Feeding The Monster
by Phil T Luker
19 April 2012
The smug man on television was billed as an "independent trader" on the little information strip at the bottom of the screen. He was talking about the latest eurozone rescue plan, the one where taxpyers in a dwindling number of solvent countries stump up ever increasing amounts of their hard earned to keep the spendthrift nations afloat for just a little longer.
The Independent trader was not going down well, if he had ben playing a comedy club he would have ben booed off, as it was his small audience were television presenters and a handful of pundits and chatterati and they just sat grim faced as he told them things about the plan they did not want to hear.
"It's not going to work," he said, "because this problem can't be solved. The Euro, he said, was 'going to crash'. But when the interviewer asked what he thought might work, he blinked like the myopic mole in The Wind In The Willows, confused by the question..
"Don't ask me, I'm a trader," he said. "We don't care whether they fix the economy. Our job is to make money from it." And then he offered us all some free investment advice: "The 1930s depression wasn't just about a market crash," he said. "There were some people who were prepared to make money from that crash. I think anyone can do that. It is," he said, "an opportunity!". His advice was simple: "be prepared". This was "not a time" to think that governments would sort things out. "Governments," he said, "don't rule the world. Goldman Sachs rules the world."
Well he might have meant The Bond Markets, it is difficult to see how one bank can rule the world, a cartel of banker maybe, but not just one. Ironic though that he should mention the 1930s, it was then that John Steinbeck wrote the words: "“The monster has to have profits all the time. It can't wait. It'll die. When the monster stops growing, it dies. It can't stay one size.” paraphrased slightly for context from The Grapes of Wrath.
Steinbeck was talking about the banks that cause the great depression by inflating investment bubbles but he could just as easily have been talking about the global economy based on perpetual and accelerating growth in Gross Domestic Product that took hold in the 1970s and eventually led us to the bursting of the debt bubble and the economic crash of 2008
As the euro crisis unfolds on our television screens and in our newspapers, it is beginning to look as though governments do not rule the world nor would they have a clue about how sort out the mess they have blundered into by blindly following the advice of academics, Nobel prize winning economists who have never left the university campus long enough to hold down a job in the real world. The impression one gets is that they're all hoping for a miracle. We have Obama, telling European leaders that the E U needs "more effective strategy" for dealing with the crisis although his promises to solve America's debt problem with one wave of his magic penis have as yet not been realised. Here's David Cameron calling for "leadership". Here are pretty much all the world leaders, in fact, calling for other people to lead. As models of leadership go, it's less "be prepared", and more "DON'T PANIC!".
Nobody in government, academia or the media seem to understand what is going on,. And yet is it painfully easy. Fifty years of politically correct thinking, the soft socialism of the bourgeois left and the tyranny of the weak have undermined traditional values, replaced stoicism with sentimentality, rewarded failure and punished success and broken the social and cultural bonds that bind communities. Social engineering projects have destroyed social mobility rather than increasing it, the replacement of skilled and semi skilled jobs in manufacturing by technology and the creation of a new managerial elite has destroyed the balance of society.
Thus alienated from their cultural roots, people have taken refuge in materialism and lived on easily available credit as they based their lifestyle on the instant gratification of impulses.
One economic pundit, Paul Mason has explained how a group of "movers and shakers" (but not world leaders) had taken part in a "war game" looking at possible solutions to the euro crisis. The "war game" was organised by a think tank called Bruegel. The "movers and shakers" went to a chateau in Chantilly (at the expense of taxpayers). What they came up with – in a document that has, apparently, been doing the rounds in Washington – was a $3-5 trillion fund should be created to be used to rescue European countries, and banks hit by debt problems.$US 3-5 trillion donated largely by European taxpayers.
Clearly such proposals are insane but the politicians and academics at the top of the new elite's oligarchy are so out of touch with reality they do not understand the madness.
Back in the television studio, while some of us were still thinking about the chateau, and wondering what exactly paintball game had to do with saving the Euro, or worrying about how we were going to pay the dentist the £400 he was charging for a tiny bit of work, or get the car fixed, the lead presenter asked various people whether they thought the plan would work. An American economist called Austan Goolsbee said we'd had two years to raise capital, and it was all a bit late. A Conservative MP called Sajid Javid, who used to be an investment banker, said it couldn't work because the euro was "a bankruptcy machine, and a swindle". And Jim O'Neill, who's the Chairman of Goldman Sachs Asset Management, said that "to work all this stuff out" was "not easy". We were, he said, "talking big numbers".
When one of the top people at the company which some people think "rules the world" thinks that you, as a European taxpayer, could be paying for something for the rest of your life that might well not work it does not inspire confidence for the future. It makes you think of the way that the people this guy works for helped to create the global economic crisis by selling sub-prime mortgage debt, and how that company made even more money by betting on a collapse in the sub-prime market that would ensure the very people they sold their debt holdings to would be ruined, and of how it made money by underwriting bonds and later advised other clients to short those bonds who could be blamed for stuffing their savings in a mattress or blowing it on fast cars and sow horses.
It makes me think of Greek debt, which is a very big part of the euro crisis, and of how some people said that Goldman Sachs for years helped the Greek government hide the true scale of hat they had borrowed to fund an unsustainable welfare system which made it possible for Greeks to live well without having to trouble themselves with work.. And it makes you think of all the Goldman Sachs people who have become very senior advisers to governments, or even very senior members of them, or even Secretary of the Treasury of the most powerful country in the world.
What it also makes us think is that being lectured by these economic illiterates is quite insulting, and being told that we can't ask them to pay even 25 per cent tax on annual incomes that are often paid in millions, and that you can't do things because "the markets" won't like it, even though the only things that markets like is things that make them rich. It is also insulting when they tell us we don't understand economics and so are not in a position to comment on the latest round of quantitative easing, or the maintenance of central banks interest rates at insanely low levels, or the way true inflation figures are disguised as government try, unsuccessfully to inflate away their debts by destroying the savings and pensions of the thrifty.
Economics is easy, anyone can understand it. In his novel David Copperfield, Charles Dickens explains the whole dismal science in a couple of sentences when Mr. Wilkins Micawber advises David Copperfield; "Annual income twenty thousand, annual expenditure nineteen thousand nine hundred and ninety nine, result happiness. Annual income twenty thousand, annual expenditure twenty thousand and one, result misery." And that's all you need to know. (Dickens fans will note that I updated the amounts. That's inflation for you.)
After the 2010 UK General election when the coalition government inherited a mess from the defeated Labour administration, a former Labour finance minister grudgingly admitted that his party "didn't regulate the banks toughly enough". That doesn't come anywhere near to admitting that under Labour between 1997 and 2010 a monster was created, and unleashed on the British economy. Now, we must live with this monster, which gobbles up jobs, and hopes, and dreams. It is the GDP monster and has already destroyed manufactiring, retailing and the service industries. They only way it can grow now is if the government keeps increasing its spending and pumping more of their revenue and borrowings back into the monster's feeding trough.
We live in "fast buck economy", a "fast buck economy" that seems to be destroying the Western world. We didn't need to. We didn't need to make financial services the biggest industry, we did not need to crate a housing bubble by lending money secured on worthless assets to unreliable people. We didn't need a new PC every two years or to throw out a perfectly good domestic appliance because the replacement uses slightly less energy. We didn't need to live in a bubble made out of debt. But we did what we did because our governments and the banks did, businesses did and our neighbours did, and here we are.
That "independent trader", was right, the Euro cannot be fixed, with all Europe's weakest economies tied to the German economic powerhouse things can only get worse. Greece, Portugal and Ireland have already failed, next it will be Spain, then Italy. Even France is in danger. Another recession looks inevitable in fact the last recession and the one before that never really ended, all that happened was governments and banks created funny money to give an illusion of recovery. We borrowed from the future to pay for the past. I hope that the developed nations that have all made the same mistakes, get the chance to build an economy that's made less of hot air, and more of things you can see and touch. It was Brueghel, by the way – the painter not the think tank – who painted Landscape with the Fall of Icarus. There was a lad knew all about flying too close to the sun.
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