Why austerity, QE,Troikanauts & Zirp are not economic tools.
One gets the feeling listening to voters and reading the old media at the moment that things like central banks, QE and Troikas are assumed to be there for the good of the citizens and their economic future. It’s time this nonsense was deconstructed once and for all.
I’m not sure why this has occurred to me as an opening gambit this morning, but I almost feel over the last week or so that the sheer weight of falsehood surrounding politics, economics, fiscal policy and investment in 2015 is such that we need an audit of exactly what the main ones are. And as the three above go together like, well, fish, chips and mushy peas, I thought I’d add some vinegar and a generous pillar of salt.
Let’s take central banks in general. They’re sort of like the TUC for banks. If harm comes to the banks – and it is always self-harm – they will collar the nearest finance minister (and probably the Prime Minister or President) and tell them that the financial system will collapse in chaos unless they act now. Hank Paulson did it to Bush, Weidemann does it to Schauble, Mervyn King did it to Brown and Darling, and the Bank of Japan doesn’t need to do it to Abe because he’s obviously mad already.
Usually the two tactics applied under the heading ‘action’ are QE and bailout. The latter has been changed recently to bail-in, which merely means that the finance ministers have become uppity about their national debt ballooning, and so the next step if the Government has no spondoolicks is us (again) – but this time more directly: we’re no longer customers, we’re now creditors. A directive has been passed in the eurozone: bailouts are out, bailins are in. Berlin signed up to this – with the usual mutterings about obyink ze rules at all timess – and then two months later bailed out a Bavarian bank. It’s a cultural thing.
It goes without saying, of course, that if and when the bank failures come thick and fast and fear stalks Wall Street, bailing in or bailing out will be roughly as useful as collecting anal wind in a colander – and the Government will run out of money in very short order once investor fears shove up the borrowing rates.
This is where QE comes in. Depending on whose definition of QE you follow, this policy has been tried a total of thirteen times in the major trading nations outside the EU. It has failed to stimulate sustained economic growth on every single occasion, which is of course why the ECB’s Chairman Mario Draghi has now opted to use it in the eurozone – except Greece of course, because he doesn’t like them.
Now you may have spotted that ‘economic growth’ in the above paragraph has not featured at all in this amble through the facts since the introduction at the start. This is because it has nothing to do with bailing, QEing or Troikaing: growth is not the objective of any of this. The first objective of QE is to buy all the banks’ daft, badly targeted loans off them, and pay them enough in return to increase their liquidity. The second one is to, in so doing, provide business with fabulously cheap loans they can then invest or lend at a higher margin, and thus make their bottom line Bodoni Bold black rather than Futura Light red. This sends the bourse share prices up, and thus maintains confidence in the system: a sort of appropriate outcome, given that it is one huge confidence trick.
Pretty much every Bourse in the world is now at least 55% overvalued because of QE: it is based on playing money games, not economic fundamentals. The one exception is Russia, because there it reflects the fact that their oil business is being destroyed by US and Saudi money games. And that just goes to prove once again what a thoroughly unprincipled dictator Vladimir Putin is.
Keeping the central and investment banks/firms train on the rails is what the Troikanauts are about too. In order to maintain the mirage of economic good being done, however, unscrupulous and at times just plain thick politicians have been hired in order to explain to the Sleeple that only by scorching the earth can it be made fertile enough for rapid growth afterwards. But really, their job is to ensure that American banking firms get paid (and make a profit) on bonds they foolishly bought related to monies they foolishly lent (the IMF) taxes are increased and tax evasion at the lower levels are reduced in order to find yet money to repay an unrepayable debt schedule (the ECB) and prices are increased on essentials to ensure the permanent dependency of the citizen upon the EU (aka German Fiskalunion) and by so doing make Brussels and Nordeurope the permanent Fat Controllers of eurozone fiscality (the EC, now being hijacked gradually by Berlin and its hairdresser friends in the Netherlands).
When after two years, it became obvious even to the village donkey that the strategy wasn’t working (in fact, 50% of the population under 30 wasn’t working) pure and incorruptible politicians like Mariano Rajoy and Evangelos Venizelos were hired to lie about the numbers and say good times were just around the corner. When that didn’t work in Italy, the banker Mario Monti was drafted in.
But this is where those who say “repeating QE endlessly and hoping austerity can produce growth are sure signs that these people are 100% deficient in marbles” have got it all wrong. None of it is working in terms of economic growth, because that’s not the idea.
The idea is save the backsides of Bourse-quoted multinationals and the deep-liquidity bonus pool of investment bankers suffering from tertiary frontal lobe syndrome.
That’s why the British economy is almost obscenely unbalanced in favour of shuffling financial instruments around, and needs to squeeze every last penny out of health and welfare provision in order to keep things seeming normal. Because the City owns Boris Johnson, Michael Fallon and George Osborne, Newscorp owns Jeremy Hunt, the security services own Theresa May, and rich donors in all the sizes and all the colours own David Cameron and Grant Shapps.
This is all being done for the 3% at the top, and no political process in the Anglo-Saxon world has a genuine Opposition that shows the remotest interest in changing it. Most legislators in the US have been bought by arms dealers, oilcos, media moguls, the Pentagon, Wall Street and the ISPs-to-NSA axis. The British Labour Party isn’t quite that crooked, but it is hopelessly naïve about what’s going on.
What’s going on is a concerted attempt to replace genuinely representative democracy with various forms of corporacratic dictatorship.
This is what makes the struggle of Podemos, Syriza, Viktor Orban, Occupy and all those who oppose business-to-banking colonialism: we may not agree with many of their policies or methods, but the abject failure of mainstream processes to produce a Resistance means they are the best weapons – the only weapons – we have.
Enjoy the day.