Bail out – its back and bigger than ever.

First off thanks to Lars.

For those of you who haven’t had had a chance to read his contribution under ‘Things to Consider Next Week’ I think its worth a read or read the Guardian original under ‘EU Financial Crisis – live blog’.

Second – The point is two fold – the dangers of short term debt and the way it needs to be re-financed, and the fact that this bail out is NOT about bailing out lazy Southern Europeans – there are some – just like there are some drunken hooligan here in Blighty – that story is to distract your attention from the fact that this bail out is FOR THE BANKS AGAIN.

Spain has debts. Of course it does. It’s banking system is also crippled with bad debts on its very own housing and property bubble created by – the banks.

I am not saying that Nations haven’t been idiotic nor that ordinary people haven’t lied, run up un-payable debts and defaulted on them – all this is true. But behind it all lies a larger uglier truth – this is all about banks still being insolvent after two years of pumping our life blood into them.

There will NOT be ANY stimulus withdrawal. No exit strategy. It was one of the earliest posts I wrote on this blog (God I hate that word) Called “Stimulus Withdrawal” It’s opening words were “In short, I don’t think so.”

The ECB lent banks vast sums to help them recover. All it did was sustain them until today. During all that time the banks had NOT used that money to ‘help the economy recover’. They did not use it to cushion themselves while they wrote down bad debts. They wrote very few down and instead decided to pay themselves handsome bonuses to make sure they didn’t all leave for somewhere nicer.

The banks did not use any of it to deleverage. Instead they used it to leverage more deals.

Then they got stuck, making YET MORE BAD DEALS. And turned to us for MORE blood.

The markets are rallying not because this bail-out is a great idea, good for a sustainable recovery, and certainly not because it is good for YOU and ME and our children. They are rallying because they proved yet again they will not be allowed to fail. Their bets win no matter how the coin lands. Heads they win. Tails they lose, but we bail them out. WHY THE HELL WOULDN”T THEY BE HAPPY!

What is going to happen now is the FED and the ECB will continue, not to prop up the market – for there is hardly any market to prop up, the FED and ECB will continue TO BE the market. They are the buyer. We are firmly into Japanese lost decade territory now. The Japanese people have been slowly impoverished and indebted over a long grinding decade (See – “Japan a lesson in pain and lies”). It’s going to happen to us now.

The rich, the big players will do fine. You wil be able to watch their stocks rise in value on the Television.

But I still don’t think this is the end. None of the bail outs so far have worked. I do not think this bail-out will work. Not in the sense of ‘recovering’ a stable and more equitable society. I would argue they were never intended to work toward that end. They were only ever designed to recover bubble-levels of growth and in so doing, to enrich the already rich. What they are also achieving, whether by design or as a happy by-product, is to create two separate economies. A financial cast system. Where the financial class is insulated and separated off in their own gated and sovereign, parasitic economy and world.

Each time a bail out comes to an end and the money has to be repaid, the money is not there and so another bail-out is required to follow the last one. But the debts and printing get larger each time. We have moved the bad debts from banks to nations and now nations to ECB and FED. Where next?