Who Art Thou That Led To This Destruction?


There are times when pieces signed by the editors leave me wanting to go long boiled rope futures on maximum margin in the hopes that the sheeple of this nation, and others, wake up before they’re enslaved en-masse or worse, shoved into boxcars.

This is one such time.

Germany’s Federal Constitutional Court has passed the buck on a case that will decide whether the European Central Bank can do its job. That’s good. The decision is now where it belongs, with the European Court of Justice.

The matter should have gone to the ECJ, the body responsible for interpreting the European Union’s treaties, in the first place, as two dissenting judges said. Without delay, the court should take a wide, pragmatic view of the ECB’s powers.

At issue is the ECB’s ability to buy government debt in support of financial stability and economic activity. With Europe’s short-term interest rates close to zero and deflation threatening, asset-purchase programs are a tool the ECB needs. The problem is, the treaty that created the euro casts doubt on whether and exactly how the ECB can use them. One such program, called Outright Monetary Transactions, is the subject of the case.

So let me see if I get the argument that Bloomberg-cum-advocate-for-banksters is making correct.

First, the ECB, like our Fed, is the primary regulator for banks in the EU.  As such it is charged with regulating the means by which and the amounts in which credit is extended into the economy such that said institutions do not “create money out of thin air”, as such does not lubricate commerce (the job of credit) but rather serves to destroy the value of said currency and, by intentionally creating the conditions under which defaults are inevitable, causes the transfer of assets from those who own them to those who created such credit with either actual or constructive knowledge that the loans could not be repaid as agreed.

Put another way, the creation of loans that cannot be reasonably supported as able to be paid off and are thus designed to be rolled over in perpetuity, whether the borrower is a government or private entity, is always improper and a fraud.

The reason is as follows:

A loan is always created “at interest”, that is, you must always pay more than you originally got over time.  But the funds that you must pay in interest do not exist in your hand at the time the loan is made, otherwise you woudln’t need the loan at all.  To the extent that said funds are expected to be earned over time and thus the loan will be paid back and extinguished, this is a bet on future production, and thus nothing more than pulled-forward economic activity.  While this is a gamble it is one that can be reasonably supported.  For this reason self-liquidating trade credit and other forms of lending against asset values where the loan is paid off on the original terms is supportable.

However, a loan that is not paid off, but is instead rolled over on a continual basis, can only continue to be rolled over over the long term ifgeometric expansion of credit takes place.

Since the rock we live on called “Earth” is of finite size and mass economic expansion cannot continue indefinitely on a geometric basis.  That is a physical impossibility.  Therefore, all such loans are predicated on one of two things — the theft of the currency’s purchasing power by debasement over time or the loss of the collateral to the lender when the loan cannot be rolled and thus defaults.

For this reason all such lending is an act of fraud at its inception.

Now here’s the money shot: What developed economy, including those in the EU (and the US for that matter) consists of a government that actually pays down debt on the original contracted terms?


So now, having been an explicit party to a mathematically-provable Ponzi Scheme, the ECB wants the power to extend said Ponzi Scheme instead of using its regulatory power to stomp on it and demand that it stop, and the Bloomberg editors are arguing for extension of a bogus edifice.

Sorry, but no.

The Market Ticker

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