GLOBAL LOOTING: How the EU Finmins’ scheme offers us almost no protection from haircuts

The thrusting lances of the Knights Template will skewer us all in the end

The Slog: I confess to wondering more and more, as the world careers towards disaster, at what point people will wake up to the systematic rules being drawn up around that world in order to steal every last bit of wealth left to us….now that the econo-banking mess is beyond self-repair.

Already, the European press routinely refers to ‘bail-ins’, casually reporting that EU FinMin clowns have finalised the Template that Was to be Unique…but will clearly be universally applied – probably starting with Italy. The process that emerged from FinMin fulmination is fairly clear. Insured deposits (of under €100,000) are to be fully protected; Uninsured deposits (of over €100,000) are not protected, but given preferential treatment; and Bail-ins of at least 8% of the banks total liabilities have to come to before any resolution funds are tapped.

Resolution funds being most likely to be coughed up by ordinary taxpayers, they also come in the last act from Sovereign treasuries. In short, the game plan is to give every bank customer in the ‘comfortable upper-middle’ an 8% haircut on their holdings before any of the bureaucrats and politicians suffer. In this context, I’m grappling in vain with the expression ‘preferential treatment’: are we expecting maybe that shareholders, for example, will be thrown to the lions as an entertainment for the gormless Underclasses?
Wolfie ‘Spinwheels’ Schäuble was unintentionally hilarious when he said that the group had been “working hard to arrive at a flexibility concept”. I know what Strangelove means: Cyprus was wonderfully flexible, in that a proposed haircut of 10% turned into one that now looks like 85% in BoC, and 100% in Laika Bank.
To reassure us all, Mr Dieselboom has promised that “unsecured bondholders will be cut first”, a marvellous example of Dutch in-yer-face if ever I heard one. You can guess what that’s going to do to the eurobonds market. According to Der Spiegel, the agreement was a milestone ‘in separating the risk of banks and states’. But not protecting the previously unadvertised risks of citizen bank customers, as such. Allegedly. Eschewing the ‘cut’ word, Wolfgang Schäuble added ominously that the deal was “an important step towards making clear that shareholders and creditors are liable first and foremost”.
Ominous or not for large investors, it’s just more weaselly crap from the German Finance Minister as far as the ordinary folks are concerned: bank collapses are never cleared – nowhere near cleared – by shareholders and bondholders taking the hit. We, the ordinary citizens, will pick up the lion’s share of the losses.
The SinBins now have to push this scam through the European Parliament, but given most MEPs appear to turn up, sign in and then piss off, I doubt there’ll be much opposition forthcoming. On banking regulation, for example, Dan Hannan talked a good game about resistance, and then duly abstained. He should carry a placard on demos, saying things like “Abstain Now! Death by a thousand nibbling sticklebacks in due course!” Either that, or a quote from Shakespeare.
Talking of due course, in theory this scheme won’t be operative until 2018. These people are profoundly risible, are they not? By 2018, there will be no eurozone. By 2018 there will be no capital left in Europe, and no bonds being bought to structure debt. It is Mickey Mouse goes heisting in Fairyland.

There is, I would stress, a very important document to keep your eyes out for: the written-up final version of the directive that will appear as the Plan for consideration by the Parliament. There’s many a clip shuffled into the small print between cacophony and Law. We have, for example, what seems  to be a very clearcut agreement that £85,000 of all deposits are protected by the Member States: but rather less about any wording involving ‘guaranteed’ or even – God forbid – ‘in perpetuity’. Jeroem Dijsselbloem is once again supremely confident that – get this – “the new rules will not discourage depositors”. Of course not, my leeturl Gouda Tuliphead: capital investors will leave their money exactly where it is. Um, by the way Jereboam, how are things going in that area? And what is the state of capital flight from the eurozone right now? Any news from Il Draghi?

Bloomberg soaked up the Dijsselbloem bollocks like bone-dry blotting paper, saying the agreement was meant ‘to bolster investor confidence and help overcome the euro-area financial crisis’. Which is OK and fine and all that, but isn’t everyone missing the obvious confidence problem here? Viz, if even these dullards are so certain of bank collapses that they need to get the template in place, why should any money – corporate, bond, citizen or small business – expect anything less than ultimate catastrophe?

Jo Chapman on Twitter posted a belter of a tweet yesterday: ‘Why should we have to pay for living on the Planet Earth?’ I’d love to hear answers to that one and more from the UK Treasury Secretary. We pay taxes to have the government of the day protect us from invasion and destitution. So the armed forces are cut back to nothing, and we get to pay for idiot financiers to be bailed out. Not content with that bizarrely upside-down view of existence, the world’s governments are now asking for what money we have left after taxes – in order to help in the task of rescuing banks we already paid to rescue from our taxes. And then, we are asked to accept austere cuts in the social and health services allegedly accounted for in our taxes….after the MPs pulled every trick in the book to avoid taxes, and Whitehall illegally feathered its pension nest by looting the money we had paid in taxes.

OK, that’s an over-simplified view – but not by much. We may be all in the same boat here, but one rather fancies that the senior officers have got the food supplies and the after-dinner tipple locked safely away at their end of it. “Don’t rock the boat” they say, “We’re all in this thing together”. Hmm.

Looting comes, by the way, in all the sizes and all the colours. Mark Carney begins work next Monday as the new Bank of England governor – and as before he even gets here, another seventy billion quid has been thrown at our flatlining economy, The Slog’s predictions of what the Canuck’s strategy will be look pretty reliable. It won’t be so much QE3 as QE squared, but it will most certainly be using our money to carry through a process that must in the end further devalue our money. I have a horrible feeling that, by the time the Carneyval is over, the Pound will be at parity with the Rupee. By the way, for someone meant to be the Canadian Conquering hero, Carney is leaving rather a lot of unsettled Canadians behind as he jets into Britain. As the BNN site noted two months ago, under his tutelage Canada began drawing up rules for a bail-in plan a few years ago in an attempt to avoid the large government bailouts required by some U.S. banks during the credit crisis. Under the proposed plan, banks would set aside contingent capital, such as shares, which could be quickly converted to cash to provide liquidity and stabilize their operations should a crisis hit.

I have to be blunt and say that such a scheme, given the coming scenario, will be about as much use as micturating on a Tsunami. And ringfenced capital in worthless shares? The feeling I’ve had for a month or more – that Osborne has chosen another tramline banker maniac – is getting stronger by the minute.

Stay tuned.

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