe Alfred Nobel was just as clear-sighted as I am, and consequently never introduced a Nobel-prize for economics. That was done after his death by the Central Bank of Norway, which also contributed the required funds. It still does so, and not the Nobel foundation!

My personal advice is to stop handing out any more Nobel-prizes for economics to any more American professors on any new theory how to steer economic development and sustainable economic growth, because none of them has ever worked.

There is a lot of blame offloaded onto Maynard Keynes by critics of the present ruling opinion of more deficit spending by governments. But I don’t believe that Keynes would approve any of today’s Nobel-Laureates who saw no other way out of recession than by money printing in unlimited amounts and years of deficit spending by already over-indebted economies. According to Keynes public investment on deficit could be regarded as an “ultima ratio” to re-kick-start a slow economy, but he would never have advised any government that is already highly indebted to increase this debt even more!

In his theory, deficit-spending should be a limited action in time and amounts, and directly afterwards this debt should be repaid by the additional tax income from the stronger revenues of industry and private individuals who have profited from the intervention of the State.

But what our economists and central bankers are recommending nowadays is completely different from “short-term-kick-starts” – our systems are so full of the sweet drug of government deficit spending that (like a drug-addict) it constantly needs heavier doses of the same drug!

It was not long ago that the American Treasury Secretary publicly blamed Germany for not using its remaining credit standing for another round of deficit-spending in order to help Italy, France and other Southern European countries. As if more public debt and burning straw in Germany would have any impact on the southern countries’ economies without any serious political and economic reforms in those countries themselves to fight the weakness at its real source!

As long as our “economy doctors” don’t know anything better than to prescribe more drugs instead of getting the patient off the needle and help him to abandon the ever increasing drug doses, we will never get our economies “back to normal”!

We should never forget that at least the European economies had no real problem as long as the public debt to Gross National Product ratio remained within the Maastricht limits of 60% and before liquidity in the banking sector was multiplied without limit, thereby creating big bubbles in the financial assets of the banks which finally led to the financial crisis of 2008.

Japan is the very best example to prove that the therapy of deficit spending and money printing is dangerously wrong: it is now 25 years since Japan has adopted this cure. If anybody needs proof that the prescription was unprofessional and ineffective, he should look at the results to the Japanese economy and its public debt. Although hundreds of billions of Dollars have been spent during this period on programs to stimulate the Japanese economy the effect was that Japan fell from one recession into the next depression and the public debt ratio to GNP has meanwhile reached the astronomic bench mark of 230% (!!), which is double that of Greece and four times higher than the Maastricht criterion!

I am certain that Maynard Keynes would turn in his grave if he knew to what extent his theory was misinterpreted and misused! Of course it’s a big temptation for every politician to utilize the sweet but toxic medicine of deficit spending and more public debt rather than to introduce hard reforms on public budgets, on social spending and other benefits to their voters.

It’s also a big mistake that European governments have disregarded the traditional role of the European Central Bank as the watch-dog against inflation. In creating the ECB, Germany never consented that it should have more responsibilities and more authority than the Deutsche Bundesbank ever had.

It’s just like with deficit spending Keynes had recommended under certain conditions: it may be acceptable if the Central Bank acts as “Lender of last resort” in case of actual liquidity crisis. But this should be strictly on short-term basis. What we experience today is completely contrary to the German (maybe not the U.S.) understanding of the role of the Central Bank. The ECB has now assumed a role not only to protect the value of our common currency against inflation but also to take action as if it is responsible to create economic growth and full employment with instruments like money printing, zero interest rates and unlimited investments in bonds which the free market is rejecting.

We pay a high price for the chimera that we need constant economic growth and that it is a stigma if our GDP-growth is only 1.5% p.a. Can’t we accept that after 50 years of undisturbed peace and continuous prosperity we have reached a certain degree of personal satisfaction where we don’t need a new car every year, another cell-phone, additional furniture, more TV-sets, more laptops etc, etc. Why do we insist upon economic growth, if we don’t actually need the products which are additionally produced every year?

Is it really worth it to increase the already heavy burden of public debt, which our children must service someday, by accepting even more debt in a vain effort to increase public demand? Let’s instead be happy with zero GDP growth, zero inflation and zero growth of public debt! That could be a more rational solution. Why don’t we consider it?

By Dr. Ulrich Salzer, German economist and banker, Munich

Marine Le Pen: Open letter to French Central Bank Governor

The French Front National’s leader Marine Le Pen has sent a letter to the Governor of the French Central Bank, the Banque de France, demanding that France join the list of nations which have repatriated their gold, or at least have tried.

In her letter, Le Pen, who would be elected president of France if elections were held today, demands a gold audit.

Mr. Christian Noyer

Governor of the Banque de France
31 rue Croix des Petits-Champs
75049 PARIS Cedex 01

Nanterre, November 24, 2014

Open letter to Mr Christian Noyer on the gold reserves of France

Dear Governor

On behalf of the French and in my capacity as the main opposition leader, I am writing to you because it is my duty to present a petition on the gold reserves of France, in the best interests of our nation.

Even before the outbreak of the 2008 crisis, the National Front had anticipated and informed the political institutions of the future worsening of the macro-economic and geopolitical context. As part of the increasingly libertarian business model adopted by France under pressure from Brussels, economic fundamentals have not shown improvement.

All the French can see is that the austerity policies demanded by the European Union and the ECB and carried out by the government are a proven failure and have had serious consequences for our country.

The monetary institution you lead has a historic mission to be the central bank depositary of the national monetary reserves including gold reserves. According to our strategic vision and sovereignty, they belong neither to the State nor to the Banque de France, but the French people and also serve as the ultimate guarantee for the public debt and our money.

In the money cold war that is being fought between the West and BRICS countries, gold is increasingly playing an important role. According to the World Gold Council, the official reserves of gold from China, India and Russia increased significantly between 2007 and 2013.

For these reasons and in light of the rapid increase of global systemic risks, it is of the utmost importance to the future solvency of our nation to engage, by mid-2015, in a detailed audit, the results of which will be the subject of a report.

Le Pen also demands a complete inventory of the quantities of physical gold, all 2435 tonnes, as well as their quality (serial number, purity, bars ‘Good Delivery’etc.), conducted by an independent French body. This inventory will need to indicate the country in which the gold reserves are stored, she adds.

Over the period 2004-2012, about 614,6 tonnes of gold have been sold by France while at the same time the other Eurosystem central banks including the ECB pledged to limit their gold sales. According to a report by the Court of Auditors of 2012, this is extremely costly to the government and constitutes a serious violation of the national heritage, carried out without any democratic consultation.

Le Pen requests the urgent repatriation of all gold reserves from abroad.

Just like your heroic predecessors of the Bank of France in 1939 and 1940 had organized the evacuation of French gold, you will need to undertake this vast security operation of the national treasury, a patriotic act which will be recognized in time by public opinion.

I hope that, respectful of your duties as a high official in the service of the State, you will show the commitment and courage necessary to defend the general interest of our country. The challenge is considerable, it is the future of France which is at stake!

I beg you to accept, Sir, the Governor, the expression of my highest consideration.

Marine Le Pen

The Swiss gold referendum: What it really means

In a few days the Swiss people will go to the polls to decide whether the Swiss central bank is to be required to hold 20% of its reserves in the form of gold

Polls show that the gold requirement is favored by the less well off and opposed by wealthy Swiss invested in stocks. These poll results provide new insight into the real reason for Quantitative Easing by the Federal Reserve and European Central Bank.

First, let’s examine the reasons for these class-based poll results. The view in Switzerland is that a gold backed Swiss franc would be more valuable, and a more valuable franc would increase the purchasing power of wage earners, thus reducing their living costs. For the wealthy stock owners, a stronger franc would reduce Swiss exports, and less exports would reduce stock prices and the wealth of the wealthy.

The vote is clearly a vote about income shares between the rich and the poor. The Swiss establishment opposes the gold-backed franc, as does Washington.

A few years ago the Swiss government, after experiencing a strong rise in the exchange value of the Swiss franc as a result of dollar and euro inflows seeking safety in the Swiss franc, decided to expand the Swiss money supply in line with the foreign currency inflows in order to stop the rise of the franc. The liquidity supplied by the central bank creating new francs has stopped the rise of the franc and supports exports and stock prices. As a vote in favor of a gold backed franc is not in the interest of the elite, it is unclear that the vote will be honest.

What does this tell us about the Federal Reserve’s policy of Quantitative Easing, which is an euphemism for printing an enormous amount of new dollars?

The official reason for QE is the Keynesian Phillips Curve claim that economic growth requires mild inflation of 2-3%. This false theory was put to death by the supply-side policy of the Reagan administration, but the misrepresentation of the Reagan administration’s policy by the Establishment has kept the bogus Phillips curve theory alive.

The claim based in disproven Phillips Curve theory that the Fed’s policy is directed at helping the overall economy is another example of the deception practiced by US authorities. The real purpose of QE is to drive up the wealth and income of the one percent by providing the liquidity that flows into financial asset prices such as stocks and bonds.

Since the 2008 US recession, skeptics of the Fed’s explanation of QE as support for the US economy have stressed instead that the purpose of US economic policy has been to support the federal deficit at low interest rate costs and to support the balance sheets of the troubled banks by pushing up the prices of debt-related derivatives on the banks balance sheets.

These have been important purposes, but it now appears that the main purpose has been to make the rich richer. This is why we have a stock market whose high values are not based in fundamentals but, instead, are based on the outpouring of liquidity by the Federal Reserve. As the economic policy of the US is entirely in the hands of the rich, it is not surprising that the rich use it to enrich themselves at the expense of everyone else. The Fed’s monetary policy that enriches the rich by driving up the prices of stocks and bonds also has robbed retirees of hundreds of billions of dollars, perhaps trillions, in lost interest income on their savings.

As I recently explained, QE is not over. The Fed is rolling over its interest and principal payments on its $4.5 trillion bond inventory into new bond purchases, and the banks now infused with $2.6 trillion in cash from the Fed are purchasing the bonds in place of the Fed’s QE purchases.

According to the latest news reports, Mario Draghi, the head of the European Central Bank will print all the money necessary to support financial asset prices. Draghi, like the Federal Reserve, masks his policy of enriching the rich in Phillips curve terms of driving up inflation in order to support economic growth. Of course, the real purpose is to drive up stock prices.

Like the Fed, the ECB pretends that the money it prints flows into the economy. But given the poor condition of the banks and potential borrowers loan volume is low. Instead the money created by central banks flows into paper financial asset prices. Thus, the monetary policy of the Western world is directed toward supporting the wealth of the rich and worsening the inequality in the distribution of income and wealth.

The rich are far from finished with their pillage. In exchange for campaign donations, state governors are turning over state pension funds to the management of high-fee, high-risk private pension fund managers who do a better job of maximizing their fee income than protecting the nest eggs of retirees.

Throughout the Western world economic policy is run for the sole benefit of the one percent and at the cost of everyone else. The greed and stupidity of the rich are creating ideal conditions for violent revolution. Karl Marx might yet triumph.

Revolt against ECB brewing in Italy

Next week, Italy’s Beppe Grillo – the leader of the Italian Five Star Movement – will start collecting signatures with the aim of getting a referendum in Italy on leaving the euro “as soon as possible,” just as was done in 1989.

As Grillo explains to the BBC, they “will leave the Euro and bring down this system of bankers, of scum.”

With two-thirds of Parliament apparently behind the plan, Grillo exclaims “we are dying, we need a Plan B to this Europe that has become a nightmare – and we are implementing it,” raging that “we are not at war with ISIS or Russia! We are at war with the European Central Bank,” that has stripped us of our sovereignty.”

Beppe rages against the ECB:

It is high time for me and for the Italian people, to do something that should have been done a long time ago: to put an end to your sitting in this place, you who have dishonoured and substituted the governments and the democracies without any right. Ye are a factious crew, and enemies to all good government; ye are a pack of mercenary wretches, and would like Esau sell your country for a mess of pottage, and like Judas betray your God for a few pieces of money. Is there a single virtue now remaining amongst you? A crumb of humanity? Is there one vice you do not possess? Gold and the “spread” are your gods. GDP is you golden calf.
We’ll send you packing at the same time as Italy leaves the Euro. It can be done! You well know that the M5S will collect the signatures for the popular initiative law – and then – thanks to our presence in parliament, we will set up an advisory referendum as happened for the entry into the Euro in 1989. It can be done! I know that you are terrified about this. You will collapse like a house of cards. You will smash into tiny fragments like a crystal vase. Without Italy in the Euro, there’ll be an end to this expropriation of national sovereignty all over Europe. Sovereignty belongs to the people not to the ECB and nor does it belong to the Troika or the Bundesbank. National budgets and currencies have to be returned to State control. They should not be controlled by commercial banks. We will not allow our economy to be strangled and Italian workers to become slaves to pay exorbitant interest rates to European banks.

The Euro is destroying the Italian economy. Since 1997, when Italy adjusted the value of the lira to connect it to the ECU (a condition imposed on us so that we could come into the euro), Italian industrial production has gone down by 25%. Hundreds of Italian companies have been sold abroad. These are the companies that have made our history and the image of “Made in Italy”.

The ECB holding Europe hostage

The European Central Bank – ECB – invented yet another tool to hold Europe hostage vis-à-vis Russia

The ECB has just launched – effective 4 November 2014 – a new watchdog to control and regulate the European banking system. It is called the Single Supervisory Mechanism – SSM. It is supposed to monitor and reign in European banks that do not ‘behave’ in terms of overstretching their investment and risk lending as compared to their capital base.

In fact, the SSM is one pillar of the three pillar ‘security’ system put in place by the ECB and the European Commission – EC.

The Single Resolution Mechanism – SRM – is ECB’s strong arm to save or liquidate ‘troubled’ banks. In other words, it will administer ‘bail-ins’ to ‘too-big-to-fail’ banks in distress; meaning – over-indebted banks will rescue themselves from depositors’ money, or from shareholders. This practice was tested in Cyprus in 2013. As reported by Reuters on 30 July 2013 – According to Cyprus’s central bank, “47.5 percent of deposits exceeding 100,000 euros in Bank of Cyprus would be converted into equity to recapitalize the troubled lender as part of an international financial bailout for the island”.

This confiscating or stealing of depositors’ funds, also called the ‘haircut’ in the denigrating jargon of the Occident, is better known as a ‘bail-in’ – since it avoids the taxpayer, those who have been bearing the brunt in previous US and European ‘bail-outs’.

This atrocious predatory and outright criminal imposition by the infamous troika (ECB, EC, IMF), with no legal backing whatsoever, went largely without protests in the rest of Europe, it was shortly thereafter accepted by the EC as the new ‘norm’.

In one of his last proud statements before handing his job as European Commissioner to Jean-Claude Juncker, Manuel Barroso exclaimed – “The European Union intends to break the vicious link between sovereigns and their banks. In the future bankers’ losses should no longer become the people’s debt, putting into doubt the financial stability of whole countries.”

There it is. The ratification of the new ‘bail-in’ rule. It is surprising that there is no run of the European banks, as many of them are less stable than they were in 2008, at the onset of the man-made ‘crisis’. Bail-ins might be imminent.

The third pillar will be the Single Resolution Fund – SRF – a stabilization and rescue mechanism for banks facing bankruptcy. It is planned to become effective on 1 January 2016 – if – and that is a big IF – the necessary funding will be put in place by the member countries.

Pillars one and two are compulsory for the Eurozone countries and banks, some 6000 – which is a lot to supervise. The ECB has quickly declared that it – i.e. SSM – will directly monitor the 150 most important ones. The others will continue to be controlled by national mechanisms, whatever these are. They will be given strict regulations to follow by SSM with sanctions or fines if the rules are not followed – to make sure they will not stray.

Membership for non-Eurozone countries is voluntary. Remarkably, the UK has not (yet) volunteered for membership.

This is the biggest boost in ECB’s power since its creation some 16 years ago. ECB now sets all banking standards throughout Europe, according to which a bank may fall or rise. This is a clear infringement on the Eurozone countries sovereignty – one of the key principles to be maintained according to the Lisbon Treaty. There is no covenant in ECB’s regulations that would give it this power leverage. It is all self-serving – and the neoliberal leaders of the Eurozone countries go along with it –to the detriment of their constituency.

And let’s not forget, ECB is intimately linked to Wall Street, the FED and the IMF – Mario Draghi, the ECB President, is a former Goldman Sachs executive.

The SSM is a flagrant conflict of interest – and it looks like the financial czars of this western greed economy are getting away with it. For now.

An independent audit of all European banks, especially those 100 or 150 considered “too big to fail” – and including the ECB itself – would indeed be in order. – Independent means – the auditors would report to a special council of Eurozone countries – but independent of the European Commission. The special council would include representation from member countries parliaments, the banking, industry and service sectors, as well as civil society.

Of course – this is unlikely to happen, equally unlikely as an independent audit of the FED. That would mean transferring power to the people, to those whose money is at play, those who are really interested in a well-functioning banking system – not a predatory one as we know it today.

According to The Guardian, a recent stress test carried out by the ECB on some 100 of the largest European banks, 24, or one of five, failed (including 9 Italian and 3 Greek banks), leaving a hole of 25 billion euros in banking capital – which eventually may need to be bailed-in — if there are no bail-outs and the SRF is not yet functional.

Implementation of the SSM will be a point of no return for European banks, including for individual countries sovereign central banks. Until now, they were nominally free to print their own money. For example, Greece could have rescued them-selves by printing its own euros, instead of submitting to the draconian, literally killer conditions, imposed by the troika. But it didn’t, since the ruling elite in Greece was and is part of the scheme. As of now, there is no ECB rule that forbids a local central bank to print its own money – which in the Eurozone is the euro.

Europeans will be at the mercy of the ECB and through it, of Wall Street and the FED – the defunct greedy dollar based monetary system.

And why do the people not react? – Because they are on purpose misinformed, kept in the dark by the media. The new SSM is presented as a system that would protect them from future crises – when the contrary is true.

However, at least equally important and highly suspicious, is the timing of this new delegation of power for the ECB. The abrogation of Eurozone countries and their banks sovereignty is not coincidental. It comes at a time when a new west-east conflict, a new Cold War with Russia is being instigated by Washington and its European vassals.

ECB’s new strong arm, the Single Supervisory Mechanism, with its transboundary powers and disregard for national sovereignty is intent to hold the Euro system and its countries hostage against Russia, or the new Russia-China alliance. The new watchdog watches that none of them will stray – perhaps into the eastern camp of honest trading, into a new realm of economic prosperity and equality, where banking may serve the peoples development, instead of the accumulation of wealth for a few.

Remember, Mr. Xi Jinping, President of China, visited Germany in March 2014, to offer Madame Merkel participation in the New Silk Road – a new trading alliance from Germany, the western most borders, all the way to Shanghai, covering Russia, the former Soviet Republics, north-western and central China. An incredible potential for trade and development that can hardly be ignored. If Germany accepts, the strongest nation of the Eurozone, the rest of Europe will follow – follow a path of more security and independence than the current alliance with threats and sanctions from a warmongering White House will offer.

Washington is aware of this. They will hold no barrels to sow unrest and destabilize Europe to eventually justify a US intervention, more NATO, more CIA surveillance, more profit-yielding armament – and moving ever a step closer to Moscow. The new banking control mechanism is just an additional – but extremely powerful tool in this direction.

An alternative monetary system, detached from the predatory dollar scheme, will be a welcome means to peacefully counter this latest financial aggression.

Peter Koenig is an economist and former World Bank staff. He worked extensively around the world in the fields of environment and water resources. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe.

Conflict between Bundesbank and Draghi intensifies

The conflict between ECB President Mario Draghi and Bundesbank President Jens Weidmann over the course of the European Central Bank is more severe than expected, and has become “almost impossible.”

The Italian ECB chief characterizes the Bundesbank president after statements from witnesses internally on a regular basis with the three German words “No to all”.

According to insiders, therefore Draghi is no longer even trying to win the Germans for its programs.

Since July there was a direct contact between the two presidents of the ECB and the Bundesbank outside of the two Council meetings in early September and early October.

Source: Focus Magazine

Will ECB test case in European Court of Justice be EU’s downfall?

The European Central Bank, or ECB’s mandate is to keep the euro stable and keep inflation low. But critics claim it has since strayed into policy making.

Germany’s Constitutional Court referred a decision on the question to the Luxembourg court which also has jurisdiction over the ECB.

On 14 January 2014, Germany’s Federal Constitutional Court made news when it determined that OMT or Outright Monetary Transactions is prima facie incompatible with the Treaty on the Functioning of the European Union (TFEU), the legal basis for the European Union.

However, before delivering its final judgment, the German Court chose – for the first time – to seek the opinion of the European Court of Justice (the ECJ). The eventual resolution of the questions raised will have wide-ranging implications for the economics and politics of the euro.

The European Court of Justice announced at the end of September that hearings in the case against the European Central Bank’s (ECB) bond-buying scheme known as Outright Monetary Transactions will begin in mid-October.

In highlighting the tensions between the TFEU and the OMT, the German Court is basically concerned that the OMT is a fiscal union by the backdoor.

The ECJ could validate the current design of the OMT, thereby locating the fiscal union in the central bank.

In such a case, the nature of the euro area will be fundamentally altered and the ECB will become a political institution.

Alternatively, if the ECJ were to determine that the German Court’s concerns need to be addressed by changes to the OMT – by imposing serious limits on purchases of sovereign bonds and requiring the ECB to claim seniority to private creditors – the OMT will be rendered ineffective.

With judgment due in mid-2015, the ruling will have serious implications for Germany and the rest of Europe.

An anti-euro party has meanwhile been making strides in the German political scene, limiting the government’s room for maneuver.

ECB President Mario Draghi has never actually had to step in to intervene in bond markets, but his promises to do so have convinced investors that eurozone countries would not be allowed to default.

Jens Weidmann, president of the German Bundesbank is a vocal critic of the plan to use the German taxpayer’s money to fund slow countries. His criticism has met with clear approval from voters too.

The Alternative for Germany (AfD), is a party founded in February 2013 by economics professor Bernd Lucke. It has made significant gains in elections across Germany. Founded as an anti-euro party, the party came very close to winning a seat in the Bundestag in the September 2013 general elections, a remarkable feat for a party founded just six months before.

It made even larger gains in 2014, winning 7.1 percent of the vote in European Parliament elections in May and between 9.7 and 12.2 percent in three regional elections in August and September.

Along with many Germans Weidmann thus believes the ECB is overstepping its jurisdictional boundaries, since EU treaties bar the bank from financing member states.

Worse, were OMT ever actually used, it essentially would be spending German money to bail out what many Germans considered profligate Southern Europeans.

In early 2013, a group of economics and constitutional law professors from German universities collected around 35 000 signatures and brought OMT before the German Constitutional Court.

In February 2014, the court delivered an unexpected verdict, ruling 6-2 that the central bank had in fact overstepped its boundaries, though it also referred the matter to the European Court of Justice. Recognizing the profound importance of this issue, the court acknowledged that a more restrictive interpretation of OMT by the European Court of Justice could make it legal.

The German judgment suggested that alterations to OMT would satisfy the Constitutional Court that the mechanism was lawful.

One alteration would limit the ECB to senior debt, a change that would protect it against the default of the sovereign in question. The second alteration would make bond buying no longer “unlimited”.

Center parties across Europe have seen Euroskeptics emerge to their right, gnawing into their traditional voter platforms with popular anti-immigration and pro-sovereignty issues on the political menu.

The anti-ECB sentiment in Germany has swelled noticably during 2014, as German conservatives have greeted each new policy with utmost displeasure.

The German media has called negative interest rates “penalty rates,” clearly not liking the fact that they redistribute billions of euros from German savers to Southern European spenders.

German Finance Minister Wolfgang Schauble spoke in the Bundestag of his horror with Draghi’s program to buy asset-backed securities.

Judging from the German hostility to “quantitative easing-lite” measures, the ECB’s attempts to rope Germany into American style money printing economic policy could prove to be a disaster.

Financial markets love quantitative easing, a broad-based program of buying sovereign bonds in order to inject a large quantity of money into the market, slurping up taxpayers’ money in peripheral economies.

Any declaration that OMT is illegal would severely inhibit Draghi’s room for undertaking full quantitative easing and thus joining the American banking team.

If the European Court of Justice rules that OMT is legal, a sizable inhibitor to quantitative easing will have been removed, and the possibility of a fully fledged bond-buying campaign will enthuse the German voter to turn against Merkel and her pro-American policies.

The contrast between Germany, which has low unemployment and modest economic growth, and France, which has high unemployment will continue to grow. Pro-Atlanticist politicians like Nicolas Sarkozy in France will furthermore try to exploit the growing division.

The Zionist-Anglo-Saxon caliphate vs BRICS

By Peter Koenig

Ever since the BRICS (Brazil, Russia, India, China and South Africa) expressed their unison through the formation of a joint Development Bank – Durban, South Africa on 27 March 2013 – the Zionist-Anglo-Saxon caliphate attempted to divide them. The BRICS constitute some 45% of the world population and close to 30% of global GDP. The BRICS idea is to issue a joint alternative currency, fully detached from the US dollar and its greed economy.

In the meantime a number of other countries would like to join the BRICS, including Argentina, Venezuela, Iran, Mongolia, Malaysia and others, which would result in about one third of the world’s economic output and half of the global inhabitants.

This gives the BRICS a profile of strength surpassing that of the United States and Europe together. China alone is not only already the world’s largest economy, China is also dominating the Asian market of some 4.2 billion people, 60% of the world populations and a combined GDP of about US$ 20 trillion, equivalent to about US$ 25 trillion, when comparing purchasing power with the dollar based US economy of about US$ 17 trillion. Asia registered an average growth rate of almost 8% over the past few years, compared to that of the western world, hovering around 1%.

There is no need for the BRICS to fear US interference – divide to rein – if they are able to solidify their union with solidarity – political and monetary solidarity, as well as common trade policies – and if they have the political will to decouple their economies from the dollar – which is key for the BRICS success.

Sir Obama – here also called the western caliphate – has multiple self-assumed capacities. He creates new caliphates at his service, like the ISIS, the Islamic State of Iraq and the Levant (Syria); then he bombs them making the world believe they are enemies, condones their beheading of western journalists and clandestinely funds their Middle East crusade for energy and world dominance, a crusade the ISIS are carrying out for the supreme caliphate in the White House.

Washington’s caliphate also has a small army of ‘martyr nations’ fighting (and suffering) for him, like the 28 members of the European Union, led (sic) by a like-minded group of Washington-submissive neoliberal Zionist- Christian puppets. They do what Washington says. Most of them are also pro-forma members of the White House caliphate-driven worldwide war machine, called NATO, and ape the war cries of (the) Fogh (of war) Rasmussen, who is Obama’s master puppet in Europe.

Of course, the caliphate is always ready with sanctions for those who don’t behave, especially sanctions which backfire on others. The latest sanctions on Russia follow a series of billion dollar propaganda of lies and outright falsehoods, demonizing Vladimir Putin and Russia. Interestingly the ‘sanctions’ imposed on Russia by Washington’s supreme warrior – and submissively carried out by his European minions, have been retaliated by Russia by blocking most of agro-trading with Europe, leaving European farmers with rotting vegetables and fruit – billion dollar losses, estimated at a multiple of the ‘sanctions’ costs to Russia.

Neoliberals are short-sighted. They are overwhelmed by greed, instant gratification, and a dream of Full Spectrum Dominance, meaning controlling the world’s resources, money and people. But their caliphate empire is doomed, since lies and deceptions work some of the time with some of the people, but not all the time with all of the people. In fact, the tide is shifting – which is the silver lining of the dark cloud shed by the monstrous, murderous western war machine. The larger of the European minions, Germany and France, and some of the newer ones, Poland, Hungary the Czech Republic, to name but a few, become doubting and hesitating on the way of sanctions. They start feeling the hurt.

The Zionist Anglo-Saxon caliphate needs conflicts and wars in order to survive. Its economy is based on producing weapons and on destruction. World peace would make it collapse.

To attain their objective, the western caliphate is using a thousands-of-year-old wisdom – dividing to rein. By a multi-billion dollar driven worldwide propaganda and lie campaign, Obama and his European bootlickers first confuse the people of nations and continents, distort their common sense, then they drive a wedge between them, between allies, neighbors, common cultures, families – turning friends into foes.

Remember, the dollar is fiat money, not worth the paper it’s printed on. It is produced at will and is called Quantitative Easing (QE), a conveniently confusing euphemism for creating debt held as monetary reserves by nations’ treasuries around the globe.

The same happens with funding of the eternal war machine. Printing money at will has become a pastime justifying wars, mass killings for conquering the world’s resources and people. It will last as long as the rest of the world permits it. It’s already a fading phenomenon. Ten to fifteen years ago close to 90% of the world’s reserves were denominated in US dollars. Today that figure has shrunk to about 60%.

Dividing to rein is precisely what the western caliphate intends to do with the BRICS. Starting with Brazil, Washington attempts through an ugly smear campaign to slander Brazil’s leader, Dilma Rousseff and to defame Brazil’s economy. The former is accused of corruption and nepotism and Brazil’s economy is admonished for runaway private debt that supposedly stands at 80% of GDP. However, the smear-campaigners do not explain that thanks to the increase in private debt Brazil’s GDP has grown by 30% in the last decade. They don’t explain either that Brazil’s foreign debt to GDP ratio stands at less than 57%, compared with that of the US of almost 101.5% and of Germany’s, 82%.

In short, Brazil is doing well. But the presstitute media propaganda masters have managed to lower President Rousseff’s popularity to the point where her re-election in the forthcoming ballot is questionable. Precisely what the Washington caliphate wants.

Imagine an economy-based real contest between the western caliphate and the BRICS. With a GDP of about 30% of the world’s economic output, covering almost 50% of the globe’s population, the BRICS have an average debt to GDP ratio of less than 45 % (2014 estimates) – Brazil (56.8%), Russia (13.4%) India (67.7%), China (22.4%), South Africa (46.1%) – compared to that of the US (101.5%) and of the Eurozone (92.6%).

It is clear that the BRICS have nothing to fear from the western caliphate – and its possible slew of sanctions. However – and this is key – the western Zionist-Anglo-Saxon empire controls the current western monetary system. The FED, Wall Street, the European Central Bank (ECB) and the IMF, an extension of the US Treasury and the FED, as well as the Bank for International Settlements (BIS), the central bank of central banks, the privately owned chief manipulator of gold and currencies – hold the western economies hostage. They finance the US/NATO war machine. The western Zionist-Anglo-Saxon controlled financial system has the same objective of Full Spectrum Dominance, as does the supreme caliphate and assassin-in-chief, Obama, who currently serves the western arms manufacturing and banking oligarchy.

It is therefore high time that the BRICS proceed to reality with their intended alternative currency, completely detached from the dollar and the Wall Street clearing system. The economic viability of such an alternative system stands about 2 to 3 times higher than that of the UD dollar.

An interim measure to stop the western bulldozer may be necessary. Russia and China and a number of other countries have already agreed to trade in their respective currencies and, in particular, to trade hydrocarbons in non-dollar denominated moneys, a measure that will considerably lower demand for the dollar, hence, further lower the dollars viability as a reserve currency. Russia and China are poised to issue a common currency, a basket of currencies that may be joined by other countries willing to detach themselves from the fangs of the western abusive monetary caliphate.

On 3 and 4 September, NATO, the military arm of the western caliphate met in Wales, UK – to discuss its raison d’être. By NATO’s own admission, this was the most important meeting since the collapse of the Soviet Union, attended by 60 heads of state, including the 28 NATO members. As expected the focus of the meeting was to demonize Russia, a key member of the BRICS, with lies and slanders that know hardly any competition in the world of deception. The final briefing report is so full of nonsense and unproven accusations – similar to those continuously aped by Fogh Rasmussen – that Russia doesn’t even need to counter them. The NATO declarations drown in their own lies and deceptions.

It is clear, after 65 years of existence and chaotic disasters all over the world, NATO needs a new identity, a new Cold War, or, better even, a new direct war with Russia – for ‘the security’ of Europe. Therefore, the caliphate Obama, in hopefully one of his last unabashed moves, is requesting that Europe ups its ante – that the European members contribute at least 2% of their GDP to NATO – and let the military industrial complex move more weapons into the European NATO bases. In other words, making Europe more vulnerable to Russian defense attacks, putting the peoples of Europe once again in the firing line. The European leaders (sic) seem to be oblivious to such dangers.

However, there is hope. As said by Pepe Escobar, “The real deal this September is not NATO. It’s the SCO’s summit. Expect the proverbial tectonic shifts of geopolitical plaques in the upcoming meeting of the Shanghai Cooperation Organization – a shift as far-reaching as when the Ottoman Empire failed at the gates of Vienna in 1683. On the initiative of Russia and China, at the SCO summit, India, Pakistan, Iran and Mongolia will be invited to become permanent members.”

The SCO summit could be the first step towards a new world order – not the notorious “One World Order” proclaimed by the empire of the Zionist-Anglo-Saxon caliphate – but a new direction of the world, away from an usurious, abusive financial and monetary system, away from Washington’s objective of Full Spectrum Dominance – towards a new world of sovereign states.

Peter Koenig is an economist and former World Bank staff. He worked extensively around the world in the fields of environment and water resources. He writes regularly for Global Research, ICH, the Voice of Russia, now Ria Novosti, and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe.

European Central Bank cuts interest rates to below zero

The European Central Bank cut interest rates to record lows on Thursday, imposing negative rates on its overnight depositors to cajole banks into lending more and to fight off the risk of Japan-like deflation.

The cut, the first time the ECB has deployed a negative deposit rate which effectively charges banks to deposit overnight, was a response to a slowdown in inflation far below the ECB’s target and to weak euro zone lending.

That is a combination that risks dragging the bloc into an economic quagmire.

The ECB lowered the deposit rate to -0.1 percent, meaning it will effectively charge banks for holding their money overnight. It cut its main refinancing rate to 0.15 percent, and the marginal lending rate – or emergency borrowing rate – to 0.40 percent.

Markets sent the euro EUR= to a four-month low of $1.3575 after the news.

“Further monetary policy measures to enhance the functioning of the monetary policy transmission mechanism will be communicated in a press release to be published at 3.30 p.m. CET today,” the ECB said in a statement.

Investors first turn their attention to ECB President Mario Draghi’s 1230 GMT news conference at which he is widely expected to present other measures to complement the rate move.

“This is a baby rate cut – a tweak to the policy stance,” said RBS economist Richard Barwell, adding that Draghi needed to announce a bundle of measures to avoid disappointing markets.

Economists polled by Reuters had expected the ECB to cut the refinancing rate to 0.10 percent from 0.25 percent and the deposit rate to -0.10 percent from zero, as well as launching a refinancing operation aimed at funding firms.

Reuters reported last month that the ECB was preparing a package of policy options for this week’s meeting, including the rate cuts and targeted measures with a view to boosting lending to small- and mid-sized firms (SMEs).

“I think expectations are very high,” Barwell added. “To exceed them, I think he (Draghi) is going to have to talk up the prospect of asset purchases in the near future.”

Just hours before the ECB policy decision, a Bank of Japan policymaker sounded a warning, saying the euro zone should not take lightly the potential danger of slipping into a Japan-style deflationary period.

In an April 24 speech, Draghi set out three broad scenarios for ECB policy action and included the possibility of a broad-based asset-purchase program in the event of a worsening of the medium-term inflation outlook.

Such a program is unlikely for now, however, even though euro zone annual inflation unexpectedly slowed to 0.5 percent last month, figures published earlier this week showed. The ECB targets inflation of close to but below 2 percent.

Draghi will present updated inflation and growth projections from ECB staff at his news conference. In March, the forecasts showed it would take 2-1/2 years for inflation to get near the ECB’s target. A weaker outlook will support robust ECB action.

QE ON THE SHELF

The ECB is widely expected to accompany the rate cuts with other measures such as offering banks cheap, long-term funding – a so-called LTRO – on condition that they use this financing to further lending to companies.

Euro zone inflation has been stuck in what Draghi has called “the danger zone” below 1 percent since October, mainly because of weaker commodity and food prices, but also because of wage and other adjustments in euro zone crisis countries.

The stronger euro exchange rate exacerbates these dynamics.

At the same time, record low interest rates are still not feeding through evenly to companies across the currency bloc. Companies in Portugal, for example, are paying on average 5.4 percent on loans compared with 2.2 percent in Finland or France.

This particularly affects smaller companies, which rely strongly on bank funding and make up the bulk of the economy.

Another possibility is the for ECB to extend its provision of unlimited access to central bank funding beyond July 2015.

U.S.-style quantitative easing (QE) – money printing to buy assets – is likely to remain someway off, however, as it is the last weapon at the ECB’s disposal and the barriers to using it are high for the hawkish contingent on the Governing Council.

“We expect the big QE-bazooka to remain in the closet,” said ING economist Carsten Brzeski. – Reuters

Greece hires Goldman Sachs, Rothschild to ‘help economy’

Who better to help Greece escape financial turmoil than Wall Street mafia head Goldman Sachs and the international banking elite family known as the Rothschilds?

According to an official statement as reported by Reuters, Greece’s bank rescue fund has turned to the banking mafia duo in order to sell off two Greek banks (Proton and Hellenic Postbank) that were all but decimated by the economic turmoil in the nation. And who better to help sell these banks and help Greece to get back to a stable economic than Goldman Sachs, who actually was very helpful in helping to wage financial warfare on the Greek people through hiding Greece’s debt.

But that, of course, is just seasoning on top of the ironic yet horrific dish cooked up by this rescue fund in choosing the very origin of the modern banking mafia through turning to the notorious Rothschild family. From funding mega wars to originally making their massive wealth through outright deception following the Battle of Waterloo, electing any Rothschild to act as a Greek adviser is a choice that goes against the interests of the Greek people.

But then again, that is the way of the international banking cartel.

As we saw with the Cyprus incident, the wealthy bankers and connected corporate moguls pulled their voluminous amounts of cash from their accounts within the nation before the government went in and took finances from the savings of the people in order to pay for the country’s mega bailout. Even Cyprus President Nikos Anastasiadis was found to be on the list of individuals who withdrew their finances before the government-backed theft began.

According to Reuters on the partnership between the Greek bank rescue fund and the corrupt banking tag team Goldman and Rothschild in an article that has received virtually zero attention:

“Greece’s bank rescue fund has hired Rothschild and Goldman Sachs as advisers on the sale of lenders Proton and Hellenic Postbank (TT), which are most likely to be bought by bigger Greek banks, officials told Reuters on Friday.”

Back in April 2012 Zero Hedge – to loud jeers by the “pundits” who were convinced there is no chance in hell of it happening – that Goldman’s take over of the world’s central bank triumvirate: the NY Fed (Bill Dudley), the ECB (Mario Draghi) and the Bank of England, would soon be completed with Mark Carney taking over the world’s oldest central bank located on Threadneedle street.

This process has now been concluded and we have photographic evidence. – Anthony Gucciardi/Zero Hedge