Business

Other people’s money

Other People’s Money! This is what Europe’s great econ-drama escape should be called.

In a compilation of dramatic performances worthy of a Greek tragedy, the Spanish Inquisition and an Italian opera, maestros Angela Merkel and Nicolas Sarkozy have come around to where many already knew they always had to be.

They want Europe to be bailed out with OPM, Other People’s Money — or, more accurately — Our People’s Money. Germany and France have told each of the 17 EU members they have set aside an allotment from the European Financial Stability Fund (EESF), but it is too small and completely ineffectual.

It totals just some $600 billion, to save all of Europe. Italy alone has a debt load of more than $2 trillion.

So logic would dictate that they are eyeing a bigger nest egg to draw on, as is the case with most serial over-entitlists. That’s if they can find someone else to help pay for it and they can somehow keep their AAA rating. Voilà! Enter the US-backed IMF and the Federal Reserve.

With an idea that could only have been hatched in the delusional halls of DC, the IMF is promiscuously flirting with being a lead underwriter of the EU bailout, with its own special currency to boot!

SDR bucks: As we wrote last month: “The SDR (Special Drawing Rights) currency would be a collaborative currency from all members of the IMF of funds that are on deposit or guaranteed by the IMF.

It would likely be printed in dollars, yen, sterling and euros, although nothing has been decided yet.”

This far-reaching plan of the IMF lending to specific countries would permit Europe to have the IMF (with the US being the largest shareholder) essentially lending to the bankrupt countries at discounted interest rates with its SDR currency, and the EFSF and the ECB directly buying the bonds in those nations.

In the ultimate OPM part of this equation, the maestros of Europe have perhaps pulled off a major coup and will have their “investments” (EFSF, ECB) now essentially backstopped, insured and — yes insured — to a large degree by the US taxpayer.

So in essence it’s the ultimate game of three-card Monti. (Sorry, Mario).

Europe’s EFSF will be propped up into profitability and financed by the US Federal Reserve and the US-backed IMF, each of which will be lucky just to get the money back.