Posts Tagged ‘Revolution’
Year of Revolutions

The progressives have done an excellent job of overthrowing traditional conservative values. Of course, there have been some unexpected consequences:

The fact that it is no longer socially unacceptable to be a lying, cheating conman, as long as you are successful at it. Greed is good, and so the achievement of wealth by any means available, as long as you beat the system and don’t get indicted, is the epitome of human achievement and worth.

Truly our modern way of life is not sustainable. Not because of environmental degradation, but cultural ones. They have created a system that can not perpetuate itself through time. Something that can not continue forever will not. But betting on when reason will reassert itself is betting on a Black or Grey Swan event. It will be a source of regular consistent losses, until the extreme event comes in. Hence comments such as this from Jesse:

I have lost quite a bit of money underestimating the willingness of frightened men in positions of power to engage in financial shenanigans, outright fraud, and seemingly irrational support for the rationally unsustainable. And I hope never to forget that lesson. Fiat is a powerful drug.

But there will be no sustained recovery until the financial system is reformed, and so we will continue on in a state of fragility, as so eloquently expounded upon by Taleb.

C.A. Fits explains just how bad things are in this video.

There are many trying to maintain the lie, seeking to obscure rather than reveal reality. They may be misguided, or acting from baser motives:

“A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.

The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards.

And so a failed policy and its support system become self-sustaining, long after it is seen by objective observers to have failed. In its failure it is counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for the thought leaders who receive their power from that system.

The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious hypocrisy…..

As Jesse goes on to point out. The problem is not restricted to the Anglo-sphere:

Their success has been propelled by the dominance of Anglo-American financialization, and the rise of oligarchies in Russia, China, Latin America, and India. Countervailing power has been co-opted and subsumed. Any opposition has become marginalized and isolated.

When reality reasserts itself it will do so globally. The correction will leave many people bewildered. Their old certainties crumbling along with the values of their fiat money.

The resulting reversion to the norm can have the impact of a thunderclap. So government becomes complicit in the control fraud which it abets, perhaps for certain policy ends, so that finally only those without conscience can abide it. And that is the genesis of the credibility trap, and the ascent of the careerists, and white collar sociopaths.

“All the truth of my position came flashing on me; and its disappointments, dangers, disgraces, consequences of all kinds, rushed in in such a multitude that I was borne down by them and had to struggle for every breath I drew.” Charles Dickens

History will repeat. It will be another 1848 year of revolutions, but at a global level. Revolution and repression will be aided and abetted by technology. We can but hope it will be the best of times along with being the worst:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way” Charles Dickens

Graphic courtesy of Jesse

Greek bailout

Well we have long said there was no way on earth people were going to be paid back the full value of their loans to Greece. Indeed, the same goes for much of the developed world. Too much debt is too much debt. The question was and remains, who bears the losses. Under capitalism it is supposed to be those who took the risks and enjoyed the rewards. At the moment it appears to be the taxpayer and ordinary citizens.

If you are retired and living off a fixed income, on state welfare or amongst the poorest members of society then you will be forced to suffer in order to make international bond holders good. The consequences for democracy and social stability of such measures is predictable. The question is simply what proportion of the nations assets will be looted before:

  • The government is overthrown.
  • Despotism established.
  • Both of the above, possibly more than once.

Make no mistake, the current process is not long compatible with democracy. At least not democracy in the traditional Western as opposed Eastern European “Democratic Peoples Republic of …” sense. It is inconceivable that a democracy would voluntarily acquiesce to:

It’s Official – Greece Unveils The Negative Salary, And A Whole New Meaning For “Pay To Play”: Beginning this month some Greeks will have to pay for the privilege of having a job. From the Press Project:

Salary cutbacks (called “unified payroll”) for contract workers at the public sector set to be finalized today. Cuts to be valid retroactively since november 2011. Expected result: Up to 64.000 people will work without salary this month, or even be asked to return money. Amongst them 21.000 teachers, 13.000 municipal employees and 30.000 civil servants.

But the Greek economy is uncompetitive. The Greeks are lucky to be getting anything. But what exactly are they getting:

Scandal: Greece To Receive “Negative” Cash From “Second Bailout” As It Funds Insolvent European Banks: It turns out that not only will Greece not see a single penny from the Second Greek bailout, whose entire Use of Proceeds will be limited to funding debt interest and maturity payments, but the country will actually have to fund said escrow! You read that right: the Greek bailout #2 is nothing but a Greek-funded bailout of Europe’s insolvent banks… and the Greek constitution is about to be changed to reflect this!

The smoking gun quote:

 The Eurogroup also welcomes Greece’s intention to put in place a mechanism that allows better tracing and monitoring of the official borrowing and internally-generated funds destined to service Greece’s debt by, under monitoring of the troika, paying an amount corresponding to the coming quarter’s debt service directly to a segregated account of Greece’s paying agent.

As for the priority of payments – it is more than clear:

Finally, the Eurogroup in this context welcomes the intention of the Greek authorities to introduce over the next two months in the Greek legal framework a provision ensuring that priority is granted to debt servicing payments. This provision will be introduced in the Greek constitution as soon as possible.

So there you have it: the Second Greek bailout is nothing but the first Greek bailout of Europe’s banks! And the Greek constitution is about to be changed to reflect that.

Congratulations Greece – you just got royally raped by your own unelected rulers and you didn’t even know it.

It is worth reminding ourselves of where the money from the previous bailouts went:

Where Does The Greek Bailout Money Go? In the end less than 19 cents of the bailout are going to allow Greece to continue its overspending. About 23 cents goes to Greek institutions, though at this point, all of that is held by the ECB, so it is not fully benefiting Greece.

18 cents are going to the ECB directly and 40 cents are going to banks and insurance companies outside of Greece. So at least 58 cents of every bailout Euro is going outside of Greece, and depending on how you treat the repo agreements, that number could easily be 70 cents.

Graphically it is illustrated as:

There is only one destination this path leads and it is not pleasant. Either a revolution of the left or the right. Both pointing to evil capitalists. But bailing out bondholders is not capitalism. Letting those who took the risks, benefited from the rewards, suffer the consequences of their poor investment choice is capitalism.  This fact needs to be screamed from the rooftops by all right thinking people. All it takes for evil to triumph is for the good to remain silent.

Do not remain silent. Evil will exploit your silence and blood will again flow in the name of fighting injustice. Do not wait before voicing your opinion. By then it may be fatal to do so. Once some things are set in motion they can consume all who are too close.

We have always had the means for mass violence. In Rwanda the machete was a weapon of mass destruction. But technology is now providing the means for unprecedented repression of the many by the few.

Again Greece is pointing the way. 43% of the population now support parties based on the ideology that killed over 100 million. Nice.

Paul Mason of BBC on How Austerity is Reducing Greece to Developing Country Status: Communists, Trotskyists and other extreme-left groups are polling at 43%. That’s a strikingly high number. This plus the level of dissent on the street suggests Greece is on its way out of the eurozone. But will the technocrats prevail? As Michael Hudson has stressed here and in other commentary, the banks are succeeding in stripping Greece of assets, an operation that used to be possible only via military force

In the video he talks about people getting Euro 350 electricity bill per month, most of which is tax. The person only earns Euro 400 per month. If you do not pay it then you get your electricity cut off. As a resident of Australia I have been horrified at how much my electricity bill has risen. Looks like there is plenty more scope. Although our price rises are the effects of green not Austerity taxes. Those will come later.

The outcomes for Greece and of what is occurring elsewhere can be contrasted with Iceland:

Icelandic Anger Brings Debt Forgiveness in Best Recovery Story: Iceland’s $13 billion economy, which shrank 6.7 percent in 2009, grew 2.9 percent last year and will expand 2.4 percent this year and next, the Paris-based OECD estimates. The euro area will grow 0.2 percent this year and the OECD area will expand 1.6 percent, according to November estimates.

Housing, measured as a subcomponent in the consumer price index, is now only about 3 percent below values in September 2008, just before the collapse. Fitch Ratings last week raised Iceland to investment grade, with a stable outlook, and said the island’s “unorthodox crisis policy response has succeeded.”

What are the chances that your government will follow the Iceland precedent rather than bailout bondholders? What has success got to do with it when there are vested interests to protect? I’d suggest you start preparing soon if you live in a nation that has experienced credit expansion to the point where people have unprecedented levels of debt. It matters not if it is secured against assets, as those assets are inflated. Inflated assets are assets that do not generate a return sufficient to justify their price. Capital gain does not count, when a bubble deflates capital gains turn into capital losses.

As an aside the economist profession ought to hang its head in shame. When some wanted an economic rationale to justify the credit expansion with all its associated excesses we trotted out the efficient markets hypothesis. Now some want to justify money printing we have a burst of coverage of modern monetary theory.

I leave the last word to Jesse:

Modern Monetary Theory Explained Simply and Questioned Again So, what is the scheme to prevent the over-printing of money in the MMT, and what recourse do the people have if this system fails?

We are grappling with this very question today with the global dollar reserve currency scheme, so it is not theoretical. Replacing a failed fiat currency with another similar system but with different denominations and names, reissuing the paper currency after it fails, is par for the course.

And I expect that to be the preferred government resolution this time as well. The only question in my mind is how draconian will they get in order to obtain the required obedience of the markets, and how far do they think their control needs to extend geographically in order to succeed?

And what would they do with countries who have things that they need, but who will not accept their monetary diktats?

Is this what we are talking about? Just give the Fed/Treasury more power, greater spans of control, and less restraint, and they will finally get it right?

Or at least right enough, because no one will be left to question it, and say it is wrong.

They say history does not repeat, but it does rhyme. Learn the rhythm. Don’t let them pervert capitalism any more, lest we all suffer the  fate of the Sabine women.