Commentary on Political Economy

Sunday 18 September 2011

The Phantom of the Opera, Part 2: "Too Big To Fail" or "Too Big To Rescue"?

The mystifying lunacy of European politicians was devastatingly on display on the week-end as finance ministers met in Wroclaw, Poland, and once more failed to take action when action was imperative. This bunch of pathetic morons even had the temerity to upbraid US Treasury Secretary Geithner about his warning of the "catastrophic" consequences of failure to jump way ahead of the financial markets before a devastating tsunami hits the euro and its institutions.

What the European politicians and policy makers, including officers of the ECB, fail to understand are the matters we have sought to expose on this site about the inter-action between State institutions and "private capitalists". The fact is that the United States are "one country" under the unquestionable and unquestioned authority of a central federal government, whereas the European Union is very far from that position and - alas - is getting even farther from it!

The difference is that if and when a fresh financial storm approaches (and that will be brought about sooner by the very inaction of European economic "authorities"), then the very different "political" positions of the US Administration as against the European member states will be on full display: in the face of a "crisis", the US Government will still be able to ensure that "private corporations" (especially the "financial" type) that are "too big to fail" can and will be "rescued" so as to maintain the viability of the capitalist system in the US.

By contrast, the EU is so politically fragile that in fact when the next "crisis" approaches many of its banking and financial institutions will be "TOO BIG TO RESCUE"!! And this for the simple reason that the European Union, especially at this juncture, simply does not have the political unity of decision-making command and power and legitimacy that will allow it to act to preserve the capitalist system over its territory!

Those European politicians and officials who chided Geithner - Trichet even said that "he did not understand" him! - over his week-end intervention are complete and utter fools who are truly playing with fire! Already, their banks have been "momentarily rescued" by the US Fed by the agreement last week to provide US dollar funding to them just as it was beginning to dry up perilously! And still they come up with their absurd dithering!

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