G8 Can’t Stop Future Inflation
JUNE 14, 2009…3:22 AM
There are many mysteries to life. One of them is NOT how we got in this economic mess. Anyone looking at the history of finance can see that credit bubbles always lead to crashes that we call ‘depressions’. And that using credit to finance wars is the #1 way of creating a credit bubble. All nations don’t need to go to war, to create a global credit bubble. Generally speaking, when major global empires go to war, they create global credit bubbles if they refuse to tax their imperial core to pay for wars. And generally speaking, no empire ever dares to tax the populace at home, for international wars. So they create immense amounts of credit based on future taxes.
The problem with all this is, if a major empire doesn’t tax its populace while going to war, if these wars never end or take forever to end like the Vietnam War or the Cold War, these quickly build up immense mountains of IOUs. So, this weekend, the G8 nations are meeting yet again, in desperation, trying to figure out how to have the pre-2008 status quo while changing nothing essential. Let’s look at some of the news stories before we visit the Bank of International Settlements:
Bank Rescue Costs EU States $5.3 Trillion, More Than German GDP - Bloomberg.com
European governments have approved $5.3 trillion of aid, more than the annual gross domestic product of Germany, to support banks during the credit crunch, according to a European Union document.
Germany, the world’s #2 or #3 world trade profit center, next to Japan and China, is floundering. This trio of nations depends very much on the US sucking down manufactured goods. This keeps them afloat. This has dried up nearly to $0 profits over the cost of importing raw materials. Throwing $5.3 trillion down the rabbit hole to keep the European banking and trade system going is an immense sacrifice and one that may not pay off, as far as Germany is concerned.
The U.K. pledged 781.2 billion euros ($1.1 trillion) to restore confidence in its lenders, the most of any of the 27 EU members, according to a May 26 document prepared by officials from the European Commission, the European Central Bank and member states and obtained by Bloomberg News. Denmark, where 13 of the country’s 140 banks were bailed out by the central bank or bought by rivals last year, committed 593.9 billion euros.
The measures, designed to save banks and revive economic growth, surpass Germany’s $3.3 trillion economy, the region’s biggest. They also helped to widen the Euro area’s budget deficit to the most in three years in 2008. The commission, the EU’s executive arm, is seeking to create the first EU-wide agencies with rule-making powers to monitor risk in the economy after the crisis led to $460 billion of losses and writedowns across the continent, according to data compiled by Bloomberg.
