Financial meltdown:: Monopoly for 1%…Russian roulette for 99%
Thursday, 19 January, 2012 Leave a comment
I am fed up watching whilst politicians, bankers, rating agencies and “the markets” play monopoly! This article (link below) refers to the UK and dates back to 17th January 2011 with links to even older items.
UK Economy: A cynic’s summary
What has happened since then is that the stakes are higher, based upon gradual exposure of the sheer scale of bank and sovereign debt – to the purists there is a world of difference to the rest of us any distinction between banker and politician merely reflects what stage they are at in their career – as a result of, at best, mismanagement and, at worst, unadulterated systemic greed.
I was really drawn to revisit this topic because of these pithy comments from TIm Hoad taken from a long-running discussion on Linkedin: “How realistic is the prospect of any country either being pushed out of, or leaving, the Eurozone?”
He bypasses much of the BS that, inevitably, accompanies “informed discussion”. Even as I write it I doubt this is the most appropriate term because discussions tend to get bogged down in a myriad of different perspectives (not all as well informed as contributors would like to think) related to symptoms: effect rather than cause!
I hope it clarifies things, makes you think…and smile. Enjoy!
…the only actual backing for the Euro or indeed other currencies like the $ or £ is the net present value of net future tax receipts.
And since the £, $ and € are all running fiscal deficits the backing is actually ZERO.
Good job we are all so trusting of our Governments………..
The Banks seem to have done far too much of what Governments have told them to do. Regulation is with Government.
Compliance requires the holding of Government debt.
Bad debts from Government is an obvious problem.
Lack of Government creditworthiness has damaged bank capital.
Increasing bank capital requires new Government borrowing and that is a vicious circle.
Printing money rewards those who borrow and damages savers
QE is a form of taxation on credit balances
What is worse is that increasing Government debt:
Boosts Spending hence GDP
Boosts Employment hence GDP
Reduces business & Personal Insolvency
And whilst all this sounds good the GDP construct has no substance, it is not sustainable, it transfers debt to our children, the debt itself is merely a “tax in waiting” and the reasons to spend are far more about politics than about economics.
…If the Eurozone Countries are serious about defending the Euro then why don’t they transfer their Gold reserves to the EFSF?
Between them they have about 10,000 tonnes of gold worth about €40,000,000 / tonne that way the EFSF would have around €400 billion of GOLD to back it.
The problem is getting runaway. It’s becoming a pure Ponzi scheme. It’s very nonlinear: You need more and more debt just to stay where you are. And what broke [convicted financier Bernard] Madoff is going to break governments. They need to find new suckers all the time. And unfortunately the world has run out of suckers.
Nassim Taleb (2010)
Further food for thought. This extract from Oct 2010 with further related links below…
Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling hosts. It is a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership. Who needs an army when you can obtain the usual objective (monetary wealth and asset appropriation) simply by financial means? All that is required is for central banks to accept dollar credit of depreciating international value in payment for local assets.
Victory promises to go to whatever economy’s banking system can create the most credit, using an army of computer keyboards to appropriate the world’s resources. The key is to persuade foreign central banks to accept this electronic credit.