Not With a Gun, But With Mortgages
When is an idea a conspiracy theory?
There is much talk about Target 2,
and how the story ends. One theory I have not yet seen
publicised. I have held it for some time as readers of my
blogs will know. It goes like this.
Once upon a time there was a war in Europe. In fact,
throughout recorded history the nations of Europe have spent
more time at war with each other than at peace. The creation
of the EU is supposed to put a stop to all of that. This is
how it works.
You create a system that initially seems to be a great
improvement on the old. That system is the eurozone.
It is designed to integrate. What it does in fact is the
opposite as can be plainly seen. I live in Spain and Portugal.
Both countries initially benefitted from the introduction of
the euro, and both are now suffering from it.
What is going on?
The actuality is disarmingly simple. It is natural for
governments to spend money they don't have. It is the way of
the world for them to borrow to pay for what they can't
The current system makes it easy for governments to borrow
heavily. Interest rates are ludicrously low, and there is a
European central bank that can lend generously, and its
manager has said that is precisely how things will be.
Unfortunately, certain governments as a result behave like
spendthrift teenagers until their accounts are maxed out.
Alternatively, the local economy can't handle competition
because of the nature of the structure of the shared currency.
Whatever the cause, certain countries end up under-performing
while others over-perform.
This situation eventually comes to a head, and two things
happen. The first is that Target 2 transfers have to
take place to stop the majority of the central currency
sliding into one place. We all know the law which says that
money goes where it is best treated. And we all know that if a
certain country can't run a balanced budget, together with a
balanced exporting economy, it will run out of cash.
The above is fact, but this is where conspiracy theory starts
to take over.
Target 2 is the first stage of the way in which the
problem of the flow of money among nations is dealt with. In
short, money that flows out of one country and into another
within the union is returned to balance the accounts, and an
IOU is issued to the country returning the money. I won't go
into a detailed description as to why this happens, but it
does. This then creates a situation where the distressed
country ends up owing money to the country which is
effectively the lender.
Let us walk a little way into the future.
Target 2 debts are built up. They are added to ECB
loans. At some stage in the not too distant future these
debts become effectively marked as mortgages. The next stage
is a request, a very polite request, for the debtor country's
government to start repaying those loans or agree to accept a
lien on tax revenues. Of course, the general public won't know
what is going on behind closed doors, but a mortgage of sorts
will be signed.
Let us move forward a few more years.
We are now at the stage where nothing has happened for quite
some time. Debtor country's government has become complacent
with the status quo. The mortgage or lien is just a piece of
paper. The assumption made by the debtor government is that
nothing's ever going to happen, until, of course, it does.
Now the creditor nation asks politely for a proper
normalisation of financial affairs. There are talks, but there
isn't any meaningful money available to pay off the debt. In
any case it is now much too large to pay off. It is at this
stage that the creditor country takes over the finances of the
No-one mentions the day to day government of the debtor
country, but the central powers of the EU now have financial
control, and there is nothing the debtor country can do about
Over the course of the next few years that control becomes
universal. He who holds the purse strings can control
everything that the central government previously paid for.
Some countries are heading rapidly in that direction already.
Those countries will soon cease to be independent states. It
may take years, or even decades, but that's where we are
This is modern warfare. This is one way to destroy a country's
independence, not be aerial bombardment, but by offering cheap
loans that can't be paid back. The modern form of aggression
is the take-over bid initiated by debt.
The current questions that need to be addressed relate to the
possible disruption of this scenario.
The biggest disruption was Brexit. It showed countries
that had their wits about them that there was an alternative
scenario. You could leave before things got too bad. If
Brussels was unhappy with such a decision, then Brussels would
be forced to do something about it. What could be done? Take
over the country anyway? Perhaps not. Lose their money?
Probably the least damaging scenario.
With a bigger country like Italy, the stakes are somewhat
higher, but the options are the same. If Italy exits the
eurozone, the dream of a united Europe falls. If Italy accepts
the mortgage option, which IMHO is the only alternative, then
it's fast forward to a united Europe, but under the control of
whichever nation holds the purse strings. That nation will be
the front runner in the economic stakes. It will be a united
Europe under the control of the country which has the biggest
economic clout. At the moment that is clearly Germany.
And that is how world war three is fought:
not with a gun but with a mortgage.