August 2012 - Richard 'Jerry' Haworth: The New Colossus

The New Colossus (Ode to the ECB, etched on a bronze plaque below the statue of Draghi)

Not like the brazen giant of Bundesbank fame,
With conquering limbs astride from sovereigns to banks;
Here at our sea-washed, sunset gates shall stand (Monaco residents only)
A mighty man with a printing press, whose paper
Is the imprisoned inflation, and his name
Father of Exiled and Beleaguered Bonds. From his beacon-hand
Glows Euro-centric welcome; his mild eyes command
The air-bridged financing that sovereigns proclaim.
"Keep, ancient Central Bank wisdom, your storied pomp!" cries he
With silent lips. "Give me your tired, your poor,
Your huddled masses of malinvestments yearning to breakeven,
The wretched refuse of your teeming trading and leveraged activities.
Send these, the homeless, tempest-tossed to me,I lift my printing press beside the golden paper door!"

“Financial Lazarus”

“But the ECB has a public face, President Mario Draghi. He didn’t want history books pointing at him. So the ECB switched gears. It allowed Greece to sell worthless treasury bills with maturities of three and six months to its own bankrupt and bailed out banks. Under the Emergency Liquidity Assistance (ELA), the banks would hand these T-bills to the Bank of Greece (central bank) as collateral in exchange for real euros, which the banks would then pass to the government. Thus, the Bank of Greece would fund the Greek government.

Precisely what is prohibited under the treaties that govern the ECB and the Eurosystem of central banks. But voila. Out-of-money Greece now prints its own euros! The ECB approved it. The ever so vigilant Bundesbank acquiesced. No one wanted to get blamed for Greece’s default.

If Greece defaults in September, these T-bills in the hands of the Bank of Greece will remain in the Eurosystem, and all remaining Eurozone countries will get to eat the loss. €3.5 billion or more may be printed in this manner. The cost of keeping Greece in the Eurozone a few more weeks. And on Tuesday, Greece “sold” the first batch, €812.5 million of 6-month T-bills with a yield of 4.68%. Hallelujah.” “Greece Prints Euros To Stay Afloat, The ECB Approves, The Bundesbank Nods….”08/08/2012

“There is little doubt that Spain will need a rescue as it struggles to raise €40bn over the next two months. The country’s finances are unravelling on every front, with internal rescues for Catalonia, Valencia, Murcia, and Andalucia fast depleting the €18bn fund set aside for the regions.

It emerged today that Spain’s social security system has raided a rainy-day fund to cover state pensions for the first time as deepening recession erodes contributions.

Tomas Burgos, social security minister, said the government had drained €4.4bn from the Fondo de Prevencion – financed from workers’ illness insurance – to the meet the shortfall in July, reducing the account to just €400m.

Mr Burgos said Madrid may have to use “all mechanisms at our disposal” to meet payments, revealing that the next step may be a raid on the pension system’s €67bn Reserve Fund. The pension system has been losing contributors as unemployment soars to 25pc. It shed a further 137,000 jobs in August.”  “Brinkmanship as Spain warns over bail-out terms” 04/09/2012

What is happening reminds me of the movie “In Time” where time is literally money and in a future where people stop aging at 25, but are engineered to live only one more year. You can earn time by working or trading but if you spend more time than you earn, the clock eventually runs out and you die.

Like that old Stones’ song…

“You're out of touch, my baby
My poor discarded baby
I said, baby, baby, baby, you're out of time”