In These New Times

The Big Con and the Big Lie
Posted in fury by Frank FrankFisher.org
October 8, 2008
Tags: bbc, bilderberg, creditcrunch, lies, media, motherfuckingbbc, robertpeston, scam, shills, theft
For a few weeks now I’ve been blissfully unconcerned by the Credit Crunch, and subsequent fall-out. I have no investments or pension, I’m not looking to buy or sell a house so the direct consequences don’t affect me. But further, I figured the market would find its balance, and this would all be small beer a few years hence – another Dot Com Crash, gone and soon forgotten. What has worried me is the usual media idiocy and uniformity of presented opinion (generally masquerading as fact), the quite pitiable reaction of the major political parties, and the general rush to ill-judged state interventions worldwide.

Throwing hundreds of billion of pounds and dollars away is not the policy of fiscal geniuses – instead, this is the classic action of a mark, trapped in a big con, desperately chucking good money after bad. And like the deluded suckers detailed in David Maurer’s entrancing work, these fellers are not fussed whose money they’re burning through. In this instance, Gordon, Alistair, it’s ours. This may be the biggest scam of all time, it may be a pan-national coup, it could be the beginning of Biblical end-times or a prelude to nuclear Armageddon – I’ve read it all in the past few weeks. But what it also undoubtedly is, is entirely ineffective. Seven hundred billion dollars might seem quite a lot of money. Forty or eighty billion quid would appear to be a fortune, but these sums are trivial when set against the mammoth debts racked up in the international credit default swap markets – once a way of insuring yourself against the failure of a creditor to pay you back, CDS used speculatively became what Warren Buffet described as “financial weapons of mass destruction”. The crashed banks have left, on some estimates, fifty trillion dollars of amplified debt careening around the world. The billions that central banks are throwing at the markets, striving to inject liquidity, fade against this vast debt.

So why the bailouts? What’s the point? Well to a banker there’s always a point in tapping the taxpayer for big fat subsidy, but why would governments get involved? Well, we have to be charitable and assume that someone in government has a three figure IQ, although it’s getting harder to stretch credulity in that direction. But I figure the answer is supplied by the other interventionist policy we’re seeing all over – governments claiming to guarantee savers’ accounts. Why do I say “claiming”? Because this is not a credible, practical policy – it’s the counterpoint to the Big Con in fact, the Big Lie. The Irish government says they’ll guarantee all funds, the Icelandic government says the same, the Germans are in on the act, the UK may follow suit – liars, liars, pants on fire. When your banks have liabilities that dwarf your GDP, a state cannot guarantee to pay out all funds, from all banks. The coffers are bare as it is, and the universe isn’t big enough to contain a sofa large enough to hold that much loose change. Anyone claiming that they can back each and every bank, each and every saving account, is a liar. And this, above all else, is what worries me. The Big Lie, repeated in every corner of the world – a hopeless, transparently ludicrous lie, but accepted as a valid, sensible policy by all quarters. I expect governments to lie, I expect big business to collude, but what the hell is up with all you zombies? Folks, wake up.

Now sure, the markets need confidence, this lie is designed to instil confidence in traders and punters alike – the goal is a revitalised consumer boom, it’s the only thing that can possibly drag the markets over this hump – but a moment’s consideration would reveal these guarantees to be worthless. How can a state provide cash handouts to bank customers that exceed its GDP, perhaps by a factor or four or five? Where would the money come from? What would be left of a nation that asset-stripped in this way? More to the point, in what way does entering a failed state compensate for getting 50K in your back pocket? Doesn’t sound a good deal, does it?

These promises are pie in the sky – what people are looking for is security and certainty, perhaps a foolish pursuit under any circumstances, but they’re not getting it from any government today. Interestingly, they can barely get it from the usual refuge in an economic crisis – gold. Prices are high, not as high as they might be though, and silver is particularly low. Insiders reckon governments and central banks are pushing prices down, making precious metals appear an unattractive alternative to stocks, bonds or cash, but the funny thing is that the spot prices on the markets, the price for “paper” gold or silver, as opposed to a hunk of the real thing, are low, yet if you want to buy, today, sovereigns, krugerands, american eagles, you’re going to find a problem. All over the world, “unexpected shortages” are coming to light – the US Mint has withdrawn all 24 carat gold coins from sale. Bullion dealers in the UK are selling out, and can’t get fresh supplies. Try a coin dealer for the odd sovereign, sure you might find some but not at the “official” price, or anywhere near. Naturally a commodity in demand will run short, but in that case, why is the market price for notional gold trending flat or down, or exchange traded funds in gold or silver trending well down? To date, at least.

Things are changing fast, and perhaps that’s one reason why journalists are unwilling to stick their necks out and pose awkward questions – a dazzling thesis on a Monday night can be cretinously dumb by Tuesday morning. One other possibility, and one I’ve suggested here many times, is that the media are part of the circus. The political world, the financial world – these are naturally in cahoots – we depend on the press to throw spanners into the works. The commodities shortages appear to be limiting spanner supplies too. There is the third possibility – that, although recognising the Big Con, and the Big Lie, journalists nonetheless ignore them, figuring the greater good demands discretion, acquiescence, complicity… If we’re all in the same boat, might it be a good idea not to rock it?

I don’t think so. Surfing this tidal wave of debt by shuffling liabilities aside and into the future, by bundling debt into “bad” banks, or even by currency devaluation – looking more likely by the day – doesn’t solve the problem. The problem is too many people, too many banks, too many nations, living beyond their means – banks need to fail, nations need to accept recession, and people need to suffer. Not a nice prospect – but it will either happen now, or perhaps in another five or ten years.

In the jargon, a market correction is long overdue. And markets will find their level – government subsidies and other market distortions may have an impact in the short term, but in the long term the volumes of trades are too great to fiddle – bans on shorting and other ill-judged window dressing can’t buck the market. If the government’s theft from your paycheck to bail out the bankers works this time, it won’t work next time – this will crash. It will crash hard. It’s just a question of when.