In the previous post I wrote about the American season of pain and isolation. I thought I should even the score and make it clear I do not think the Europeans and GB are cruising to any sort of victory.
The US is caught in a trap of its own making, tied, for the moment at least, to endless debt increases and futile bail-outs and stimulus. But just because the Amercian policy is stupid and doomed doesn’t make the European/GB policy better. This assumption of either ‘loose monetary policy’ (ie increase debt and stimulus spend) or ‘austerity’, is a bank inspired fiction. It is indicative of how the broader discussion and indeed almost all thinking on this banking crisis has been captured and fenced-in to one narrow, permitted mind-set.
The European plan is to cut debts through austerity measures of slashing public expenditure. The US plan is to spend their way out. By talking, as most financial experts do, as if these two options covered the spectrum of choices, we are all doomed to failure. We are living in a carefully engineered financial and political flatland. We are being discouraged from being able to even discuss a whole other dimension. That dimension is to cut out the growing cancer of bank debts.
The US plan is going to fail because the debts of its banks are too large to hide forever. And the stimulus spending cannot force ordinary US citizens to take on more debt. Once Europe peeled away from the debt/spend policy, it left the US exposed. And the US will find more and more unwelcome attention focused on its debts and ability to pay them.
The European plan will fail because the savagery of cuts required, on top of extra taxes, which the UK has already shown are NOT going to be progressive (the Lib Dems have already been screwed and they know it) will mean unemployment will rise fueled by massive public sector redundancies, a further collpase in income tax take (fewer people earning) which will help wipe out any gains made by the new taxes, and we will see a further decline in house prices and household spending. And then there is the fact that not eveyone will peacefully roll over and play dead when instructed to. There is going to be unrest and it will grow. There will be a furious press campaign to try to demonize anyone that opposes the cuts but this attempt will crack and deep unease and resentment will spread like dry-rot in a house.
The European countries will not succeed in making all the cuts they plan on. It will fail in Greece and in Spain. It may fail in the UK too. We’ll have to wait a bit on that one. But even if it suceeded it would still fail in its aim of getting us out of recession. The austerity cuts will be seen as apsirations and goals to which the governments are working. Destinations rather than things to deliver at a specified date.
But what no one is talking about is that if we want recovery, we have to clear our lives and our economy of those who are crippling us with their debt. Those people are the banks. They must be put down, as one would any dangerously infected animal. WIthouth clearing the debts and relieving the public purse of the crippling cost of insuring, buying and replacing those debts, NO RECOVERY will take hold.
I’m not saying the banks won’t do well or that the stock market won’t be driven up by a narrow number of stocks being HFT traded up and up. But that will be merely watching a party for the elite as would the grimy peasants in any banana republic or dictatorship.
Why are we not being allowed to discuss this? Why is it just not mentioned, as if it were the dimension that does not, nust not, exist in our thinking? Of course the answer is because it would change the balance of power through-out the world. The globally dominant financial class is not going to allow itself to fall.
But fall they must.
Hi Golem
I thought this recent so-called "Hard Talk" interview with arch-capitalist Jim Rogers would illustrate your point of the missing dimension of alternative mind sets. http://news.bbc.co.uk/2/hi/programmes/hardtalk/8745686.stm
This is just an excerpt of of the 25 min interview and it's the most anodyne segment of the show – so the BBC have neutered it to avoid the continuous look of incomprehension on the face of their bewildered hard talking rotweiler. The basic theme of what he's saying about the Euro was repeated only more vociferously in relation to the banks and to the US banks in particular – but it is interesting to watch her reaction – he is definitely leading her into an unknown dimension i.e. let them go bankrupt.
Sorry for being dim, but what are HFC trades?
Hello Dexter,
Jim Rogers is an interesting man isn't he? He thinks Capitalism's next home is China and so is quite keen to jetison the hulking dead weight of the old order.
My unease with Mr Rogers is that unlike him I feel a cultural love for Europe as I imagine you mightn for Australia. The west's financial class and banks can wither and die as far as I am concerned, but I am not so quick or so rootless as Mr Rogers, that I want to move to China and forget what EUrope and my cultural heritage still has to offer.
Mr Rogers weakness, the reason he does not sway as many people as he might optherwise, is that he is seen as talking up his finanical choices (talking his book as the phrase goes) when he says let the West's banks go and hurray for China. I would like to know what he thinks should happen to the vast bad debts and bank/housing bubble in China.
But I like his forthrightness.
Peter,
Sorry Peter, I shouldn't slip into lazy acronym use. HFC means High Frequency Trading. Essentially machine tarding. Getco is the largest I think. Though I'm not sure about that.
They are the traders who it is now widely assumed are responsible for what someone, perhaps Zerohedge, called the 'melt up' that has been a feature of the last weeks gains.
That is, late in the day against an otherwise low volume of trade you get a few stocks and shares, suddenly being traded very fast back and forth betwen the HFC traders. Machines making millions of trades for fractions of a cent. The tell tale sign is the steep ascent on the days trading which looks unlike the gentler slope of the rest of the day.
Thi is the market manipulation people talk about and why it is seen as not indicating anything other than the synthetic price ramping of the HFC traders.
It is seen as being a tool of the governing interests to make sure at critical points – end of day, ends of week, any time confidence needs to be injected to ward off something nasty. Melt up, squeeze any short traders and give the headline writers the chance to talk about gains on the day, on x days in a row, on the week, despite x news (shrugging off such and such) or to seem to validate some piece of allegedly wonderful news.
Sorry I didn't make this clear.
HFC pretty obviously a ref to High Frequency Trading ,but i don't know what the initials stand for either !
snap !
SORRY PEOPLE,
Finger AND brain trouble this morning. No wonder no one knew what HFC is. Neither do I.
Ahem – another wonderful egg on face moment. For HFC please read HFT. Correcting now.
Bonjour Golem
Have you had more ideas on that Solutions article ?
I tend to agree with you Golem. It's not that I'm an admirer of Rogers (his moral compass seems always pointing toward true profit, a profound shallowness if you ask me, shared by the likes of Murdoch et al and sadly held up as a model of intelligence in this increasingly distorted world, not my idea of intelligence) but it seems that it takes someone like this to be invited on the BBC before we even get a whiff of the notion that there is an alternative to what the political and financial classes are forcing down our throats. Indeed it would be impossible for them to get away with it were it not for the compliance of the media playing their role of horizon narrower.
I too have a Euro-centric world view. I've been over here only a few years and I miss being part of Europe. I like Australia by heart belongs to another.
Dexter
On the deficit cutting debate, surely some of the pollies know very well that it is all on a knife-edge, but do not have a clue to a solution?
So their actions are the results of hoping for the best ( growth) while being in denial that it is almost impossible. Rock and hard place.
We've known about the Limits to Growth for forty years but nobody has worked it through to the obvious answer of redistribution of incomes and wealth and stopping stupid consumerism.That's the very difficult underlying economic and political problem, but magnified incredibly by the rotten Global Financial superstructure.
After all the whole political class doesn't want to leave for some island ,nor do they want to live in a dystopian hell of violence and poverty ?
Maybe the wiser among them do have sensible radical longterm ideas , but find getting there impossible at the moment.
Frog 2,
Yes, I was afraid you'd ask that. I have been thinking about it. But I find myself hesitating. I am not sure anyone wants to hear my solutions.
I also fel we should be building an opposition and opening a broad discussion that might fragment into useless factions if solutions are advanced too early. I worry people would feel they had to withdraw form common opposition to the current idiocy if they felt themselves at odds over possible solutions.
Do you see what I mean? Or am I just being a coward?
Frog2
talking of the political class and what they want for the future. I can't help but notice the price of gold and of the state of the fine art market. Both look to me like people putting wealth into easily transportable objects that they hope will retain value in the event of a catastrophic monetary collapse.
Golem
Not sure if i get you but will mull over this pm.Starting to get back to work mowing lawns etc after my strokes of 1st April last year .
Well people being oppposed don't have a leg to stand on if they don't have some 'answers' ? All too easy to say "we've got to cut because we don't want to issue gilts at junk bond rates" etc TINA !
I found a nice interesting blog of refugees from CiF, but all too often they get angry and diverted from the basic problem.
Craig Murray had an interesting list of his cuts pre-Budget, and mine would have been much the same.
That's apart from the Financial Meltdown prob tho !
Not only the political class, our old mate GreatGrandDad at CiF buys gold !
I hope he has bought the actual gold and not just a contract for it.
Physical stuff — he's in the Mekong delta or somewhere close.
Fascinating old bloke. How to enjoy life while living frugally.
Frog2
I think that you are right – the politicians have been briefed to the effect that the alternative to what we are currently doing is some kind of Armageddon – a dark, uncertain future where all sorts of horrors could be unleashed (possibly true) – and like the proverbial rabbit they are frozen in the face of the on rushing doom – fear does that – it's all about fear.
And I certainly agree with what you say on the Limits of Growth and perhaps hints there of the need to break away from a monetary based society and perhaps towards a resources based economy where growth is no longer the axis around which we all spin and from which so much despair grows – we now live in a world where fear and stress and lack of security are the norm – we've been clinging to the side of a mountain for so long that we think we're horizontal – so yes, we need to break the cycle and the people need to be told. But I look at the politicians we have today – and I see, pretty much to a man, careerists, with no political vision other than the perks and status that they believe their job gives them (god help them) and these are not the people to stand up and be counted, to say that there are dangers ahead but we must have the courage and take control of our lives again. The kind of seismic change in perception required will perhaps come from outside parliament, I don't know, but I really don't think it will happen unless we demand that the fear is faced. It used to be that the market was part of LIFE – now LIFE is part of the market – and these politicians are the midwives to this new reality.
You're right about the need for solutions.
You're right that it can be the refuge of the lazy and cynical to always carp about what is wrong but never be bothered to offer anything positive. All these can be easy options.
But what is not easy is bulding an effective and solid opposition. An opposition that has ideas and reasons and loyalty to itself. I think to build such an oposition, a real one – that is not just the kind of 'loyal oposition' we have now, which is nothing more than a harmless variation on the dominant and universally agreed themes – that is not easy.
I think you need to build an open arena where people can feel liberated to encounter and think the thoughts polite discussion won't hear of. People need to feel inspired and free. They need to feel that while there are good thoughts from other people for them to wrestle with and consider, there is no pressure for them to merely trade in one dominant opinion for another one.
I want to help create a seed bank of true opposition. Of radical opposotion. A confident and loyal one that cannot be hushed or frightened by those in power and authority.
Golem
I assume that you're last comment was a response to mine:
I think you've already started. I'm in!
Dexter golem
Very well put both of you about the rabbit in the headlights etc and the need for networking & organisation.
Looked up "bullshit" on Wiki, fascinating article including philosophers . The difference between a bullshitter and a liar is the former is totally uninterested even unaware of the truth, while the latter knows very well what the truth is.( I was looking for a one-word translation into french, but am sure there isn't one.)
One point for golem.
Love your articles but even with the Search things do disappear into the Archives.Too ephemeral.
Boring stuff, but I can't help, not a geek!
Seeya both, work !
frog2
I normally use the expression "c'est du pipo" for bullshit.
Jim Rogers looks to me like all those people quitting New Orleans. Thankless S.O.B.s who can afford to leave and are greedy for a new territory to despoil. But then he has money to burn.