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Spain is About to Make Trouble for German and French Banks

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Ooh, this might get ugly.

The ECB rather firmly resisted the idea of releasing its recent stress test results on individual European banks. And with good reason: many observers suspect that some of the big German and French banks look less than robust. (And this is before we get to the obvious elephant in the room: since they were modeled on the too-bank-friendly US stress tests, even this measure is likely to be too permissive).

Desperate times are now producing desperate measures. Spanish firms are locked out of international credit markets. Its banks are getting funding from the ECB.

The Spanish authorities think this is all misguided prejudice (which is not entirely accurate, its savings bank, the cajas, which were not subject to the ECB stress tests, are a bit of a mess, to put it politely. The last few weeks has witnessed rescues and forced marriages among the cajas). So it has decided to defy the ECB and publish the results of the tests on specific Spanish banks.

But why should this work? First, the pressure on Spain intensified with the downgrade of its government debt by Fitch. That was due in turn to the fact that Fitch sees that the severity of its austerity measures will lower tax receipts, making Spain a worse credit risk. This also affects banks, since it is national governments that backstop their banking systems. But the big cause for alarm was the validation of the idea that austerity might actually exacerbate budget crises, the opposite of their intent. And an economic slowdown isn’t very good for private sector creditworthiness either.

Second, it is has been known for some time that Spanish banks have been heavy users of ECB collateral facilities, way out of proportion to the size of the Spanish economy. So is anyone going to take much solace from good stress test results? Doubtful. Note Spain will disclose results on its cajas too, which may or may not have the desired outcome of reassuring investors (recall how much good all those efforts at “transparency” did Lehman. Many investors seem quite convinced the cajas are still wobbly, and need very large funds injections. One of the reasons the US stress tests succeeded is the Treasury said any bank that fell short, and some did, would be required to raise funds, and if they failed to do so privately, they’d need to take a government equity injection. If investors regard the stress tests simply a an effort to sidestep capital injections, nothing will change. We’ll see soon enough how this plays itself out).

The danger of this move isn’t that the failure to make similar disclosures about French and German banks will lead to more doubts about them (if investors haven’t figured out yet that their delicate condition was the reason that the stress test results had been kept under wraps, they are denser than I realized), but that it will increase frictions among an already fractious eurozone leadership group. Although this is admittedly small beer in the overall scheme of things, one never knows in advance which straw will finally break the camel’s back.

Eurointelligence reports that an unnamed source has told FT Deutscheland that Germany will also release the stress test results. Eurointelligence deems this to be a trial balloon, since the executive branch lacks the power to do so (it requires legislation, which suggests this is really a long shot)

From the Financial Times:

Spanish officials and bankers believe that international investors and speculators are harbouring exaggerated fears about the potential problems of Spanish banks, when the banks of other countries are often weaker than Spanish lenders or have already been bailed out with massive injections of government money.

Miguel Angel Fernández Ordóñez, governor of the Bank of Spain, said on Wednesday in a speech to launch the Bank’s 2009 annual report, that it had carried out stress tests to verify that commercial banks, savings banks and co-operative lenders had enough capital available to support even difficult growth scenarios.

“The Bank intends to make public the results of these stress tests, showing estimated loan losses, the consequent capital requirements and the contribution of promised balance sheet reinforcements, so that the markets have a perfect understanding of the circumstances of the Spanish banking system,” he said.

Mr Fernández Ordóñez gave no further details…

As a result of strict regulation by the central bank, and a cushion of reserves arising from counter-cyclical “dynamic” provisions built up during profitable years, the stronger Spanish banks have so far weathered the crisis in relatively good shape.

Several of the 45 unlisted savings banks, or cajas, however, have proved vulnerable to the collapse of the domestic property market and are being forced into mergers to cut costs and rationalise operations. The Bank of Spain has seized control of two small, struggling cajas, one in the centre of the country and one in the south.

Spanish financial officials on Wednesday denied repeated suggestions from hedge funds and bank analysts that the Fund for Orderly Bank Restructuring, known as the Frob from its Spanish acronym, will need to raise tens of billions of euros to recapitalise the country’s lenders.

They said the Frob was likely to pay out €11bn in loans to support mergers among the cajas, including €4.5bn for the merger among seven lenders led by Caja Madrid.

To cover this, the Frob has €12bn of funds available – €9bn from its initial capital and a further €3bn from a bond issue last November. The Frob is expected to try to raise a few billion euros more after the summer to give it extra funds for emergencies.

Update 12:30 PM: EU leaders have announced they will publish stress test results, but the comments at Bloomberg suggest these are NEW stress tests, not the ones already conducted (which Spain is planning to release). And as pointed out above, Merkel can’t deliver on her promise, she needs the cooperation of the legislature.

From Bloomberg:

European Union leaders agreed to disclose how banks perform on stress tests, seeking to show investors that the financial system can withstand shock…

“We will do stress tests institution by institution and we’ll announce results, though I don’t know the details about how much exactly we announce, like if we release the answers to each question,” French President Nicolas Sarkozy told reporters. Results will be published in July.

The decision by EU leaders came a day after an announcement by the Bank of Spain that it would make its findings public…

“What’s important right now is that we have maximum transparency,” German Chancellor Angela Merkel said in a separate briefing. “If you have something to hide, it would come out into the open in the long run anyway.”….

Merkel sidestepped questions on how the governments would react if tests revealed shortcomings, saying the EU has “taken precautions,” including a 750 billion-euro ($927 billion) financial backstop.

Lordie. That backstop was for sovereign debt, remember? Oh, and a big motivation was to keep the banks from taking losses, Now it will be used to bail out banks directly too? That 750 billion euro facility was looking a little light when announced, and now Merkel is proposing to spread it even further?

All I can say is the authorities had better manage the optics really really well, because if Mr. Market does not like the results, the authorities will be hard pressed to come up with yet another shock and awe campaign.

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34 comments

  1. attempter

    First, the pressure on Spain intensified with the downgrade of its government debt by Fitch. That was due in turn to the fact that Fitch sees that the severity of its austerity measures will lower tax receipts, making Spain a worse credit risk.

    So Fitch for one is directly contradicting the propaganda about austerity = market “confidence”.

  2. Debra

    So… this is really interesting.
    Time to break out of the limits that nationalism has recently imposed on our thinking. (Relatively recently on the scale of civilization…)
    Through not dealing with the debt problem, we are going to topple our INTERNATIONAL banking system ?
    We are going to unravel the whole schmiel ?
    Do we really think that given the current dematerialization of the money “tool”, we are going to contain the effects of sending the euro into a tailspin ?
    If anybody here knits, you will notice that if you pull at the thread at just the right spot, the WHOLE FABRIC comes undone…
    Oops…
    I don’t know if this is the “right” spot.
    But on the basis of that quote about accountancy practices yesterday, it looks like we are definitely questioning our Renaissance heritage.
    One of the things that I find the MOST interesting these days is the degree to which Europeans AND Americans seem to ignore that their fates are linked, and that the United States is an outgrowth of European civilization.
    Nationalism has dulled the recognition of interdependance, and a COMMON cultural identity.
    This is a dangerous mistake, in my book.

    1. Externality

      “Nationalism has dulled the recognition of interdependance”

      The use of “interdependence” to force international cooperation among unwilling countries is a favorite theme among pro-globalization elites.

      Actually, I do think that globalization should be suspended, and to some extent, reversed.

      The international bankers seem determined to impose globalization and global governance on the world over the objections of its citizens. The idea that a small global elite should effectively run the planet is inconsistent with democracy and human rights. The writings of prominent globalists, such as David Rockefeller, treat democracy and human rights with contempt. http://www.amazon.com/David-Rockefeller-Memoirs/dp/0679405887

      Globalization has helped bankers, a handful of governments, and a small group of rootless elites. It ignores the fact that the average citizen does not benefit from having their jobs exported to countries that use child and slave labor, does not benefit from from the wars created by disputes between elites over resources, does not benefit from the escalating floods of refugees and immigrants, and does not benefit from the pollution that race-to-the-bottom industry creates. The escalating conflicts over culture, religion, worldview, and philosophy are ignored by elites or attributed to xenophobia and racism.

      Many of these effects are deliberate, with the globalists arguing that the benefits of economic “interdependence” in promoting peaceful trade outweigh the harm to workers, the environment, and the political systems that Rockefeller and others admit manipulating.

      Allowing the international banks to fail would cause short-term pain and dislocation. It would would also destroy the globalization movement, just as World War I destroyed the globalization movement a century ago. Authority and sovereignty would then return to the people, their nations, and their (hopefully) elected leaders.

      1. Toby

        You make important and interesting points, Externality, but WWII followed quite quickly on the heals of WWI. The main problem of nationalism is dehumanisation, the tendency of zenophobia to brew and grow unchecked. Granted, the globalization you describe is no cure for this, nor is it intended to be, and yet there is this little accidental side effect of a shrinking world that we are more exposed to one another, giving dehumanization and zenophopbia less fertile soil in which to prosper. I am a Brit working with ex East-Germans in Berlin married to a Philippino-German wife. This exposure to various cultures is a boon in my opinion. I have zero interest in promoting ‘British interests’ above planetary, and my children are being raised to think of the planet as their home. I am not alone in this.

        I would welcome too much less of what you describe, but I do not welcome a retreat to nationalism, which is happening. This tends to lead to war — it has done historically. It is a focus on sharing, which is a pragmatic necessity considering the chaotic spread of resources across the planet, a deep recognition that we are one species sharing a planet with other species, that we need to pursue.

        Nations are illusions just as much as are any other conglomerations of power and vested interests one cares to mention. Our money-creation system, namely pure debt-money, brings out the worst in us, fosters greed, scarcity, partisanship, crime, poverty, community and ecological collapse, war and so on, because the priority is always money, the measure used to value things is always money. This is obvious but overlooked. It must be undone first, nefore the incredible shrinking world, brought to us by airplanes and internet and other technologies, can start to be more beneficial.

        1. Doug Terpstra

          Brilliant. Thanks. You give hope for the vision of a miraculous world. Indeed…imagine…why not?!

        2. Graveltongue

          Winter is coming and it’s going to be cold and dark and long. This house that we built is big and ugly and smells of rotting flesh and creaks and moans in the wind. Right now it is the only home we have and tearing it down seems so drastic and final. If we could make it through just one more winter…. I asked for a black swan but I’ll take a pelican in its stead.

      2. Debra

        Globalization has been around for a hell of a lot longer than you or I, and it’s not going to go away because we want it to.
        Now that doesn’t mean that globalization always took the form of delocalizing, for example, because it didn’t.
        THAT kind of globalization has come with the increasing DEMATERIALIZATION of our money, and the unchecked proliferation of our disconnected symbolic systems.
        Like Toby, I too, am an expat speaking a language that is not my mother tongue, (not on this blog, though).
        I like exposure to foreign cultures. It enriches me.
        MONEY… does NOT enrich me the way that exposure to foreign cultures does.
        MONEY.. is an abstraction, not a flesh and blood person…
        Exacerbated nationalism will push us into the NEXT series of world wars.
        Not my cup of tea, you guys…
        I have children to think of…and YOU ?
        We ought to be careful about promoting nationalism on our blogs.
        It’s… dangerous.
        It will NOT solve our GLOBALIZED problems at this stage.
        Don’t think for ONE MINUTE that I am in favor of world government because I’m not.
        But federating around nationalism ? Time for something else to fuel our ideas of collectivity.
        Let’s be… AMBITIOUS and use our neurons. That’s what we have them for, right ??

        1. Doug Terpstra

          Well said: “MONEY… does NOT enrich me the way that exposure to foreign cultures does. MONEY.. is an abstraction…”

          How true. And indeed the love of it, something so temporal, is the root of all manner of evils that envelope us and destroy life. “What does it profit a person to gain the whole world but lose one’s soul?”

        2. Externality

          To Debra:

          “Globalization has been around for a hell of a lot longer than you or I, and it’s not going to go away because we want it to.”

          At the end of the Cold War, the consensus was that America, the “sole superpower” would permanently control that planet, and that American-style democratic capitalism had triumphed. It was Francis Fukuyama, “the end of history.” Two decades later, superpower America is, unfortunately, going away.

          Most people who oppose nationalism for Western countries have no problem supporting a country that reflects their religious beliefs and/or ethnic group.

          Even cosmopolitans and transnational progressives who despise America seem to have no problem using the benefits of American nationalism (e.g., support for the military, tax compliance) to further their goals at home and abroad.

          As we have seen with the EU, average people are unwilling to make sacrifices of any sort to support their transnational government. In the EU, there are mass protests and riots over national budget cuts done at the behest of the transnational EU. Here in the US, the media is appalled that average people _want_ budget cuts to help balance the budget. In opinion polls, Americans top concerns always include deficit reduction. Americans similarly supported allowing GM, AIG, and the banks to die to protect the federal budget.

          I would be surprised if nationalism goes away anytime soon, at least in the USA.

        3. Externality

          “I have children to think of…and YOU”

          Is a dig at childless people to go with your earlier implication that I am an uneducated hick?

        4. Externality

          To Debra:

          “Globalization has been around for a hell of a lot longer than you or I, and it’s not going to go away because we want it to.”

          At the end of the Cold War, the consensus was that America, the “sole superpower,” would permanently control the planet, and that American-style democratic capitalism had triumphed. Francis Fukuyama called 1989 “the end of history.” Two decades later, superpower America is, unfortunately, going away, and history continues.

          Most people who oppose nationalism for Western countries have no problem supporting a country that reflects their religious beliefs and/or ethnic group.

          Even cosmopolitans and transnational progressives who despise America seem to have no problem using the benefits of American nationalism (e.g., support for the military, tax compliance) to further their goals at home and abroad.

          As we have seen with the EU, average people are unwilling to make sacrifices of any sort to support their transnational government. In the EU, there are mass protests and riots over national budget cuts done at the behest of the transnational EU. Here in the US, the media is appalled that average people _want_ budget cuts to help balance the budget. In opinion polls, Americans top concerns always include deficit reduction. Americans similarly supported allowing GM, AIG, and the banks to die to protect the federal budget.

          I would be surprised if nationalism goes away anytime soon, at least in the USA.

        5. i on the ball patriot

          Nationalism has not imposed limits on our thinking, it is the internal corruption of nationalism that is the problem. The rationale for nationalism, forming alliances, is essential for our survival.

          Nation States are deceptions, as are; tribes, clubs, religions, marriages, etc., and all other social groupings. They are all externalizations (deceptions) of humans made to get needs met.

          Two things are important:

          1. The rationale for the forming of the social grouping of deception is strength. Social groupings are all alliances of individuals in which the individual deceptions of those within the group combine and get re focused against all others outside the alliance (you and me against the world babe!) to effect greater strength.

          2. The integrity of the alliance of deception within the group is its glue. Alliances are destroyed and weakened from without, but they are also destroyed and weakened from within.

          What we have today is a situation where the wealthy ruling global elite, through their central banks, corporations, and other corrupt mechanisms, have, from without and from within, gained control of nation state government officials. Thus co-opted (with the glue of alliance weakened or destroyed) they now seek to eliminate the middle classes and set the masses one against the other in a divisive and decimating global perpetual conflict.

          The EU conflict, the tearing apart of the glue of the EU alliance (an alliance, co-opted from its inception and aided in its creation to be manipulated and torn apart, much like Israel was set up as a surrogate control device in the Middle East) is a part of a well orchestrated global take down of the masses by the wealthy ruling elite — Yes they ARE through with you! Get used to it! Accept it! — who now walk the Full Spectrum Dominance walk provided by their current ear whisperers, their neocon flunkies.

          Reversing the process demands that the integrity of the alliances be restored — at all levels. The fight is for democratic representation, again, at all levels, so as to re-impose FAIR and equal regulation and transparency from all of your government officials, in ALL nations. Globalization is going to happen. We ARE all one. So lets federate around the globalization of FAIRNESS! If we are to move forward we must re-balance the present way out of whack; control of, and distribution of, global resources, excessive income for the few, and excessive wealth for the few. We must ultimately fuse all nation states, through FAIRISM, into one global community that respects the rights of ALL humans to equal access to life’s pie.

          We also have to recognize our cannibalistic human nature and rise above it by refocusing our deceptions (our externalizations), on exploiting, as humanely and FAIRLY as possible; each other, other non human organisms (there is a whole industry of employment possible right there), and inorganic nature on this planet and beyond. This can all be done with respect for the freedom of the individual. We can have decentralization in unity if we rigorously and transparently regulate our agreed upon equalities.

          In some countries, like scamerica, it will first require a constitutional rewrite forced by election boycotts.

          Deception is the strongest political force on the planet.

        6. Valissa

          Well said Debra. To add to your point about money not being the only point…

          Globalization is not only about money & economics… it’s also cultural, political, religious, biological/ecological, and more. Globalization exists in many flavors and variations, as does localization or re-localization as a balancing force. Local peoples everywhere have their part to play in attempting to determine the best balance of local, regional and global allegiance/affiliation for their needs… and this will evolve over time as it always does… we are all “living history” here and much us unknown… most predictions of the future will be wrong. Therefore I don’t see the point of stressing myself out about an unknown future. Instead I try to make sense of the present so I can navigate the world around me more optimally.

          1. i on the ball patriot

            “Therefore I don’t see the point of stressing myself out about an unknown future. Instead I try to make sense of the present so I can navigate the world around me more optimally.”

            Making sense of the present tells you that the future — change, which is what the future is — is happening at a faster rate. It is no longer an unknown process because of its greater speed. We can see it clearly in the present.

            The present is the future because the future is rapid change occurring in the now. Said another way; the rate of change is now happening so fast that changes are recognizable in the present (if one is perceptive), as they are being created in the present. The point of being aware of it is that it is a force, an external force, that is shaping and forming you, and your present actions assist in its creation. You want to be in alliance with it.

            The aggregate externalizations of humanity (all past deceptions), that are presently morphing into our newer form, the onotron, are now a significant controlling portion of the driving force of the evolution of humanity. It is the onotron that is responsible for the greater, ever increasing rate of change — the speed of change — because it can evolve faster than a human can evolve. We create and live in the future as we contribute to and experience its creation, its rapid evolution … The cars need to be driven. The internet demands new content. The iphones have to be texted, and facebooked, and twittered. The satellite signals need monitoring. Etc. It is this rapid rate of change, this merging of future with present, that has us all so anxious and gives us the sense of living in uncertain pivotal times.

            So … you must participate in creating and directing the forces that shape you and mold you in the now, or be molded or shaped by them.

            As the onotron grows and becomes more controlling it will make changes more rapidly. You must contribute to its morality with your own externalizations. Be careful what you externalize.

            Deception is the strongest political force on the planet.

          2. Valissa

            i-on-ball… we use language very differently to talk about similar things, but the one thing you said that I really liked is this…

            “You want to be in alliance with it.”

            That appeals to my daoist inclinations.

  3. craazyman

    It might be interesting to run some “Social Stress Tests” to evaluate just how much pious and glad-handed looting a population can take before it collapses utterly into a hopeless, outraged and violent anarchy.

    The test should also seek to identify the likely primary structures of group consciousness around which such a breakdown would organize and around which a new order would form.

    The Marxist revolutionary paradigm is DOA — discredited by the Gulag, Cambodian killing fields and myriad other jurisprudential atrocities combined with the economic collapse that arise when hope in human virtue is unballasted by a structural containment of the cannabilistic instinct that seems to rule the 20% who prey on the 80%.

    The French Revolution paradigm, wherein so-called nobles give up their jewelry and prestige, is an anachronism. There are no entrenched royal families who control the wealth. One of the virtues of capitalism is that the elite change over time, driven primarily by good luck and bad luck, and to a far lesser extent, by innate ability.

    Rebellion against the riches of the Church and the depravity of Church leaders (in the economic sphere) is also a fossil of time. Although the echos of the institution of and opressions by the Church are very much alive today in the pious worship of money as an object in itself and the reflexive and grovelling respect given to institutions that regulate its flow. Contemporary Analysis has remarked on some of the energetical psychic structures that have animated this evolution of metaphor.

    Anarchy itself, by definition, would appear to lack any sort of regulating structure for group consciousnes. However, I would argue that such a lack is really a temporary vacuum that results from the unresolved collision of competing ethical systems vying for control over the universal mind.

    Our age is rather interesting in this regard, in that there appear to be opportunities for new structures of thought to emerge and dominate social cohesions. It may take time for these to evolve, but surely they will. And what they will be, how they will relate to money, and what sorts of moral codes they will use as a foundation for law, are still very much a mystery.

    1. Valissa

      Agreed… and I especially liked this part…

      “Our age is rather interesting in this regard, in that there appear to be opportunities for new structures of thought to emerge and dominate social cohesions. It may take time for these to evolve, but surely they will.”

      This is an area of great personal interest to me and it is one of the major reasons why I spent many years studying spiritual philosophy, religion, and the shifting paradigms of those over the course of civilizations. I feel that new ways of thinking, perceiving and framing life and reality (including new “religions” which may look very different from current perceptions) are greatly needed and will result in changing worldviews. Current thinking in Western intellectual culture and academia is highly ideological and narrow in many fields, as well as being arrogant and detached from reality via reduction, abstraction and reification… no wonder humans have a hard time solving complex interconnected problems… they don’t know how to usefully think about them.

      One book that addresses this issue quite well, along with many others is…

      The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization, by Thomas Homer-Dixon (a Canadian)

      Highly recommended! See the reviews here http://www.amazon.com/Upside-Down-Catastrophe-Creativity-Civilization/dp/1597260657/

    2. Toby

      “The French Revolution paradigm, wherein so-called nobles give up their jewelry and prestige, is an anachronism. There are no entrenched royal families who control the wealth. One of the virtues of capitalism is that the elite change over time, driven primarily by good luck and bad luck, and to a far lesser extent, by innate ability.”

      I’m inclined to disagree with this, and also with your 20/80 split observation.

      In terms of social mobility statistics in The Spirit Level show it is good ol’ state interference in places like Sweden and Norway that help that beast along, not the market place. On this point I guess one’s definition of capitalism, a word invented by Marx, is the nub of the matter. And in terms of powerful families, what with inheritance and regulatory capture I would argue capitalism’s instinctive reliance on markets to creatively destroy the mighty is naive, if not a masquerade to keep the hoi polloi from guessing what’s going on.

      My suspicion is that capitalism/free market liberalism tends, over time, to raise sociopaths and psychopaths to power positions. A statistic I read in some PhD paper on sociopaths mention 3-4% of the human population, where a large proportion of those are secondary sociopaths, or ‘curable.’ The degree to which they are members of this family or that is actually not very important. What matters is the system itself and its blindly rapacious addiction to growth. Also, humanity spent the vast majority of its time on this planet in egalitarian societies, in a structure Christopher Boehm calls an inverse hierarchy, where the many dominate the alphas with teasing techniques, ignoring, social exclusion, and ultimate assassination. The current top-down control systems are actually, in terms of time, aberrations.

      As for alternatives, strands of Marxism (i.e. transcending the nation state), parts of MMT, alternative money types a la Lietaer, and a greater cultural reverence for our obvious dependence on the environment, some anarchy, plus some other exotics, can together come to be, in some mix, a new socioeconomic system. There is no silver bullet.

      1. Doug Terpstra

        Toby,

        It’s not entirely Craazy to note “the virtues of Capitalism” —IF ONLY that is what we had—a true meritocracy of free enterprise, where one’s success has great rewards but necessitates a commensurate re-investment in the essential commonwealth foundation that enables such success—AND, along with that of course, real-world accountabiliy for failure. The latter would necessarily entail loss of wealth and freedom for reckless negligence (for more than just the “small people”—as BP’s (Helmsleyesque) Chairman so tellingly put it).

        Unfortunately, under our strain of Parasitic Crony Capitalism we do not have that, and as you observe, the fatal genetic flaw is inherent in the way we created it. Your skepticism of the 20/80 split is also right, IMO; it’s more like 1/99. Kevin Phillips ably documents in many of his books that we do indeed have a trans-generational aristocracy. And now with nearly 50% of the world’s wealth concentrated in the hands of less that 1%, this has become the Neo-gilded Age, a very precarious time.

        On that note, here’s an interesting link on enlightened self-interest:

        “‘Time to give it up,’ Buffett and Gates tell the super-rich”

        http://latimesblogs.latimes.com/money_co/2010/06/warren-buffett-bill-gates-givingpledge-billionaires-charity-philanthropy.html

        1. Valissa

          Perhaps both numeric split views are correct depending on what specifically is being referred to in terms of who is cannibalizing who.

          One is the assumption/association of the superwealthy as preying on the rest as a kind of financial cannibalism – the 1:99.

          The other seems to be about human nature in general, which is what I think craazyman was referring to here with his 20:80 concept… after all within EVERY social class or group there are those who are more “cannibalistic” than the others… even among those posting comments on this blog.

        2. Toby

          You describe virtues, but I don’t believe capitalism can deliver them over a long period. There’s too much inherent pressure to ‘win’ (accrue more money) and secure that position by stifling competition and capturing the regulation process. To my mind it is a conflation to equate lasting equal opportunities in a durable meritocracy with any ‘free’ market system, because there’s no such thing as a free market.

          I believe we can have meritocracy, healthy competition, equal opportunity AND a sustainable relationship with the planet IF we take our focus off money and demonstrating success via material acquisition. There are other forms of success. To quote that army guy from Twin Peaks: “Success is its own reward.” Surprisingly, that’s what I took from that show. ;-)

    3. i on the ball patriot

      Good post!

      Re this: “Our age is rather interesting in this regard, in that there appear to be opportunities for new structures of thought to emerge and dominate social cohesions. It may take time for these to evolve, but surely they will. And what they will be, how they will relate to money, and what sorts of moral codes they will use as a foundation for law, are still very much a mystery.”

      I think the new structure of thought will require that we drop the 20% 80% mix and recognize that we are ALL 100% cannibals — and that we need to embrace our human nature, our deceptive cannibalistic nature, in order to rise above it.

      Our age is interesting in that this IS already the struggle — recognizing our cannibalistic nature and rising above it — and that struggle is going on right now. With many still mired down in the old co-opted deceptions of the past (which in great part contained many initiating elements based in rising above our cannibalistic state); tribes, nationalism, patriotism, religion, etc., they give up their power to those who have hijacked the deceptions. But the deceptions are being revealed to them. They awaken! They perceive!

      Exacerbating all of this is that the past externalizations (deceptions) of humanity are now many times more powerful than individual humans and many groups of humans. And so these externalizations, having a fledgling life of their own, represent a moderating dog in the fight for survival. With survival the question, and resources the key, humanity will either embrace more fully its predatory cannibalistic nature and continue on its present, apparently destructive of many humans course, or rise above it, and form newer more moderating alliances, that move human evolution, and its externalizations (the onotron) less chaotically down the road. I think that’s what the onotron wants. I know that is what I want.

      Sooo … Be careful what you externalize.

      Deception is the strongest political force on the planet.

  4. charles

    First to remember that a first round of ‘stress-tests’was made
    and handed to the Finance ministers of the Eurozone.
    Secondly, there is a debate in Brussels because of the ‘political implications’
    Thirdly, while the German Handelsblatt reported last weeek
    that the second banking crisis had started, I am yet to see
    any confirmation in the German press, so let’s hope for the best.
    Given the figures provided by the B.I.S in its latest Financial Stability Report, it would be greatly time to get
    these figures in the public sphere. What is really surprising is to see countries who have had to ‘bail-out
    a good part of their banking system and while it is well known that the leverage levels for the main French and German banks is way above the big 6 in the States, balking
    at the idea or calling such as Austria for an industry-wide
    ‘stress-test’.

  5. charcad

    Here’s a serious and practical question for people with folding money to invest. Does Spain’s demeanor and behavior with its current creditors make you more or less willing to loan money to Spain?

  6. Hoi Polloi

    Spain just had a succesful auction of their state bonds (€3,5B), it was in fact overdrawn, so there still seem to be trust in Spain’s future. What’s all these doom stories, shorties anyone?

    1. i on the ball patriot

      Weaker demand than May, and sold at a higher rate … still in very choppy waters ahead …

      Excerpt;

      “Nick Stamenkovic, fixed-income economist at RIA Capital in Edinburgh, said the results were encouraging but that nervousness is likely to remain ahead of Spain’s heavy refunding calendar.

      The government must turn over around €25 billion of debt in July.”

      http://www.marketwatch.com/story/spain-bond-auction-prompts-sigh-of-relief-2010-06-17

      Deception is the strongest political force in the planet.

  7. NOTaREALmerican

    There is a very simple solution to all this, of course.

    Create a new Keynesian Bank of Western Culture (KBWC LLC). The KBWC then “creates money” for any person than happens to need the money. The bank is funded with collateral in proportion to the GDP of the member countries. Of course, because MMT proves that money can be created without debt, the member countries don’t even need to fund the bank (in the traditional sense), a few buck – just to keep the computers going – should do the trick. (Oh hell, we don’t even need computers, just keep the money – we don’t want it back anyway, it just messes up our MMT accounting).

  8. curlydan

    FT Article quote: “As a result of strict regulation by the central bank, and a cushion of reserves arising from counter-cyclical “dynamic” provisions built up during profitable years, the stronger Spanish banks have so far weathered the crisis in relatively good shape.”

    I still have a hard time believing Spanish banks are in that good of shape considering the situation in Spain. Banco Santander just paid $B’s for BoA’s Mexico operation, so it appears that they’re healthy, but with all of Spain’s potential problems, I just don’t see how something is not rotting in those vaults.

  9. sunny

    Timmy and Ben’s STRESS tests miraculously made Zombie Banks ‘stable’ enough to make ‘profits’ and pocket millions in bonuses!

    The biggest miracle was the suspension of M to M accounting (which no one objected when the value of homes rising!)and lo and behold ‘problems solved’ and kicked down for another day!There was no mass protest against this brazen accounting fraud either by Economists, policy consultants or the MSM!

    Now they will do the same or similar TRICK for European Banks. Everything will be hunky and dory, soon!

  10. rybone

    David Stockman said “Deficits don’t matter”.

    Viva da supplyside economics!

    Walk into any Law office in the USA and you will see an

    entire wall full of Bankruptcy Lawbooks.

    But people (some people) want bailouts…

    Try going to Vegas,losing big at the Blackjack table,

    and then ask for your money back… Hah!

    High risk,high yield….

    people seem to forget that FDR’s plan for a New Deal

    intrinsically implies that the game was fixed beforehand.

    Congress is now rearranging the deckchairs on the Titanic.

    No stability without market reforms,stiff jail sentences,

    and reestablishing confidence in the markets to bring

    back investors. Nah…

  11. danny

    The interbank problems in Europe at present are just a ploy in order to create a european wide bank levy in order to centralise power further within europe.

    The EU banking problems have once again escalated just prior to the g20 and the EU will put forward proposals for a global bank tax. At g20 level nothing will be agreed to at this point but when the financial crisis re escalates then measures to centralise global control will be adopted. Also notice China announcing a new currency policy near the g20 meeting. The method is to give the g20 credibility as a global forum for solving issues individual nations cannot.

    Over time the g20 will become a way for the elite to control the whole world without democratic accountability.

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