(March 10) Wall Street is headed toward international pariah status thanks to two recent actions by the European Union (EU).
On Tuesday, the EU announced that it was banning Wall Street banks from the lucrative government bond business in Europe. They didn’t express official concern or fire off a warning shot. They simply banned Wall Street from financing government bond deals like the one Goldman Sachs sold to Greece. The Guardian pointed out that Wall Street bond business from European governments has gone down over the last two years. Now the business is gone period. In effect, the EU has labeled Wall Streets business tactics as too dangerous for their governments to handle.
Then on Wednesday, the President of the European Commission said that the EU was considering a ban on government debt speculation through Credit Default Swaps (CDS). President José Manuel Barroso announced that, “the Commission will examine closely the relevance of banning purely speculative naked sales on Credit Default Swaps of sovereign debt.” While not an outright ban, the threat of banning CDS on national debt would be a major loss for the world’s financial speculators, particularly those in the United States and Great Britain.
These two hostile moves toward Wall Street by Europe were discussed by officials in the context of the current Greek debt crisis. Wall Street firm Goldman Sachs has been implicated in helping the Greek government hide the true nature and size of the debt. Discovery of this sleight-of-hand action exacerbated an already challenging crisis.
While the Greek crisis was presented as the proximate cause of the anti Wall Street actions, these announcements follow a March 6 national referendum in Iceland. Citizens voted overwhelmingly, 93 to 2 percent, to reject their government’s plan to have citizens cover the losses incurred by Iceland’s second largest private bank, amounting to around $6 billion.
In January, public opinion polls showed opposition to the bailout in the mid 50% range. The 93% opposition vote Saturday was a startling and bold statement of citizen opposition to subsidies for the private sector.
A few days before the vote, German Chancellor Angela Merkel said:
“The debt that had to be accumulated, when it’s going badly, is now becoming the object of speculation by precisely those institutions that we saved a year-and-a-half ago. That’s very difficult to explain to people in a democracy who should trust us.” Business Week, February 23
Escaping the sinking ship?
The Chancellor is right. It has becomes increasingly difficult to explain socialism for the financial elite and survival of the fittest for the rest of us. Despite promises of trickle down benefits from policies that benefit only those at the top, the record since the 1970’s has been one of declining living standards and benefits for those who produce the wealth through their hard work.
The politicians behind the two policies are the center-right Merkel of Germany and hard right President Nicolas Sarkozy of France. Could their sudden, harsh actions against Wall Street reflect a general awareness among their patrons, the European financial elite, that citizens have had enough? Are the leaders worried that the contrived government debt crises throughout the continent will be met by citizens with sustained, angry protests and democratic defiance of de facto socialism for the financial elite?
Goldman and other Wall Street banks are a perpetual presence along the corridors of power in Washington, DC. Will this insider influence be used to dictate a U.S. response that reflects the will of Wall Street at the expense of the people?
Merkel and Sarkozy are hardly heroes of working men and women. They’re reacting to the excesses of Wall Street as those excesses threaten the Euro currency and its beneficiaries, not their people. To a greater degree, no doubt, their actions reflect fear among the European elite that the entire continent might rise up in a rage if they continue policies that turn the vast majority of citizens into indentured servants.
Citizens all over the world are getting a crash course on the politics of scarcity for the many and abundance for the very few.
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