Saturday, June 25, 2011

today : Greece is the word

You can't blame the greeks for rioting and getting upset (it reminds me of the old joke 'What's a Grecian Urn? Answer: these days not much at all"). After all, they didn't really do anything wrong. This is almost always the case with the population of a country. In the UK public service workers are facing slash and burn cuts to their pensions (although this is an ideological thing that also happens to help cut public debt - like all the Tories' policies. They are driven by ideology first and any notion of national interest second).

There are two ways that people and nations get into unmanageable debt. The first is if they behave fraudulently. But the main one is when they behave like sub-prime shopaholics. Speculative lenders continue lending to them - which they seem to often do even when the sums don't add up and the loan is more risky than becoming Spinal Tap's new drummer. Of course, in recent years the lenders convinced themselves that credit default swaps abolished risk, so they simply ignored the sums.

One wonders, why they continue to hurl money at obvious bubbles and economies that are on ther brink of collapse? It's not like it's a new phenomenon.

S'funny, but when it all goes wrong, as it repeatedly does, I am not seeing many lenders taking the hit. Their hair remains resolutely lengthy. It's always the lendee who loses. In the case of countries, it's the taxpayer: always the taxpayer (never the tax avoider who shelters their assets offshore and has a team of people from accenture to minimise 'liability').

The super-rich speculative lenders know this. They know that when it all goes mammary-skyward, the IMF will come along and do their bidding. The first people to get paid are always the super-rich. God forbid if they should actually ever lose out, so they skew the system to keep themselves rich, even whilst convincing themselves (or trying to convince the rest of us) that the market is 'free'. It is the belief that they are secure and living above risk that feeds the frenzy that inevitably creates bubbles in property and stocks, dragging the rest of us poor saps along. The super-rich feel that they are entitled to make more money out of any given situation, however dire. Hence the fact that the investment banks bet on their own failure in 2007/8.

Meanwhile the little people - you and I, dear reader - are squeezed like the lemons in a Wimbledon debenture holder's Pimms. Why are we paying more for food and fuel? Well, rather a lot of money was 'printed' to keep the system flowing i.e. to help the speculators keep their money-making schemes afloat (a bit like the house advancing credit to a rouletteer whose luck is about to turn, honest). The speculators had killed their preferred equities and property markets as money-making prospects, so they instead looked at the commodities markets. They took their free money (as kindly handed out by treasuries and central banks) and started to gamble it in wheat, oil, macadamia nuts and, I guess, pickled onions, precious metals and Stinking Bishop. It created a bit of a bubble, not dissimilar to footballers wages and transfer fees. Commodities are now overpriced, which means less for more for the rest of us and a consequent push back towards recession, which will lead in turn to more over-leveraged governments struggling to pay their bills as their welfare tab goes up and their tax-take goes down. In the meantime the super-rich will take their free money and start attacking weak currencies, which will further push countries towards bankruptcy by doing things like making oil really expensive. They'll also use the money that the governments gave them to lend back to the governments at an inflated rate of interest (wasn't it specifically the money lenders that Jesus threw out of the temple?).

But none of this will matter. Many speculators still believe that all they have to do is off-set their risk by using the magic of their own genius made up sums.

And even if they get it wrong and end up in trouble they know that the systems of 'rescue' are not there to rescue countries and their people, but always to rescue the wealthy investors' money.

The job of the rich is to stay rich and get richer. Everything they do is towards this end. They spend some of their money making sure the law is there to support their aims by strongly influencing (incentivising politicians with campaign donations, the possibility of negative media coverage etc) governments to skew the rules.

This is why there will be a bailout of Greece, as there have been in Ireland and in the past some of the Tiger economies where a trumpeted economic miracle fell flat on its arse. If Greece does default, it is not really the Euro that will be a problem - Greece will have to revert and everyone else will carry on with the single currency project. What would be the problem is that all the gambling investors would lose their money. And that simply wouldn't do. So the not-so-rich taxpayers of Greece and the rest of the Eurozone will cough up, as they always do, to make sure the rich remain rich.

A cynic might see it as a legitimate tactic. A couple of Davos summits later and the super-wealthy get a guaranteed payback from the poor, and as a condition of not going bankrupt Greece (or whatever country) has to privatise its publically owned assets - by selling them to... the rich. Taking things ostensibly owned and controlled by the average citizens and placing them in the hands of a wealthy few. Shock horror.

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