I know it's a cliche to say the more things change, the more they stay the same. Another one along the same line says everything old is new again. The 1972 Stealers Wheel song 'Stuck In The Middle With You' comes to mind with the news of banks resorting to negative interest rates and bail-ins. People we don't know continue to make business decisions people like us are forced to pay for. The media would like people to believe bank and stock market failures are new, but such events span decades.
The succession of costly bailouts across Europe resulted in the establishment of the EEC and the euro, a fiat currency backed by nothing but debt. This limited partnership of governments was designed to lower the risk and cost of economic failures by spreading such costs across most of the world economies. The alliance also allowed countries like Cypress and Greece to live beyond their means. The citizenry of these two countries are still living with the painful effects caused when these governments went into default.
More recently, there was news of the four largest and oldest banks of Italy experiencing difficulty to the point of taking control of depositors' money in an attempt to bail-in salvation. Yet, last week, Italian Prime Minister Matteo Rinzi travelled to Berlin to visit with Ms. Merkel.
Last week also saw Japanese banks turn to negative interest rates. Business leaders are said to disagree with aspects of this old as new recovery plan as it trims their profits. So much for Japanese Zen Banking.
The succession of costly bailouts across Europe resulted in the establishment of the EEC and the euro, a fiat currency backed by nothing but debt. This limited partnership of governments was designed to lower the risk and cost of economic failures by spreading such costs across most of the world economies. The alliance also allowed countries like Cypress and Greece to live beyond their means. The citizenry of these two countries are still living with the painful effects caused when these governments went into default.
More recently, there was news of the four largest and oldest banks of Italy experiencing difficulty to the point of taking control of depositors' money in an attempt to bail-in salvation. Yet, last week, Italian Prime Minister Matteo Rinzi travelled to Berlin to visit with Ms. Merkel.
Part of Italy's new plan is to create bad banks into which all the bad debt will be transferred, bundled, and resold. In the US we know this as The Big Short. Not so new; not so viable. But certainly this is different, right?
Last week also saw Japanese banks turn to negative interest rates. Business leaders are said to disagree with aspects of this old as new recovery plan as it trims their profits. So much for Japanese Zen Banking.
Just for the record, I didn't coin the phrase Japanese Zen Banking. That honor goes to the New York Times from 1998. Even the news of Japanese negative interest rates turns out to be something old made new again.
As the Stealers Wheel song says:
Clowns to the left of me,
Jokers to the right, here I am,
Stuck in the middle with you.
Catchy name for a band or a bank, don't you think? Stealers.
An excellent summation of the mess the experts have created.
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