Right, where are we at? The eurozone disaster drags on,
America is rising up and UK economic indicators are going down; that's where we're at. I say the eurozone disaster drags on but we have had some recent developments. There's Greek ex-PM George Papandreou, who had managed to implement several rounds of austerity measures on Greece and still hold his seat, despite growing unrest all over his grinding-to-a-halt country. After daring to consider offering the Greek people a referendum on the next round of austerity measures demanded by the European Central Bank, he was swiftly booted out of office to be replaced with an unelected technocrat, Lucas Papademos, a former ECB Vice President who will happily act on their behalf without regard for the people of Greece. And so much for democracy.
A similar development occurred in Italy only a few days later, with unloveable old rogue Berlusconi finally giving up his seat of power in Rome. Of course, Silvio wasn't sent on his way for being a lover of democracy, far from it, but he was too nationalistic, uncontrollable and didn't play well with others (unless they were hot women who put out, of course - another trait which made him a liability). But the parallel between Silvio and G Pap is that he too was replaced by an ECB endorsed unelected technocrat, Mario Monti, who will do the banks' bargaining at the expense of Italian democracy.
See a trend here? European countries might fly their own flag but the central banksters are calling the shots. Watch how this trend unfolds as other European countries such as Spain and France feel the heat and likely follow suit. I think some form of breakdown of the European Union in the very near future is pretty much a certainty. The central planners know it and they are taking hands-on control in an effort to prevent the individual countries of the EU from pulling in different directions. Long term, maybe even short term, I think there will be an attempt to turn Europe into one autonomous bloc that will make the euro currency project look like the work of amateurs (which it is).
In other words, all signs now seem to pointing to European countries being effectively owned by central planning agencies and banking entities which exist beyond national boundaries and are not accountable to the countries' people. These unelected bodies have no interest in doing what is best for the individual nations and will pursue their own agenda instead, completely removing everyday people from having any influence in the direction of their home countries and leaving them with no means of changing their installed leaders. I mean, how do you de-elect the unelected?
So, that's where Europe is headed but what about the UK? Well,
unemployment is in the news again, with
youth unemployment over a million (the first time since the 80s) and looking set to rise. The story is really the same as the one we opened this blog with a couple of weeks ago except the numbers are a bit bigger; the media have just latched onto it now because the 1 million figure makes for easy headlines and soundbites. Osborne and other government mouthpieces were out in force with the usual vague talk of plans to get things growing again, but all signs point to the contrary and they know that; it's just politically disasterous for them to admit it.
Or so they think; I, for one, would appreciate a little honesty from politicians. I'm not stupid, I know what's going down and every time the guy in the grey suit lies to me I lose respect for him. I'm sure I'm not the only one, so a little honesty might actually do politicians more good than harm (and it might save me from having to spend time putting together articles like this in order to try to communicate a more realistic appraisal of the situation we are in).
For instance, The goverment tried to shrug off
the unemployment statistics released by the ONS on 16th November and create positive spin with their aforementioned vague plans to create jobs for young people and help grow the economy (details TBC, of course). They completely failed to acknowledge the European crisis, the limbo effect it is having on panicky markets, and the forthcoming shrinkage, if not outright collapse, of the global economic system. Yet, in reaction to data released from the same source on the same day, which highlighted poor economic performance in the UK, the European crisis was trawled out as the very excuse for our lack of growth. So which is it; can the euro crisis be ignored and our nation's youth should look forward to an impending growth market, or should we be worrying about economic contraction and maybe even collpase due to Europe? Well, it seems obvious to me it's the latter.
On 17th November, one day after the above data releases and futile government responses, it was announced that Northern Rock, a bank bought out by the government for £1.4bn in 2008 to avoid its collapse (there's that word again),
is being sold to Richard Branson for £747 million. That's almost a 50% loss. Seems like a bum deal to me, yet the Treasury said that it is "the best deal for the taxpayer". Now, if that's the case, it implies that the value of the bank is going to go down. I say this because, if Northern Rock was going to become a profitable business again and rise in value, it would be a better deal for us to hang on to the bank that each and every taxpayer owns (owned) a tiny stake in and sell it for a profit later. So, I can only assume Osborne's decision to sell the bank now, at a loss, is because he knows the financial industry is about to go belly up and the value of banks is going to go down. Why? because there's going to be an 'economic collapse' (EC) of course.
Just a quick note here, to roughly describe what an EC is, or at least what form it will likely take this time round. Basically, there is more money floating around in the global financial system than at any other time in history. Most of this money has been created by banks issuing debt, credit card spending and the financial derivatives industry. These things all increase the amount of money in circulation, an idea described by economists as 'expanding the money supply'. It's very easy to do when the money system is backed by debt rather than something tangible like gold, as per the old days. You can't just make more gold appear, but it's easy to create more money when, as a bank, all you have to do to bring it into existence is open a loan account for a customer.
Much of the growth that has happened in the last 20 years has been fuelled by this unbacked debt. We've now reached a point where there is so much debt in existence that there isn't enough money to pay it all back. Also, with many banks already having recieved bailouts and governments reluctant to give them more, it's too risky for them to create more unbacked debt-based money. So now, after years of credit (debt)-based expansion, we have hit a wall; there is no more money to lend, so there can be no more growth. With no growth on the horizon, any organisation with money at stake is try to unwind and de-leverage their debts. The only other alternative is for governments to print more money in order to cover their debts. Any country which goes down this route will devalue their currency, creating inflation which will ultimately only make things harder for everyone.
So someone is going to lose out big time; either due to lack of funds, or worthless currency. It starts behind the closed doors of large financial institutions, they push the problem onto governments who push it onto the people. If the problem is small enough, the people absorb the losses and everything carries on as before (with a few protests along the way). But, with this oncoming collapse, the man on the street doesn't have enough money to solve it, so it goes back into the heart of where it came from and tears apart the financial institutions, which causes businesses to stop functioning and causes society to break down and turn on their governments. The process continues until enough scalps have been had and whoever is left standing wins. It is not a pleasant process.
Hence the panic and scramble you hear about on the news; it's governments and banks passing the hot potato. Nobody wants to be the one to drop it and be out of the game, so they keep hiding debts, making cuts and trying to pass the problem on to the next one in the circle, and the merry-go-round continues. But it will end, and fairly soon if I'm reading the current signals right. People who watch the markets can feel it building; long accumulated tension is about to be released in the financial markets and it will wreak havoc. And once you get havoc in the markets, you get panic in government and it soon trickles down to the street.
Don't underestimate this; it is a done deal, it's just a case of
how and
when it unravels, not
if. By my reckoning, what we're seeing in Europe is just the start of things to come. I expect more instability in governments and markets and I expect more unelected technocrats to be installed in any countries that are unable to resist the pressure. How badly it affects the UK is hard to estimate but time will no doubt tell. At least we have our own currency and a government accountable to the election process (for now), we just don't have a plan for going forward. I don't think well fair as bad as Europe, thankfully, but it seems happy days are not really ahead for us either.
I saw an interesting spot on the news the night the Northern Rock deal was announced. Krishnan Guru-Murthy of Channel 4 News was interviewing some goverment mouthpiece (whose name I didn't catch) about the Northern Rock deal. The mouthpiece was asked why Osborne described it as "the best deal for the taxpayer". He replied with the stock response that "the Branson deal was better than all other offers on the table". The interviewer asked him why it had been sold now instead of waiting for it to gain back its original value and avoid the loss, to which the mouthpiece response was "our advisers told us this was the best best price we could expect", implying they aren't forecasting higher prices ahead, which suggests a rather gloomy outlook for the economic future. Guru-Murthy pressed him on this; the mouthpiece shifted uneasily in his chair and, after a fleeting knowing look in his eye, struggled to put a sentence together before repeating the previous scripted answer like an automaton instead of enaging the interviewer's question. It was pathetic to see; his body language said it all and it said "bad times are ahead and we know it, so we're cutting our losses but we can't come out and say it".
The only other explanation for such a sale is that the government had to sell it at a loss now because it desperately needs to raise short term cash, even if it means taking a loss in real terms, which isn't a good sign either. No matter how you look at it, the sale of Northern Rock this week can not be a good thing.
(In fact, the only smile it has managed to raise is from a joke that when NR is rebranded as Virgin Money, it should market itself with the tagline "The bank that won't fuck you" - kudos to whoever thought that one up).
If it really is going to be a profitable venture (and who am I to doubt Branson's business acumen), then why not hang on to it and pay dividends from the profits to the taxpayers who funded the bailout, y'know, as a goodwill gesture? No, thought not. Also, when I say the government sold Northern Rock, it only sold the high street banking aspect of it, it still owns the part called Northern Rock Assets Management
(NRAM). which has a whopping £20bn debt on its books. How are you going to get out of that one, George?
But the takeaway from this for me is that I see signals of a coming trend: unelected technocrats coming in to steer the European ship, our government selling off taxpayer owned banks at a multimillion pound loss in an age of austerity while they try to tell us things are getting better. It all smacks of a massive damage limitation exercise, which implies that the powers that be know they can't stop the oncoming shitstorm, they can merely try to prepare for it and seem to be doing so by taking a hands-on centrally managed approach in an effort to save themselves whilst ignoring that little thing called democracy and all the people such as you and I who it supposedly accounts for. I guess you could call it the rise of fascism. Which means we've got to look after and provide for ourselves and our nearest and dearest. If the top dogs are preparing for some kind of collapse scenario, I suggest you do the same.
