All through the Western world young technocrats are tweaking national economic models, factoring a temporary credit hicup that has knocked consumption expenditure and sending in reports asserting that as growth is far below the trend line only a catch up can be expected.
Meanwhile, politics has become so focused on managing relationships with those who fund election campaigns and those sectors that provide state revenues that the policy formulation process has been almost completely coopted by the need to offer political favours rather than the dispassionate scientific analysis of policy options and there promation.
Do you really think, for example, that the promise of carbon sequestration alone is responsible for the high profile this technology gets in the west.
As Machiavelli pointed out, real change is difficult; those who will benefit from change lack power while those who will lose by it are well established.
As cheap money and credit creation proliferated and asset prices exploded the property and finance sectors of the economy became more and more overweight they became important political players, capturing the local, state and national party apparatus and evolving into the senior patrons of our western institutions.
Thats why the bailout to date has been all about applying the shock paddles of bailouts and the amphetamines of even cheaper money to the sick and financially obese polity rather than accepting that only detox and rehab offer any future. The phantom wealth of the credit bubble and perverse patterns of activity engendered by the monetisation of illusionary gains completely captured politics.
That's why both the money needed for work relief and green jobs and the capacity for saving and capital formation that will be desperately needed for new sustainable and efficient production systems in agriculture and production is being squandered on futile efforts to prop consumption.
Western leaders will be found who will bite the bullet and abandon, repudiate and punish those responsible for this long terrible sleepwalk into disaster: the property and real estate carny barkers, the directors of public companies unresponsive to the will of shareholders, the housing developers against local democracy, the auditors and accountants who certified an oligopoly of greed and tax fraud as prudent in return for a place on the gravy train. And generally, a whole media, business and professional elite that apropriated twenty years of productivity growth on the promise of prosperity for all when they delivered instead declining real incomes, insecurity of tenure and equal opportunity disaster.
The only question is if we will get these new paradigms and policies by way of the bold moves of a refreshed political class and active interested citizens or lose it all by way of complete collapse first.
I'm not the only one thinking along those lines.
Kevin McKern 10/12/08
"The Bank for International Settlements (BIS) issued a report on global lending and bond issuance that says both are down 70-80%, with bonds in Euros dropping 94%. This means companies can't borrow from banks, nor can they expect to raise capital in the bond markets. The result should be obvious: tons of companies, from small to large, will inevitably have to declare bankruptcy. This is true in the US, in Europe, in Japan, and the bankruptcy and job loss wave will spread from there to the rest of the planet, in a self-reinforcing manner, feeding off itself.
I would truly expect governments to prepare for this wave. However, I see no such action anywhere. Which I think will have very dire consequences, with millions of people on both sides of the Atlantic, and in markets worldwide, with no chance of finding work, and no hope of receiving government (financial) support: there'll be too many of them. All this will put enormous pressure on individual countries and their political systems.
Governments, meanwhile, use what money they can get to prop up an insolvent financial system, whereas their prime concern should be to feed and clothe their citizens, and make sure they have shelter and clean water. If you know of a government that is looking at these issues today, I'd like to know about it.
And before you knee-jerk that the central banks and Treasuries will simply print these amounts: (an) EU payment moratorium will come because the countries can't pay: the positions are beyond the ability of the EU governments to bail them out without a cessation of CDS payments.
They can't, it's end of the line, no hyper-inflation, a giant default wave, more morose attempts to save banks that should have been thrown out the window years go, and no money to take care of the millions of desperate citizens roaming the streets.
Banking and investing as we've known it won't be back for at least decades. The upcoming round of bank failures, which will leave very few, if any, standing, cannot be prevented.
A lot of the suffering among ordinary people can (be prevented), if only through using the current bail-out funds to make sure every American and European can get at least their basic needs fulfilled . But no politician anywhere is even looking at this reality, and the citizenry has been kept in the dark. It makes the implosion of entire societies an easily predictable fact."
As a young technocrat that´s more independent, I can only counter that it isn´t a question of where bail-out money is applied, but an opportunity to redesign the system.
Aussie, Aussie, Aussie...
I wrote this on another forum (I self immolated myself in that flameswar with my Viper):
"The action in the bond market is telling us just how much fraud and balance sheet impairment there is on Wall Street and the global private sector. Confidence in public sector debt is not unusual, it's merely telling us just how bad Wall Street f**ked up. This won't last, with Benny and Hank dreaming up new liquidity schemes by the hour sooner than later they'll scare the smarter money out of government bonds back into corporate debt paying 15%, select equities, and select commodities whether they like it or not. If we get a scenario where the whole planet moves out of government debt all at once there is more than enough money involved to cause a hyper inflation not ever seen in history. Fitting a tenth of the government bond market into gold would have a gold price easy into 5 digits."
Nice blog by the way!
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