Friday, December 16, 2011

 

Then and again the same situation, for so many years....

Pray tell if the current crisis is all about humankind’s digressions and subsequent actions on things utterly beyond their grasp. One should not go to the oracles such as Bill Gross at Pimco, or peruse the musings of Krugman, boring as that sun shining in the green catholic abodes of a Bayerisch quasi-crescent laughing it all the way.

We may as well go to the heart of Woody Allen, Larry David, and Joseph Heller. The latter on a minor key – nonetheless telling it all… No one should be taking “seriously” the current state of affairs. Let’s then riff off an internet description, alas quite apt I might add, of “Good as Gold”, Heller’s novel. We have the metal, the man, the archetypes and stereotypes.

“…Bruce Gold, a Jewish, middle-aged university English professor and author of many unread, seminal articles in small journals, residing in Manhattan, is offered the chance for success, fame and fortune in Washington D.C. as the country's first ever Jewish Secretary of State. But he must face the consequences of this, such as divorcing his wife and alienating his family, the thought of which energizes him and makes him cringe at the same time. Furthermore, he's faced with the task of writing about the Jewish experience in America, but isn't sure he's lived it and thus has to figure out what it is, not knowing that he was invariably going to describe his own life….”

Italy is going down, Greece already lost the match. Monty Python had them wining against quite a German squad when Archimedes screamed “eureka” and scored the winning goal. PIGGS on the wing...

Eric Fry reminds us that “…Nearly ten years after the war ended, the British were still rationing sugar and meat.” So how long until we come out the current misery?

“If ideas could file for bankruptcy,” James Grant muses in the latest edition of Grant’s Interest Rate Observer, “the modern model of money and banking would have beaten MF Global Holdings to the courthouse. The concept of leveraged finance in a world of paper money and socialized risk deserves rehabilitation under an intellectual Chapter 11.”

Now you see, these people are like gold, good as gold, or… Goldman…

Maurice Roche finished his book on the legendary institution with a different viewpoint. It is not even available in English yet. He is the UK correspondent for Le Monde and starts his saga with Goldman advising the neo-Platonists, where representation, so it seems, passes for the actual form. What he pointed out is that Goldman Sachs also hedged the chicken and potato out of the pan. They were not betting very much on their own ideas for the pan-Hellenic feta lovers.

The machinery needed some oil, but not enough olives to grease the wheels – and/or hands.

We start missing Cockburn, Trotsky and the permanent revolution, as we know there must be casualties.

Back to Eric Fry: In general, the central banks are borrowing and/or printing money to buy “distressed assets.” By removing these distressed assets from the marketplace, the central banks hope to clear away some of the rot in order to “stabilize” the financial system and, by extension, the value of the currencies they print.

“But since central banks are functionally outlawing bankruptcy for every large institution and government in the Western world — along with a few of those in the Eastern world, the rot remains...and it’s spreading. The rot is not only undermining economic activity, it is also undermining the entire global monetary system.


“And the worst of it is that these multi-trillion-dollar interventions do not remove the rot from the financial system; they merely relocate it from the private sector to the public sector.

(Are we kidding? Or is Roubini a happy St. Francis?)

The European Central Bank (ECB), for example, holds sub-AAA assets equal to 14 times its equity. Large portions of those sub-AAA assets are the very sub-AAA government bonds of Greece, Portugal, Italy and Ireland. If these assets, in the aggregate, were to lose 7% of their value, the ECB’s equity would be zero. (For perspective, the government bonds of Greece, Portugal, Italy and Ireland have already lost 30% to 60% of their values).


If Dante would tumble over the gates of delyrium and steps to hell…

Meanwhile, Italy too has been forced to get rid of its popular, but difficult to control, elected leader — Silvio Berlusconi. It has put in a company man. Yes, a company man. What company? Goldman Sachs, of course. The new fellow, Mario Monti is an ex-Goldman guy. And so is the new fellow at the European Central Bank, Mario Draghi. Monti was also an EU commissioner. Draghi ran the Bank of Italy as the nation built up one of the world’s biggest piles of debt. Then, when Italy’s cost of borrowing shot over 7%, in came Monti and Draghi.

(Berlusconi’s media propagated the anti-Goldman sentiment while he is back singing in cruises or in a bathroom with fantastic acoustics… But no one will hear…)

So how does Bill Bonner think we can match the yang with the thing?

“…Tax evasion is the only thing that keeps these economies going. People prevent their government from squandering their money. They spend it themselves. But the new Goldman guys won’t like it. They’ll want to get their hands on as much of that ‘black money’ as possible. And more safety net…

“…So far, they seem to be making great progress towards their objectives. They stuff the world with debt. It blows up. Then, they push out democratically-elected leaders...gain new power and authority...and take charge of the rescue.

You know the plot? Or the Pol Pot?

We do...

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