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Its full name is more than a mouthful. Trans-European Automated Real-time Gross Settlement System is better known as TARGET2 for short. It is the behind-the-scene payments system that conveniently enables citizens across the euro area to settle electronic transactions in euro. And at just over €500 billion, its TARGET2 claim on the Eurosystem is also the largest and fastest growing item on the Bundesbank’s balance sheet, as well as a source of much misunderstanding and debate.

The allocation of TARGET2 balances among the seventeen national central banks, which together with the ECB make up the Eurosystem, reflects where the market allocates the money created by the ECB. The fact that the Bundesbank has a large TARGET2 claim (asset) on the Eurosystem, while national central banks in southern Europe and Ireland together have an equally large TARGET2 liability, simply reflects that a lot of the ECB’s newly created money has ended up in Germany. Why? Because of capital flight.

Since the euro eliminated exchange rate risk among its member states, Germany has invested a substantial portion of its savings in Europe’s current account deficit countries. Some of those savings are now returning home. That’s the capital flight.

It will mark the end of an era for Cyprus, which has in effect spent the past decade advertising itself as a place where wealthy individuals who want to avoid taxes and scrutiny can safely park their money, no questions asked.

To some extent this reflected the fact that capital controls have potential costs: they impose extra burdens of paperwork, they make business operations more difficult, and conventional economic analysis says that they should have a negative impact on growth (although this effect is hard to find in the numbers). But it also reflected the rise of free-market ideology,

Like an inmate on death row, the euro has received another last-minute stay of execution. It will survive a little longer. The markets are celebrating, as they have after each of the four previous “euro crisis” summits – until they come to understand that the fundamental problems have yet to be addressed.

Likewise, they now recognize that bailout loans that give the new lender seniority over other creditors worsen the position of private investors, who will simply demand even higher interest rates.CommentsView/Create comment on this paragraph

European Borders Tested as Money Is Moved to Shield Wealth

Fundamental to the argument that Spain (or Greece, or anyone else) has a moral obligation to repay in full its debt to Germany are two assumptions. The first assumption is that “Spain” borrowed the money from “Germany”, and that there is a collective obligation on the part of Spain to repay the German collective. The second assumption is that Spain had a choice in what it could do with the German money that poured into the country, and so it must be held responsible for its having mis-used hard-earned german funds.

There was plenty of irresponsible behavior in every country, and it is absurd to think that if German and Spanish banks were pouring nearly unlimited amounts of money into countries at extremely low or even negative real interest rates, especially once these initial inflows had set off stock market and real estate booms, that there was any chance that these countries would not respond in the way every country in history, including Germany in the 1870s and in the 1920s, had responded under similar conditions.

The winners have been banks, owners of assets, and business owners, mainly in Germany, whose profits were much higher during the last decade than they could possibly have been otherwise

Now, the large 82.8% German government debt to GDP ratio is a source of shame for many because Germany was a driving force in enshrining the 60% government debt to GDP hurdle into the Maastricht Treaty that set out terms for the euro zone.

The crisis has also transformed the European Union into something radically different from what was originally intended. The EU was meant to be a voluntary association of equal states but the crisis has turned it into a hierarchy with Germany and other creditors in charge and the heavily indebted countries relegated to second-class status. While in theory Germany cannot dictate policy, in practice no policy can be proposed without obtaining Germany's permission first.

Italy now has a majority opposed to the euro and the trend is likely to grow. There is now a real danger that the euro crisis may end up destroying the European Union.

The fact is that three years ago none of the countries now in or near crisis seemed to be in deep fiscal trouble.

Then came the global financial crisis. Those inflows of capital dried up; revenues plunged and deficits soared; and membership in the euro, which had encouraged markets to love the crisis countries not wisely but too well, turned into a trap.

Why should a Latvian cow deserve less money than a French, Dutch or even Romanian one?

The colossal effort that was required to agree to a sum of about 960 billion euros ($1.3 trillion), a mere 1 percent of the bloc’s gross domestic product, exposed once again the stubborn attachment to national priorities that has made reaching agreements on how to save the euro so painful in recent years.

The central bank chief is coming under increasing pressure because he can't quite bring himself to embrace the concept of quantitative easing, the latest fashion in the world of finance. It involves central bankers engaging in the large-scale purchase of bonds issued by their governments and other securities, thereby injecting huge sums of money into the financial system. In this way, they hope to stimulate the domestic economy and keep their own currencies cheap, thereby strengthening exports.

The country is in the process of "boldly rebuilding" monetary policy, Prime Minister Shinzo Abe declared. Indeed, the Japanese yen has lost 12 percent of its value against the dollar in the last two months.

The US central bank, the Federal Reserve Bank, has also been printing money to a previously unimaginable extent since the financial crisis. Calling its efforts QE 1 and QE 2, the Fed has pumped more than a trillion dollars into the US economy.

"I was amazed at how quickly and easily this guy was able to open the door," Peter said. The locksmith told him that locks are on doors only to keep honest people honest. One percent of people will always be honest and never steal. Another 1% will always be dishonest and always try to pick your lock and steal your television; locks won't do much to protect you from the hardened thieves, who can get into your house if they really want to. The purpose of locks, the locksmith said, is to protect you from the 98% of mostly honest people who might be tempted to try your door if it had no lock.

What we have found, in a nutshell: Everybody has the capacity to be dishonest, and almost everybody cheats—just by a little. Except for a few outliers at the top and bottom, the behavior of almost everyone is driven by two opposing motivations. On the one hand, we want to benefit from cheating and get as much money and glory as possible; on the other hand, we want to view ourselves as honest, honorable people. Sadly, it is this kind of small-scale mass cheating, not the high-profile cases, that is most corrosive to society.

The euro zone nations already have 3.5 million fewer jobs than they did before the financial crisis hit in late 2008, bringing the total number of unemployed to 17.4 million as of April, the organization said in a report issued Tuesday.

The unemployment rate hit an all-time high of 11.1% in May.

Deposit flight from Spanish banks has been gaining pace and it is not clear a euro zone agreement to lend Madrid up to 100 billion euros in rescue funds will reverse the flows if investors fear Spain may face a full sovereign bailout.

Many banks are reorganising, or being forced to reorganise, along national lines, accentuating a deepening north-south divide within the currency bloc.

Since government credit ratings and bond yields effectively set a floor for the borrowing costs of banks and businesses in their jurisdiction, the best-managed Spanish or Italian banks or companies have to pay far more for loans, if they can get them, than their worst-managed German or Dutch peers.

the ECB gears up to go full throttle into a business that, according to its statutes, is verboten: buying the debt of member states.

The ECB is about to turn into a money machine, into a lender of last resort, and damn the treaties that mandate an inflation-fighting commitment to “price stability”. The magic phrase now is “capping bond yields”, meaning the ECB buys up the debt of Italy and others in order to depress their borrowing costs.

But the shortcomings of the agreement have once again undermined renewed confidence in the eurozone and sent the bond yields of several countries higher, including Spain and Italy.

The Spanish government said a predicted rise in GDP next year of 0.4% had proved optimistic, and the economy would suffer another year of recession.

Regional governments deliver the key parts of the welfare state, including health, education and social services.

French loans to Spanish banks plunged 34 percent in the fourth quarter of 2011 compared with the previous quarter, according to the latest data from the Bank for International Settlements.

For Italian banks, French bankers cut their exposure by 16 percent. German banks have also been increasingly wary of their Italian and Spanish peers, reducing lending to them by about 19 percent last year

Sixty-four percent of the population lives on less than $1 per day, 14 percent have HIV, 40 percent don’t have access to clean drinking water. Almost 90 percent of women in rural areas cannot read or write. Name a category—schools, health care, environment—and I’ll give you statistics that will depress the shit out of you.

For more than 150 years, the only reason to come to Kitwe—to Zambia, really—was the copper.

Most of the buildings in Kitwe, the roads, the health clinics, the schools, were built by the national mining company