Last week, Reuters issued a report which shows that quantitative easing has never stopped for the four major central banks, and that they are printing over $1 trillion every six months in new liquidity to support their markets. And incredibly, what began as programs to purchase non-performing toxic debt from financial institutions has morphed into both direct equity buying, and now with the ECB, the purchasing of corporate debt.
So with so much stimulus money being printed now, and over the past eight years, how is it possible that banks, particularly in Europe, can be so insolvent and once again be on the cusp of collapse?
Perhaps because of the fact that once they knew central banks would never let them fail, and bail them out of every mistake and fraud they did, they simply kept speculating on risk and never even bothered to use the cheap money to correct the problems that endangered them in the first place.
The EU banking ‘stress tests’ which were published on Friday showed what most analysts already knew… that Deutsche Bank was insolvent and that most Italian banks were themselves on the threshold of bankruptcy. So what begs the question then is, why has the European Central Bank been fighting hard to keep from stepping in to re-capitalize both of these institutions, which could feasibly collapse the entire European financial system? And why have they instead been focusing more on either buying stocks, or aiding private companies through the purchasing of their corporate debt?
Because the central banks do not want to admit just how bad their monetary systems actually are, and that their policies have been abject failures.
In late 2015, the European Commission (EC) forced every member state to pass legislation calling for financial institutions that are revealed to be insolvent to use bail-in methods for re-capitalization, with taxpayer funded government bailouts no longer being allowed. This then took the European Central Bank off the hook for following its core mandates of being the lender of last resort, and opened the door for the EC to use bank failures as a means to institute austerity on member nations within the union, and especially on the Southern portion of the continent.
In fact, all one has to do is look at last month’s actions by the ECB, who announced they were no longer lending money to both Spain and Portugal because they did not adjust their budgets to reflect cuts in pensions and other austerity mandates.
You would never know that Europe once again stands of the precipice of a banking collapse because both the media and the central banks are acting as if nothing is wrong, and that it is business as usual for the financial recovery. But more than that, I believe the real question that must be asked is whether we are coming upon the time when the central banks are preparing for, and wanting a collapse to happen, because the policies and programs that they have been initiating over the past few months signal that they have either given up, or are looking to prop up other entities (European corporations) to protect them when the system finally fails.