Source:
Global Research
Paul Craig Roberts
On
November 25, two days after a failed German government bond auction in
which Germany was unable to sell 35% of its offerings of 10-year bonds,
the German finance minister, Wolfgang Schaeuble said that Germany might
retreat from its demands that the private banks that hold the troubled
sovereign debt from Greece, Italy, and Spain must accept part of the
cost of their bailout by writing off some of the debt. The private banks
want to avoid any losses either by forcing the Greek, Italian, and
Spanish governments to make good on the bonds by imposing extreme
austerity on their citizens, or by having the European Central Bank
print euros with which to buy the sovereign debt from the private banks.
Printing money to make good on debt is contrary to the ECB’s charter
and especially frightens Germans, because of the Weimar experience with
hyperinflation.
Obviously,
the German government got the message from the orchestrated failed bond
auction. As I wrote at the time, there is no reason for Germany, with
its relatively low debt to GDP ratio compared to the troubled countries,
not to be able to sell its bonds.
If
Germany’s creditworthiness is in doubt, how can Germany be expected to
bail out other countries? Evidence that Germany’s failed bond auction
was orchestrated is provided by troubled Italy’s successful bond auction
two days later.
Strange, isn’t it. Italy, the largest EU country that requires a bailout of its debt, can still sell its bonds, but Germany, which requires no bailout and which is expected to bear a disproportionate cost of Italy’s, Greece’s and Spain’s bailout, could not sell its bonds.
In
my opinion, the failed German bond auction was orchestrated by the US
Treasury, by the European Central Bank and EU authorities, and by the
private banks that own the troubled sovereign debt.
My
opinion is based on the following facts. Goldman Sachs and US banks
have guaranteed perhaps one trillion dollars or more of European
sovereign debt by selling swaps or insurance against which they have not
reserved. The fees the US banks received for guaranteeing the values of
European sovereign debt instruments simply went into profits and
executive bonuses. This, of course, is what ruined the American
insurance giant, AIG, leading to the TARP bailout at US taxpayer expense
and Goldman Sachs’ enormous profits.
