Eurozone Central Banks Spend Reserves

Tuesday, April 28, 2009

Eurozone Central Banks Spend Reserves

While Mexican swine flu is being used to fill newspaper headlines, one is forced to search hard to find the real stories that are being hidden away in the background. Governments are still peddling hard to try to stop the financial crisis from engulfing the 'system'. In the US, Paulson and Bernanke are in court defending their actions in the takeover of Bank Of America. In Europe who on earth knows what is going on, as little of any significance gets reported.

We are told, however, by Reuters that last week Eurozone Central Banks found it necessary to part company with 16 billion euros of reserves. That's nearly 1% of their total reserves going west in a week. If that rate is maintained for a year, the effect will be to reduce reserves by about 50% - getting close to Euros 1 trillion in a year. With no war being fought, this is a colossal figure to explain away.

ECB says gold reserves down by 823 mln euros on wk
FRANKFURT, April 28 (Reuters) - Gold and gold receivables held by euro zone central banks fell by 823 million euros ($1.1 billion) to 240.84 billion euros in the week ending April 24, the European Central Bank said on Tuesday.

Net foreign exchange reserves in the Eurosystem of central banks fell by 11.8 billion euros to 265.4 billion euros, the ECB said in its regular weekly consolidated financial statement.
Gold holdings fell because of sales by two euro zone central banks, consistent with the 2004 Central Bank Gold Agreement, the ECB said.
It added its balance sheet had decreased in size by over 16 billion euros in the last week to 1.824 trillion euros.
For details of the report, please see the website: http://www.ecb.int/press

If this rate of spend from reserves is continued, the euro might start to catch Mexican chill. Presumably there are also borrowing and tax revenues being spent in addition. Is it possible that in a year or so from now the IMF will be called to bail out the eurozone, raising money from around the globe to do so? I cannot imagine that the Chinese government or others will be too keen on the idea, pouring good money after bad.

Mexican Flu Con Blankets Real News

Mexican swine fever is sure as hell filling the airwaves. This is most convenient for politicians especially those in the US who might have something to hide. According to the Wall Street Journal, the takeover of Merrill Lynch by Bank of America was carried out under duress. Bernanke and Paulson are on their way to court accused of illegally enforcing it. This has yet to be mentioned on CNN or the BBC, but ought to be big news worldwide. The story is being suppressed by those who control the media, and it is appearing as a sub-story in financial newspapers, making it appear as of minor importance. 

Stock markets continue with their recovery around the globe blissfully unaware how close to collapse the American banking system had come.

Instead we are treated to endless details about a pandemic which never was. The headlines about Mexican flu in the BBC are indeed terrifying. But look at the details. It really is laughable.

In almost all swine flu cases outside Mexico, people have been only mildly ill and have made a full recovery.'

Link to Paulson/Bernanke story HERE. Pictured while testifying, Ken Lewis, Bank Of America chief executive.

EXTRACT -

Federal Reserve Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America Corp. to not discuss its increasingly troubled plan to buy Merrill Lynch & Co. -- a deal that later triggered a government bailout of BofA -- according to testimony by Kenneth Lewis, the bank's chief executive.

Mr. Lewis, testifying under oath before New York's attorney general in February, told prosecutors that he believed Messrs. Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, the struggling brokerage giant. As part of his testimony, a transcript of which was reviewed by The Wall Street Journal, Mr. Lewis said the government wanted him to keep quiet while the two sides negotiated government funding to help BofA absorb Merrill and its huge losses.

Bank of America CEO Ken Lewis testified he was pressured to keep silent about deepening financial difficulties at Merrill Lynch. Here is a art of his testimony -

Q: Were you instructed not to tell your shareholders what the transaction was going to be?

A: I was instructed that 'We do not want a public disclosure.'

Q: Who said that to you?

A: Paulson...

Q: Had it been up to you would you [have] made the disclosure?

A: It wasn't up to me.

Q: Had it been up to you.

A: It wasn't.

Under normal circumstances, banks must alert their shareholders of any materially significant financial hits. But these weren't normal times: Late last year, Wall Street was crumbling and BofA faced intense government pressure to buy Merrill to keep the crisis from spreading. Disclosing losses at Merrill -- which eventually totaled $15.84 billion for the fourth quarter -- could have given BofA's shareholders an opportunity to stop the deal and let Merrill collapse instead.

"Isn't that something that any shareholder at Bank of America...would want to know?" Mr. Lewis was asked by a representative of New York's attorney general, Andrew Cuomo, according to the transcript.

"It wasn't up to me," Mr. Lewis said. The BofA chief said he was told by Messrs. Bernanke and Paulson that the deal needed to be completed, otherwise it would "impose a big risk to the financial system" of the U.S. as a whole.

But don't think about all this. Look instead at the terrors of a flu outbreak that has yet to kill a single human being outside of Mexico. That's far more important.

French Hate EU

The French have had enough of their beloved EU. The organisation that kept the Germans in check and guaranteed French farmers riches for eternity is no longer loved. No details are passed on in the survey reported by Open Europe below, explaining why but surely it is a most significant day when even the French have had enough of 'ever closer union'. 

Le Figaro and Cevipof have undertaken a study on the changing attitudes of the French population towards the EU. The study emphasises that France and Greece have experienced the sharpest decline in confidence in the EU and also cites the Eurobarometer survey, in which only 49% of French people said that France being a member of the EU was a positive thing. In 1987, 74% said that it was a positive thing.