There seem to be to be two broad narratives of our present situation. The dominant, official narrative, is that there was a technical crisis of money flow, precipitated by a bolus of bad debts which then caused a collapse of confidence in the value of several large asset classes. What was required was to show that such assets would always retain their ability to find a buyer and thus their value, even if the buyer had to be, in the immediate term, the public purse. The public purse was duly opened to steady nerves and sales, and massive purchases of whatever could not find any other buyer were duly made. The plan was and is that the purchased assets would be sold by our governments, back to the market, once other buyers returned.
The dissident narrative is that this was never a technical crisis of money flow – liquidity – but one of insolvency due to the troubled asset classes being, in fact, vastly over valued. The collapse in value and the lack of buyers was not a temporary lack of confidence in an otherwise sound financial system, but a rational shunning of paper assets whose previous value was almost entirely due to the press of gullible buyers who were keen to partake in the buy, flip and buy some more ponzi scheme of speculation.
As long as the paper value was never questioned by all the players then no one feared reality intruding. Even those holding the worthless paper were happy as long as everybody else was signed up to the same grand fiction. Banks held the paper assets and used them as cheap ‘capital assets’ just so long as the lies they were based on remained wholly accepted. But of course as soon as someone defected from the grand lie, then the rational thing for everyone to do was to defect as quickly as possible. This is what every insider tried to do as quickly as they could which is why the collapse was as fast as it was and was led by the banks themselves.
The end game of such a scenario would have been the ruination of those left holding the worthless paper. And if those holding the paper had been you and me then this is what Wall Street and The City of London would have been happy to see happen. But in this case the collapse was so shockingly rapid and, in the preceding euphoria of the bubble, so much of the paper had been retained by the banks and super-wealthy that this was NOT going to be permitted to happen. Instead actions were taken to ensure that the worthless paper assets were transferred to the public purse. If it looked like they were going to recover their value the banks would re-purchase them in time to make a profit, but if not then, the ‘assets’ would be left where the loss would fall on people who were more accustomed to being poor and whose prior poverty has often been seen by the wealthy as an indication that they deserved to be poor.
The official narrative today is that the plan of recovery is working. The narrative focuses on the rise of the stock markets to almost pre-crash heights. The failure of housing or commercial property markets to recover and the fact that unemployment is hideously high is simply no longer part of the recovery narrative. These things have been dropped. What has been added has been the ‘shocking’ level of public, national debt. In the new narrative the cause of the ballooning of public debt has been steered away from facts about the cost of the bail outs or how the disintegration of the speculative bubble caused a subsequent collapse of real economic activity. The new story is that the debts we have now are nothing to do with the banks and their temporary difficulties. They are due to a deeper incontinence in public spending.
The narrative is being re-written so that the ‘debt crisis’ is seen as something that is under control and being solved, whereas the present and pressing problem in need of controlling is the cost of public services and the unreasonable expectations that underlie them. Public expectation of a free lunch for their children at school or a pension for their life’s work or a health service paid for through taxes – these socialist weapons of fiscal destruction are to blame for the vast public debt. That is the narrative we are being fed. The bankers are being air brushed out of the story and certainly any mention of blame being attached to them is being described as backward looking if not downright suspect and dangerous. Not far, I suspect, from being vaguely alluded to as financial terrorism or a ‘financial hate crime’.
What we are left with in the official narrative is that our betters have one crisis under control – the cash flow/liquidity crisis and are now taking heroic steps to deal with the recently uncovered, deeper, systemic crisis – the ‘true’ crisis – of out-of-control public spending which is responsible for sovereign debt levels that are injurious to the efficient workings of the markets. Markets whose fearless leaders are trying, despite pubic profligacy and obstinate stupidity, to help us out of debt and back on to the true path of prosperity via necessary austerity and more ‘realisitic’ expectations of what we are worth and what we deserve.
The question for me is if the dissident narrative can hold its ground and find something more say. Or have we been been swept aside?
Certainly we are outgunned and alone. The press are supine collaborators, the rule of law has been bought and whored, and academia is either captured by the dominant ideology and too dimwitted to escape or just too concerned with grovelling for tenure and a city sinecure.
The dissident narrative I advance says that what we are told are ‘temporary and extraordinary measures’ are nothing of the sort. The measures taken to ‘deal’ with the ‘crisis’ have in fact created, whether by accident design, a new and very much more reliable system for ensuring that the super rich stay that way. The new system horrifies me because it has put finance above democracy, markets over governments. But it also appals free-marketeers, because it sets up an untouchable aristocracy within the markets who are not allowed to lose and who can therefore take what they want, when they want, from whomever they want and the law will not touch them. Neither the law of the land nor the law of the markets. Free marketeers and those on the left like me find ourselves in the unlikely position of sharing an abhorrence for what a global super elite are doing.
What we have in place now is a system of permanent and institutionalized acceptance that the largest accumulations of wealth and those who own, manage and serve them can never be imperilled or threatened either by the democratic rule of law nor even the workings of the markets themselves. Both perils have been removed for the super rich and their banks because it is now established that the purpose of government is to make sure the system and the hierarchy of wealth and power at its peak, remains untouchable and unchangeable.
With this accepted, the rules of sovereign democratic government and global finance have mutated beyond recognition. Today when banks need more of their assets purchased by the public purse in order to relieve them of possible losses, the public purse is opened without discussion. What this means is that you and I are NO LONGER simply buying up, as a temporary, emergency measure, mistakes made in the bubble of three years ago. We are there to buy up the results of any greedy speculations made in the last two years. Government purchases and the QE which fund them are no longer part of dealing with any ‘crisis’ at all. They are now part of how the banks do business. They are the new normal.
This isn’t a crisis. This is the new business of profit without risk. It isn’t even really a ‘bail out’. The new normal is a no risk machine for expropriating public wealth. The banks can now buy what ever they want, the higher the risk the better, because the new system guarantees that there is no risk for them. The banks can speculate on sovereign debt, currencies and commodities knowing that if they are in the elite, they will be bailed out. Not in the spectacularly embarrassing fashion of 07-08 but in the low key ways dreamt up in the last two years. A plethora of ‘exceptional’ funding measures, bond purchases and abrogations of the rule of law in favour of bank profit, which are all, in fact, bank bail outs at public expense.
Crisis? What crisis?
The only crisis for the elite and their banks will be if the next round of QE in America and of ECB bail outs for German and French Banks via Greece, Portugal and Ireland somehow do not happen. If there is a minor miracle and our leaders remember we exist – THEN there will be a crisis for the banks and the financial elite and some small hope for us.