Jul
23
From Zero Hedge:
Personally, I consider the European bank stress tests to be a farce; an attempt to Bamboozle, Hoodwink and Dis-inform any who would be naive enough to drink the Kool-Aid – not to dissimilar from the US bank stress tests…CNBC reports that “NO” default scenarios will be played out, which I find to be rather unrealistic since the reasons why the banks are enjoying restricted access to the capital markets is the fear of default! Think long and hard about this…
The way the European Central Bank has set it up, it seems, is that the actual bad assets on the books of European banks are not counted in the stress tests. The “logic” behind that is that the banks plan on hold on to those bad assets until maturity. A sensible person immediately goes, “but, they’re bad assets – doesn’t matter if you hold them to maturity, you’re never going to get paid”. Any such sensible person who worked for the ECB was apparently fired…as were any such persons in charge of buying stocks today, as the market seems to have risen on the news that everything is just spiffy in the European banking system.
The purpose of the stress test was not, of course, to determine the health of Europe’s financial system. The bottom line on that is that they are insolvent (so is America’s financial system…in fact, an argument can be made that not a single bank in the world is actually solvent). The purpose was to confuse the issue and keep the system from complete collapse. We’re doing this sort of thing here in the United States in order to try and save the Democrats’ bacon in November. I can only imagine they’re doing it in Europe because they simply don’t know what else to do – just keep it going and hope some Prosperity Fairy comes along and creates the wealth necessary to discharge all the bad debts.
It won’t work, of course – there is no Prosperity Fairy. Keynes was wrong – spectacularly so. Only hard work, savings and careful investment can build wealth. You can’t print and borrow yourself in to prosperity. Long term, the only thing you get out of such a system is some very well connected financial sharks who are determined to keep it going as long as possible. And, so, here we are.
