LTRO – A New Name For An Old Scam

This story is interesting. I’ve seen a new acronym thrown around.  It’s “LTRO”, which stands for “Long Term Refinancing Operation”. It’s the latest bank bailout package in Europe. It’s the usual trick of “The central bank (ECB) prints new money and gives it to banks.” The details are slightly changed each time, helping to obfuscate the evil.

It’s amusing the way State comedians pick their acronyms. “LTRO” makes it sound complicated and not evil. Why don’t they call it the “Long Maturity Asset Organization”? That would be a more accurate name.

Here’s the details of the LTRO scam. Banks in Europe own junky European government bonds (Greece, Italy, etc.). With the LTRO, the banks swap their junky bonds for LTRO money, valuing the junk bonds at par, borrowing at a rate of practically 0% (actually 1%). Then, the banks use this money to buy more junky government debt. Also, the bank CEO needs a new mansion and yacht.

The banksters get a risk-free profit. They borrow for practically nothing and buy higher-yielding bonds. If there’s a default, the banksters may stick the central bank with the loss. In a paper monetary system, the central bank has an unlimited budget.

This has a perverse/intended effect of preserving the illusion of solvency, for bankrupt European governments.  The bankrupt government sells bonds to banks.  The banks swap the bonds with the ECB for cash.  The banks use this cash to buy more bonds.  The governments use the cash from these new bonds to pay off their old bonds!  As long as the ECB buys junk bonds for par, the banks can keep buying the bonds, enabling the governments to keep refinancing their debt.  In a paper monetary system, you can “extend and pretend” indefinitely, covering up problems with more and more paper.  The only limit is hyperinflation and complete collapse of the paper monetary system.  In the meantime, banksters make a risk-free profit.  They borrow from the ECB and buy higher-yielding government bonds.

In the USA and Europe, the central bank isn’t allowed to buy government debt directly. Instead, private banks buy the debt and then sell it to the central bank. The “advantage” of doing it this way is that banks get to scalp a profit. They buy low and sell high. The buy bonds from the government and sell them back to the central bank for a profit. It’s pure illicit interest arbitrage. It’s pure corruption capitalism.

These profits aren’t free. The cost is paid via higher inflation.

The banksters make a ton of money speculating in government bonds. They use this free cash to buy politicians and the mainstream media. They will always block reform. They have fake reform, changing the details of the scam, while blocking real reform.

That’s the “advantage” of paper money. Politicians and banksters can always steal via inflation. Politicians can keep printing more paper to refinance government debt.  No matter how much money “too big to fail” banks lose when gambling, they can get a bailout. When they gamble and win, they keep the profits, paying themselves huge bonuses for their brilliant “leadership”. When they’re wrong, they get a bailout.

The European LTRO is the usual bankster scam. The central bank creates money and lends it cheaply to banks.  Each time, the details are slightly changed and the scam is given a new name. That helps obfuscate what’s going on.

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