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German Banks and the Eurozone Crisis

[1]COMMENT: The Ger­man word for pow­er is “macht”–derived from “Machi­avel­lian.” One of the rel­a­tive­ly few Inter­net enti­ties cov­er­ing the behav­ior of the sup­pos­ed­ly “new” Ger­many is the Ger­many­Watch blogspot.

They fea­ture a post high­light­ing the aggres­sive, skill­ful­ly cyn­i­cal maneu­ver­ing of Ger­man finan­cial insti­tu­tions with regard to the Euro­zone cri­sis. Far from being the ide­al role mod­el for the rest of the con­ti­nen­t’s finan­cial enti­ties, Ger­man banks in fact pumped cap­i­tal into the bub­ble economies of the periph­er­al coun­tries, thus set­ting those coun­tries up for the col­lapse that threat­ens the glob­al econ­o­my.

(In that con­text, one should not lose sight of the fact that the major Ger­man banks oper­ate under the stew­ard­ship of the Bor­mann cap­i­tal net­work, as dis­cussed in FTR #232 [2].)

Not only did they “do every­thing right” while every­one else “did every­thing wrong,” but Ger­man banks had enor­mous expo­sure to the burst­ing bub­ble of the periph­er­al Euro­pean economies.

Cit­ing an arti­cle from The Inde­pen­dent, this post takes stock of that fact.

With Ger­many push­ing for the afflict­ed nations to sur­ren­der polit­i­cal sov­er­eign­ty as a con­di­tion for Ger­man finan­cial assis­tance (ful­fill­ing the goal enun­ci­at­ed by Friedrich List in the 19th cen­tu­ry and put into action by the Third Reich in its above-ground phase), we see that Ger­man banks have been acces­sories or enablers for the loom­ing dis­as­ter.

A 2012 arti­cle by Mr. Chu in The Inde­pen­dent details how the Ger­man bailouts have actu­al­ly helped to assist Ger­man banks, illus­trat­ing “macht” or “Machi­avel­lian­ism” in action.

In this con­text, we should not lose sight of two con­sid­er­a­tions we’ve dis­cussed in the past.

One is the role of the mys­te­ri­ous Roland Arnall (“the John­ny Apple­seed of sub­prime”) in help­ing to pre­cip­i­tate the glob­al finan­cial col­lapse that burst the Euro­pean bub­bles, set­ting the stage for the cur­rent Ger­man pow­er play.

A refugee from Nazi occu­pied Europe, Arnall was alto­geth­er mys­te­ri­ous, mask­ing every­thing but his avowed Jew­ish­ness and sup­port for the Simon Weisen­thal Cen­ter. When ana­lyz­ing an indi­vid­ual who goes to great lengths to hide infor­ma­tion about him­self, those details he goes to great lengths to empha­size are significant–not for what they tell us about what he is, but for what they tell us about what he isn’t.

In FTR #690 [3], we exam­ined the very real pos­si­bil­i­ty that Arnall was a “Bor­mann Jew.” What bet­ter cov­er for a Nazi finan­cial gam­bit than to have a Jew fronting for the oper­a­tion?

We should also remem­ber that the Under­ground Reich and its SS foot sol­diers had designed to exe­cute con­spir­a­cies on behalf of Ger­man car­tels in for­eign coun­tries.

Are Arnall and the Ger­man banks that set up the Euro­zone cri­sis, thus jeo­pradiz­ing the glob­al econ­o­my rep­re­sen­ta­tive of those con­spir­a­cies?

(New­er lis­ten­ers should make a point of down­load­ing, print­ing and read­ing Mar­tin Bor­mann: Nazi in Exile [4]. Increas­ing­ly, the pro­grams and posts will be incom­pre­hen­si­ble with­out doing so.

“Ger­man Bank­ing Supe­ri­or­i­ty Is a Lie”; Ger­many Watch; 9/2/2011. [5]

EXCERPT: . . . . And of course, the very claims of eco­nom­ic supe­ri­or­i­ty are a com­plete fab­ri­ca­tion. Ger­man lead­ers defined the prob­lem as an Anglo-Sax­on one, and blamed Amer­i­ca and Britain (all they have done is drop the claim that Anglo-Amer­i­can Cap­i­tal­ism is run by Jews. They still want to bring down Anglo-Amer­i­can cap­i­tal­ism).

As we have men­tioned before, accord­ing to the Bank for Inter­na­tion­al Set­tle­ments, Ger­many lent almost $1.5 tril­lion to Greece, Spain, Por­tu­gal, Ire­land, and Italy. Add to that heavy Ger­man involve­ment in the cred­it binge in Amer­i­can real estate, and it is clear that wher­ev­er par­ties were tak­ing place, Ger­man banks were sup­ply­ing the drinks.

Ger­man banks are two and a half times more lever­aged than their US bank­ing peers, accord­ing to the Inter­na­tion­al Mon­e­tary Fund.

Some of them have pulled out of the bank­ing stress-tests that the rest of Europe has had to under­take, because they did not want the results to go pub­lic.

The arti­cle [by Ben Chu of the Lon­don Inde­pen­dent] also says; “A poll of Ger­mans last month indi­cat­ed that 71 per cent of the pop­u­la­tion are either par­tial­ly or com­plete­ly in the dark about the tech­ni­cal rea­sons behind the sin­gle cur­ren­cy cri­sis.” . . . .

“Ben Chu: Ger­many Is not Bail­ing out Europe, It Is Res­cu­ing Itself” by Ben Chu; The Lon­don Inde­pen­dent; 7/5/2012. [6]

EXCERPT: Poor Ger­many, forced to pro­vide mas­sive guar­an­tees for its prof­li­gate Euro­pean neigh­bours.

The Fed­er­al Repub­lic did every­thing right – push­ing its domes­tic labour costs down, keep­ing pub­lic bor­row­ing low. And its neigh­bours did every­thing wrong – let­ting wages spi­ral and run­ning up big pub­lic debt piles. But now pru­dent Ger­many is being forced to foot the entire bill.

And even with­out the addi­tion­al costs of bail­ing out Greece, Ire­land, Por­tu­gal, Spain and Cyprus, Berlin is fac­ing a cat­a­stroph­ic bill thanks to the Euro­pean Cen­tral Bank’s (ECB) pro­vi­sion of liq­uid­i­ty life sup­port for the euro­zone’s bank­ing sys­tem. The Bun­des­bank has racked up vast claims against oth­er cen­tral banks through the mon­e­tary clear­ing sys­tem known as “Tar­get 2”.

That’s the stan­dard nar­ra­tive from Ger­many. And it’s large­ly false. The guar­an­tees that Ger­many has extend­ed – and the huge liq­uid­i­ty oper­a­tions of the ECB – have indeed been used to assist the strug­gling nations of the euro­zone periph­ery. But they have also, as new research from Gold­man Sachs show, been used to bail out Ger­man banks. . . .

. . . .  Ger­man banks have been steadi­ly extri­cat­ing them­selves from their expo­sure to south­ern Europe since 2007, as Chart 3 shows. Ger­man banks’ gross cred­it claims against the nations of the euro­zone periph­ery have fall­en by 50 per cent, down to €300bn. They have been busi­ly off-load­ing euro­zone assets to reduce the risks to their bal­ance sheets.

And that has been tak­ing place as the ECB has been extend­ing its own bal­ance sheet by pro­vid­ing cheap lend­ing for banks across the con­ti­nent to pre­vent them from run­ning out of mon­ey. Here’s how that works:German banks have stopped lend­ing to euro­zone periph­ery banks. And those banks have been forced to fund them­selves, instead, by tap­ping the ECB for cash.

But the risks return. Euro­zone periph­ery nations are still run­ning trade deficits with Ger­many. Those deficits that were pre­vi­ous­ly financed by pri­vate Ger­man banks are now financed by the ECB. And thanks to the mechan­ics of the Euro­pean mon­e­tary sys­tem that has result­ed in the bal­loon­ing of the Bun­des­bank’s claims against oth­er euro­zone cen­tral banks.

“It is no coin­ci­dence that the increase in net for­eign assets on the Bun­des­bank’s bal­ance sheet rough­ly match­es the decline seen on banks’ bal­ance sheets,” said Dirk Schu­mach­er of Gold­man. “The Tar­get 2 imbal­ances … have main­ly replaced finan­cial risk that was pre­vi­ous­ly sit­ting on pri­vate-sec­tor bal­ance sheets.”

What this means is that the ECB and euro­zone gov­ern­ments, as well as bail­ing out oth­er mem­bers states, have qui­et­ly been res­cu­ing Ger­man banks and, by exten­sion, Ger­man savers. With­out these emer­gency oper­a­tions, the euro­zone would have bro­ken up, Ger­man banks would have gone bust and the sav­ings of many ordi­nary Ger­mans might have been wiped out. More like­ly the Ger­man tax­pay­er would have had been forced to bail out those banks.

So, as the Ger­man peo­ple dis­trib­ute blame for the sit­u­a­tion in which they find them­selves, they should not ignore their own bankers. If those insti­tu­tions had not made these invest­ments and financed the cur­rent account deficits of Ger­many’s neigh­bours for so many years, their coun­try would not be on the hook for hun­dreds of bil­lions of euros of bad debts.

Yet this is some­thing Ger­man politi­cians refuse to acknowl­edge. . . .