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The Daily Reckoning | Monday, June 11, 2012 The €100 billion “Spailout” and the coming end of the euro experiment... “Nobody is better than anybody else and everyone is the best.” Plus, Bill Bonner on why there are so many zombies devouring the US economy and plenty more... ------------------------------------------------------- External Advertisement Why are “801k Plans” Restricted from Being Advertised? These “801(k) Plans” — which have no age, income, or employment requirements — grow your money up to four or five times faster than traditional 401(k)s or IRAs. But it’s unlikely you’ve ever heard about these special programs before: The U.S. government has placed restrictions on advertising them to the general public. Click here to learn why. No Such Thing as a Eurozone Eric Fry Reporting from Laguna Beach, California... The Spaniards announced a new bailout this morning. This “Spailout,” as some are calling it, will send €100 billion to Spanish banks. Undoubtedly, these rescue funds will quickly disappear into the ether, as rescue funds tend to do. But for a moment or two, the financial markets may cheer the European Central Bank’s (ECB’s) “resolve” to fix the Eurozone crisis. For a moment or two, the financial markets might celebrate the ECB’s aggressive new tactic of providing funds directly to struggling financial institutions, rather than to struggling sovereigns. But of course, there is absolutely nothing new about this new tactic, other than the fact that a headline and a press release accompany it. Spanish banks have already been gorging themselves at the ECB’s trough for months. By accessing the ECB’s long-term refinancing operation (LTRO), Spanish Banks have obtained about €200 billion of emergency financing during the last six months. “The only place Spanish banks can turn to replace this lost funding is the ECB,” our colleague, Dan Amoss reported recently. “Spanish banks have taken up 30% of the LTRO loans issued thus far.” Thus, the Eurozone experiment continues to degrade...and no one in the laboratory seems to know what to do next. As in most labs, theories abound, but solutions remain elusive. Like many grand experiments, the grand European Union experiment is failing because it failed to account for the obvious. The masterminds of the EU experiment failed to account for the fact that there is no such thing as a “European.” To be sure, the masterminds understood that Greeks are not Germans and that Italians are not Belgians. But the masterminds did not believe that the idiosyncrasies of eurozone member states could undermine the entire experiment. To the contrary, they believed that these little idiosyncrasies would bind together as naturally and refreshingly as a hydrogen/oxygen “three-way.” Obviously, the French would never become Dutch, but maybe they would adopt a bit of Dutch-like prudence. Then too, the Germans would never become Spanish, but maybe they would learn to relax a bit and drink sangria from time to time. Nope. Not gonna happen! The eurozone is degrading because there is no such thing as a eurozone...and there never was. The eurozone is a fictional construct that only an economist or a bureaucrat could love. “Europe is revolting against ‘sameness,’” observes Dan Denning in today’s featured column. “The French want to be French. The Dutch want to be Dutch. The Greeks want to be Greeks. None of them want to be German. And the Germans want to stay German. All these primal, tribal, political loyalties are in conflict with the sameness and conformity required by political and monetary union.” Nigel Farage, leader of the UK Independent Party, heartily agrees. Farage, who has been an outspoken critic of the eurozone since its inception, remarked recently on RTTV’s Capital Account, “One of the ironies of the European project is that this project that was set up to make us all love each other is actually beginning to make us hate each other... Far from Europe coming together, Europe is being torn apart and we are risking stirring up the very kind of nationalisms that the project was supposed to stop in the first place." In the column below, Dan Denning explores the centripetal forces of nationalism that are pulling the Eurozone apart — forces that are, as Dan calls them, a “revolt against sameness.” Read on... New breakthrough fuel could power your car It took the earth 300 million years to make the oil we burn. Imagine if we could squeeze that whole process into just a few months... a few weeks... or even a few days. Because that’s exactly what could be happening. At least a half-dozen labs and companies are working on this, right now. If they get it right, we could literally “make” as much gas for your car as you need. We could make fuel for planes, trains, and diesel trucks this way too. Find out more by clicking here. The Daily Reckoning Presents Backlash Against Conformity Dan Denning This is getting interesting now. Governments in Europe are toppling like subprime lenders in the US, circa 2007. Smaller European political parties are gaining traction as they resist proposed spending cuts. This whole chain of events is part of the idea that the failed monetary and fiscal policies in Europe are now political problems. The financial crisis of the Welfare State undermines the legitimacy of the Welfare State itself. The financial becomes political. Now, financial markets have been pretty exciting the last few years. You’ve had Ponzi schemes of Madoffian proportion. You’ve had defaults, bankruptcies, “flash crashes” and more. But when it comes to show-stopping drama and social upheaval, nothing can match politics. And that’s what scares us these days. Europe’s political crisis is evidence of deep structural problems in the European Union that can’t be solved by more central bank liquidity. Europe went for monetary union ahead of political union when it started down this path many years ago. The common currency allowed European governments to borrow at low interest rates and run up large deficits. The trouble now is that there’s no way to impose a political solution on the economic problem. That’s probably a good thing, now that we mention it. Imposing solutions from on high has not worked very well the last few years. But it does leave markets with a giant question mark hanging over them. Namely, how will this European mess end? One option is that Europe will go the way of Japan. This is a best- case scenario. In this scenario, the authorities prevent a climax to the debt crisis by extending it out over time. We say “best case” in the sense that a long, drawn-out, crisis that turns the financial market into a Zombie may be preferable to a political and social crisis. But then, a political and social crisis seems inevitable at this point. Why wait? Clearly, the eurozone architects failed to account for the fact that the national identities/personalities of Europe are as diverse as any extended family. You’ve got the stern grandmother, the crazy uncle and at least two teenagers who are off somewhere trying to “find themselves.” But the eurozone architects ignored Europe’s heterogeneity in order to impose a faux homogeneity — a structure in which, as Principal Skinner on The Simpsons put it, “Nobody is better than anybody else and everyone is the best.” For a while, this fictional sameness worked...or appeared to work. But it never really worked...as the expanding crisis is demonstrating all too clearly. Even though the eurozone structure enabled the Greeks to borrow money as if they were Germans, it did not prevent them from repaying their debts like a Greek. No political authority can mandate “sameness.” There is no such thing as multi-national sameness. Besides, at a very core level, nations and individuals covet their unique identities. People don’t like being “the same.” They like being different. That’s why they get nose rings...or dye their hair blue...or vote against “austerity measures” imposed by the EU and IMF. Europe is revolting against “sameness” — the enforced sameness of the common currency is causing a backlash. The French want to be French. The Dutch want to be Dutch. The Greeks want to be Greeks. None of them want to be German. And the Germans want to stay German. All these primal, tribal, political loyalties are in conflict with the sameness and conformity required by political and monetary union. Something has to give. Regards, Dan Denning for The Daily Reckoning Is The White House Terrified of the “Secret $200 Retirement Blueprint?” If you’ve already retired, or want to retire soon, I urge you to watch this video presentation before we have to pull it down. This “Secret $200 Retirement Blueprint” shows you step-by-step how to grow a monster-sized nest egg with a little time and a tiny grubstake. Click here to watch this video presentation now. And now over to Bill Bonner, with the rest of today’s reckoning from Baltimore, Maryland... Government Spending: Food for Economic Zombies Bill Bonner Coming soon...a Zombie Apocalypse... You must be getting tired of hearing us talk about zombies. And maybe we are getting a little obsessed by them. But we see them all around us. And they’re getting bold...brazen. They’re coming out in broad daylight. Here’s an article that appeared last week in The Wall Street Journal: The recipient of the Obama administration’s biggest loan guarantee for solar energy won federal money after an intense push in early 2011 that included hiring a former chief of staff to Vice President Joe Biden to lobby the administration, according to federal records and people involved in the approval process. The lobbying blitz came as the $1.6 billion loan to BrightSource Energy Inc. — a centerpiece of the administration’s program to promote nascent green-energy projects — faced a do-or-die moment, and the company called on its Democratic connections to help push the deal forward, according to emails, records and those familiar with the loan. The $16 billion federal loan-guarantee program became headline news in September when a recipient of a $535 million guarantee, solar- panel maker Solyndra LLC, declared bankruptcy. Solyndra’s chief backer was an Oklahoma industrialist who had bundled contributions for Mr. Obama’s 2008 campaign. The White House said there was no connection between the donations and the loan. President Barack Obama has said the loan program was run fairly and that some failures were inevitable in the business of backing new energy systems. Mr. Obama lauded BrightSource in a weekly radio address in 2010. The company, which is building a 392-megawatt solar-power plant called Ivanpah in the Mojave Desert, had several other Democratic connections, including its then-chairman, John Bryson, a longtime green-energy proponent whom Mr. Obama later named commerce secretary. BrightSource spent more than $500,000 on lobbying in the third quarter of 2010 through the second quarter of 2011, according to federal records, on behalf of the loan program and its own loan. The records show that $40,000 of the BrightSource lobbying money went to Bernie Toon, who was chief of staff to Mr. Biden, then a US senator, in the 1990s. Yes, dear reader, the zombies are everywhere. Lobbying. Spending. Getting disability and bailouts. Every US government program is full of zombies. Why so many zombies? What you pay for is what you get. And with the “new” dollar after 1971, the feds could buy a lot of zombies. Remember, zombies are people who take money from the productive sector of the economy and transfer it to themselves. As they grow more numerous and more powerful — thanks to the resources that go their way — the productive part of the economy is less and less able to support them. Fewer and fewer workers...more and more zombies. Fewer and fewer people producing things...while more and more people just consume them. Everything is okay as long as the resources keep flowing. But the productive sector of society can only support so many zombies. Yes, the producers can be bamboozled into supporting more “education” and more “defense” when they are flush. But when times get tough, the zombies and the producers head for a showdown. Scott Walker won a battle in Wisconsin. But the zombies’ power still grows — funded by cheap credit and government spending. A larger war lies ahead. *** Poor Mr. Obama. We warned George W. Bush and his henchmen that they would be held accountable for torturing people. It’s clearly against the law. It violates treaties and conventions that the US signed. And sooner or later some ambitious, gutsy or naïve judge is going to issue a warrant for their arrest. “Stay in Texas,” we told the ex-president, or he is likely to fall into a judicial trap, like Chile’s former head of state, Pinochet. Now, Mr. Obama better put his passport away too. Is Obama committing crimes? He might someday be prosecuted for ordering drone attacks By Dan Simpson, Pittsburgh Post-Gazette The coincidence in time of an international court sentencing former Liberian President Charles G. Taylor to 50 years in prison for war crimes and the detailed account in The New York Times of how President Barack Obama decides which foreign and US citizens to kill with drones, without trial, makes me nervous. Mr. Taylor was not the first major political leader tried for crimes in an international court. Former Yugoslav President Slobodan Milosevic was on trial when he died in 2006. Former Bosnian Serb leaders Radovan Karadjic and Ratko Mladic are currently on trial. Former Chad President Hissene Habre and Sudanese President Omar al- Bashir are candidates for such trials. Any prosecutor involved in international law is fully aware of one of the major difficulties of bringing off successful war crimes prosecutions — tying the actions of the accused directly to the crimes committed. Now, putting aside whether it is legal for Mr. Obama to order the death by drone of al-Qaida and other figures, numbering now around 2,000 in Afghanistan, Pakistan, Somalia and Yemen, plus whoever happens to be nearby when a rocket hits — associates, friends, wives, children — he is clearly responsible for doing so. The president is described in the Timespiece as personally choosing the targets. Few have said yet that these killings are war crimes, but one day someone is likely to deem them so and Mr. Obama may even be charged in an international court, probably after he has left office. He clearly is taking direct responsibility because he sees the drone killings as something that only a president can order. Regards, Bill Bonner for The Daily Reckoning ---------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com