Some five months ago I started the dedicated Slogpage Global Looting after bouncing the idea off a long-suffering Greek acquaintance. I think it was a good choice of title, being simple, descriptive, and accurate. Last night, I became absolutely certain that it is also imminent.
As Acting Man rightly points out (along with many others) if Greek Bailout2 showed the bonds market you couldn’t trust the ECB any more, then Cyprus blew away any credibility Sovereign Bonds had as a store of value for investors. We are going to find the same here in the UK once the Great CoOp Rape gets under way. Ditto the Italians over Monte del Paeschi. And the Spaniards with money in Cajas.
Even worse, in their cynical but club-footed rebranding of investors as bondholders, the central banks have effectively declared that nowhere is a safe storage entity – let alone a store of value.
This would be a seriously destabilising problem in the best of worlds, so it’s worrying that we have been in the worst of worlds since 2004, when Greenspan allowed the slavering Bulls to continue on their gore-happy path. Looking back now, one can see that – in this, the Final Olé – the Picadors poking the Bull into the corner are about to give the coup de grace honour to the audience. This may seem surreal, but when Salvador Draghi is the set designer, it’s entirely predictable.
The facts are these – indeed, they have been for nearly four years. Western debt is a vicious circle in which the needs of the markets, the creditors, the politicians and the economies simply cannot be squared off. (I don’t include The People in those considerations: the MoU 3% don’t GAF about them).
If you starve the consumer and give to the shareholder, the markets stay high but so does the currency…and the economy remains in neutral. If you deliberately devalue the currency, you have to pay more for your debt. If you don’t invest in products for the future, your share of trade falls. Expensive debt plus falling trade = Raise Higher the Debt Ceiling, Carpenter. If you keep doing that (and don’t fix the underlying problem) the economy flatlines, traders lose faith in your currency, and China starts to cut you out of financial arrangements. They also one day start charging you more to borrow, because the certainty has gone.
The above summarises America’s position vis a vis Asia et al right now. The eurozone/EU position is very different in narrative, but precisely the same in terms of consequences. If you starve the consumer and stick a yardbrush up the bondholder backside, the economy slips out of neutral and into reverse. You have to pay more for your debt borrowings, but as you also have political obsession with supporting a silly currency, you lose even more share of world trade. If you decide to rape canny investors on a small Mediterranean island, the masses don’t notice but Big Capital does. Big Capital deserts the eurobanking system, and investment grinds to a halt.
The outcome on either side of the Pond is very straightforward. You used to borrow from bankers, but they’re all broke. You used to raise income taxes, but that loses votes and reverses the economy further. You used to borrow from bondholders, but they no longer trust you.You used to have an inexhaustible supply of Asian bondholders, but they think your dead in the water anyway. They doubt whether you can repay the debt…and you know damn well you can’t because you passed Third Grade mathematics….and you have access to the real data.
As regulars will know, I believe the only route left for Central bankers after 2012 was to redefine gold’s future bank-asset value upwards while manipulating its market value downwards. This they are about halfway through doing, and the second half is I suspect about to start. It’s a neat trick – not to say an outrageous fraud – but as always, it shuts out the investor yet again. Sooner or later, if you manipulate everything in your favour – with Zirp, QE, gold cheating, Libor, subordination and all the rest of it – nobody’s going to give you any more money: and just as relevant, nobody can make money for their clients.
So the only route left for Sovereigns and CBs is to steal it – that is, apply a 10% or whatever levy on Citizen Capital and current/savings bank accounts.
The only question I am left pondering this sunny morning is, “Will they do this before or after the stock market finally collapses down to its real value?” After giving this a nano-second of thought, the blindingly obvious answer is, “This is a major reason why they’re in such a hurry, you dolt – it’s increasingly obvious that without stimulation, all the major Western bourses would collapse the following day. So if they wait for that, there’ll be a lot less money to steal”.
Ducks are being placed in a row. The row has some gaps in it for the time being and it’s not an entirely straight row as yet, but it’s going to be before too long. While Bernanke has the holding option of more QE, Mario Draghi doesn’t. His acolytes very carefully released glowing figures on north European capital liquidity a fortnight ago, but in ClubMed and France, I understand they are dreadful. I don’t recall seeing those numbers.
In what may seem a haphazard process, I think a vaguely coordinated, central-banker/lender driven process is now under way. It’s a process I dub Killing the Lobster by testing the water.
The IMF has flagged up the levy idea. Chase Manhattan has given notice that as from November 17th, no customer will be allowed to transfer personal money abroad. My French bank Credit Agricole just hit me with a €200 a day withdrawal limit; it used to be 500. The Cooperative fraud is under way with a deathly silence about it throughout Westminster.
Before all that, we had subordination of Greek bondholders and the total destruction of the Cypriot economy beyond potato farming. Clearly (given the degree of desperation) the first major test-market will be the eurozone.
The trick here (as I have learned – and so have they) is to keep to a strict minority of people being affected at any given time. So it’ll be the eurozone for starters – not Britain, and not America or Australia. There will always be at least 80% of the world’s population who can see this as happening to somebody else. As most of us are driven by selfish and distracted denial, like the European Jews after 1935 we can keep on thinking “It’ll never be my turn”. And there will always, naturally, be political and media collaborators ready and willing to write claptrap about “blogosphere conspiracy theory fantasy”.
Will the West’s financial and fiscal mobsters be able to pull this off? On balance, my view is yes, in the short term they will. If they play their cards right in ClubMed, for example, those people currently destitute anyway won’t care a fig about any 10% capital levy, as 10% of nothing is nothing. Believe me, I have personal Greek and Italian experience of this attitude. Equally, as the IMF document suggests, a fair number of better-off people would rather give away 10% of their wealth to wipe the slate clean….rather than continue in a perpetual state of fear about being wiped out completely.
But the medium term problem is that to really deal the debt a mortal blow, Draghi & Co need to do more than slowly raise the Lobster’s water temperature until he dies unconsciously. Overconfidence will set in (as it always does with the boys and girls of Brussels, Berlin, Wall Street and Frankfurt) and then the riot police will be working lots of overtime.
I think there are two key factors here: the fact that the USA has an armed populace; and the stupidity of Berlin in driving the recruitment policies of Europe’s Far Right.
I’ll be analysing them in the very near future. In the meantime, enjoy the weekend and remember what I’m doing: converting as much cash as possible into assets.
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