SWMBO’s End Game

Good evening,

The new European directive on Bank Resolution was to come into effect in 2018, that is everywhere in the EU except for Spain – which like Puerto Rico – has a different status in the Union. Here it was applied on November 14, 2012.  Nearly five hundred and twenty years from the foundation of the first European Nation State, Spain ceased to be a sovereign country as it ceded the last remaining parcel of sovereignty to become a protectorate of the EU, that is a warden of SWMBO.

The draft of the directive on Bank resolution seems to incorporate a provision to bail-in wholesale deposits and senior unsecured bondholders as a result of SWMBO’s understanding, or lack thereof, of the financial system and what’s equitable and what’s not, and how a modern economy works, or doesn’t work. This will inevitably lead to the nationalization of the Euro zone banking system which seems to be ultimately SWMBO’s goal. For who in their right mind would become a senior unsecured creditor of a Euro zone bank or a depositor for that matter under that regime.

What is to be gained with the nationalization? For one thing banking is something that Germany is not very good at. Its banking system takes deposits from the public to lend them to companies and government, and the result of this is that never, ever, under any circumstances or economic backdrop do banks in Germany as a whole make any money whatsoever. In this respect Germany’s is quite similar to the Japanese or South Korean banking systems. It would appear that creditor countries are not very good at underwriting credit. Go figure!

With a nationalized Euro zone banking system and control of the ECB, Germany would be in a position to allocate credit in the Euro zone. Some people will be unable to hide their lack of enthusiasm for this glimpse of the future according to SWMBO. Perhaps one should take advantage that there are still tickets to get out of town and some banks are still honoring requests for withdrawals and wire transfers.

Best regards,
Luis

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