MAYDAY! MAYDAY! They can’t save the economy, so the gargoyles are going to save themselves

The Slog

by John Ward

For the first time in seventy years, to be radical is to be responsible

They are outnumbered, but we are alone

Some of you may have already seen this, but yesterday Mohammed El-Arian (the brains behind Pimco) wrote a typically succinct and clear piece in the FT about why most contemporary economic optimism is deluded bollocks. This was his end paragraph:

‘At a time when Europe continues to struggle, and growth in emerging economies has tapered, many now see a more robust American recovery as the key to maintaining the momentum of the global economy. They are right. And Friday’s jobs report will help shed light on a crucial requirement in this regard: the progress the US is making in shifting from assisted to genuine growth.’

That final phrase there is right on the money, because it sums up the need to tell real from confection in looking at the situation on this 2013 Mayday. I doubt if El-Arian would agree with all of what follows, but his sentiments as expressed yesterday have at least brought me back to the basics: where are we, and what happens next?

That is, where are we economically and fiscally, and where we are going next socially and politically…unless a major figure and/or movement emerges over the next five years in the West with the avowed intent of both stopping drift and resisting oppression.

There are ten fundamental problems with the econo-financial structure of planet Earth at the minute:

1. So much mass wealth in the West has been ripped out of the mass-middle demographics, it has become almost impossible to restart the growth cycle.

2. The growth cycle itself raised market expectations to silly levels over many years because of its increased dependence on forward money – credit – not earned money, as in post-tax cash. Remove the credit liquidity, and nothing can restart the growth.

3. Faced with this double-whammy problem, nobody in power is taking the obvious step of querying the one criterion for success: growth. Equally, nobody in Office is querying the neocon-Friedmanist religion that dictates we must have low tax, inequitable wealth spreads, and accessible credit.

4. In the East, a mass middle class has not yet emerged, so the tiger economies are forced to export almost everything they make to keep up consumption levels. Their cheap goods undercut Western alternatives, and their cheap labour merely accelerates the movement of factory location from West to East. This results in a permanent pool of Western unemployed….and governments unable to afford the consequent welfare overheads. Add medicine’s success in prolonging life to that factor, and you have every Western government borrowing more and more. Add that building debt to recurrent trade deficits in the EU, UK and US, and you get debt mountains which are unrepayable…at least, by level playing-field means.

5. Globalism has encouraged and helped create this impasse. Instead of focusing on self-sufficiency and a broad level of citizen wellbeing, the West took Theodore Levitt’s mercantile theories and built a greater and greater share of world commerce for bigger and bigger multinational companies, and a greater share of the wealth for fewer and fewer people.

6. Capitalism has thus morphed from multi-sourced risk capital being lent to dynamic new business, into one where monopolies are sought – and then their ever-increasing competitive lockout is funded by globalist investment banks who underwrite megamergers. (By the time Lehman fell, its business was virtually dependent on such deals).

7. Globalist investment banks act as marriage brokers between bourse investors (increasingly institutional and hedge-fund technology driven) and multinational Goliaths to ensure that more jobs move East and more sales are international. Today, after thirty years of plying this trade, banks have no national ties or loyalties any more; equally significant, they are tied into each other like a thousand unstable dominoes; and worst of all, they too have encouraged people to see the surreal valuation of derivative products as if they might be proper, tangible wealth.

8. The consequence of this bloated derivatives sector is that we now have a global gambling den in which all bets are thought to have been hedged and insured (netted) but the sheer degree of off-piste, devious further betting used to pump up profits still further over the years makes this extremely unlikely. There is thus the ever-present danger of a bank being seen as wobbly, trading partners calling in debts on the basis of that perception, and that doubtful institution collapsing.

9. Having collapsed, the devoured prey in turn leaves behind a trail of unfortunates who netted with it – and now no longer have that safety. One by one (the likelihood is) those netting partners in turn become the object of suspicion, they too collapse – and more banks still are left without cover. As there has always been an unhealthy relationship between megarich banks and overspending Sovereign governments, enormous pressure is now put onto those already indebted nations to bail out their exposed banks.

10. This is effectively what happened from late 2008 until mid 2009. But reform has been resisted by most players in the banking system, Friedmanite economics have produced systemic obstacles to Sovereign recovery, Asian States selling to such strapped economies have seen their expansion slow down, and so the globalist mercantile leviathan of expansion has shuddered to a halt. Unfortunately, it needs permanent acceleration to make everything else work: the longer it remains idle, the higher the Sovereign debts become, the more fragile banking confidence becomes, the more politicians are under pressure to save money via austerity, and the less consumption occurs. It is the ultimate, closing, vicious noose with which we are hanging ourselves.

In response, the following policies have been adopted by technocrats, central bankers, and governments around the world:

1. Interest rates have been driven to zero (‘Zirp’) in a bid to slow down sovereign debt accrual and encourage nervous businesses to borrow at low rates. Not only has this not worked, it has failed to understand that given the West’s ageing population structure, some of the biggest consumers are people dependent on interest-awarding investments. Many have now switched to stock investing, causing market bubbles throughout the West, whereas consumption levels have continued to fall.

2. Quantitative Easing (QE) has been introduced with the stated intent of increasing lending liquidity – to stimulate both business output and consumer credit driven consumption. In fact, its unstated objective has been to help restore bank balance sheets and, via priming the multinational profit pump, also keep confidence high in the stock markets. Each application of QE has delievered less and less return in relation to growth stimulation, made the stocks bubble bigger still, and fuelled the inflation pipeline.

3. All Western Central Bankers and their governments have in turn followed policies designed indirectly (and covertly in some cases) to reduce the value of their currencies. The aim here is to make their debts smaller in real terms, and their export products more competitive. The idea is gaining ground in the US, and is the central plank of incoming Bank of England boss Mark Carney’s policy. It is also being employed on a massive scale to by Tokyo to reduce the value of its Yen. The only end result of this is a zero-sum game, as recessed countries devalue and creditor countries buy those devalued currencies to counter the process. Further, debtor countries’ import costs rise, and thus their debts rise too.

4. We are now just beginning to see a move towards lowering labour costs in the West by reversing the usually desired supply and demand relationship between jobs and workers – primarily to make exports more competitive. Eurozone central banker Mario Draghi has openly presented this as a key success strategy to EU finance ministers. The austerity policies in ClubMed (especially Greece) have already produced spectacular wage deflation. What this socially dangerous and shortsighted policy must also do, of course, is further reduce consumption by the mass middle….and do potentially irreparable damage to the social infrastructure of every Nation State.

5. In turn, we saw in Cyprus (and the revelation of similar plans elsewhere) the kick-off in a concerted effort by Sovereigns to hand responsibility for funding bank bailouts to depositors. Angela Merkel admitted in Dresden last week that Germany could no longer cough up for such bailouts. The three problems in this equally short-sighted strategy are (i) stealing savings simply reduces consumption further (ii) it drives more citizens into the welfare trap…both of which increase sovereign deficit and debt, and (iii) it can never hope to make up the difference between what governments need, what banks might lose, and what the citizen could (or would) give.

The region in the most trouble at the moment is Europe.

In the eurozone particularly, loose lending policies and economic under-performance have led to dangerously high Sovereign borrowings, particularly among the so-called ClubMed States. Thus not only bank bailouts but Sovereign bailouts have become necessary…in the absence of any willingness by the banks to write off loans they should never have made in the first place.

So here, a particularly harsh form of austerity has been applied to Southern Europe. The obvious results of this monetarist inflexibility – drastically cut GDPs, further pressure on debt bonds, and latterly citizen/politician rebellion – are there for anyone to see.

As I posted earlier today, this has left Germany isolated, and sealed the fate of the euro. It has also left France in particular dangerously exposed to Greek and Spanish default.

In Europe outside the eurozone, without question the most endangered State is the United Kingdom, which three years ago overlaid an austerity programme on an already unbalanced economy and overpopulated island. In being far too little far too late, the Osborne policy leaves Britain with a terribly weak outlook: little space for agriculture, a tiny manufacturing sector, a dominant but fragile banking sector, a generous welfare system, and far too much net migration into the nation.

What is the big change in élite objective that now looms on the horizon?

Some of the flaws in the latest ‘thinking’ and ‘solutions’ being put forward among Western Establishments are so Page One obvious, the informed observer is drawn to the conclusion that not every one of those suggesting them can be a brainless clown.

For me, the emerging feature now is that the fight to save mass-economic growth has been tried, and it has failed. What the officers in charge seem to be doing now is focusing on saving themselves, rather than their citizens’ livelihoods.

This is not to suggest a carefully planned conspiracy, although I have no doubt at all that the reality of the situation has been discussed in these terms by the top media, government, political, business and banking opinion-leaders around the world. It is really nothing more than the logical conclusion of the directional mindset these people have: ‘We are the Alphas, and we are more important than you’.

On the Titanic – as the movie hinted at one point – the underlying assumption of only enough lifeboats for the First Class passengers was that the lower orders would be left to their fate.

When the ideological political madness of the 1947-1989 era was at its peak, the locations of nuclear shelters were kept secret from all the major nations’ citizens. Each shelter had a clearly defined and enumerated list of those who would get in. In Britain, the rest of the population – in a ridiculously mad leaflet, Protect and Survive - were encouraged to take doors off hinges and hide beneath them.

Since those times, the tendency of those in senior public life (I would contend) has been to become more sociopathically concerned with their own fate, not less. In 1963, there was an insane political face-off: fifty years on, there is an equally mad economic/fiscal debt face off. That is the only difference between the two sets of circumstances.

The Establishment’s sauve qui peut approach is unlikely to work, because – sofa-ridden as we seem to be in 2013 – not even telly-deadened idiots will simply lie there and starve. To the natural survival instincts of even the most stupid people has been added that sense of entitlement contagion that has infected the West since roughly 1975. “Because I’m worth it” is now a universal belief. Jarrow Marchers in the pre-war slump merely wanted food on the table and shoes. Today, everyone thinks they can have it all. It is yet another mismatch between expectation square and vicious reality circle…only in this example, the circle cannot be squared without violence: either the élites cede power, or there will be widespread social disorder.

How will our ‘leaders’ respond next?

They will react as control freaks always do, by amassing more control. Several technological, legal, social and media factors have already moved to favour repression against rebellion.

All the social network sites now know who we are, who we know, and what we look like. All the ISPs now know what we write and what we say: in emails, on websites, on mobile phones, in media comment threads. All the security services now have full access to ISP and telecoms switchgear. All the supermarkets know what we spend and what we buy.

Recent political events – from Obama’s re-election campaign to Murdoch’s BSkyB bid, from the systemic paedophile cover-up to the Libor scandal – have demonstrated how startlingly easy it is for the guilty to stay out of prison, and the innocents to be brought under the control of the State. Privacy invaders, senior cops, bankers, politicians and wealthy media moguls will only ever go to jail if it suits the Establishment to send them there. The rule of law and equality before the law have become – first under New Labour and now under the ConDemned – utterly diluted and subverted. Everything results in things being set aside, or enquiries opened, and no case found to answer. Nothing is ever open and above board. A minister has only to say “I have done nothing wrong” to be exonerated in the face of overwhelming evidence of guilt. Spin doctors bully international legal advisers and Prime Ministers lie to the Mother of Parliaments.

Face it: we no longer have any protection. We can no longer guarantee that some among the powerful will be on our side. And we already have a very large pool of unemployed. ‘Security forces’ and ‘special riot operatives’ could quickly be hired…no doubt by G4S. The very society that these greedy people have created offers a thousand excuses for recruiting such people:

* Dangerous terrorist immigrants threatening our ‘freedoms’ (as in the Boston Marathon)

* Looters threatening the respect for law and order (as in Croydon)

* Gun-gangs peddling drugs and endangering the lives of innocent bystanders

* More surveillance cameras ‘entirely for our own protection’

* Controlling rioters who threaten important institutions of government and finance

* Expanding laws from it being illegal to incite non-payment of tax to punishment of calls to action on civil resistance

* Extension of the imprisonment without trial limits

* Expansion of Court cases held in camera

Those who doubt the speed with which fanatics would bring in these measures (and query whether they’d find officers to execute them) must be terminally naive, or have been asleep for forty years. The man lauded as a fine chap qualified to be Prime Minister, Boris Johnson, is the companion of crooks, defender of fraudsters, and accomplice to violence. During the Croydon riots, senior Met officers openly suggested that texting the location of riots should become a criminal offence. Last year, a measure by the French Asembly to make satnav two-way was only narrowly defeated. In Athens, the police force is already heavily infiltrated by Golden Dawn thugs. Over the last two years, elections have been bent in Ireland, abruptly turned down in Greece, and democratic processes usurped in Italy. The central bankers of the UK and the EU will be, in two months time, former Goldman Sachs employees. Until recently, the Prime Ministers of Greece and Italy had the same background. The Spanish Assembly last month passed a law forbidding the use in the media of the word ‘illegitimate’ in relation to its leaders. Greece has a law blanket-pardoning all Government ministers of any and all corruption charges.

What the élites and their agents will do is bully citizens into acceptance, put themselves further above the law, and try to employ just enough people at just high enough wage levels to keep everything relatively calm. I would expect they will also use the media’s lack of self-control as the excuse to block and take down any form of ‘seditious’ criticism. Given that the entire media set in most Western States is now in the hands of power-freaks who own islands, control politicians, listen in on their readers, peddle pornography, hide paedophiles and evade tax, it seems highly unlikely that such will be a tricky operation to carry out.

It still won’t work – at least, I think it won’t – because the very expectations these leaders have created will wind up being their downfall as life gets increasingly harsh; and the more consumption and output fall, the bigger will be the deficits. They will also, along the way, take too long to organise the repression….and thus lose control. Finally, they’re largely incompetent – which can only serve as a bonus for the rest of us.

Is there an answer?

Yes there is, but the vast majority of people either pour cynical scorn on it, or can’t be bothered to get involved.

The following steps would deliver us from the existing tunnel leading to serfdom:

1. The creation of a citizen movement to be a regulatory watchdog for everything undertaken by the State

2. The abolition of central-government administration in favour of regionally-based mutual organisations

3. The rejection of a failed public sector and neocon capitalist model private sector in favour of an economy of mixed motives

4. The rejection of globalist mercantilism in favour of national self-sufficiency plus trade in surpluses

5. The diminution of monopolistic investment banking and multinational business, and rapid expansion of credit to new smaller manufacturing sectors

6. The separation of all ISPs and all security agencies of the State

7. A massive push behind turning remaining (UK) land over to food production

8. An immediate guillotine on any further inward migration

9. A reduction in the emphasis on consumption growth, but with vastly more emphasis on selling higher-margin products to Asia

10. The reaffirmation of a separate Judiciary, the restriction of litigation law, and the preparation of a written Constitution guaranteeing liberty and democratic rights to all law-abiding citizens.

Realism alongside radicalism.

The Slog is not and never has been in search of Utopia. It is merely one of millions of sites seeking an end to self-serving Establishment élite bollocks, closed political Parties following outdated agendas, dysfunctional greed-and-credit fuelled economics, and BIG in every walk of life.

Homo sapiens will always be Homo sapiens: we are appetitive, irrational, and prone to unwarranted fear. But when under pressure, Man is a pack animal whose success is based as much on cooperation between packs as competition within them.

Whatever we end up creating as a result of radical reform will be a curate’s egg: that is inevitable. But the alternative on offer is poverty-stricken dictatorship. I choose the former. If you believe in self-reliance, self-respect, and community freedom, keep coming back here: it’s all I and many others of like mind have to offer.