It appears that while some will argue that all is well and all we need are some animal spirits to bring us out of the doldrums, it would appear that governments and central banks disagree. Having recently discussed Argentina’s forced bank-lending (and of course the BoE’s wink at Barclays), we now hear a German think-tank (DIW) is strawman-ing an idea to force the wealthy to buy government debt (or lend “transfer” up to 10 per cent of their net worth). As the Germans come under more and more pressure to save their friendly neighbors the compulsory loans from anyone with a net worth above EUR250k would provide around 9% of annual GDP (or EUR230 billion) that could be mobilized to support the Euro-rescue efforts. As FAZ,Handelsblatt, and Die Welt note, this is not being well-received as the ZEW (Center For European Economic Research) reacted critically that this “would be a huge intrusion into property rights, and probably not possible under German law” running the major risk that “with enforcement action it will probably not be able to regain market confidence,” and while a similar system had been installed after the Great Depression in the 1920s (as well as after WW2), these previous loans encumbered real estate properties and not directly to cash.
We discussed this three months ago (not as policy recommendations but as expectations that all wealth will be extracted to prevent what ‘they’ think is pending social collapse), and while it will not be popular, it seems either directly through this route or indirectly through banking repression, the forced financial tax that we wrote of back in September is exactly what is occurring – as there are only painful ways out of this miasma.
(h/t Thomas Weber)