Still busy with the tail end of brush clearing around here. The dry conditions have impelled many folks hereabouts to doing much the same thing, and I noticed yesterday the Highway Department (or some state agency) has put a number of those big flashing road signs at strategic points along the highway declaring “High Fire Danger! No Open Fires!” Good for them, though shit like that will bring out the pyromaniacs like nothing else could. Still, what can you do?
Anyway, while skipping around with the chainsaw I took to thinking about the economic situation again, and was kinda composing a rant about it all in my head, but something was bugging me and I couldn’t quite figure out what it was. Then just now I was scanning some punditry on economic affairs generally but especially the Eurozone kabuki, and it struck me something’s just kind of odd. After about eight or so articles it finally hit me that what’s missing is any reputable (or any at all, really) punditry suggesting than any of the measures currently being deployed are likely to help. Quite the reverse in fact.
It’s actually quite startling. The Keynesians have been going nuts for ever, naturally, about the foolishness of imposing “austerity” measures at the height of a contraction, but then that’s what they do. They have a point of course, but it’s expected anyway. But where’s the Other View? The Austrian School advocates are not unhappy to see government expenditures slashed, to put it mildly. They don’t like the government being such a big piece of the economic pie to begin with, so “starving the government beast” is OK with them in general, but they’re not fans of bailing out failing private institutions, which is what’s happening of course, so they don’t think it’s going to “work” either. The IMF is even warning about dire consequences of pursuing “too much austerity”, whatever that might mean. Obama, naturally, is shitting a blue light and hoping it all holds together enough through November. About the only resolute cheerleader for slashing spending come hell or high water, and also reducing taxes is Norquist. Even Paul Ryan has started to crawfish a little, and a small but steady stream of GOP functionaries are backing away from Norquist’s “pledge” thing.
So here we are with the “left” and “right” economic prognosticators in agreement about something. It won’t work, and will make the situation worse. Let’s remember that none of these people actually know the situation directly—there is no way to know that without bugging the executive suites of every bank and finance house in the world. There is no transparency at all, nor any requirement for any, regarding the level of toxicity in the system. Banks don’t have to mark their assets to market value, nor must they disclose how they are being valued. Not even to shareholders. All that can be known with any real certainty is that there’s a shitload of debt, a massive accumulation of toxic derivatives, a whole universe of hedges and short bets all rolled together with popping bubbles, massive (in Southern Europe, for now) unemployment, declining wages, disappearing pensions and healthcare funding, and governments digging behind the couch cushions to pay teachers and cops.
And nobody is saying that what’s being done will solve any of this. Massive amounts of public money being sluiced into the private sector, which is being hoarded there against the day when the shit really does hit the fan, and the only real collateral for any of that money is the taxable future earnings of shmucks like you and me. Thus, hey presto, private debt and risk becomes public debt and risk;
Last year I started to label the money used to allow zombie banks to continue to extend and pretend, zombie money. It’s conjured up out of thin air, the thinnest air on the planet. The only thing that serves as collateral is the future taxability of the future citizens of bankrupt nations.
In the end, the only truth that remains, though people are seemingly completely blind to it, is this:
The banks that are kept alive with the zombie money will use it to do what they will see – rightfully, in the present economic model – as the most profitable thing to do: bet against, and ultimately bring down, the very system that has “saved” them. This is how perverted the entire scheme has become. The money taken from you by your “leaders” will be, and already is, used to bring you to your knees.
The €100 billion for Spain agreed on last weekend evaporated in two days. 18 Spanish banks were downgraded this week, and Spain’s 10 year bonds are at 6.69% as we speak, reflecting, among other things, that the Spanish government, re: – future – population, is on the hook for that €100 billion. 6.69% is close enough to the 7% threshold that it effectively means Spain has no access to the markets. In the same way, Italy’s 10-year 6.20% is a big red alarm flag, and Italy today paid 3.79% for €6.5 billion in 1-year debt, up from 2.34% last month, a 62% raise.
Moreover, the €100 billion for Spain will by default have to be the model for other bailouts. New lines have been drawn in the sand, and Greece, after the June 17 election, Portugal, and soon Italy, will not accept different, stricter, terms than Spain has gotten.
Not that any of it truly matters; it all just prolongs the agony. It does so, however, at a very steep price for the woman in the street, and even more so for her children.
This is not going to end well. Nobody thinks that.
And it is spreading. In the birthday post I mentioned how Spain had acquired its own neologism—”Spailout”—for the latest transfer of the people’s future earnings into the present private coffers, and of course we already had “Grexit” for when Greece exits the Eurozone. Now comes “Spanic” and “Quitaly”.
At least someone has a sense of humor, even though where all this is headed is not going to be funny at all.