G8 Can’t Stop Future Inflation

[Joanne98]

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 aEuropean 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.

All very, very big numbers. The EU is a bigger economic entity than the US after it foolishly expanding wildly, for geopolitical reasons: to surround Russia so Russia could be intimidated and controlled. This has fatally weakened the EU and has not weakened Russia more than it weakened the EU/NATO system. One thing that commentators often forget, is that all things are relative.


For example, the US was badly damaged by the Great Depression. But it was still stronger than all other nations, on the whole. And came out of its shell like a thunderbolt when Japan foolishly attacked the US directly. All things are relative: if both Europe and Russia fall off the economic cliff, the question is, who has the strongest potential? In this case, the fact that Russia has a stranglehold on Europe’s gas supplies means, Russia is relatively stronger than the EU. So, expanding to draw in all of Russia’s former provinces into the EU doesn’t help one bit, if they don’t provide gas directly, themselves.


Russia knows that Europe is fatally weakened. All they have to do is have a loud dispute about gas production on the coldest month of the year, yet again. The immense amount of debt taken on by Europe means, they can’t afford energy inflation, it will kill them just as it will kill the US economy. So what is happening? The price of energy is rising compared to last fall, when the crisis suddenly went into overdrive. Below is a BIS study about debt management. It gives us several options for government/central banker relationships:


http://www.bis.org/publ/qtrpdf/r_qt0906.pdf

continued>>>
http://emsnews.wordpress.com/2009/06/14/g8-cant-stop-future-inflation/#more-4130

This is very informative. Lot's of charts.

[xchrom]

1. recommend -- fascinating -- and one thing strikes me

right at the beginning --'The immense amount of debt taken on by Europe means, they can’t afford energy inflation, it will kill them just as it will kill the US economy.'

and 'energy' in europe was expensive compared to the u.s. -- and i think no matter the form 'energy' comes in -- it's all going to be much more expensive than in the past.

this may account for a globally very uncomfortable moment.

i would add -- russia -- economically is not sitting so pretty -- the may have 'power' in relation to the eu -- but their economy -- hmmmm.

what good is power if your don't have an economy? middle east anyone?