Sterling….fading influence?

It’s beginning to look like unelected money will make more and more demands

I think that, at least for the time being, we should now move on from the Merkozy hissy-fit, and get back to what matters on the global scene: the onward march of dysfunctional money. It is, after all, what history will almost certainly remember this era for; and over the last few days, all that happened was the stage moved from somewhere else to Brussels. What went on, however, remained exactly the same.

As far as I can see thus far, not a single major medium has referred back to the ‘no more haircuts ever’ clause in the new eurozone pact which must not be called a treaty otherwise it shall be deemed illegal. I’m reliably informed by a major press source, however, that it’s in there – in ink. This alone makes the bondholder/markets/banking axis the real winner last Thursday night…by a Brussels kilometre. Felix Salmon at Reuters (to where We Shall Not Link because they won’t publish my links) described the clause earlier this week as ‘the most insane financial idea ever devised’. I suspect tulips costing 4 million gilders will always be hard to knock off the No 1 insanity spot, but the idea is indeed a multiple taxpayer-led bailout waiting to happen.

It was of course effected (and predicted here) as an unsubtle bribe to get the markets off Merkozy’s back. Based on the truly infantile idea that the banks will keep their word, it is in effect a death-sentence for the eurozone peripherals. But David Cameron too went to Brussels with but one thing on his mind: doing the bidding of the financial lobby. Although in a really quite clever bit of spin, every Coalitionista on the airwaves yesterday spoke of “protecting the single market”, the UK issued a veto in defence of what the City does, pure and simple. Had he gained immunity for the UK on that point, be in no doubt that Dave would’ve happily let a law through forcing the Queen to wear a pink French-made wind turbine in place of her crown.

In short, situation normal: the role of Western government these days is to ensure that bankers take no responsibility for anything ever again…and if there’s any argument about it, they take over the Government just to be on the safe side. Greece, for example, wanted a debt forgiveness package and a vote about not getting one. Exit democratic government, enter banker with reassuringly Hellenic name. (And yes, the promised 35-60% haircuts remain in an ongoing not there as such just yet mode.)

The transfer of wealth from the Sovereign bodies to the financial system is something I first blogged about in late 2008. More recently, I have posted here about the reality of Europe’s debt collateral being liberal democracy. That liberal democracy now has the bailiffs in – and they all used to work at Goldman Sachs. The problem for those of us who can see more of this coming  is that very few other people do.

The reasons for this mass somnambulism are pretty obvious: it’s a boring subject, the terminology is baffling, other jargon is deliberately inserted to confuse, celeb, talent show and soap tabloidism has taken up most of the spare time people have, education has discouraged the desire to learn, the Parties of the Left have become distracted by pointless strikes, loopy feminism, leadership jostling or prostitutes. The failure of politicians to wean themselves off debt – and then achieve a consensus about WTF else to do – has given unelected, corrupt monet its biggest assist of all; but the voter boredom factor is crucial: if you want to create some space around yourself at some crowded drinks do this Christmas, start talking about why deep liquidity pools are a licence to commit the perfect crime 200 times a day.

This process will become infinitely more real to us here in the UK next year, once the money-men and their media allies have decided that sufficient attention has been pointed at Europe – during which time the US can prepare for its own Tsunami of toxic debt while re-electing the Patsy in the White House. This isn’t a planned conspiracy by the way: it’s just that arseholes tend to wind up on the same side. Working for JP Morgan, Newscorp or a tobacco company demands exactly the same requirement to switch off the ethics digibox every morning. It also demands that you have everything from a Presidential candidate to a UK Cabinet in your debt.

I write of a nasty reality check here in Britain, because the eurozone pavanne genuinely has distracted too many people at every level in the UK for far too long. George Osborne in particular has benefited enormously from this, but even Mr Cameron must now realise that what he began to lose on Thursday was somebody else to blame for our difficulties. We – nobody else, only us – chose to steer clear of euro madness, and now ten years on, payback time from Brussels has arrived. At last it is time for the EU (and trade in general) to stop being a non-subject – “an imponderable” – in the fiefdom of Camerlot: time to get pondering chaps…because in terms of exports, now we really do need a Plan B.

Except that there is no Plan B and there never was. We have a dominating financial sector about to go backwards and – vetoes or not – come under attack from the French and Germans. The manufacturing sector is no more than ticking over, and every month shows to anyone with an open mind, of whatever political persuasion, that our output has reached the stage where it is losing the battle with our debts. Other factors are exacerbating this, but it’s too late now to rewind to 2010, or 2004, or 1985, or 1966, or all the other times when the political class had a chance to sort things out, opting instead for the comfort zone of re-election.

The markets’ attention will soon turn to us. As with the EU, it remains my sense now that a banking failure will be the catalyst for panic. Top of my list would be RBS, but there are so many cans of worms inside LloydsHbos, no political footballer on Earth could kick them all down the road. We lack the gold for bailouts, and the taxable population to replace that gold. What we do have is the City, and its now somewhat dangerously important position as a world banking centre. For this puts a great deal at stake as far as the markets are concerned: given the relatively small size of our economy, the global influence of UK financial services (and their ephemeral nature in a changing world) is absolutely enormous.

We will come under the microscope of every financial news station, every modeller, and every Hedge Fund or lone billionaire. Even worse, our defences against illegal financial crimes are pathetic….roughly the equivalent of the Polish cavalry in 1939. But the situation will also present opportunities for others in the murky demi-monde that surrounds UK government in 2011.

I very much doubt we are going to see the IMF appointing Jim O’Neill of Goldman as Prime Minister. But the potential for disastrous slump to create chaos must be advantageous for, say, Rupert’s Revenge. Never imagine that he and others don’t think at that level. Think Tesco, the brothers on Sark, Lord Ashton, and the same folks who dislodged Dominique Strauss-Kahn. We have a Treasury desperately short of money, and a Government drowning in debt. Money has driven everything else in politics over the last decade or more. We are about to see where all that moral hazard might now lead.