As the Euro Zone moves into another weekend of rhetoric and false promises regarding a resolution to the ongoing debt crisis, Treasury Secretary Timothy Geithner travelled overseas and reiterated that it is the central banks and governments who will create solutions, and bring investors back to the markets.
In his meeting with Euro Zone leaders on December 8th, Geithner spoke on the necessity of more central bank intervention.
"Financial crises are ultimately resolved when governments and central banks succeed in creating conditions that make it compelling for investors to take the risk involved in lending to governments and to banks." - Bloomberg via Max Kaiser Report
(Click on the video to the left of this article to see the entire program)
The ironic thing in Secretary Geithner's statement is that it fails to mention that governments and central banks were the primary cause of the crisis to begin with, and the opposite of this message would be the very answer to recovery regarding the problems plaguing the Euro Zone.
Investors are not taking on the risk for more government debt or investments because sound investors no longer trust the current systems in place. Greek and Italian bonds are much too high to believe that investors would ever receive a return on their money, and the recent events of MF Global in buying toxic Euro assets proves that even the brokers are not immune to failed decisions in the current crisis.
Government intervention means austerity and higher taxes, while central bank assistance means a devaluing of consumer purchasing power through inflation and money printing. Ironically, these are the very same programs both entities implemented to help create the problem, and now they seek to double down and call it a solution.
In the end, the Euro and Euro Zone are doomed to failure, or at least encompass massive changes to the current system. On Thursday, French President Nicolas Sarkozy and German Chancellor Angela Merkel rejoiced at an agreement for the future of the EU, but the plan was quickly dimmed when Great Britain rejected it outright. The underlying truth is that each nation that is currently solvent is working behind the scenes for a day when the EU will be much smaller, or nation states will once again be autonomous in their economic sovereignty.
Just as Secretary Geithner was laughed at by the Chinese, and rejected outright by the ECB bankers earlier this year, so too is the reaction this week by Europe to the US envoy's message. The Euro Zone knows that governments and central banks no longer have the capacity to deal with the current crisis, and each attempted rumor to prop the markets leaves investors with little confidence of a resolution, and little desire to risk more capital in a failing market.
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