Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Europe Migrant Crisis - For a Few Dollars More

Politics / Euro-Zone Apr 24, 2015 - 12:11 PM GMT

By: Tom_Naysburn

Politics

The migrant crisis in the Mediterranean is symptomatic of the wider malaise afflicting Europe, the new Wild West.  As Sergio Leone put it " where life has no value, death, sometimes, had its price. That's why the bounty hunters appeared".  Today, after the Euribor finally went negative, it seems quite plausible and legitimate to update the phase to "where Euros have little less value, death, sometimes, has its price, that's why the people traffickers appeared".  When banks and governments are being paid to borrow Euros you have to ask the question: has this inverted perversion of classical economic theory hastened the beginning of the end for the Euro experiment?


The process of lending something must have a positive value in all but the shortest of timeframes otherwise a profit is impossible and everything must therefore end up free.  If a car hire firm pays the customer to rent the car a) nobody would ever buy a car and b) as long as the business has other costs in doing business (excluding the fact that interest rates may be zero) such as staff costs or rent on premises, they will be a loss making and unsustainable business quick smartish. It all sounds, and is, an utter nonsense.

Mr Draghi wants the banks to lend, or another way of looking at it, to take on more risk, or another way of looking at it, believe in the inflation trend and ignore the likelihood of the tightening cycle. The banks don’t want to lend to the real economy because they know its a terrible trade so they have dumped everything into the corporates and the interbank market resulting in yesterdays new lows.

Mr Draghi is trying to fix (and not in a good way) the competitive game. To bend the hand of the market and cui bono to his will to preserve the political project, but without the necessary fiscal union. The problem is when you fix a game you may find nobody turns up to play it.  Therein lies his problem. If, for example, everyone knew the 3.10 at Perth was fixed nobody would turn up to the racecourse and nobody would place a bet on the race. He wants to bully the market with his tower of chips when everyone else just wants a stable stack.

Thomas Jefferson said two hundred years ago that “banks are more dangerous than standing armies” and that “speculators sweep away the fortunes and morals of the people”. With the Euro losing values at this rate soon everything the EU does will be free. Negative nominal and real interest rates are a plausible possibility and before we know it the banks will have to subsidize their debtors. They might call it a “loyalty bonus”, borrow 20,000 Euros at zero cost for a car and receive 1,000 Euros cash back every year of the loan. It sounds crazy yet worryingly possible in this brave new world.

Back to the life and death of real lives, migrants flooding into southern Europe are only operating rational self interest by trying to balance risks against benefits. They hear that the magical Eurolands (and the UK) are paved with gold where everything from housing, employment subsidies, unemployment benefit, medical provision, to name but a few, are all free on demand from conception to grave. Who wouldn’t take a punt for that and to escape the savages of the Islamic State?

By Tom Naysburn

http://zanadome.com

Zanadome.com is a news, views and commentary site, incorporating an alternative view of the headlines, providing financial intelligence and attempting to show a sustainable way to reason.

© 2015 Copyright Tom Naysburn - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in