News & Analysis
Brussels' Bogus Bank Regulations
Europe unveils sweeping plans to govern reckless banks ... Brussels has called for sweeping powers for regulators to seize failing EU banks, sack board members, and impose haircuts on senior bank debt, aiming to ensure that taxpayers are never again held hostage by high finance. The European Commission's "Framework for Bank Recovery and Resolution" draws on Scandinavia's hard-line approach during their banking crises in the early 1990s. The goal is to end the pattern of moral hazard and mispricing of risk that generated Europe's debt woes. "Banks will fail in the future and must be able to do so without bringing down the whole financial system," said Michel Barnier (left), the internal market commissioner Mr. Barnier's consultation paper will lead to a "legislative proposal for a harmonized EU regime" as soon as this summer, with an insolvency structure in place by 2012. The final phase will be the creation of a European Resolution Authority by 2014, adding a fourth pillar to the EU's new architecture of financial regulation. EU "authorities" typically have their own permanent staff and powers to override national bodies. – UK Telegraph
Dominant Social Theme: Regulate the banks and these cyclical depressions will occur no more.
Free-Market Analysis: Another day, another meme. This is one of the older ones and its reoccurrence shows us more clearly than ever that elite propaganda is neither innovative nor complex. Just yesterday in an article entitled "Necessity of the Plutocracy?" the Daily Bell pointed out how concerted efforts were being made to blame Wall Street for the Greater Recession that began in 2008. A steady drumbeat of anti-Wall Street and anti-banking sentiment has issued forth from the organs of the state and its enabling mainstream media – designed, in our opinion, to shift the blame away from mercantilist central banking. We also pointed out the following:
The idea is to blame the securities industry and the "plutocrats" for the West's economic woes. This is what happened in the 1930s when central banks last blew up the system. Wall Street was regulated and "populism" was encouraged as a political system. The power elite is happy to point fingers at rich securities bankers; it is central banking that is to be off limits. And even now, we observe, despite a general sense (especially in America) that central banking is a main player in the disaster of the Greater Recession, central banks remain above the regulatory conversation. The Federal Reserve in fact has received vast new powers.
Yes, hard as it is to be believed, in the United States, the Federal Reserve has been given more power. Now in Europe, banks are about to become far more highly regulated. The idea that regulators themselves are partially to blame, and central banking economies themselves are set up to create cyclical depressions is not dealt with by the people making the rules nor is it made clear by the media and certainly not the academic community.
Thus as we can see, historical narratives are created by elites and elite media, not by "the facts on the ground." The elite creates dominant social themes – fear-based promotions that are widely distributed via universities, think tanks, white papers and the mainstream media. In the 21st century, these memes have been widely checked by the truth-telling of the Internet. But what has been fascinating to see is that exposure does not stop the propagation of these memes, nor their SOLUTIONS.
It is an absolutely bizarre spectacle. Global warming is an obvious culprit. It is now rejected by the majority of people in the West and probably around the world (if they have heard of it). But the global warming meme (and the tiny network that propagated – exposed via a famous hacking) continues onward nonetheless. The UN holds meeting about it; portions of the mainstream media continue to tout it as a fact; automobile companies and power companies continue to move ahead with "solutions" to a problem that is not only seen as increasingly incidental but also actually wrongheaded, in that the world may be entering another "mini-ice-age."
Global warming is an especially important dominant social theme for the power elite because so much depends upon it, including upcoming food and water scarcity memes. But what we have observed is that when elite memes are thoroughly discredited, the elite itself – via elite promotional mechanisms – continues serenely to market its discredited propaganda as if nothing has happened.
This is not because the elite, in aggregate are genius-types; nor are they reptiles as David Icke proposes; but they are arrogant and they are, we would propose, paranoid and frightened. More importantly however, the memes of the elite are simply not reversible entities. The fear-based promotions currently in play are vast enterprises that are beyond the control of any one particular person at this point. Once they are put in play they almost, of necessity, have to run their course.
But just because a promotion is ubiquitous does not make it correct. It is incorrect to blame the Greater Recession on commercial banking, or even investment banking. The elite itself at the highest levels has created a central banking economy worldwide, and the booms/bust cycles that central banking engenders has proven inordinately destructive to Western economies especially – which have the most to lose.
How does it work? The stimulation of fiat money causes tremendous surges in temporary prosperity in a given society; but as we have seen over and over again, the "bust" cycle of central banking is tremendously destructive and when combined with the progressive income tax, tends to hollow out economies and ruin their productive capacities over time. The boom-bust cycle of central banking is also immeasurably destructive of middle classes. Throughout history it seems that elites and middle classes have been at war.
The banking reforms in the US and Europe will not do a single thing in our view to ameliorate the boom-bust cycle generated by the worldwide central banking economy. Central banks will continue to print too much money, fooling people into thinking their economies are doing well. When the distortions build up enough, a crash takes place and people lose wealth and economies lose vitality and are evermore prone to authoritarianism.
Conclusion: The regulations in Europe are in fact fairly Draconian and give government and its regulatory bodies tremendous powers they did not have before. Eventually, such regs will be "harmonized" around the world. Thus we see that despotism advances at the expense of truth and the free-market is diminished as a result of man-made catastrophes.
Posted by Clark on 01/07/11 11:41 AM
"One actually can visualize central bankers sitting around a table and..."
Yes, and this brilliant video cartoon does a pretty good job of helping people to visualize just that:
Click to view link
Reply from The Daily Bell
Thanks for the link.
Posted by Emilio Zuniga on 01/07/11 11:24 AM
You have not realized that in Mr. Bainer words despite more bank regulation, banks will nonetheless fail in the future. However the new regulation attempts to soften the impact on the public.
More regulation is not as you mentioned to get rid of market failure. As a human activity, banking is bound to sometimes fail to obtain the proper balance.
All real competitive markets, not theoretical contructs, have that nature, and the issue is not more regulation but the proper regulation to avoid greater pain in the society.
Reply from The Daily Bell
Dear Mr. Zuniga. We are always appreciative of your informed inputs. But - Good Lord! - the threshhold of "proper regulation" must have been passed about 100 years ago.
And actually there is no such thing as "proper regulation." It is an economic impossibility. Regulation is always a price fix, an interfering with market itself and the Invisible Hand. Every law, every code, every regulation (which carries the force of government punishment behind it) is a price fix creating a queue, or a shortage otherwise distorting the market - giving to some arbitrarily while taking away from others who are (often) doing the creative work.
As far as the banks go, the system is now even more ludicrous than it was. Instead of simply returning to free-banking and honest money, the powers-that-be plunge ahead with this crazy fiat-money/central banking system that creates tremendous distortive booms and INEVITABLE BUSTS that bankrupt whole industries and much of the Middle Class besides.
Within this context many banks inevitably go broke. The entire US S&L industry was wiped out in the 1980s. Now it so happened that the ENTIRE MONETARY STRUCTURE was WIPED OUT in the 2000s - and thus the power elite stepped in to ensure that "trillions" in additional paper money were made available to the largest, ruined firms in the world.
The inevitable cry came, then, that these banks - some of them - should have been allowed to fail. One actually can visualize central bankers sitting around a table and choosing which banks will fail in a further crisis to make sure that the public gets its pound of flesh.
More and more the world resembles a Swift novel these days, where nothing is at is seems as everything is rendered as some sort of dramaturgy.
So long as the world lies helpless under the boot of its central banking economy, banks and industries will fail regularly. Central banks will then step in and prop up chosen entities. The ones they do not choose to prop up will be referenced as bankrupt - and served up as examples to the public at large as examples of the "free market" at work.
What is going on in the highest circles of power these days is almost beyond belief. It IS beyond belief.
Posted by GMwillput'YOU'inthesoil on 01/07/11 10:41 AM
Nah,-imho these FEAR agends will topple.The swarm of snowballing Truthfull info' will see the elite take drastic Suicidal last ditch measures.I had'nt a clue 'til recently of Dominant Social Themes & am so much the more in the know now;so i assume theres Millions of more coming outta the fog! That Insane Clown Possee 'Miracles' video great DB! A deffo meme -the charting of it in 10 most Click to view link actually very very smart & great message to it.Them Magnets surely are a Pandoras Box awaiting it's key.P.s;did ye view Bill Ryan on 'Avalon Project' interviewing the assasin the elite set on him;well 'career /credibility destroying hit-man @ least.Is it genuine or a Julian Assange type doubt dispeller attempt.. :-/
Reply from The Daily Bell
We don't have much faith in the Avalon Project, sorry. But thanks for writing.
Posted by Don The RkyMtn Gnome on 01/07/11 10:13 AM
"The fear-based promotions currently in play are vast enterprises that are beyond the control of any one particular person at this point. Once they are put in play they almost, of necessity, have to run their course."
A Shakespearean tragedy that the PE's most successful fear based promotion of all time (a total collapse of the PE's own elaborate financial system) is actually unintended.
Posted by Grekko on 01/07/11 09:11 AM
Well said, DB. Once again, you have cut through the bull and pointed your finger correctly at the source of our woes. Namely, Central Banks and fiat currency.