Do not panic! It’s just a correction. UPDATED

When the plane you are in starts bumping up and down sending drinks all over the place, when the noise from one of the engines seems, you could swear, to have stopped – and then the plane starts droopping like a stone, what do you think?

Well everyone is different, but what the crew are trained to do, is to lie to you.

“Do not panic – everything is under control. Everything you are experienceing is normal and expected. Please take your seats and wait for the captain’s announcements.”

And this is precisely what the mainstream media orofices are squeezing out.

Personally, from my perch, it looks a little different. What I see is that we are getting cought in the outer edges of a large swirling downward spiral of debt load, austerity cuts to deal with that load, economic contraction caused by the austerity cuts, which in turn leads to a greater debt load which demands more cuts and around and down we go.

Plus, I see one other worry which is now weighing heavily on the collecitve herd/hive mind of the investor colony.

You see, because in our globalised world, capital is, to use the 90’s mantra again, ‘Free to move’ , capital does not really care about a recession here or even a Depression there. Not as long as banks and funds can stay on the right side of the market movements. In fact, a little fear and volatility is good. More volatility equals larger profits. (See Wall Street bank profits for the last quarter, as examples)

Because capital/money can move, it can always be moved to wherever there are profits to be made. As long as somewhere is booming, then there is somewhere for excess capital to be put and a return to be made. As long as that happens who cares if some other huddle of little people, are in a recession/depression. It can even be your nominally ‘own’ country. What do you care. You won’t be riding on any public transport, or worrying about cuts to state schools or grotty public funded health services. Of course you won’t. You will be making huge returns from whatever market is ’emerging’ and then putting your bonus to work making sure you are untouchable.

UPDATE – couldn’t resist this from The Times of India – it is just so aposite is it not?

Lloyd Blankfein CEO of Goldman Sachs visiting India today.

Q. Lloyd, it is interesting that you should be visiting India when there is so much happening back home. Tell us what’s the reason?

Well, if I did not come to India, where else would I go? The fortunes of Goldman Sachs correlate with growth. India is one of the fast growing countries, which makes it one of the most important countries to us. If you think about the activities that we do as a firm, we help people raise capital, we help advice companies who want to expand their acquisition, we help people manage their money in risky assets. All those things are activities that are more conducive in growing economies and India is one of the most stable and growing economies in the world today.

Dracula landed in Whitby. Blankfein in India. Short version of the quote, “Need more blood!”

Back to the post as was…

But the new fear, is that the contagion has spread, perhaps too far. If everywhere slows down, even China, then where is the capital going to find its next pot of gold? It was OK when the US was in trouble. In fact it became rather fine. It was even OK when Europe started to feel the heat. Plenty of lovely volatility to chase around and cause profit-making panics here and there.

But now it might be getting away from the ‘Masters of the Universe’ as they once unashamedly liked to refer to themselves. If growth slows everywhere, where will the growth and retuns come from, to keep the minimal cash flow going? If cash flow dries up in too many places CITI and Santander would not be long with us. Commerzbank may already be road kill.

If we do enter a downward spiral of economic contraction, growing debt and QE as well, then NOONE gets out alive. No one.

Re-structuting debt may be the last option to avoid QE becoming the last peice of the nightmare mechanism to click into place.

A little bit of correction with your recovery sir?

I don’t think so.