Thoughts on Money and Debt as Seen from Main Street
We suspected it was a scam all along. The whole money and debt thing. I mean, how much sense does it make for any government to hand over money creation to a group of private individuals who then lend it back to their own government and earn interest (in other words, do nothing other than collect a kind of rent) on something that, more or less, doesn’t even exist? Dire Straits got it right about the “Money for nothin’ ” thing.
Ellen Brown’s recent piece on DissidentVoice throws around some pretty impressive figures: 500 trillion of derivatives here, 100 trillion of some kind of national debt there (as far as I’m concerned, derivatives are just a fancy way of saying I can’t pay for it right now, just let me sell this shit to someone else at a profit, and I’ll pay you back somewhere down the line. Or, I’ll sell this shit right back to you, but you won’t know it’s the same shit. And I’ll make a profit twice.). So most of those trillions are just bets, leveraged speculation, gambling that, at some point, in a distant future, in a distant galaxy, if they manage to keep everything going … You get the idea. And yet, if, for some reason, enough people catch on to the scam, they’ll also bet against their own scam, and still make money. And what’s impressive about this whole situation is the fact that they’re getting away with it! Talk about mysticism for the masses. The economics departments at our so-called institutions of higher learning must have a hard time keeping a straight face while reciting the magic formulas that enthrall their acolytes, introducing them into the esoterica of monetary alchemy, the hieroglyphics of high finance, the Rosetta Stone to riches.
And people take this shit seriously!
I figure some of these true believers probably have to take it seriously, seeing as how they have mortgaged their futures to join the brotherhood of keyboard kleptomaniacs. I can imagine some other scenario as well, in which a hesitant doubter, having a little bit of common sense, having been raised in the heretical ways of honesty and altruism, being scolded by his fellow novitiates as they convince him that hey, it’s only money!
It’s just zeroes and ones! And besides, you can always cite some quant from, you know, China or somewhere, to make it look scientific (h/t The Big Short)! It may look like robbery, but it’s really not. What we take, we just replace with something from the future. So, as long as there are another few minutes, you know, enough time for whatever we’ve sold to be sold who knows how many other times,we’re covered, everything is cool. Nobody’ll ever know where it even came from in the first place. This is science fiction to the nth degree. And everybody loves science fiction.
Look. Do you think anyone believes that the US debt will ever be paid? No way! We’re kind of like Greece, except we can print enough money to at least pay the interest. Maybe. Greece can’t do that. They can’t print their own money. They have to use Euros. But no one really gives a shit! That can will get kicked down the road long after your great grandchildren are dead. Don’t worry. You’ll probably pay off your debts in your first six months anyway. And if you don’t, get this: We created our own hedge fund that buys student debt and sells it to other hedge funds who sell it to … Well, you get the picture? We just sold a whole shitload of Stanford debt and made a ton! And now that that’s settled, let’s go clubbing! It’s on me tonight.
And now back to the Brown article.
What disturbs me about Ms Brown’s article is the fact that she seems to consider those trillions of dollars real, when they are mostly derivatives. That is, just theoretically leveraged, make-believe money whose projected existence depends upon this house of cards not falling apart. To take a pedestrian example, consider the US housing bubble. As long as prices were going up, people felt safe in purchasing houses they could never really afford because they could flip them for a profit a year or two down the road and pay off what was, at the time, an ephemeral, sustainable debt (variable interest), and still come out with a profit. And, for a while, it worked. Money for nothin’. And we all know how that turned out. At least Dire Straights did something to earn their money.
And the banks, the Holy of Holies, the money mafia that runs the country, who basically own the regulators (the government), when they are caught in their game, more or less say, Okay, a few things we did here and there probably weren’t too legal, but since we made a ton of money, we’ll pay a fine instead of having to admit that we committed a crime. You can say that we’ve been sent to the corner, and we can just write it off as a cost of doing business. Let’s talk figures and we’ll see what we can do.
We don’t even have to try to imagine this on a global scale. It’s happening right now, in real time, the most recent example being Greece. The big banks got together with their corrupt proxies in Greece and basically made them NINJA loans so Greece could ‘prove’ to other corrupt proxies in Brussels that they had the means, the monetary/budgetary wherewithal to play on an equal basis with the big boys, when those means never existed at all. Couple that with the assumption that this debt, just like the debt associated with the housing scam (or any other form of debt, for that matter), was being sliced, diced, and resold who knows how many times, with all the players clamoring for their cuts. None of this money is based on anything other than a continuation of the scam. On top of that, the banks, knowing the loans were fraudulent, turned right around and, thanks to the miracle of derivatives and compliant regulators, bet against (shorted) the very loans they made. You can’t make this stuff up. Well, I reckon you can, because it happened.
Note. Greece (meaning the people, the ‘demos’) has been trying stay out of the clutches of the US and other associated fascist interests for probably over a hundred years now. The real estate they happen to occupy is way too important geo-strategically for the Great Game players to allow the people who actually live there to have any say in how they would like to lead their lives. Had Tsipras and Varoufakis been true patriots, they would have left the EU the morning after their election to power.
The final section of her article, (Time for a Reset), kind of makes sense, and then doesn’t. She claims that a debt ‘jubilee’ ” … ” … would devastate creditors and collapse the massive derivatives bubble”. That poses two questions. Who are the creditors in this case? In an ethical world, that would be the banks who loaned the money in the first place. And again, in an ethical world, a bank that didn’t have the sense to perform due diligence to see if the borrower had the means to pay back the money he was asking for deserves to lose its money (or so-called investment).
Of course in this new world of hyper finance, the banks don’t care if the loans ever are paid. The whole derivatives scam (slicing, dicing, and selling) absolves them, somehow, from any responsibility. As for the derivatives bubble, who wouldn’t want to see that burst? Except for the banks and the idiots who bought the slices of said debt without knowing anything of its origins. Or anyone else left holding the bag. Which, given the ways things are done today, could mean a lot of people. Which might actually be a good thing. It might have people asking some uncomfortable questions. It might wake up people to the fact that their once stable retirement, guaranteed by their years of work, guaranteed by their own government, had been taken to the casino by that very same government and its friends, and blown. And now the contributors are on the hook?
Then there’s turning ‘sovereign debt’ into ‘sovereign money’. On the surface, what’s wrong with that? But, as she points out, that means being sovereign financially, and being a member of the EU rather moots that possibility. Plus, suddenly turning a minus into a plus kind of reminds me of the economic alchemy noted above. QE or not.
And then there’s the final paragraph which I’ll cite below:
If people and governments were incentivized to spend more, however, that would actually be a good thing. Consumer markets need more demand today. The way to stimulate economies is to get money into the pockets of people who will spend it. Demand (money) stimulates supply (productivity). Before QE can stimulate the real economy, it has to make it into the real economy. If the goal of the EU is to hold itself together and avoid a derivatives meltdown, some QE that actually got into the hands of the people could be just the ticket.
I find something sinister in this paragraph. The underlying logic is ‘more’. Incentivizing (sounds like some marketing technique to me) people to consume more is not really what we need today. We already consume too much, and not all that intelligently (thanks to this whole ‘incentivizing’ thing). As in the case of Greece, for example, I don’t think you need to incentivize people to want to eat or live lives worthy of living.
I don’t think I need to remind (maybe I should) Ms Brown that the goal of the EU is not to somehow ‘hold itself together’ for some twisted altruistic idea. The idea was to make sure that ‘Europe’ bought into the mind-numbing American Dream and all the hegemonic Hell that entailed.
If the Greek population had understood what this was all about (which they probably did, but couldn’t, for one reason or another, make that understood to the neo-con acolytes running their country), they would never have had the least interest in joining the EU. I have no idea what kind of pressure was brought to bear on the so-called socialist party then in power in Greece, but it had to be pretty frightening to convince them to sell their country to foreign interests. For peanuts. And they did that just to pay the interest on the loans. The principal? It’s one of those things projected into a distant future …
But, in the meantime, our economists and bankers consider this money, which will never be paid back, as real. They use it as leverage to make other bets on oil, lithium, water in Argentina, whatever. On our collective future.
And so it goes …