IMF and Fed to open new round of bailoutsSubmitted by lancealotlink on Fri, 10/21/2011 - 19:24
The IMF is calling for a huge new round of bank bailouts.
As the Telegraph noted yesterday:
across Europe and the US are facing a $4 trillion refinancing hurdle
in the coming 24 months and many still need to recapitalise, the
Washington-based organisation said in its Global Financial Stability Report. Governments will have to inject fresh equity into banks – particularly in Spain, Germany and the US – as well as prop up their funding structures by extending emergency support.
Prop up their funding structures?
Virtually all leading independent economists have said that the too big to fails must be broken up, or the economy won't be able to recover, and that smaller banks actually lend more into the economy than the mega-banks (and see this).
And the leading monetary economist told the Wall Street Journal that this was not a liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach. Nobel economist Paul Krugman and leading economist James Galbraith largely agree.
The Telegraph continues:
“Progress toward global financial stability has experienced a setback since April ... [due to] the recent turmoil in sovereign debt markets,”
the IMF said. “The global financial system is still in a period of
significant uncertainty and remains the Achilles’ heel of the
Turmoil in sovereign debt markets necessitating another round of bailouts?
This is amusing, given that it was the last round of bailouts which caused the sovereign debt crisis in the first place.
Specifically, the Bank for International Settlements – often described as a central bank for central banks (BIS) – slammed the failure of the Fed and other central banks to force companies to write off bad debts years ago.
BIS also warned
that the Fed and other central banks were simply transferring risk
from private banks to governments, which could lead to a sovereign debt
crisis. That is what caused the sovereign debt crisis in the first place!
And BIS cautioned that bailouts could harm the economy (as did the former head of the Fed's open market operations).
The Telegraph continues:
Although banks have recognised all but $550bn of the $2.2 trillion
of bad debts the IMF estimates needed to be written off between 2007
and 2010, they are still facing a looming funding shock that will
need state support. “Nearly $4 trillion of bank debt will need to be rolled over in the next 24 months,” the report says.
trillion? In reality, Tyler Durden, Mike Shedlock, Edward Harrison, Reggie
Middleton, Max Keiser and many other savvy financial commentators would
put the number closer to $20-40 trillion in bad debts. And they say
that one of the main problems with the world economy is that the banks
are hiding the real amounts of their debts (and the fact that they are
totally insolvent), so that they can have the taxpayers bail give them a
number of bailouts.
In other words, the big banks are saying, "The economy is unexpectedly not doing well, so we need another bailout."
And the banks and their water-carriers in the central banks, IMF and
other agencies will repeatedly say the same thing over a number of years
to slowly get the banks' $20-40 trillion dollars worth of debt mopped
up by the taxpayer.
See how that works? If people knew that
the giant banks have created a black hole of debt large enough to suck
most of the world economy into it, and that the debt was created through
fraud and wild gambling and speculation, demands to break up the giant
banks and imprison their management would be overwhelming.
So they hide
Instead, they leak out a little information about their debt in dribs
and drabs over the course of many months and years, acting surprised
that there's still debt on their books due to "unexpected" conditions in
the economy. The party line is and will continue to be that these
conditions aren't their fault, but are due to the bad housing market, or
unemployment, or other conditions "out there in the economy" and not of
their making. And, of course, bailouts are needed to deal with these
Remember, the largest U.S. banks have repeatedly gone bankrupt due to wild speculation, and the government helped to cover it up. Many top analysts have said the U.S. banks are insolvent (see this, for example). And the big banks have hidden huge liabilities in "off balance sheet" accounts.