by John Ward
Get into dealing with banks and other financial institutions today, and you will quickly realise just how big a distraction the process of effecting Brexit has been. The prevailing economic orthodoxy of Planet Earth is not only on a collision course with sovereign States; globalist business, the banks and the media are engaged in a concerted campaign of deception about Crash2
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During the first year at University, I took economics as a subsidiary subject to my joint course in History and Politics. I also studied it in the sixth form at school. Since my retirement twenty years ago, I seem to have thought about very little else.
The overriding conclusion (from my involvement with the subject since the of sixteen) has been that economics is a pseudo-science at best, and a form of quackery in general. Indeed, one of my favourite smile-inducing thoughts is the degree to which the fluffy Left is in thrall to anything “economic experts” have to say – even though 90% of the time they’re saying stuff that contradicts Socialist orthodoxy, and many of them are spectacularly wrong 100% of the time.
At some point shortly after the false dawn of the 1980s, the economic “system” the world employs moved largely away from social capitalism towards a belief in so-called monetarist ideas comprising various strands – Friedmanism, mercantile globalism, laissez faire capitalism, neoliberal government intervention and bourse funding of capitalist growth.
There is a great deal of muddle in the way people see all this – not least in many being unable to separate the tenets from the consequences of monetarism. It is a pillar of the theory, for example, that wealth will “trickle down” from those at the top, but an outcome of the application of monetarist ideas that the “financialisation” of capitalism (via an imbalance towards the provision of financial services) leads to all kinds of problems…..problems that tend, on the whole, to be kicked down the road by one finance minister after another.
Broadly, however, the neoliberals/monetarists hold that top end taxes should be cut, exporting via a global presence is the key to success, government spending on social provision should be slashed, the only corporate responsibility is to the shareholders, growth can be financed by the issuance of debt, all markets should be deregulated and overseen with a light touch, cutting costs is a key element of product distribution and formulation, Big is Good, mergers can be fun, and there is nothing wrong if, across the planet, some nations are running surpluses while others run deficits: in the end, they balance up to a zero sum.
This last tenet of monetarism is something that has crept to prominence in recent years, as the founders of this way of thinking (who by and large expected deficit economics to become a thing of the past) have been forced to accept that financialised bourse capitalism is leading to more and more sovereign debt…..and higher and higher costs of servicing it. Economists (as any CEO will affirm) are very good at explaining why something went wrong, just not very good at seeing it coming).
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Veteran Sloggers already know my views on the monetarist-cum-neoliberal approach to economics, fiscal structures and financing growth. But for the record, I’ll state them in one place here.
- Like all systemic ideologies, there is no place in it for the human and social sciences, which are ignored in all the thinking
- This had led its proponents to hopelessly underestimate the human capacity for greed, trickery, sharp practice and spin
- Thus – far from trickling down – wealth gushes up….and stays there
- Poorer State welfare provision and education reduces the spending power and creativity of the average citizen
- Far from reducing the cost of government, the expenditure goes up – to bale out banks, provide unemployment benefits, offer more healthcare as medical technology cures more things, and manage sovereign debt
- The democratic nature of the State becomes increasingly diluted, because – by being in debt to banks and bond holders, and requiring funds to operate Parties in a more complex society – the power balance shifts to global brand owners and debt providers, but away from the People
- This is exacerbated by the power such organisations have to get their taxes reduced, or be given massive tax breaks in return for inward investment in the sovereign
- The flow of talent from business and finance to State bureaucracy and back again further strengthens the power of civil servants: what was once a cop v robber situation becomes one of sharing bodily fluids and ignoring moral hazards
- This same revolving doors traffic applies in particular to the media sector, allowing moguls in that space to “swing their support” behind one Party (or candidate) in return for “gratitude” if and when the recipient is in government
- The taking of vast energy profits at low taxes for several decades by greedy oilco managers created a dearth of new ‘finds’, and made the geopolitics of energy ever more pressing….leading to the geopolitics and neoconservative foreign policy that further cripple various States today in terms of military purchases and technological investment
- The huge shift of power from labour to capital in deregulated employment markets produced a catastrophic fall in real spending power among the mass of the population, and this in turn has made it more and more difficult over time to arrest recessions without eye-watering interventions via QE and Zirp….yet more welfare overheads, and more debt liabilities piling up over time
- The principle of ‘financialisation’ encourages banking firms to expand way beyond capital provision for business and into trading among themselves via sectors such as derivatives – a good idea initially aimed at farmers, but perverted once again by the rise and rise of accountants and quants with the moral compass of the co-conspirators in The Producers
- A technological focus on robotisation in business and electronic money in the financial sector has caused sovereigns to spend yet more on welfare, and enabled their now largely independent central banks to “pay for” the debt management by the electronic creation of fiat money – ie, not backed by gold
- SOL trading on the bourses (alongside algorithmically automated models of buy and sell) have rendered any control over fraud in doing that impossible, have kept the smaller investor out of the stock markets, and make for a UXB the next time a curved ball hits the system
- Bourse capital creates the amoral, disloyal remote shareholder who almost always prefers a 25% short-term return on the gross to investment for the good of the company’s future survival.
The net result of defending a dysfunctional system that lacks the human realities has been the development of so-called MMT – or Modern Monetary Theory. By and large, it scores highest of all on the Economics Toshometer.
It is a myth that “sovereign debt is not problematic because the central bank can’t go bust”. Ask the Greeks who went through 2011-2018, the Italians getting heat from the Brussels machine, and the Venezuelans brooking US interference right now. As long as bondholders and banking firms have a grip on politicians, all debt is a potential disaster.
It is a myth that “the US and UK employment and inflation figures prove that monetarism works”. The sovereign statistics on both dimensions are so obviously designed to disguise the real picture, only a moron would take them at face value. A “job” in England is anything that pays a wage of any kind; in the US, a person no longer getting benefits (they aren’t infinite) is treated as a person who “has found a job”. In both countries, the basket of goods used to “measure” consumer spending power have been manipulated by every finance Minister since the early 1990s.
It is a myth that mergers and acquisitions produce economies of scale. As long ago as 2006, The Economist concluded that 58% of them destroyed shareholder value in the end.
It is a myth that rising stock markets reflect underlying economic health. Cheap money has enabled multinationals to take on debt and transform it into unwarranted dividends: since 2011, over 70% of all stock trades on the NYSE have been corporate executives buying their own stock. The mismatch between real profit performance and a Dow at its currently ridiculous level is one of the biggest reasons to void any exposure to mainstream stocks at the moment.
It is a myth that the US Fed can “normalise” borrowing and investment rates from here on. So much sovereign debt in the developing world is Dollar denominated, the more the Buck strengthens and rates rise, the more we will see a catastrophic trail of major sovereign defaults….which can only lead in the medium term to multivariate market panics. Algorithmic formulae not programmed to take that on board will make things worse: those involved in that field of endeavour would be well advised to ask themselves now, ‘How easy is it going to be to override the auto-pilot?’
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Why am I writing abut this now?
Over the Christmas period, I finally decided to make radical changes to my investment portfolio. Don’t get carried away: thanks to Ben Bernanke, it’s been not so much a portfolio as a porous jar since 2012.
Suffice to say that I am now handling all investments (pension or otherwise) personally…..and I have but one mission: to find as many ‘spread’ safe havens as I possibly can.
What this process has revealed is two very worrying and blindingly obvious features of the financial sector in 2019:
- The conflicts of interest, joined up dominoes and moral hazards involved are far, far worse than they were in 2007
- Retail-exposed financial institutions will do anything – invent any lie, peddle any bollocks and disguise any affiliation – in an overt attempt to stop you getting at your own money.
This reality alone should be enough to ring alarm bells. In the coming days, I will be going into more detail on the obfuscation, subterfuge and general mendacity I’ve experienced.
In the meantime, I offer this advice: lift your eyes from the trees of Brexit, and take a closer look at the termites burrowing into your furniture.
Caveat emptor. Stay tuned.