Europe Considers Wholesale Savings Confiscation, Enforced Redistribution.HT:
ZeroHedge.
At first we thought Reuters had been punk'd in its article titled "EU
executive sees personal savings used to plug long-term financing gap" which
disclosed the latest leaked proposal by the European Commission, but after
several hours without a retraction, we realized that the story is sadly true.
Sadly, because everything that we warned about in "There
May Be Only Painful Ways Out Of The Crisis" back in September of 2011, and
everything that the depositors and citizens of Cyprus had to live through, seems
on the verge of going continental.
In a nutshell, and in
Reuters'
own words, "
the savings of the European Union's 500 million citizens
could be used to fund long-term investments to boost the economy and help plug
the gap left by banks since the financial crisis, an EU document says."
What is left unsaid is that the "usage" will be on a purely involuntary basis,
at the discretion of the "union", and can thus best be described as
confiscation.
The source of this stunner is a document seen be Reuters, which describes how
the EU is looking for ways to "wean" the 28-country bloc from its heavy reliance
on bank financing and find other means of funding small companies,
infrastructure projects and other investment.
So as Europe finally admits that
the ECB has failed to unclog its broken monetary pipelines for the past five
years - something we highlight every month (most recently in
No
Waking From Draghi's Monetary Nightmare: Eurozone Credit Creation Tumbles To New
All Time Low), the commissions report finally admits that "the economic and
financial crisis has impaired the ability of the financial sector to channel
funds to the real economy, in particular long-term investment."
The solution? "
The Commission will ask the bloc's insurance watchdog in the
second half of this year for advice on a possible draft law "to mobilize more personal pension savings for
long-term financing", the document said."
Mobilize, once again, is a more palatable word than, say,
confiscate.
And yet this is precisely what Europe is contemplating:
Banks have complained they are hindered from lending to the economy by
post-crisis rules forcing them to hold much larger safety cushions of capital
and liquidity.
The document said the "appropriateness" of the EU capital and liquidity rules
for long-term financing will be reviewed over the next two years, a process
likely to be scrutinized in the United States and elsewhere to head off any risk
of EU banks gaining an unfair advantage.
But wait: there's more!
Inspired by the recently introduced "no risk, guaranteed return"
collectivized savings instrument in the US better known as MyRA,
Europe will
also complete a study by the end of this year on the feasibility of
introducing an EU savings account, open to individuals whose funds could be
pooled and invested in small companies.
Because when corporations refuse to invest money in Capex, who will invest?
Why you, dear Europeans. Whether you like it or not.
But wait, there is still more!
Additionally, Europe is seeking to restore the primary reason why Europe's
banks are as insolvent as they are: securitizations, which the persuasive
salesmen and sexy saleswomen of Goldman et al sold to idiot European bankers,
who in turn invested the money or widows and orphans only to see all of it
disappear.
It is also seeking to revive the securitization market, which pools loans
like mortgages into bonds that banks can sell to raise funding for themselves or
companies. The market was tarnished by the financial crisis when bonds linked to
U.S. home loans began defaulting in 2007, sparking the broader global markets
meltdown over the ensuing two years.
The document says the Commission will "take into account possible future
increases in the liquidity of a number of securitization products" when it comes
to finalizing a new rule on what assets banks can place in their new liquidity
buffers. This signals a possible loosening of the definition of eligible
assets from the bloc's banking watchdog.
Because there is nothing quite like securitizing feta cheese-backed
securities and selling it to a whole new batch of widows and orphans.
And topping it all off is a proposal to address a global change in accounting
principles that will make sure that an accurate representation of any bank's
balance sheet becomes a distant memory:
More controversially, the Commission will consider whether the use of fair
value or pricing assets at the going rate in a new globally agreed accounting
rule "is appropriate, in particular regarding long-term investing business
models".
To summarize: forced savings "mobilization", the introduction of a collective
and involuntary CapEx funding "savings" account, the return and expansion of
securitization, and finally, tying it all together, is a change to accounting
rules that will make the entire inevitable catastrophe smells like roses until
it all comes crashing down.
So, aside from all this, Europe is "fixed."
The only remaining question is: why leak this now? Perhaps it's simply
because the reallocation of "
cash on the savings account sidelines" in
the aftermath of the Cyprus deposit confiscation, into risk assets was not
foreceful enough? What better way to give it a much needed boost than to leak
that everyone's cash savings are suddenly fair game in Europe's next great
wealth redistribution strategy.
Update:
An objective stress test of the euro zone's biggest banks could reveal a capital
shortfall of a whopping 770 billion euros (more than $1 trillion), a study by
an advisor to the EU's financial risk watchdog and a Berlin academic has found.
Related:
Some European banks 'have no future', need to 'die in an orderly fashion’– new bank supervisor
