Sinister forces within the Anglo Saxon Financial Community ( Wall Street) are trying to destabilize the European Unions financial structure and the present euro crisis is casting, yet again, a harsh light on efforts by Wall Street lobbyists to gut proposed rules requiring transparency in trading. Their strategy dates back to the '90s, when countries such as Greece and Italy, with chronic fiscal deficits, were eager to join the EMU but couldn't match the standards of budget discipline imposed by the European Maastricht treaty in 1992.
Wall Street ( Goldman Sachs) helped them hide their true national indebtedness, at a high price. But these deals only made the crisis worse when the market reckoning finally came. This is not a new phenomenon. Many previous currency crises, going back to Asia in 1997–98 and Mexico in 1994–95, were exacerbated by overleveraged derivatives trades that were not revealed until much later. In those earlier cases it was the local banks, not the governments, that cut quiet swaps deals to juice their income. When Mexico decided in December 1994 that it would try to devalue the peso by just 10 percent, hundreds of millions of dollars of off-the-books derivatives deals turned the effort into a market rout. All of a sudden Mexico's major banks were hit with margin calls from U.S. banks, taking Mexico's central bank by surprise. The result was a $50 billion bailout orchestrated by Washington—the first of many, with Wall Street the main beneficiary nearly every time (though to be fair, the Treasury ultimately made a profit from Mexico's paybacks, too). The Asia crisis played out similarly, with Asian banks also badly hit.
A number of publications have exposed the ways in which Goldman and other firms helped Greece, and countries such as Italy and Spain, disguise their true indebtedness using swaps and other complex instruments that make government borrowing appear to be something else, like a currency trade or asset sale. In some cases, like a swap deal Italy did in the late '90s to defer interest payments on a bond issue, allowing it to squeak into the union, such instruments may have helped in the long run—assuming the euro zone and Italy's place in it remain intact. But many such deals, by pulling the wool over the eyes of investors, also "led governments down the wrong policy path of avoiding to take strict measures to rein in their deficits and debt," says Gikas Hardouvelis, an Athens-based economist who has documented Greece's transactions with Wall Street.
Many of these deals which are never publicized help to explain the mystifying profit levels of Wall Street, even after the crisis. For two decades, Wall Street's biggest money machine has been driven by a formula: create very complex deals with high profit margins and leverage. The complexity is made possible by the freedom that Washington regulators have given the banks to structure little-understood derivatives off public exchanges, or "over the counter." These hard-to-understand deals—labyrinthine structures that combine swaps in different currencies, for example—permit the banks to charge huge "spreads" to customers like the Greek government because the deals are "customized" or one-time-only affairs not subject to public scrutiny or competitive pricing. And it's not over for Athens or other weaker sisters such as Spain and Portugal. The OTC swaps market "is currently pushing Greece to the edge," says Hardouvelis. "Hedge funds and banks can bet on the cost of Greek government debt by taking positions in the CDS [credit default swaps] market without owning Greek debt. In a thinly traded underlying bond market, the derivative CDS market can cause damage and is prone to manipulation by insiders."
Basically it comes down to the fact that if the US Administration can not put the clamps on Wall Streets uncontrolled global reach, the European Union will have to act more drastically, with all the means at their disposal to stop these destabilizing forces on the sovereignty of the European Nations. If not, it will self-destruct.
EU-Digest
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