Although it is not said out loud anywhere, the EU is going to centrally manage banks, de facto nationalize banks. The effects of the whole thing can be catastrophic.
A new regulation is being prepared in the EU: banks will have to have "gender" balanced management and The EU will determine for banks what money to buy for what money, what to invest in.
If so, how Petr Mach writes in his article, we have something to look forward to.
The new EU regulation - if passed - is to force banks to invest their money in "risk-free" assets to some extent. Which assets are "risk-free" will be determined by the EU - above all, they should be EU state bonds.
Central planning per excellence
To date, it has been practically a bit difficult to explain how, while the central bank can (or is trying to) manipulate interest rates, how it is a form of central planning.
Now that explanation will be much easier.
I have a riddle for you: you decide where the company will save its clients' money and its own, what products the company will offer, who will manage the company to what extent.
The question is: who are you? The owner or a high-ranking manager of a company (here a bank), or a "government" official? You are second in the future EU. Not only will officials have the de facto power to run entire banks. Thanks to the EU regulation, even the owners of the bank or its management will not be able to disobey that directive. The bank's managers will become operational maintenance workers, and real decisions will be made by the clerk.
Sure, the official won't be from the state planning commission today, but that doesn't change anything. His powers will be the same, if not greater. It is only a matter of time before it is no longer just about banks, but also about many other "important sectors".
Banks will be nationalized, moral hazard stirred up
If the original owner can no longer decide on the operation of his business, it means that he is no longer the owner.
But what is the EU doing? By its regulation, the EU deprives property rights to owners and appropriates them. It is a real nationalization of banks.
Banks will be decided by officials, the responsibility will lie with the (former) owners. Decision-making without responsibility leads to moral hazard. It is the same as if the state guaranteed bank investments.
If banks have to invest in the bonds of the most vulnerable countries and these assets are considered "risk-free", this is utter madness.
Not only are "risk-free" assets essentially non-existent, but bonds of vulnerable countries are certainly not even "minimally risky". Why are yields on distressed country bonds rising? Because holding their bonds is an increasing risk! The whole regulation goes against elementary logic.
Of course, drowning money in this black hole will have an impact. In these high-risk bonds, much more money will be deposited under the guise of "EU lawlessness" than usual. The moment these investments really stop coming back, the banks run out of money and a massive banking crisis comes.
It will then spill over into the whole economy with strong vigor, as the banking crisis will affect financial markets, commodities and more.
Only those who make decisions but are not responsible can afford to order something like that dangerous and liquidation. This catastrophe is possible only in an environment of moral hazard, in an environment that the EU creates.
Remember: the banks are not to blame for that crisis, but the EU, which will actually manage them!
When banks run out of money, politicians will take advantage of the situation promptly and force the ECB to provide liquidity to the banks - figuratively speaking, "press the money".
Keep the talk of the ECB's "independence" for grandmothers. Today, the independence of the ECB is perhaps not believed even by the biggest naives, especially if Europe is ruled by the Merkel-Sarkozy duo.
Given that banks will have to buy EU bonds, states will be happily in debtbecause they will have some sales for their debts. This is also a moral hazard - States will be indebted many times over.
The market will not warn them that "it is already too much", because the market will be blocked. Banks will be managed centrally, and the purchase of bonds will simply be ordered.
What does it mean? That "when it fails, it will be a real mess" - it will really be "big money". Today's national debts will be just a drop in the ocean compared to the future situation.
If the ECB is forced to supply huge amounts of money to banks, it will also mean significantly higher inflationthan we are used to. Sure, private creditors can take out "inflation insurance," but Remember that banks will no longer be private creditors.
When certain economists predicted the monetization of debt, many laughed at them. Today we have it here in black and white. By the way, do you remember the CMEA? This is basically her second version.
Government debts will be paid by the poorest
Higher inflation has the worst impact on the poorest. It is necessary to realize that after pouring new money into circulation, the ones closest to the banks will be the first to get the new money. Those with new money buy at old prices.
Prices will then start to rise - and will rise before the poorest get the new money. They will become even poorer - It will be they who pay the state debts. They and all the savers in money.
Rising prices and widespread poverty will, of course, be significant social impacts. The banking crisis and the ensuing economic crisis will bring for some time high unemployment, followed by poverty.
Will the EU approve its own end?
Such crises and aggravated situations blame extremists. Needless to say, that one of the reasons for Hitler's rise was hyperinflation and that one of the last races in the devaluation of the currency ended in World War II.
The culprits of the whole crisis will be identified as "capitalist banks" that went "fed up with profits". Ironically, it will actually be completely opposite.
As a result, however, it will lead to even greater resistance to open markets. He's coming protectionism "To protect jobs", massive redistribution and central management "to help the poorest" and "eliminate the recurrence of the crisis".
In short, the Plan will come. Central plan. The road to slavery will be completed.
Either way, the idea of the EU will be dead. Disillusionment with the crisis will destroy it. On the one hand, it can be nice. On the other hand, what comes will be more reminiscent of Orwell's 1984 than the liberal world of free trade, low (or no taxes), freedom and responsibility.
If that regulation is approved, a bleak future can await us all. It can, it doesn't have to.
What future do you want?