Where we are now

Ask yourself this, what are ‘we’ – our leaders and the bankers – trying to get us back to? Sustainable growth and development? Or irresponsible risk-taking and unstable bubble creation? Which do you think the bankers and politicians would say they are going for?

Of course there’s no question is there? Only problem is they are lying through their teeth. Sustainable growth will just not get us out of the very deep pit, the bankers in particular, are in.

There is one brutal fact about getting into debt, however you did it, whoever you are – person, bank or nation, and that is, that the amount of money you were making as you sank into debt, won’t be enough to get you out of it. For the simple reason that on the way into debt you had your normal expenses. After, you have all those plus the payments to clear the debt. Thus your old income will just not be enough.

So either you earn more or you cut your expenses. Or you do both! The one thing you should avoid, is the temptation to borrow a tenner from a mate, tell him its to help you get back on your feet, but then just go to the pub with some drinking pals who are also in debt and all of you pretend its just not happening.

It’s a simple recipe really. Spend less, earn more. Either or both. You don’t need to have a Phd or work at the Fed to figure it out. Oddly, those who do have Phd’s and often do work at the Fed, are convinced that only one can work and the other is not only wrong but evil. And worse, like the Little and Big Enders who so astonished Gulliver, our experts can’t agree which is the good and which the evil, and instead with intransigent stupidity they take sides and call each other names.

The result is we, like Gulliver, are plagued with puffed up pedants enagaged in a pompous and sterile, faux-debate of expert name calling between Keynsians spenders and austerity slashers. But take a step back and wonder to yourself how can something so simple – spend less, earn more – have become so polarized?

And the answer, of course, is the banks and their debt. No one on either side of the furious ‘expert’ argument is willing to admit this simple and festering fact has any bearing. Instead they agree to ignore it. And because they ignore it they understand and solve nothing.

One side told us we were going to borrow in order to spur growth. The other side came back and said, it hasn’t worked and now we are in such terrible debt that we must now cut our spending to balance the books. The problem with the argument is with the claim that we borrowed to spur growth. We didn’t. We borrowed to give cash to the banks so they wouldn’t have to declare their debts and suffer the consequences. That IS NOT the same as borrowing for growth.

In reality we borrowed hundreds of billions only to give it to the one section of the economy which had no hope at all of turning a profit. And sure enough, they didn’t. Instread they took ALL the money we had borrowed and did nothing with it except park it in central banks to earn themselves interest ( which we pay them!) or hoard it, in order to pay off the endless bleed from their still undeclared and uncleared debts. Or they use it to speculate against the very currencies that have been endangered by the reckless and doomed borrowing.

Had we forced the banks to default on THEIR debts, then we wouldn’t have any. At least not of the nation crushing scale we do have. We would have the strucutural debts we had before, and all the un-adressed issues of pensions that all parties ignored for a generation.

What should have happened is that the Bond holders of the banks should have found their money being used to pay down the debts. Which funnily enough is the risk a bond holder agrees to take when he lends his money and why he gets a premium for lending it. He takes a risk and gets paid for taking the risk. Now, however, the bond holders want to be paid but not have to accept any risk AT ALL.

Had we followed common sense and stuck to part one of the common sense plan – cut expenses, by forcing banks and bond holders to honour their legal agreements, then the TRILLION or so we have wasted saving them from poverty, would now be available to spend on dealing with the structural debts and paying for actual stimulus of real productive, job creating salary paying, growth.

But the money isn’t there, it is gone. And because its gone, wasted, stolen even, what we now have, is a second group of idiot politicians – the Little Enders. And they pretend its democracy!

The Little Enders are opposed to all Big Enderish spending. They insist it all has to be cut. Though curiously not one word is said about getting any of the money back from the banks. And, in fact, before long the Little Enders will tell us in sad but determined tones of how we will have to give yet more money to the banks and have to print more money for them and not tax them too much and and and…. In that respect sounding uncannily like the Big Enders. A charge they would deny to the death, of course. Bitter enemies that they are.

Instead they insist cuts are what they are about. And the saddest thing is that the stupid and corrupt Big Enders are right that these cuts will cause huge damage and suffering. And in so doing, will carve away any, still- living tissue from what is left of consumer spending and will impoverish everybody. But the Big Enders had their chance and chose not to do what they preach. They were too busy toadying to the Bankers. Just as the Little Enders will.

And we are left with the worst of all worlds. No stimulus, no growth, hundreds of billions of other people’s debts, and the systematic dismantling of every progressive aspect of the welfare state.

If we hadn’t bailed out the banks we would have money now for real stimulus and not have to destroy evrerything the War Generation fought for.

But that didn’t happen. Instead we are left listening to prattling about cuts and growth. As if sustainable, reasonable growth can dig us out of the pit of debt we have dug.

Since no one has had the courage or fortitude to force the banks and Bond holders to eat their losses, we are left with cuts for us and the need to search for unrealisitc levels of growth for them. What this means is that while we are becoming a great deal poorer and our nation a lot less able to withstand further shocks to its finances, we are going to witness not sustainability but volatility.

The Banks know they will bleed to death if they don’t find super levels of growth. And so they are looking out for the mega deal, the amazing return. Is it the Tesler car? Maybe it is and the price shoots up. Then maybe its not and the price falls like a stone, catching out the small investors, robbing them of millions. Then its the huge Chinese Agricultural Bank IPO. The largest the world has ever seen. Yes, that’s it. That’s the super return. But will it be? Or will it grow beyond reason only to plummet when the desperate enthusiasm flits away in search of something else.

This search for the super return is going to create waves of volatility and instability. Which might enrich the fastest of the big banks. But it will wreak yet more suffering on the rest of us.

This is where we are today, and cowardice, greed and stupidity brought us here.