Bankers & Fools

After a tense week with world markets teetering on the edge of collapse Angela Merkle finally met with her French counterpart Nicholas Sarkozy and they ended the seventh month chill in their once cozy relationship. According to  The Independent, they faced a serious impasse regarding bank haircuts in the "déjà vu all over again" Greek financial crisis. Sarkozy fought tooth and nail to guarantee that the largest holders of Greek debt, the French banks, wouldn’t get a clipping. Merkel made a valiant effort to demand accountability from the banks but she finally caved in, giving great comfort to the second largest holders of Greek debt: the German banks.

According to the Financial Times, French banks are holding $53 billion in Greek debt, Credit Agricole alone is $30 billion invested, while German banks are holding $34 billion. Colloquially speaking, Frau Merkel and Monsieur Sarkozy know who their daddy is.

Follow the Money

One key question is missing from the discussion of the Greek sovereign debt crisis. Imagine a close friend is moaning non-stop about a debt owed to them that looks like it won’t be paid. Worst of all they borrowed the money from someone else in order to lend it! Most attentive and caring friends would make that most indelicate but necessary of inquiries. Who did you borrow the money from?

We are blessed to have a corporate media so polite  that they don’t burden us with these embarrassing questions. Where did the French and German banks get the $87 billion to lend the Greeks? They would have you think that these are the deposits of hard working Europeans, small businesses, corporations and maybe even tax revenue from governments. This is not the case. Banks use their assets as reserves against which they either “create” money to lend or borrow "created" money  from central banks, in this case, the European Central Bank. When buying government bonds, which supposedly have no risk, they use maximum leverage and actually have no reserve requirements.

The Fake Bull Market: A Dollar Mirage

José Tomás

The SP 500 hit an apocryphal low of 666 during the financial crisis  in March of 2009 from which point it has surged to more than double in price in about two years. This bull market is one of the most robust in  US equities history; its only rivals are the end of the roaring 20’s and the late 1990’s.

There probably couldn’t be two more diametrically opposed moments in US history as the to late 1990’s and the post financial crisis period. The late 1990’s were a period of massive innovation, relative peace, budget surpluses and low unemployment. The US military was resting on its laurels after a swift, definitive victory over Saddam Hussein and the once ominous Soviet threat had disappeared, mired in a decade of decay. Microsoft, Yahoo, Oracle, EBay and the like had made advanced technology once again part of the America brand after the 1970’s and 80’s when it seemed Japan would overtake the US as both the world's dominate economy and innovator. But the nineties were a lost decade for the Japanese and saw a serous decline in their economic power relative to the United States. The 1990’s were the culmination of an American century and victory in the Cold War;  the long, sustained bull market made sense.

JFK and 9/11: The Common Threads

Criminals leave signatures.  There is consistency in their motives, methods, alibis and techniques.  A detective from the Spanish National Police said that investigators knew within minutes of reaching the mangled remains of commuter trains in Madrid where almost  200 commuters were killed that the Basque terrorist group ETA had not carried out the attack-  a fact which was concealed by the Spanish government for several days in a vain attempt to save an election.  The investigators immediately saw that the signature was wrong; it just didn't smell right.

President Kennedy was murdered on November 22, 1963 and less than two years later American Marines entered South Vietnam beginning the US intervention that would end ten years later with the fall of Saigon and millions dead.  Less than two years after the September 11th attacks in New York and Washington, the United States began the Iraq War, which would end eight years later with the withdrawal of the coalition forces, leaving Iraq destabilized and clearly within the sphere of Iranian influence.

Apart from the similar aftermaths, both events have common elements both in their buildup and execution as well their social ramifications.