Eugenio Benetazzo (16/08/2007 )

Here's what the Fed and the ECB are: talk and distinctive. Before the largest financial bubbone in recent years that is now about to explode, if they come out with statements like,, keep calm, Don't worry so much the economy is healthy, Europe does not risk anything !

The bigger the lie, the more people will believe it. Recent liquidity injections (four interventions in seven days) To support banking activities, now in full financial default caused by a state of generalized insolvency (Only in my province there is a well -known modest size bank that has something like 1.500 mortgage contracts last generation in distress). The crisis that hit the US markets, it will have anything but negligible consequences on European markets, who wanted to mimic the overnight brothers.

Far from gloating to the misfortune, But the analysis developed and elaborated in Best Before and contemplated also during the Blekgek tour has found their evangelical materialization these days: In the face of all those so -called economists graduated in prestigious replicating clones factories that gave the use of the debt to low interest rates such as the lymph of globalization.

Anyhow, In the end Camelot collapsed: Castle debts built on the foundations of other paper debt (covered in their face by a river of derivatives: the other bubble that will have to break out) has shown all his fragility. Here is what the economy claimed, GDP, stock index and the real rally: the use of unbridled debt. All in all, even without guarantees or to put it to the American, all things to all thanks to NINA (none acronym for income, none assets) or also issued loans to those who have some income and does not have collateral (Be careful, however, because we also have them in Italy, just that they are called by another name, usually the name of financial providers them !).

Particularly in Europe in the last few hours they have been trying to cheer the hearts and hopes of investors and savers, stating that the situation in Eurolandia is not as serious as in the USA: it is true it is not serious, it is very serious ! Despite tell you otherwise ! The substantial differences can also find on the different dynamics of enforcement of the judicial imperial system than Europe, a few months in the US against a few years in Europe, even in Italy even five ! This means that an Italian bank that lent to a pair of young precarious the 100 % for the alert of a miserable apartment from 40 sqm can also wait 5 years before getting back the financial resources he lent.

It is no less added that in Europe the use of the purchase of properties with full financing has been adequately covered and sealed by amazed real estate appraisals (that they would allow to make reasonable the possible hypothetical realizable value in the event of realization). Unfortunately, the debts are paid and only extinguished with money (money that now seems to be no longer there), And that's why a truly unprecedented scenario awaits us: an economic bubble that will have anything but predictable dynamics. Forget not to such an extent that the shares you sell in three minutes with a phone call to the bank or with a click of mouse, while a home or an apartment (assuming that you find at this time buyer) It could also take several months.

For this consideration this time to be deeply exposed to borrowers and investors in addition there are also the banks themselves, whose assets in the past four years have increasingly crystallized: It takes very little now to compromise their solidity. And if the banking system falters, the industrial (tight to it by an umbilical cord) and far from heartening. I do not think there are many solutions: We are simply meeting the improcious of the turbocapitalistic system in which the only use of the debt has allowed the support of consumption. For this reason the system is not healthy, As damn rotten and end-stage: It is one thing to spend because he spared himself in previous years, Another thing is to continue consuming and buying consumer goods because someone lends the money easily.

History repeats itself: I want to remind you that Thursday 24 October 1929, Five days before the famous black Tuesday, following the first ravvisaglie of panic selling on price lists, Three national banks intervened to support prices and limit sales hemorrhage: la National Bank, Chase Manhattan and Morgan Banking. The next day, FRIDAY 25 October, Many prestigious bankers hurried to make statements still reassuring about the state of good health of the economy, even the famous Charles Schwab (founder of the eponymous brokerage house) And President Hoover himself stated that the situation was substantially healthy and the economic fundamentals of the American industry projected a vigorous and stable prosperity for the future. We all know how to end three days later: a dramatic drop in prices, The most catastrophic negotiation day, hitherto, the history of Wall Street: the famous black Tuesday of 29 October 1929.

Take notice that history is repeating itself ! Central institutions and banks that guarantee that the worst has passed and above all that Europe will not suffer the consequences of the liquidity crisis of the US banking system. Too bad that the facts contradict their encouraging statements: know for this purpose that the ECB has carried out liquidity interventions much more full -bodied than the FED, Basically he entered much more money than he made the same Fed available. And as if this were not enough, we are witnessing the theater of the mass media that speak of liquidity injections by the central banks as if they were a cure for the dying patient: quite the. Injecting liquidity is certainly not a long -term healthy maneuver, can allow a momentary stabilization of the ongoing crisis, but subsequently involves an inevitable increase in inflation with contextual instability of the markets: Basically, interest rates will have to be raised to cool the entire system, maybe much more than what was previously announced. The hypothesis of a discount rate al 6 % In Eurolandia it begins to become more and more plausible.

But let me tell in a slightly more technical way what would happen: If at the end gionata a bank had a balance of deposits / withdrawals negative, He can then buy the money he needs in the interbank circuit, where he will find the funds made available by other banks who have instead had a positive deposits/withdrawals. This rate in recent days had flown to 4,7 % against an official discount rate 4 %. The ECB therefore intervened on the offer side, to rebalance the system, ensuring the liquidity necessary to satisfy the application and in fact the market rate immediately came to the 4%. In essence, therefore, the ECB created money from nothing and made it available to the official market conditions for some banks in difficulty, to prevent others from mirrizing on an alleged liquidity crisis.

We can therefore agree that injecting liquidity into the system means giving money to a restricted elite of banks in momentary financial difficulty at the expense of the rest of the world in such a way that there is no immediate perception of this operation. Everything is somewhat scandalous as it is instead of creating money (from nothing) To help those who have contracted a debt for the first home (in fact the debtor with a primary social need), it is preferred to sustain and support the banking system (then the creditor with a purely speculative purpose) who is in difficulty because the effort is able to return the money taken on loan. In my view, The only real risk that really runs the banking system is that of a popular revolution.

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