Bernanke’s QE3…naked desperation to save a dead system

Trying to raise the Dead with money: when will it end?

When Ben Bernanke finally stopped chucking QE2 monies at the markets earlier this year, there was a widespread opinion in the US business community that the operation had been a qualified success: it created the false bull markets of the last twelve months, pumping the Dow up to near pre-crisis levels, and helping the FTSE leap above 6000. This, it was felt, had inspired confidence in a likely economic turnaround – and stopped things getting far worse than they did.

It didn’t help the American deficit ceiling, of course, which breached $13 trillion and helped cause the worst Washington fiscal crisis in peacetime history. And now – only a short time after it stopped – in just two weeks the Dow has lost almost exactly 50% of the gain. Ben the Banker is now dropping broad hints about QE3.

One question that occurs to me this morning is, should he be allowed to do that? The first two attempts didn’t create jobs, and largely rewarded banking stupidity alongside multinational shareholder greed. QE is a short-term palliative in the current situation: both the US and the UK have structural socio-economic problems and unstable banks – and QE isn’t going to solve either of those.

Tacticians continue to argue (and it is becoming very tiresome listening to it) that with little in the way of ‘real’ inflation in the background, additional Zirp and QE are still the best way forward. But they’re not moving things forward at all – merely putting back the day of settlement. Last week Mervyn King’s MPC colleagues were all of a dove-like flutter, voting unanimously to keep rates low, with King himself hinting at another crack at QE over here. What’s he going to use for money, I wonder?

What both these great Anglo-Saxon nations are doing is printing money to dilute their debts. It’s just more can-kicking. Greenbaum in 2004, the EU after 2005, Brown after 2003: these three great acts of vapid denial all have one key thing in common – dishonesty. I’m not talking here about cheating the Chinese (whose sabre-rattling a week ago did them no credit at all) but rather, the citizens – the hundreds of millions of citizens – who inhabit Europe and America, and whose futures are being hocked to stale ideas, pointless gestures, daft theories, and mad bankers.

The EU, US and UK have been living beyond their means for the best part of thirty-five years. While Obama is that curious thing – a waste of space with no substance – it is beyond laughable for the GOP’s elephant in the room to lumber him with the blame for this mess. Getting universal healthcare on the Statute Book was an act of economically illiterate ego (yet more legacy-searching) but long before that, Reagan and both Bushes jollied America along on the idea that ‘trickle-down economics’ would make everyone super-wealthy in the end: the debt is their doing, not Obama’s.

Had the wealth of the few in the US and UK been invested in economic reconstruction instead, bankers would be poorer, but the public finances would be in far better shape….and more people would have jobs. Instead what we have is a yawning gap between the MoU’s and the middle, and an even bigger one between the lower middle and the looter…..and debts levels under which – should interest rates ever normalise, which they must in the end – everyone from Anaheim to Vladivostok will be insolvent.

The EU is a very different case, but the equal of the Anglo-Saxons in its insane wastage of public monies. A continent dominated by social democrats in the West and south, following the launch of the euro (without any fiscal disciplines or penalties applied whatsoever) investment changed from positive infrastructural improvement via Brussels to cheap money handed out from a cavalcade of deregulated sources. Unfortunately, the economies this cash was supposed to stimulate didn’t deregulate at all; what happened was that far too much of the ‘investment’ went on increasing social benefits and offering cheap consumer credit. To the social democratic mentality, the creation of wealth via commerce comes a very poor last. In the case of the eurozone, it was withdrawn from the race just before Starter’s Orders.

Trickling wealth and the ever-benificent State are not, and never have been, good starting points for a healthy culture – primarily because they are both tonto theories that ignore commercial dictates and social anthropology. Their empirical bankruptcy has been turned into first moral and then financial bankruptcy by an even sillier trio of ideas: that the citizen serves the system; that those working the levers should ignore the Law; and that the population of the planet is bound together so closely, globalism is the only possible economic solution.

The last few paragraphs represent a slightly long-winded way of saying that the system is dead. Bernanke and others have tried to nail its feet to the perch, but it is no more. It is an ex-system, no longer extant and – beautiful plumage or not – it has expired.

I quite like the word ‘expired’, because in commercial terms it is redolent of something being past its sell-by date. And yet, still our ‘leaders’ insist on trying to sell it as the only alternative. Every utterance from the EU, the World Bank, Westminster and the White House is designed to evoke fear of change, and steer people away from the Thought Crime of embracing a very different future. As always, this reflects two things: the lack of respect politicians have for the ordinary citizen’s stoicism, and the barren minds of those in charge. The Berlin farce last Tuesday, and the Christine Lagarde FT piece of the same day, offer all the evidence of this latter reality we will ever need: pompous banalities wrapped in visions of Paradise, and surrounded by diaphanous veils designed to hide a nasty power-play agenda.

These people are the product of the perverted and misguided ethical values that create almost every idiocy within our cultures: Health obsession, Safety rules, political correctness, doing whatever it takes, looting shops, dealing drugs, oleaginous police officers, rotten work/home life balance, multiculturalism, cheating, delusion, denial, superficial knee-jerk education, and the never ending attack on fathers, mothers, families and communities.

The values they reflect are selfishness, inflated expectations, blinkered inflexibility, extremism, egoism, materialism, wish-fulfilment, mananaism, nannyism, and above all, credit: ‘I’ll borrow some credit, I’ll take all the credit, I deserve the credit’.

So the question remains: should Bernanke, Trichet, Merkel and all the other clowns be allowed to put off the dawn of reality? And I’m afraid the disturbing answer is that, within the existing system, we can’t stop them.

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This news isn’t exactly oven-fresh – although very few citizens labouring under the current depravity think about it much, if at all. But media distraction and soft drugs can only induce torpor for so long: when the welfare stops, the jobs dry up, and negative attitudes about the political/governmental class turn into angry behaviour, like pretty much everything else that happens, the elite will be taken by surprise. If this isn’t going to turn very nasty indeed by this time next year, somebody or something needs to fill the vacuum.

That won’t happen in the US just because a cockeyed bunch of mad Hatters want the clocks to run backwards. It won’t come from the Republican Party either, because both Huntsman and Ron Paul are struggling – lacking as they are the breezy soundbites and cosmetic dentistry required for Office these days. And the Party machines in the UK remain as vacuously controlling as ever. As for the EU, beyond national borders it avoids elections – indeed any response from its citizens – like a bout of bubonic plague.

The Western world is crying out for a new politics offering radically different socio-economic ideas, more responsibility for the individual, and more power for the community. At some point this will start to emerge, but my fear remains that such movements will come to fruition too late. People with no hope and little education, reared on a diet of disrespect, material desire and media violence, won’t take long to decide that every last vestige of their environment needs to be smashed: scorched-earth violence will naturally be met with Mail/Sun disapproval and Guardian sermonising, attitudes will harden further….and the chasm between these arcane camps of Left and Right will grow wider still.

But somewhere between the Sun and the Guardian lie the remaining people capable of thinking for themselves. To these people, banging up looters, buying up Italian bonds, QE3, passing laws to improve the culture, bailing out Greece, levying a financial tax, playing politics with deficits, and sovereign debt restructuring all represent the same thing: an old culture surrounded by the Future, and determined to fight until relief arrives to rescue it.

There is no relief for the Mafeking mentality. You can’t rescue the past, any more than you can revisit it. If all our leaders can think of is to do that, the Future will sweep them away.  As and when that happens, it’ll be up to open minds on the Web to ensure that a Party of decency is around to pick up the pieces. I still see no sign of that happening. So we must all prepare to create that…or prepare ourselves for anarchic poverty.