Private Bank debt laundering

This is NOT and never was a sovereign debt problem. It has always been a private bank problem which is merely being laundered through some unfortunate nations.

I am not saying certain nations do not have their own governmental debt problems.  They do. Some of them are large and are due to stupidity having mated with greed.  BUT, an insolvent nation is not the end of the world. There have been many insolvent nations and we and they are still here.

What has made this a crisis is that almost exactly as banks knowingly lent out money to people whose only prospect of paying them back was if the good-time bubble continued for ever, so the banks have ALSO been just as blindly avaricious when it came to lending to nations whose prospect similarly rested on the bubble never bursting.  And these TWO streams of greedy stupidity have flowed together and flooded us all.

Nations refused to let their banks go bust because their sclerotic political systems had some time before been captured and suborned by their financial elite.  The common state of affairs in any banana republic. Our banana nations issued a torrent of new debt to add to what they already had, in order to have the cash to ‘save’ the banks. Other banks, and sometimes even the same ones as were being ‘rescued’, bought this debt (which for a bank is the same as lending money).

The result is that insolvent banks became the creditors of the nations trying to save them (if this sounds incredible read about Greek banks and who is exposed to Greek sovereign debt losses) while the nations, who were already in trouble, sank under a mud slide of their own creation, of new debts taken on in the name of saving unsaveable banks.

Together this incestuous imbecility bound nations and private banks into a tight suicide pact.  Now this might not have been so bad if the banks and the nations had been paired off neatly within national borders: Greek banks tied to Greece etc.  But the ties run across national boundaries.

The stupid nations are in the so called periphery of Europe the greedy banks are at the centre.  Thus we have the very worst of all situations thanks to the unstinting genius of our bankers hand in glove with the eager connivance of our politicians – who were simply and principally trying to make sure that they  would get a lucrative consulting or board member sinecure after they left politics.

This suicide pact suited the banks in two ways. Obviously they enjoyed being bailed out. But it also laundered their debt into nations so that the whole crisis could be re-branded in a much more bank friendly way.  Away went the bank debts and in came sovereign debts. Same money, same debts, new packaging.

So let us be clear. The reason Ireland is a crisis, Greece was and will be once again and Portugal may soon become one, is because if they or their banks are allowed to declare bankrupcy, it wil bring down Germany’s and France’s banks.  It is the debts of the banks in the central nations which are being bailed out whenever Ireland gets ECB money. The money goes from Ireland straight to Germany and France.  With every bail out, the Irish people are being forced to pay the bad debts of German and French banks as well as their own.

Why not have Germany and France sort out their own banks?  How much nicer to launder the debts and the blame through someone else.

No one is clean in this crisis. No nation, no people, no bank. But let us at least try to be clear and honest with ourselves even if such honesty is constitutionally impossible for our financial and political elites.