Tuesday, February 21, 2012

SNAFU! On the Day After It's Business As Usual in Brussels (update)

The recipe for crony capitalism: Just add stimulus, subsidies and socialism then simmer (crony capitalism is a bad term, since it has nothing to do with capitalism and everything with corporatism, the very definition of fascism according to Musso himself, and he should know). But that aside. @DanHannanMEP: "It is difficult to convey the determination of MEPs and Eurocrats to respond to the debt crisis with yet more expenditure; but the clip above might give you some idea. More...     Hat tip: @UKIP
Politicians are self congratulatory with the news this morning emanating from BRX about the second Greek bailout @ 130 billion euros. See pie below: 81% goes directly to the banks. See the vid above how they can't wait to 'stimulate' and 'invest' in tourism in Greece *OMG* and how the Greek MEP is oblivious to the fact the green industry has all but bankrupted Spain and is now scandalising the US, Solyndra's collapse said to be merely the tip of the iceberg
When reality is too hard to contemplate, humans are prone to all kinds of fantasy, particularly if they are of the pOmo persuasion. Having rejected truth as a matter of rationalization and laboring under the fallacy that thought creates reality *yes, they think the universe is just magick*, the psychology makes perfect sense.
POmo anti philosophy is Utopian in nature. This requires subordination to the system and all dolts pretending Utopia actually exists, as the communism and Plato's Cave have shown. Orwell's 1984 is another good example (free download). 
In economic terms make-believe is a real killer, since it is made of the stuff with which productivity is converted into value. In other words, it's robbing us of our wealth. It works thusly for example: increased VAT and lower payroll tax mimics devaluation, and printing new money mimics growth! But none of it is real. It just creates the impression. 
So you may ask yourself the question: why was Greece bailed out? When one eliminates all the hypocritical blabla and the smoke and mirrors, as Dan Denning (former editor of Strategic Investment with Lord William Rees-Mogg) has done in "The Real Reason Greece Matters", it's to kick the can down the road for a while longer. The sickening system perpetuates itself: tax and spend politicians of the Keynes school of economics piling debt upon debt with their so called stimulus money, national central banks selling it as 'assets' to banks that pay for it with fresh, crispy printed money they just received in the Long-Term Refinancing Operation (LTRO). Since it concerns virtual interbanking money this trick can be performed without causing obvious inflation. What's more, since last night banks have the guarantee no sovereign can escape the euro zone without being bailed out by the ugly twin, the EFSF and ESM. The system is perpetuating itself. The interpretation nicely dovetails with Philipp Bagus booklet: "The Tragedy of the Euro" (free download). As Denning explains:
(...) the technocrats in Europe are at war with private investors. The members of the ISDA (International Swaps Derivatives Association, i.e. the major banks, see update [CT]) are in league with the technocrats to preserve their system. That part is easy to understand.
The technocrats are employed by government and get to spend your money. This system is good for them. It's good for the members of the ISDA too. Loaning money to the government is good business. Collecting rent off the expansion of credit is easy money. They want the system to last as well.
Who is the system not good for? Everybody else who's on the outside looking in. Investors who want their capital to be productive are out of luck. And taxpayers who question the value of austerity measures and debt reduction plans that don't really reduce debt are also out of luck. No wonder they are angry.
But there's hope yet. Read in The Slog "When is a deal not a deal?"
Nobody has actually signed up to anything yet: as usual with all things EuroZen, the bankers are alleged to be on-board, but the IIF statement made after the press conference suggests otherwise: ‘We recommend all investors carefully consider the proposed offer, in that it is broadly consistent with the October agreement’. That’s not true for one thing: but as a recommendation, it’s somewhat limp. Further, there is still a body of hardline ezone sovereigns who don’t want to do the deal – and in Germany itself, a growing rearguard campaign to stop it. (See this morning’s Spiegel for immediate evidence). And finally, most Greek citizens themselves will react violently to some of the more pernicious clauses.
So we'll have to pin our opes on the private investors and the PSI talks (flowchart h/t Zerohedge). The EUR/USD rate has already fallen to pre-announcement levels. The markets gave the deal less than 12 hours of grace!. Buck up, freedom may not be #FUBAR yet!
Update: WHY GREECE OR ANY SOVEREIGN WILL NOT BE ALLOWED TO DEFAULT! The ISDA (International Swaps Derivatives Association), whose members are the major banks, get to decide whether a default is in fact a default, triggering a Credit Default Swap. A situation of "we from company X recommend product X. Or the negative in this case. The underwriters of Greece's CDS may well be Goldman Sachs. Read it all in "How Greece Could Take Down Wall Street" Update: There you go! Greek CDS and the New House Rules: Get Over It