Highly credible sources report that Germany and France, the two most important European countries with the largest economies, are back to printing their old, pre-Euro currencies. Germany is back to secretly printing Deutsche Marks and France is printing French Franc. It is Germany, however, that is more likely to exit the Euro as the common currency of the Eurozone. The majority of German people are in favor of exiting the Euro and moving back to Deutsche Mark, a currency that provided Germany with stability and impressive economic growth in post-World War II era.
The reason that Germany and France are secretly printing their on currencies is that they are fast losing hope in the future of the Euro as the common currency and are already contemplating a scenario wherein they will be left with no other option but to exit a crumbling Euro. This is a precautionary measure by these two countries as the fate of the Euro and the economic union is now moving closer and closer to the edge of the abyss. Islam and other religions have banned usury or rebaa hundreds of years ago.
Now the usury and rebaa-based financial system in the West is collapsing and one important reason for this collapse is what religious scriptures and teachings had banned hundreds of years ago: usury and rebaa. Die-hard Islamists of the sort that we have in abundance in Afghanistan now can be happy, running around shouting and pointing to the fate of the collapsing Western financial system and rightly blaming it on usury and rebaa.
The Western financial system in the European sector is collapsing. The American system is also nearing a cataclysmic collapse. However, the American day of reckoning might take a few more years since the financial oligarchs now are doing whatever in their power to hold the system together for some more time and delay the inevitable collapse.
Greece has already defaulted and more countries are on the verge of financial collapse. Portugal, Italy and Spain are the three other countries whose governments own too much to European banks and now it has become evident that these governments will not be able to repay their debts. The affected banks are banks in France, Germany and other richer countries in Northern and Western Europe.
The French banks are heavily exposed to the Greek debt. European authorities as well as the International Monetary Fund have been urging the European countries to urgently re-capitalize the European banks. The French bank, Societe Generale is effectively bankrupt as a significant part of its assets have sunk in the black hole of Greece.
Only until a few weeks ago, the French authorities as well as the Societe Generale's management used to vehemently deny rumors that this bank has gone bankrupt. Deception and dishonesty and covering up the actual situation can only be a temporary refuge. Now that the house of cards is collapsing, no longer it is possible for these people to hide the once-in-century catastrophe that is unfolding before the eyes of the world.
Portugal, Spain and Italy will go the way of Greece. Their governments will default on the servicing of their debt (in other words losing the ability to keep paying the interest on the debt that they owe) and when they default on servicing of the debt, it automatically means that they will never be able to pay the principal amount. Greek government owes more than 300 billion dollars to European banks.
The restructuring of the Greek debt and the fact that Greece has been forgiven on 50% of its debt means that financial problems of this country are brought under control. But the firefighting efforts in Greece have badly exhausted the strength of European Central Bank as well as the European banks such as the French Societe Generale.
These banks are no longer able to absorb major hits such as the one they received on Greece. Their balance sheets and financial positions have worsened a lot and now the hope is pinned on the European Financial Stability Facility (EFSF) that has now more than 400 billion dollars in funds. The staggering magnitude of the financial tsunamis unleashed by Portugal, Spain and Italy easily dwarfs the EFSF and it is so clearly a loser.
Governments borrow from financial markets by primarily issuing what is known as bonds. For example, if a government such as Portugal wants to borrow 100 million Euros, it issues bonds with this value and sells it in international financial markets. Those who buy these bonds issued by the government of Portugal pay the money to that government and become bondholders.
The government of Portugal then pays interest on each bond according to the prevailing rates in the market. Forces of demand and supply in the market determine the interest rates on the bonds. When the financial situation of a country and its government becomes bad, then bondholders and investors demand higher interest on the bonds that they want to buy and therefore it becomes more expensive for the country and its government to borrow from the international financial markets.
With Portugal, Spain and Italy, given their worsening financial positions, cost of borrowing is going up and they have to pay higher rates of interest on the money that they already owe. This is a financial disaster for these countries and is further making them sink in the water. The European Central Bank has been trying to push down interest rates on bonds (bond yield in financial jargon) but how long this can go on is not known. Finally, the markets will assert themselves and will throw these three countries to the jaws of the financial monster.
In such a situation and when the ship of European peers is sinking, everybody tries to save himself and his country and financial and banking system. The fact that Germany and France are contemplating exiting from a collapsing Euro should not be surprising. For now and many more months, European authorities will continue fighting the inevitable. As the saying goes, this, more or less, amounts to kicking the can down the road. How long they can kick the can down the road instead of picking it up will not be long. The financial cataclysm is on the way.