We as commodity

"Unfettered, unregulated capitalism...turns everything into a commodity, human beings become commodities, the natural world becomes a commodity, that it exploits until exhaustion or collapse. In essence it cannibalizes itself, and this is the process that we are undergoing."

Chris Hedges

The man who sold the world

SEC Staff Ends Probe of Lehman Without Finding Fraud

"U.S. Securities and Exchange Commission investigators have concluded their probe of possible financial fraud at Lehman Brothers Holdings Inc. without recommending enforcement action against the firm or its former executives, according to an excerpt of an internal agency memo.  "

The man who sold the world ...

We are on the growth to nowhere

The article of  Alasdair Macleod  The fallacy of economic growth  spells it out:

"A free-market economy in the absence of external factors does not grow: it progresses, which is a very different thing. It discards those things consumers do not want and produces things they are likely to want. It adjusts the price of products to a level which satisfies the consumer and is at the same time profitable. Overproduction is punished and underproduction invites competition."

But we are learned to love growth and almost panic when the tv puppets say that the growth is faltering. And that might be our bicycle - the growth in itself is meaningless or at least irrelevant for the society. Except that it might be dangerous for our limited resources and the environment. But, yes, growth is very well relevant for the ever rising profit junkies in the financial and corporate world. And zerohedge nails it down in its must read post


"That the world is slowing down everywhere. And since conventional theory means that much, much, more debt will soon be unleashed to restart growth, and since everyone already is full to the gills with debt, the only realistic buyers remain central banks. And they know it. Which, incidentally, is why the market is tumbling: after all, as we have been claiming all along, there must be some pretext for global coordinated QE. Well, another 10-15% drop in the global capital "markets" will get us there in no time."

Here is also our actionable insight - buy the fucking dip in gold and silver. They have already stopped plunging and much too soon we will see the new wave of easing.

enjoy  talking heads

We are so screwed ... but where is the bicycle!

Yet another statement that we are all screwed:  The All-Important Question!

Yeah, he really has some point  but it's all like the 21.12.2012 thing, just without the mystic stuff. 

What bothers me is that the author rightfully says 

" Of course, given that we are talking about a complex system – the economy – total certainty is never completely possible."

but then immediately follows with

"my conclusion is thus:

The world's largest economies, including the US, Europe, Japan, and China are speeding for the equivalent of a brick wall. In short, I believe that before this crisis is over, we will experience the Greater Depression my dear friend and business partner Doug Casey has long anticipated.

In case that conclusion fails to communicate my current view sufficiently clearly, I will condense it as follows:

The world's largest economies are screwed."

And of course this is the prevailing chain of thoughts:

"In other words, for the better part of two weeks, I was immersed in presentations and one-on-one discussions with truly some of the smartest, best-studied people in the world today on economics and investment markets – with the primary topic being whether the so-called recovery is real, and the consequences if it falters.

While the speakers used a variety of methodologies to approach the topic, when all was said, the only conclusion that could be reached was that the world is headed for a very challenging period."

Well, when everyone believes we are screwed we are typically actually not  ... at least not that specific way they think we are!! I just wait for GS and CNBC to say we are screwed so I can finally relax!

Why we are so  screwed -  because we produce too much and cannot afford to buy it and even do not need it that badly?! Or wait, we are screwed because we are indebted in paper money being printed at will? Or because the houses are becoming so cheap it is easier to foreclose and buy a larger and a cheaper house ...
 
Guess what, just to make a difference I think we are not that screwed! Well we are in a sense but just because we  feel so badly  screwed we are making the wrong decisions and not looking out of the box.

Did you know that typically "westerners" get  hijacked by aliens, not  people from say Africa or generally poorer regions?  That is definitely another way to feel perfectly screwed ... sometimes even literally ... you know the aliens examining their bodies and stuff.

This sounds to me like thinking in the box painted by someone. So why don't we try to think out of the box by using the "Youngman technique for problem solving"  inspired by the joke

" At the US/Mexico border a guard sees a man crossing into the United States. The man is riding a bicycle and has a box balanced on the handlebars. The guard pulls the man aside, tells him to get off his bicycle and opens the box, but all he finds inside is sand. This goes on every day for two months: the man comes across the border on his bicycle with a box balanced between the handlebars, and every day they open the box but find nothing but sand. One day, the guard sees the man at a store and says, "Look buddy, you drove us crazy. Everyday for 2 months you came in on your bicycle with that box of sand...what were you smuggling?" The man says, "Bicycles.""

 So we see the sand "we are screwed by this financial crisis"  but where is the bicycle! So if you have any ideas about this pls comment!

One possible shot  is that it is the dismantlement of the  welfare state being  scapegoated  for the so called crisis. In Europe definitely more money has been spent to recapitalize the banks than on social issues.  They say the banks are sooo important so the money spent there are for our own good. Really? So the social security and peace are less important then or what?     

Simple solution to the Greece/EU problem

I do think that the resolution to the crisis in Greece and indeed for the EU is strikingly simple and easy. Let's start with Greece as a concrete example:The only thing that needs to be done in Greece is to reintroduce the Drachma as a parallel currency with a floating exchange rate to the Euro and  to 

 "be declared by the government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for "all debts, public and private" (wikipedia).

The Euro will coexist as a  parallel legal tender so Greece needs not leave the monetary union which would be implying a stigma of failure and the lack of concrete prospect of entering again the union.


The elegance of this solution is its simplicity -  as wages and the prices of local goods will be both in Drachmas they will automatically balance. It is clear that in the beginning the Drachma will depreciate against the Euro. Hence the  wages denominated in Euro will decline but also will  the prices in Euro of the local products, so it will even out and the consumption will not decrease that rapidly but instead will just shift from imported to local products.   This will naturally stimulate the domestic demand for Greek goods and will weaken  the demand for imported ones.

As the wages will be in Drachmas they will become highly competitive when denominated in  Euro which will result in an increase of the Greek exports too.

Combined,  the increased demand for local goods and increased exports will stimulate the economic activity and lead to a decline in the unemployment. And there you have it - no increase in debt for stimulus and sustainable improvement of the Greek economy!


And of course the major advantage is that to implement this solution they really do not need to be given green light by Merkozi,  Horkel and  Obama.  Furthermore, this plan does not bear the   stigma of leaving the euro zone. Just introduce  a parallel  local legal tender.Partly this decision was de facto but not de jure  implemented in Bulgaria and other countries in crisis - local and foreign currency can coexist. The point is that money have different functions like medium of exchange and store of value. Now who says that you should necessarily use the same currency as a medium of exchange and as a store of value. Even as a medium of exchange you can use local currency for transactions between local residents and a foreign currency for transactions between local and foreign agents. You can use yet another, supposedly more stable, currency as a store of value.   So if the liquidity is problem introduce a new local currency as a local medium for exchange but keep the "good old" Euro as well.   I think the solution is viable because it has been invented by the market and not by  some bureaucrat in Brussels. The only remaining step to accomplish  is to legalize  it and put it in a proper legal framework.

Pls, do not get me wrong. I do not believe I have invented this. I just spell out something what is and has been happening in the market place.  

There is probably a minor technical problem with having two parallel currencies  that they both  "must be accepted as a form of payment within the boundaries of the country" so if you are in a situation that both contracting agents want a different settlement currency you have to clearly regulate which one has the priority. That is actually not a great issue - either the agents agree on a common currency or if they don't you will legally define in which situation which currency has the right to be enforced. For example if both contractors are subject to the local jurisdiction and the contracting amount is less than say 1mil. Euros then the Drachma is the default currency, that never the less can be renegotiated if both parties agree on this.  For all other cases the Euro is the default currency. This of course is just an example.

 

 TARP-MARP

Somebody may object our previous post by repeating statements from the officials that the Troubled Asset Relief Program (TARP), one of the taxpayer funded help programs  for the banks, wasn't actually a subsidy but a profitable investment. Nope! It has almost no chance of breaking even let alone become profitable.  The myth buster on zerohedge:

Myth Buster: TARP Bailout May Realize A Positive Return for Taxpayers?

The bottom line being:

"The Office of the Special Inspector General for the TARP) pouring ice water on the seemingly overly optimistic Treasury:

"It is a widely held misconception that TARP will make a profit...... As of March 31, 2012, $470.1 billion is obligated to TARP programs.6 Of that amount, $414.6 billion had been spent and $50.2 billion remained obligated and available to be spent.  Taxpayers are owed $118.5 billion as of March 31, 2012.

"

Some other sources came with projections for even larger losses, like CNN Money bailouttracker  estimating $356.2 billion invested and just $118.5 billion paid back leaving us with outstanding  $237.7 billion.

But this is not the last word! As per zerohedge:

"Nevertheless, don't think the buck stops here--SIGTARP report indicated $50.2 billion of TARP funds remain available as of March 31, 2012 to be drawn down by TARP recipients under three of TARP’s 13 announced programs mainly supporting banking, housing and auto sectors.  That means the $118.5 billion TARP loss concluded by SIGTARP could get even worse as more fund is still to be disbursed."

Not to mention the various QEs and the secret  loans to the Wall Street Banks (Bloomberg: Wall Street Aristocracy Got $1.2 Trillion in Secret Loans). 

Well ok, we must agree, given the track record of banks this might be called a profitable investment ...

Distracted slavery

 When the financial system creates debt it gives  a "license to consume" but of course without actually creating the resources needed.  That is in itself more than enough to deem this system harmful. Yet it is even worse, as by doing so it enslaves the majority of the humans with the  debt of the few. The future time of ourselves, our future labor  is already sold  to the  few ones as we now owe them said debt.

Reflect for a moment -  they have created the debt, consumed the resources bought by this debt, then transformed it with the help of the politicians onto us and now they own our future labor which is the means for us to repay their debt back to them. It looks like a nonsense but it is exactly how it is!
 
I believe the generations to come will look back and think "how come they were so blind not to see this obvious injustice and robbery ".   Probably one of tricks is that such a blatant  plundering is hard for a decent person  to see.

Well at least some of us do see: 

Excerpt from the  Debt Generation by David Malone:

For anyone who has never been ‘kettled’ it is when the police at a protest suddenly close ranks and refuse to let anyone leave. You suddenly find you are held against your wishes. The police will not explain why, and they won’t allow any exceptions. You suddenly have no control over what is happening, and no discussion is permitted. A decision made by someone you have never seen now exerts complete and total control over your life.

We are all in that position now.

So vast is the debt our government has burdened us with that this one fact will now determine most of the politics of the next decade. Other hopes and desires – the wish for better schools, a better health service, better care for the elderly - will wither in the shadow of the debt repayments. If we are forced to pay back from taxes all the vast sums that have been sucked out of public spending and given to the banks, the country will not recover for a generation.

The economic ‘plans’, forced on us without debate, are all based on the banks returning large parts of the money they have taken from us. This means, whether we like it or not, we all have to hope that the banks make profits as quickly as possible. We have all been ‘kettled’ into having to hope and work for the largest possible growth in world trade and finance. We have to hope that the rich get richer, and quickly. The lords of finance and their servants in politics decided this for us.

There never was any discussion or debate of possible alternatives when the financial crisis began. It was declared, and universally agreed (always a bad sign) that the problem was liquidity, not solvency. That meant the only answer ever proposed was to provide liquidity at all costs. Liquidity being our money to cover the massive losses they had incurred. This, we were told, wasn’t really a cost at all, but ‘an investment’. An investment which would pay back all the loaned, borrowed and printed money long before the debts came due through reinflated levels of growth and asset value.

That was, and is, their only plan. And so absolute is the certainty in the minds of all concerned that none of them can even conceive of looking beyond the closed circle of that logic. No counter-argument is allowed or taken seriously. No warning signs are read as such.

Their so-called ‘free market’ has seized control and locked us in to a course of action in which democratic choice has been foreclosed. The growing realisation that this is what is happening will bring about increased anger. The smug reaction to anger is to label it ‘mindless’. The mindless anger of the ignorant who don't understand the necessary steps being taken by those who know better. That is the boiled down assumption of all our leaders, all the economic experts and most economic journalists.

The truth is quite different. People like me are angry because exactly the same people who, in 2008, assumed they knew how to run the global economy still assume they, and only they, know what must be done now. And their prescription is as simple as it is arrogant: put it back they way it was.

We are told that the debts accrued by those in charge must be paid by us rather than honoured by them. No debate.

We are told we must get lending back to the old levels. No debate.

We are told we must get the consumer consuming again rather than saving. No debate.

We are told that we must agree and complete the Doha round of global free trade liberalization. No debate.

To be robbed is one thing: to be condescended to by the people who robbed you is another altogether.

That is why many people like me are angry. We are angry because the financial elite are shoving their ideology down our throats. We are angry because we might have wanted to have a say. We are angry because we had different ideas that were never even considered.

Here we are at the point in history when many of us are looking at the imminent threats of climate change and oil scarcity, clearly seeing the dangers of unbridled growth, and yet at this point democratic choice has been kettled. No debate.

And that is why this crisis is no longer just about lack of confidence in the markets: it is now about the legitimacy of our governments. The entire political class has been captured by the same ideology. They all, to one extent or another, believe ‘the market’ is going to save us. No other solutions have even been allowed into the debate.

We shouldn’t waste our time arguing over which party is most to blame. All the parties and the economists and the City boys all agreed, and they still do. In their minds the banks had to be bailed out and their losses made ours. We were taken to war without discussion and on false pretences; the same has happened with this financial crisis. So enough of who is to blame: they all were and are.

They all believe in a system that says we must create demand and then feed it with debt. This necessarily involves increasing demand by the creation of yet more debt. It always crashes and always will. That is how their system works. If we allow it to be the solution, it will create another crash and another. Each time the rich will reap profits on the way up and rape the public purse on the way down. It's win, win for them and lose, lose for us. Plus ça change!