Saving the Euro while kicking the can

So Merkel and her friends deliver another “Europe is saved” moment. This time with 120 billion USD pact in order to spur growth. The Algos managed lifting the markets, and may we remind you of the half year window dressing. The can is kicked down the road yet again, and yes, only the Spanish banks need more than 120 billion USD. They tell us we must save the Euro, but why, and for who? More on the subject by Golem.

It is a troubling aspect of our present financial and political situation that there has been a tendency, I would say a deliberate desire, to confuse wealth with debt; to present them as flip sides of each other when they are, in fact, entirely different. Why should this be? Well it might be because much of Mr Soros’ wealth, the wealth of the institutions he owns shares in, the wealth of banks and other financial institutions and the wealth of those who own and run them, is tied up in debt agreements of one kind or another. Your wealth and mine is probably in sovereign issued ‘money’. Most of us don’t have investments. Many don’t have savings to speak of. The wealth of the top 10%, on the other hand, is tied up in debt of one kind or another.

Since the advent of securitization, that process whereby debts can circulate as a form of currency, which can be used as collateral for issuing loans and can be counted as capital, debt has become a larger repository of wealth than sovereign currencies.  Why do you think no one talks about the money supply the way they did in the 80’s?  Governments do not control the money supply. The issuers of private debt control it.

This may seem an odd claim, but the amount of debt issued by private banks denominated in euros, dollars, yen and Yuan, is far greater than the amount of those currencies issued by the sovereign nations. Derivative agreements denominated in sovereign currencies run to the tens if not hundreds of trillions.

Were the debt backed currency in which those private debt agreements are denominated to collapse, then those agreements would be worth very little, if anything. They would be like finding a parchment of a debt owed in golden pazoozas from a long lost kingdom. Good luck cashing it.

Full article here.