21-Aug-12 World View — Europeans debate next desperate step to try to save the euro

Posted on August 21, 2012 by John J. Xenakis

This morning’s key headlines from GenerationalDynamics.com

  • PKK terrorists kill 8 in huge blast in Turkey near Syrian border
  • Europeans debate next desperate step to try to save the euro
  • U.S. banks double investments in Treasuries as deposits explode

PKK terrorists kill 8 in huge blast in Turkey near Syrian border

Car bomb explosion in Turkey (Hurriyet)

Car bomb explosion in Turkey (Hurriyet)

At least 8 people have been killed and 60 injured in a huge bomb blast
in Turkey, near the border with Syria. No one has claimed
responsibility, but various reports blame the Kurdistan Workers’ Party
(PKK), a separatist terrorist group within the Kurdish community
demanding an independent state of Kurdistan. Turkey has a long
standing problem with the PKK, who have been based in the mountains of
northern Iraq and have been conducting terrorist attacks throughout
Turkey. But the major fallout from the Syrian crisis, besides the
huge flood of refugees pouring into Turkey, is that there’s a large
community of Kurds living in a region of northeastern Syria that’s no
longer governable from Damascus because of the conflict. So now the
Kurds in Syria, along with the Kurds in Iraq and in southeastern
Turkey itself, are agitating for that entire region to become an
independent Kurdistan. Zaman (Istanbul) and Hurriyet (Ankara)

Europeans debate next desperate step to try to save the euro

Over the weekend, the German magazine Der Spiegel said that it “learned”
that the European Central Bank (ECB) was going to go on a massive money-printing
program to purchase bonds issued by Spain and Italy:

“Interest rates on Spanish sovereign bonds have been
rising to dangerous levels in recent weeks. Now, SPIEGEL has
learned that the European Central Bank plans to use a new
instrument to stop the trend: The bank is considering setting
yield targets on the bonds of euro-zone countries. Should interest
rates exceed those levels, the ECB would intervene by buying up
their debt.”

The effect of this plan would be to permit Spain and Italy to borrow
unlimited amounts of money from the ECB to fund all their spending
programs without any restrictions whatsoever. First thing Monday
morning, the head of the Bundesbank (Germany’s central bank) said,
“The Bundesbank holds to the opinion that government bond purchases by
the Eurosystem are to be seen critically and entail significant
stability risks,” adding that the new program “could be unlimited.” A
statement from the ECB itself added that it’s “misleading to report on
decisions which have not yet been taken.” Finally, Ambrose
Evans-Pritchard of The Telegraph confirmed that Spiegel’s original
report was correct, and not only is a “game changer” of this type
being planned, but it has the support of German Chancellor Angela
Merkel, despite the fierce opposition of the Bundesbank.

I quoted all these statements to illustrate the total level of chaos
that Europe is in. The bond-buying program is no trivial thing. It
would explode public debt from trillions of euros to tens of trillions
of euros and send the markets into chaos. The only alternative to
this totally desperate measure that the Europeans are talking about is
to cut Greece out of the eurozone. But either of these two
alternatives would have disastrous consequences for Europe and the
world. As I’ve been saying for over two years, generational theory
says that there DOES NOT EXIST any solution to Greece’s debt problem
or to the euro debt crisis in general. If I were to guess which of
these two alternatives will be chosen, it will have to be the
bond-buying program, because that kicks the can down the road a little
longer. Der Spiegel and Bloomberg and The Telegraph (London)

U.S. banks double investments in Treasuries as deposits explode

Generational trends are also in full gear in the United States where
households are becoming increasingly thrifty, depositing their money
in bank savings accounts instead of going out and spending it. This
has caused bank deposits to explode, leaving banks with a lot of
excess cash on hand. But banks are also following the same
generational trends as in the 1930s and are reluctant to take the risk
of lending the money out to business owners. Instead, banks have
already bought $136.4 billion in Treasury and government agency debt,
more than double the $62.6 billion in ALL of 2011. Bloomberg

KEYS: Generational Dynamics, Turkey, Kurdistan Workers’ Party, PKK,
Syria, ECB, Bundesbank, Angela Merkel, Germany,
Greece, Italy, Spain


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38 Responses to 21-Aug-12 World View — Europeans debate next desperate step to try to save the euro

  1. Hank_Scorpio says:
    August 21, 2012 at 8:43 am

    Sure, go ahead EU, print more money, keep eating yourself alive for a failed experiment. Eventually there will be rioting everywhere in Europe.

  2. Deusexmachina says:
    August 21, 2012 at 11:00 am

    I'd like to apologise to John for having that vile creature follow me in here……

    It was never my intention for that to happen….

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