Emergency (Non) Meeting Over Italy, Max Keiser Calls New IMF Head a "Debt Whore," and Some Inconvenient Truths About the Debt Ceiling

Euro finance leaders had an emergency meeting today which will surely be denied:

(Reuters) - European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning, reflecting concern that the crisis could spread to Italy, the region's third largest economy.

The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs around 2.45 percentage points on Friday, raising the Italian yield to 5.28 percent, close to the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy's finances.

You gotta love these continuous reports of secret, emergency meetings that entail a few people quite literally determining the fate of an entire group of nations.  The fact that some people are not only worried about such elitism but actually promote it shows a ignorant and naive view of praxeology and the real interests of those narcissistic enough to want to be said leaders.  Following such demented beliefs, we get the usual blame game of speculators:

Italy was the victim of “irrational speculation” in the financial markets last week, German Deputy Foreign Minister Werner Hoyer told La Stampa, saying the country can balance the budget by 2014 and its banks are sound.

Yes, that's right, those unpatriotic and treasonous speculators who refuse to keep the wool over their eyes and blindly buy government debt which they will undeniably lose millions on are clearly the enemies here.  What makes the prospect of a crisis in Italy tomorrow so worrisome is that the European rescue fund may not have enough money in it to bail Italy out right now.  Look for the IMF to try and bolster up the fund.

Max Keiser has quite a few words for new IMF chief Christine Lagarde in a PressTV interview:

Press TV has interviewed journalist and broadcaster, Max Keiser, about the issue of budget deficit in the United States. The following is a transcript of the interview:

Press TV: The IMF chief hopes that in Washington there is enough bipartisan intelligence and understanding of the challenge ahead of the US and the rest of the world. Do you think America will default at the end of the day?

Keiser: Christine Lagarde is a debt whore. She sees the world in terms of how much debt she can create. The IMF is there to create debt. The problem is debt…0 She will do anything for debt.

Press TV: Why do you think the situation has reached this point? Would you say the American lawmakers have taken the budget issue hostage?

Keiser: Barack Obama has defaulted on the US Constitution. The solution is to round up the corrupt bankers who are pushing more debt and to throw them in jail. The former IMF Chief Dominique Strauss-Kahn was a financial rapist and he has been replaced with a debt whore. This is not going to solve any problems in terms of the austerity measures that are being forced on people like the people in Greece unfairly, because they did not incur the debt, the debt whores incurred the debt. That is why they are revolting.

As John Locke said in 1690, when the social contract is broken, the people must revolt and that is what the people must do now.

In regards to the debt ceiling, Bill Buckler has a few facts in his new newsletter:

• Not one penny of US debt has been repaid for 51 years: the last time US government funded debt actually decresed on a year-over-year basis was 1960
• 97% of today's funded debt has been accumulated since August 1971 - the end of the Bretton Woods era by Nixon, and the terminal delinking of all fiat currencies from any and all hard assets, ushered in the era of modern-day hyper-debt insolvency
• Obama projects 2.5% Fed Funds rate in budget calculations through 2020. Average Fed Funds rate since 1980: 5.7%; Since 2008: 0.00%, If average 5.7% rate was used, projected US deficit would increase by another $4.9 trillion by 2020
• Obama projects 4.2% growth rate over next 3 years. If a normal growth rate of 2.5% is used, deficits would increase by another $4 trillion by 2020
• The US government borrows 40-50 cents for every dollar it spends. A balanced budget would mean cutting government spending in half.
• Implementing a balanced budget would not reduce current debt outstanding. It would merely stop it from growing.
• Over the past three fiscal years US debt grew by over $1.5 trillion per year: this is more than three times the record annual debt increase in any previous year in US history
• Last night deficit reduction targets were cut from $4 trillion to $2 trillion over the next decade, in exchange for a $2.4 trillion debt ceiling hike, which will last the Treasury until the next presidential election. Said otherwise, the Treasury needs to fund a $2.4 trillion hold over the next 15 months. Over a decade this come to $20 trillion: ten times more than the proposed deficit reduction.

The Global Financial Crisis (GFC) is said to have been precipitated by the Lehman failure in 2008 which froze inter-bank lending on a global basis and almost brought down the system. It is said to have been prevented by a massive and global increase in new money creation. In reality, had economic nature been left alone to take its course, there is a good chance that the world would be fast emerging from its financial black hole by now. At a minimum, most of the malinvestments would have been discounted to the point where they would no longer act as a dead weight on future savings and investment.

Economic “miracles” (so-called) have happened before. The US emerged from a deep recession in 1920-21 because the government and the central bank did NOT interfere. Germany emerged from the actual physical rubble of WW II for exactly the same reason. So, to a lesser extent, did Japan. In all these cases, debts which could not be repaid were not held on life support by central banks, they were written off. In all these cases, creditors took very severe “haircuts” indeed while many debtors literally had to start again from scratch. In all these cases, the LACK of government impediments or government largesse meant that a recovery took place in a much shorter time frame than would otherwise have been the case.

Economic distortions today are HUGELY bigger than they were then. That means that the recession will be deeper and the recovery phase possibly longer. But until it is allowed to begin, there is no way out.

Judging by Buckler's use of the word "malinvestments" I can't help but feeling that he has a deep respect for the likes of Mises and Rothbard.  I will have to pay more attention to him in the future.