In response to Europe's Financial Troubles, Part 1

Very interesting responses have come from the current financial troubles in Europe. In the news, it states that Germany is leading the way by revising their budget to include Billions in savings each year. Is this from budget cuts, or the raising of taxes? From what we can see, it is both, more though on the side of raising taxes and creating new taxes. As mentioned in a previous blog, one of the main ways countries are dealing with the financial troubles is to raise taxes and create new taxes. We are even seeing this here in Canada where we are supposedly better than many other nations!

After much negotiating, the European Union has now approved a Financial Safety Net as part of the response to the European Financial troubles that began mostly with Greece’s debt woes. The Financial Safety Net is worth $440 Billion Euros, which is currently over $525 Billion Dollars. Although this is the amount of the Financial Safety Net, the actual amount including amounts pledged by the IMF totals over $750 Billion Euros, or over $1 Trillion dollars. The program is set up for 3 years and will allow Euro Zone countries to borrow from the EU in the case that the borrowing costs of that EU or euro zone country rise so high that borrowing on the market is unsustainable for reasons beyond its control. Currently, the EU laws forbid any Euro member to assume the debt of another Euro member. The European Union will use the revenues of their budget to guarantee the debt.

How it works is that the Euro Zone country that wants to borrow would tell the EU's executive arm, and the European Central Bank how much it needs, submitting a draft economic and financial adjustment program to the Economic and Financial Committee which prepares monthly meetings of ministers. The ministers would then say "yes" or "no" in a qualified majority vote. The ministers would then set the policy conditions of the financial support, including the maximum amount of the loans, their price and duration, and the number of installments to be disbursed. Once the details of assistance are settled, the Commission will issue bonds to raise cash within the first 60 billion euro limit. If more cash for a euro zone country is needed, a Special Purpose Vehicle (SPV) called the European Financial Stability Facility (EFSF), will issue bonds to raise money on the market.

The IMF’s Initiatives

Many people do not know what the International Monetary Fund (IMF) is or what they do. The IMF was created in 1944 and is the world's central organization for international monetary cooperation. It has over 185 countries that are members and it oversees the Global Financial System, which many people don’t even know exists. Each member of the IMF has a quota allocated to them. The quota is a member's subscription in the IMF, or what a country must pay to "belong" to the IMF. A member must pay its subscription, or quota, in full to the IMF; up to 25 percent must be paid in reserve assets as specified by the Fund. They have created a global currency called Special Drawing Rights (SDR’s) that is used, and many countries contribute usable currencies like dollars, deutsche mark, pounds, yen etc. The IMF also has large amounts of gold assets, which they are in the midst of selling over 400 metric tons into the markets. Getting rid of their gold and continuing with more paper assets, does that sound like a good strategy for the world’s central organization for international monetary cooperation. There must be a reason! This is an organization that is working to lead the world into global financial recovery and they are endorsing things such as spending less on health, less help for the elderly and raising taxes. (See http://www.ctv.ca/CTVNews/Canada/20100601/canada-20-bank-tax-100601/) How about less government spending in areas that do not affect our health, elderly or taxes! What about eliminating some of the special interest groups, lowering large government pensions and salaries, and eliminating some of the bureaucracy that so much is spent on! The trends that we are in are quite clear; more money in government hands, less in the people’s hands and steps to a one world government in control!