CRASH 2: Why we are approaching The Tulip moment.

A world in which nearly everything is overvalued cannot be sustained

At Zero Hedge this morning, Rick Ackerman (a bloke whose observations I find pretty sharp on the whole) posted a typically outspoken piece that included this extract:

‘…hundreds of billions of dollars – trillions of dollars, if you keep a running total – are floating in the financial ether, unable to find their way into the world of real goods and services. Only a liar or a dolt could assert that this all-too-transparent, economically valueless shell game will continue to provide “breathing space” to the banking system for much longer….’

He was referring to the various packaged investment derivatives sold to idiots by private banking firms, and the QEs or other financial system liquidity schemes mounted by central banks in general, and most recently by Mario Draghi at the ECB. But in a broader sense, the point Rick raises is one that’s been pestering me for five years: when is money ‘real’ money, when is it notional money, and is it safe to have traffic moving from one to the other?

To answer the last part first, the simple response  is ‘don’t be silly, how could it be?’. Banker denial of this reality has been easily the most absurd form of Elmer Gantry con anywhere on the roller-coaster of fantasy that began after Greenspan ignored all the obvious signals of growing insanity during 2004. Money created by the buying and selling of paper derivatives has nothing at all to do with real wealth, because after a certain point – not very far into the mission – the whole thing is based on the value of paper. Which is near to zero.

So really, this answers the first part too: wealth is only real when it is directly related to a known-value item or currency.

A thing is produced. It is manufactured or grown. It is sold into market. It gains a tangible value. This can last for centuries – until it becomes an antique. Instead of barter – and then precious metal purchase – people buy it with currency of a valued guaranteed by the Sovereign State. If I want some money upfront from my crop or factory production, I can sell a certain derivative value of it to a third party.

All the above is real. But seventeen purchases later – and later still, after it and a hundred other things have been salami-chopped into a meaninglessly packaged cacophony – that derivative is worth what somebody might pay for it on a good day. On a bad day, it is worthless. It is, simply, a piece of paper.

The trouble starts when, somewhere along the chain, somebody needs some real money: to buy a house, or a company, or 450 pcs following a competitor’s bankruptcy. That somebody – probably thought of as a nobody by the MoUs – sells his or her counterfeit derivative note….and in exchange gets the real thing: real money guaranteed by a Federal something or other, or a Crown Treasury, or a European Central Bank. Now that person has received money in return for something that represents nothing of a final, produced, grown or indeed physical nature at all. In doing so, the seller of paper must, by definition, reduce the value of the currency received in return…for the currency has been used to buy something that doesn’t exist.

In theory of course, what can happen is that – via a notional value bestowed upon it by users of the real currency – the counterfeit version gains a value in its own right. Except that what this produces is two currencies side by side. By doubling the amount of ‘money’ in circulation – when one of them has no intrinsic value guaranteed by a reliable government – the result is inevitable in the long-term: erosion of the real currency’s value – ie, inflation.

In good times, all this will go unnoticed. The tricky bit comes when economies stall, stock markets wobble, and lots of investors want to realise proper cash all at once – in order to buy the ultimately reliable things: gold, silver, platinum and so forth. Because this leaves a whole lot of folks suddenly holding paper with all the tradeable value of a Post-it Note.

Over the years, this is what I have come to call The Tulip Moment. In the 1630s in the Low Countries, a fashion for tulips turned into an insane obsession. A single Viceroy tulip bulb might sell for a value roughly equivalent to $1,250 in current US dollars, while a rarer Semper Augustus bulb might cost twice that. By the winter of 1636, Tulip traders were making over $60,000 a month at today’s prices. Then one day in Haarlem, just the one buyer failed to show up and pay for his Tulip bulb. Within ten days, Tulip values fell by a staggering 99%.

OK, that’s what we call a panic. Our current crop of leaders would have us believe that their control over every lever from buying toxic loans and worthless bonds to pumping liquid cash into the system ensures that any future ‘event’ can be controlled. This is bollocks: pure human hubris. There is no such thing as a gradual panic – and this is especially true of a system so complex, it takes even a high IQ person at least a week’s focused effort to even begin to understand it. As Woody Guthrie correctly observed, “Seems ter me, if a thang kint be ‘splained in two minutes, then t’ain’t worth a hill o’ beans”.

I believe we are very close now to our Tulip Moment. The Tulip this time is the entire credit default swap/derivate tickertape shadow currency that has been created for entirely venal reasons by the investment banking community. Only this time, it isn’t even circulating at a 1:1 valuation: the so-called derivatives sector is ‘worth’ ten times the entire real gdp of the planet.

None of this is new information. The problem is, this notional – almost astral – plane of ‘money’ is worth nothing at all: for it is no more and no less than a Xerox copy of what already exists in the physical world. Like an exact photocopy of the Mona Lisa, its value is 0.0004% of the real thing. However, thousands of naive souls out there have been convinced by snake-oil salesmen that 400,000 copies of the Mona Lisa are worth ten times the value of Da Vinci’s original masterpiece.

So when there is a run on Xerox copies, very quickly the owners will cotton on to what they bought. And once more, the 99% loss in ten days flat principle will apply.

I met a chap while on safari in Africa last Spring, and he explained to me at great length why, so long as derivatives aren’t traded at retail level, there will not be a problem. This is like saying that if we all keep Xerox copies of the Mona Lisa in Swiss bank vaults, they will keep their value. When macro-economic things go wrong, investors look for just two things: an insurer who will pay out on value, and other things not yet owned that cannot lose their value. They don’t give a good God Damn via what channel these things are available -  they just want them.

When nobody puts a value on derivatives any more – and almost every government has diluted its currency to protect the banks who perverted their original purpose – there is no telling what will happen. This isn’t a Damoclesian warning – it’s a fact: this has never happened before. But as Rick Ackerman notes, there will be no place in the real world of value for this bathroom tissue.

My parallel is simple: what inflated currency is to precious metals, so derivatives and flakey insurance are to real asset valuations. When everyone at once wants to get cash for valueless derivatives – and/or to call on their insurance – the whole system fails. The one thing likely to create exactly that unhappy coincidence of desire is horrendous bad debt – not just on a global scale, but also on every dimension of credit from plastic cards to Sovereign bonds. This is exactly what we face in 2012: a banking system whose value rests upon bits of paper – ranging from sovereign bonds to default swaps and insurance – that, in the final analysis, lack that important fiat message: “We promise to pay”.

Add to this the crazy, almost unbelievable fact that a huge amount of lending has been backed by collateral consisting partly or entirely of such worthless paper……no: don’t go there, you’ll only want to sleep with the light on forever and ever.

The financial system as it stands today is flawed in many ways, but two stand head and shoulders above the others. First, it has failed to provide finance for anything beyond the mega-multinational sector of our economies. And second, it has served a mad form of capitalism that insists growth is the only thing that matters, and credit is the only way it can be sustained. In sticking rigidly to these precepts, it has turned capitalist renewal into stagnation, business creativity into bottom-line bourse mania, and social stability into potentially explosive imbalance.

Ironically, the very tendency to create wealth inequity using this model has made it nigh on impossible to stage the very mass consumption-led recoveries it declares to be sacrosanct; and the same insistence on false wealth grown through untargeted lending has rendered banks unable to release risk business money that could restore a desire to restock. The inevitable result throughout the West has been the emptying of Sovereign Treasuries in order to assume that ‘bankrolling’ function on behalf of the banks. But such efforts in turn have been grabbed by greedy short-termist banking firm managements and big multinational companies as a means of delivering returns to partners and shareholders respectively. These bonus and dividend ‘results’ are a total confection, paid for in full by the already hard-pressed governments and their cash-strapped taxpayers. Net-net, under this suicidally myopic approach, the only possible result is middle-class impoverishment, zero credit, and thus economic slump.

The viciously circular nature of mythical wealth and hyped valuation has produced some extraordinary spectacles in recent months: tactics and ‘explanations’ have been put forward worthy only of a place in the sort of black satirical novel that even Swift never quite got round to writing. But perhaps the most striking contemporary example is that of Mario Draghi’s European Central Bank providing money to private eurobanks, in the hope that they will carry on purchasing worthless government bonds, and thus stave off the sovereign defaults caused by incontinent lending by those very same banks to those very same sovereign States. What turns something potentially comic into certain tragedy is that none of this money will go to stimulate either the output or demand that these sovereign EU member States need to recover.

If ever there was a clear signal that we are months away at most from the Tulip Moment, this is it. For if the US recovery isn’t real (and trust me, it isn’t) and the EU economy is grinding to a halt (and trust me, it is) and Chinese growth is disappearing in this context of falling consumption (and trust me, it is) then all those stock markets based on results that are a confection – and stocks kept artifically high by those results – will collapse.

That is going to create a demand for cash never even envisaged before in the entire history of Bourse capitalism. And it will be, without any shadow of doubt, the Tulip Moment.

Cameron’s veto-macho: Tory backbenchers decide it was a flash in the pan.

But why did Sopel butt in just when it got interesting?

I wonder if I was the only person, watching Cameron wriggle and squirm this afternoon in the Commons about what he ‘achieved’ at the EU session yesterday, to spot how – the second a backbench MP mentioned “the German attempt to establish an EU commissioner in Athens” – the BBCNews anchor Jon Sopel abruptly cut short the live broadcast and began to blather about something else.

It was one of those moments when – even though one suspects there probably isn’t a planned conspiracy to keep the Brits unaware of Merkel’s developing madness – it was hard not to blink in disbelief. The equivalent would’ve been ITV cutting away from a football broadcast for the ads just as a penalty was about to be taken.

Anyway, for once it seemed to me that Cameron’s smarm didn’t wash – if smarm washes at all in the real world. Whereas Tory backbenchers usually try to weedle a straight answer out of Dave in these circumstances, my overall impression was that – having decided such a mission was doomed to failure – some of them were trying to wind him up. There was, for example, a distinct lack of either respect or politesse in some of the questions emanating from behind the Prime Minister.

All that said, I won’t hold my breath waiting for a Tory rebellion. The truth is that, if the Tory Right really was principled, it would’ve hijacked UKIP long ago.

EU GOES FORWARD: TIME TO CELEBRATE A CENTURY OF CHANGE….

Just prior to the outbreak of the First World War, the above assertion was what English writer and commentarian G K Chesterton wrote about the politics of Europe. His aphorism proved to be astonishingly prescient: just under two years later, a collection of foolish French, German, British, Russian, Austrian and Turkish leaders declared war and alliance by timetable and, after twenty years of largely perfidious diplomacy, launched four years of utterly pointless mass slaughter.

A hundred years later, we have pretty much the same cast of mendacious, foolish characters (with noises off from the Americans) declaring that unless something is done by X Hour, then Y will happen by Z day and we will all be vapourised by the hopeless inability of the Greek population to organise a Zorba Dance in a Taverna.

Olli Rehn has pulled the XYZ stunt four times in three weeks on the Greek debt talks – and we’re only a month into the year. Venizelos has done it twice, and Papademos (who told the media the deal was done 20 days ago) now promises all will be signed by the end of the week. Yesterday he promised it would be completed “within hours”. Rehn said last Friday it would be signed during the weekend.

Berlin effectively sent an ultimatum to her EU partners about seizing Greek sovereignty, since when Nicolas Sarkozy has denied there was “Ever any intention of enforcing guardianship on Athens”. One only has to read the German memorandum of last Friday to see what a gigantic lie that is.

Papademos said at 1.30 am today that “talks between Greece and the bondholders are ongoing, and progress has been made”. Neither of those statements is true.

Herman van Rompuy said yesterday evening that it  was merely a question of “putting the current [Greek austerity] programme back on track”. The austerity programme was never on track, and has steadily exacerbated the Greek economic output since its half-baked inception.

Mathematically, short of a bondholder write-off at close to 90%, there is no chance at all that Greece’s debt repayment schedules are achievable.

And finally, for a fuller account of why none of this is about Greek tax evasion, idleness or debt-mania, see the Slogpost of last Saturday for the facts rather than the rhetoric.

Not much has changed in a century. The current lot are analogous to the generals in the Great War, calculating gains efficiency by men killed per square metre. “One more heave” is all we need. It will all be over by Christmas. The tank will change everything. The Dardanelles are Europe’s soft underbelly. Morale is high in the trenches. God is on our side. Gott mit uns, Gott strafe England, C’est pour la gloire.

Just the once – and don’t take this as an invitation to do likewise – I am going to break my obscenity rule.

The people running the world have always been, and always will be, fucking mad. It is the insoluble dilemma of our species that we seem to be incapable of breeding strong leadership personalities without the accompanying schizoid megalomanic tendencies.

And like every congenital disease, this one is easy to diagnose – but the very Devil to cure.

GREEK DEBT TALKS: As social conditions worsen in Greece, Merkel’s annexation request is widely condemned.

Baby keeps wary eye on mad Nanny

But the debt talks are 100% deficient in the talking thing

With the Greek media estimating that 50,000 Athenians are currently sleeping on the streets, three prison Governors told the Government that their institutions could no longer cope with those facing jail terms and tax charges of one form or another. Each prison is designed to hold just over 800 inmates. On average as of yesterday, they were holding 2,320 each. Astonishingly, none of them were bankers.

Everyone from Sarkozy to Juncker told the Fuhrerine that her Gauleiters EU budget commissioners were not to be mentioned again, nor indeed would the issue of Greek sovereignty. Frau Merkel said nothing very much. Nor indeed did those supposed to be engaged in talks about Greek debt….except of course for Olli Rehn, whose job is to keep saying that we are ‘just days’ away from a deal.

The truly bizarre thing about this impasse is that the Athens Government continues to act as if it was running things, whereas in reality Brussels, the ECB and Berlin have been rejecting every bondholder offer for over a week. Goldman Sachs Account Director Greek Prime Minister Lucas Papademos said debt-swap talks ‘have made progress’, but remained predictably vague as to whether the progress was good or bad.

“The fact we’re still at the beginning of 2012 talking about Greece is a sign this problem hasn’t been dealt with,” reasoned U.K. Chancellor of the Exchequer George Osborne, his  antennae sensitively tuned to the situation as always. He was just marginally out when he used the verb ‘talking’.

Whether Merkel has been temporarily knocked back is irrelevant: the fact that she and the other mad person Schauble (probably with van Rompuy’s assent) wanted to press ahead with Sovereignty transfer in the first place is the key point here. Portugal is getting closer to the edge, and Italy’s bond yields are up over 6% again. Berlin will put the sovereign takeover thing back on the table again – and the more desperate that EU2012 (the new 25) GmBh get, the more the Fuhrerine will push. For Geli always gets what she wants.

What we need right now is some form of Frankfurt Stauffenberg to emerge and start reading the riot act. Out of one side of its mouth, Berlin refuses to be the Sovereign saviour; but out of the other, it demands control. Both would be disastrous – geopolitically and financially – for Germany.

We are rapidly approaching a critical point.

 

 

EZONE CRISIS: SLOG PREDICTION VINDICATED AS BANKS NEED ANOTHER TRILLION FROM THE ECB

“I have one euro left….any takers?”

Draghi stunned by trebling of liquidity demand

On December 23rd last, The Slog analysed the rate of acceleration in private eurobank demand for money from Central Banks. I calculated that pumping in liquidity at this rate would cost the taxpayer $9 trillion by the end of March 2012. I also said the river would soon be dry again. Here we are on the last day of January, and the eurobanks need a trillion euros more. If the banks do take the full trillion, that will make the running total $3.3 trillion since September.

The FT carries a piece this morning which, following interviews with eurozone bank heads, suggests that the 325bn euros set aside by Mario Draghi for his next (imminent) session at the liquidity pump is less than a third of the amount bankers want. There is a pearler of a quote from one of the anonymous MoUs as follows:

“Banks are not going to be as shy second time round, we should have done more first time.”

Shy, eh? I love it: welfare dependent or what?

I first started posting about this a year ago. There are now so many elephants in the eurozone, pretty soon there won’t be any room for people. We’ll have to house Jumbo and his chums in the Treasuries of Europe. But that’s OK: they’re emptying fast.

Related: US debt is forty times greater than total Fort Knox gold reserves.

At the End of the Day

One of the more venom-evoking things I posted appeared in 2005, and involved Britain winning the 2012 Olympics venue marathon. I pointed out that (a) nobody had ever made money from staging the Olympics and (b) Britain’s transport infrastructure simply wasn’t up to it. (It still isn’t). I have never since received so much spitting bile in return for my efforts to point out the obvious.

Within three years, the event was 40% over budget. Seven years on, today I’ve been reading that we will lose £3.5bn (and counting) because those responsible have cocked up the supply of hotel rooms. Tonight I watched a local London show on ITV showing how some Tube journeys normally taking 50 minutes will now take over two hours; and at least forty major Underground stations will suffer with queues throughout the day. Relief roads to regional events like sailing are either behind schedule, or insufficient for requirements. A source in Southern Trains told me last week that no matter how poorly attended the sailing at Weymouth is, the train service will be hopelessly overloaded.

The one thing we have completed in style and on time is the main stadium itself. But even that has been the subject of grubby wrangling about who will buy it, and what use the purchasers might put it to. Last but not least, for what must be the first time in history, the host nation’s citizens have found it almost impossible to get tickets.

In 1943, Nye Bevan rose in the Commons to join in a debate about fuel and food shortages during the War. This is what he said:

“Honourable Members, we sit here on an island built on coal and surrounded by teeming shoals of fish. Only this Government could arrange for there to be a shortage of both”.

The successful 2005 Olympic bid came more or less at the height of Blairite hubris, and the abolition of boom and bust by The Great Tillerman. I suspect that one of the problems City Clowns face is that they never quite caught on to this all being bollocks: they didn’t get it then, and they don’t realise it now. So my idea is this: every bonus  due on the Square Mile this April is hereby confiscated, and will be put towards hiring 200,000 young jobless folks. Each will wear a stylish uniform, and their job will be very focused: to go out of their way to ensure that our guests – and that isn’t fluffy damn it, they are our guests – will be helped, comforted and made to feel welcome despite the inconvenience they will experience on account of our inability to either invest in transport, or organise a Happening on a Marijuana Farm.

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But in a more gentle sense, life goes on here. There probably isn’t an Avian Survey Unit any more in the UK (s’a cuts mate, s’a cuts) but if there was, it would currently be showing an abnormal blip of activity in the South West of England. A careful study of the data would soon have all the arrows pointing to our converted barn here in Devon. We have the best-fed avian wildlife on the planet: our garden is an international runway for birds of every shape, size, origin, colour and species. And the reason is simple: three squares a day and all found.

If I was to tell you that my wife orders birdfood on the internet in 12.5 kilo batches, you probably wouldn’t believe me. But the proof is in the hordes of winged holidaymakers jetting into our garden in search of a winter oasis of plenty. Soon we shall have high-rise nests covering all the paved areas, and a range of nets, cages, turrets and bird-tables d’hotes catering for every taste: fastfood fat balls, mixed seeds, peanuts, bacon rind and God knows what. Older winged dinosaurs will shake their heads and say the resort has been spoiled by too much construction and noisy early-bird parties, but they will keep coming back because it’s all free.

To our new puppy Coco, this is not so much a mystery as a marvel. Like all very young people, her immediate assumption is that the whole tableau has been laid on for her benefit. Coco wants to play with all these fluttery things, in a sort of savage them to bits and then throw them around kind of way. But they don’t want to play with her, and it’s so unfair. Personally, I’d prefer it if she started focusing her attention on the required location of puppy-turds – but as the Stones memorably sang, you can’t always get what you want. Everywhere in our house there are informally arranged spreads of newspaper as guides for Coco about where to urinate. Like a Monopoly player trying to miss Mayfair, she manages to wee with clinical accuracy in between each pile of newsprint every day.

This is the problem with acquiring a puppy in winter. Summer is fine, because the outside doors can be left open, and every buttock-wobble or sniff monitored to ensure that, at the first sign of leg-spreading or bottom-emptying, the small hairy person can be whisked outside until gradually she catches on to the fact that poozanweez outside = good, inside = old grey chubby bloke having a small epi. But in winter, it’s too  cold – and thus unfair to do that sort of thing to anyone. Especially me.

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I spent much of the weekend trying to establish whether German Chancellor Angela Merkel actually committed adultery with her second husband Joachim Sauer while still married to her luckless first husband Uli Merkel. I still don’t know, although I suspect she did: she certainly shafted every other bloke with whom she was involved. But in the midst of undertaking this bit of sleuthing, it occurred to me what an odd word adultery is.

Shagging somebody while you are married to another doesn’t strike me as remotely adult. It is very often good fun and terribly exciting, but ‘adultery’ is not the word I would’ve invented to describe it. Very probably, the original Biblical derivation is one of the adulteration of sacred marriage vows – which is fine as far as it goes. Except that for most dunderheads in the UK, it’s become a rite of passage: “Look mum, I must be a real grown-up now: I’m committing adultery”.

We shouldn’t allow this sort of accidental linguistic encouragement of vice to catch on. I fact, I hereby announce my candidature for the post of Lord High Etymologistician General. In future, all dangerously suggestive descriptions will be banned. There will be no more of this bestiality: sexual intercourse with animals is not even nice, let alone the best. I shall also put an immediate end to having relations. Relations with one’s family are entirely ill-advised.

It’s a ghastly minefield, but I’m the chap to take it on. I am, meanwhile, reminded of the great Peter Cook sketch where – as Inspector Streeb-Greebling – he explains to a bewildered news anchor (played by Alan Bennett) that he thinks thieves are responsible for crime.

“I see,” says Bennett, “So you think thieves are responsible do you?”

“Certainly not,” Cook replies, “I think thieves are thoroughly irresponsible. If you think thieves are responsible members of society, then you must be a very odd cove indeed. You don’t work for The Guardian by any chance do you?”

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In case you hadn’t noticed, News Ketchup is now a much briefer daily feature in the Slog’s right hand column. I want to keep it short but funny. If you don’t find it funny, I’d appreciate you telling me. And if I think you’re wrong, I’m sure you will appreciate me telling you.

A few lines on the abnormally silent UKIP Leader Mr Nigel Farage….and the relentlessly gobby BCG muppet Mr David Buick

Do moral issues end at Dover?

Over the last four days, the EU/ECB/Berlin axis has deliberately undermined the debt talks in Athens, following which the Germans drafted a ‘paper’ suggesting that, as a result of the Greeks being crap at negotiating – and failing to stimulate their sabotaged economy – German-speaking persons should wrest the Sovereignty from Greece’s grasp.

The most surprising silence over the weekend has been that of anti-EU ‘hero’ Nigel Farage. He got very upset about David Cameron rolling over in the light of the Fiscal Union…..but had nothing to say about national self-determination.

Isn’t that what UKIP is supposed to be about? Double standards here Nige….or just not interested, these folks being mere greasy latins? Should you change your forename from Nigel to Neville, hmm?

Nigel is addressing another Union tonight….the Oxford Union. If you want to advise him about your views on his silence, Mr Farage is on Twitter – @nigelfarage. And if you’re going, why not ask him about it?

Being taken for a ride in a Buick

If only silence was something that might occasionally envelop the ghastly David Buick of BCG partners, the world’s most insensitive, privileged and stupid pillock. Asked today on BBCNews about the Government’s decision to explain the concept of ethics to Stephen Hester, Buick the Muppet lookalike declared, “Well, this is the death of commercial democracy”.

So then – just to recap – a fat cat stopped from trousering a million quid for slightly slowing down the imminent death of RBS – a bank still owing the taxpayer 4,900 times that sum – Buick thinks represents the death of commercial democracy. As opposed to the brainless greed of a man whose sole achievement has been to reduce RBS’s balance sheet. Which, given the discount levels at which he flogged most of the assets, has effectively damned the taxpayer to never getting paid, and contributed exactly 0% to struggling UK business.

“There he was, minding his own business at British Land,” observed David the Daft, “and the Treasury tempted him to do this job but now objects to him taking a bonus”. Er…but Hester has missed his lending targets, and paid the taxpayer nothing back. And, um….the bonus was discretionary, not guaranteed. And nobody forced him to take the salary of, ooooer, £1.2 million, and £6.7m in pension payments. But apart from that, David Buick, I suppose you have a point.

Buick even looks daft. He has – as my Auntie Mollie used to say “a gob like a split in a potato pie”. And a potato head to go with it.

REVEALED: Angela Merkel – Rigid serial conformist…..

…and ruthless career technocrat

Angela Merkel is often depicted by the Western media as a boring, mousey and indecisive physicist obsessed by rules and the Euro ideal. In fact, she is none of these things. Her unusual and at times murky past suggests that she is driven by the ideal of technocratic power, has no firm belief in anything, and is ruthlessly disloyal when it suits her. Her role in the former East Germany has been cleaned up by those around her. But today, The Slog puts some flesh on the real character behind the Chancellor’s image.

Angela Dorothea Merkel sits in the Berlin Chancellery today, the mistress of Europe. An extraordinary combination of bizarre events and her own driven will have put her there. But we really do not know enough about this woman to whom, it seems, the citizens of 27 countries have handed the leadership of Europe without a single vote being cast. The fact is, she has been underestimated by every male boss she has had during her remorseless rise to power….and each one has paid for that with his career. There is far, far more to Frau Doktor Merkel than most people realise.

Angela Merkel’s father Horst Kasner died last September aged 85. Some secrets surrounding this enigmatic man have died with him, but quite a few things are a matter of public record. Born in 1926, he served on the Russian front during World Ward II and, at the age of 19 in 1943, was taken prisoner.

How long he remained in Russian hands – and when he got back to Germany – is not recorded. But somewhere along the way, he became a clergyman, and married a Polish woman, Herlind Jentzsch,  in 1952. She gave birth to Angela in 1954, and then three weeks later Kasner did what almost no other German had ever done: he moved from West Germany to the DDR. By choice, he became an Osti.

Sources protective of Angela Merkel claim that her father was merely posted there by the Lutheran clergy, but others deny this. He was known at the time as ‘Red Kasner’, and given a privileged position in East Germany. Throughout the 1960s and 1970s, Merkel Senior openly criticised West Germany. In 1989, he opposed reunification. The family had a smart apartment and access to two cars. Almost uniquely, Horst Kasner was allowed by the Party to travel to the West, so loyal was he felt to be.

All of this did young Angela no harm at all. Despite widespread harassment of the Christian Church in the DDR, she was educated – and pushed forward – like the daughter of a senior Party member.

German biographers have talked of “near panic” setting in when former Kasner neighbours in Templin are asked about the family – and especially its eldest child. One told me – on a promise of strict anonymity:

“Horst was a nice man, very friendly, all the children know him, he was a pastor. But he had influence, all the adults are knowing this. And Angela quickly became an enthusiasm for the regime, and persuading young people to be loyal.”

Although learning Russian was obligatory in East Germany, the young Angela excelled in the language, and undertook regular visits to Moscow and Leningrad. Russian officials today confirm that she speaks Russian “fluently with a very slight accent”. Putin, as it happens, speaks German with no accent at all: he spent fifteen years as a KGB agent liaising with the DDR’s notorious security agency, the Stasi. Horst Kasner was friendly with prominent Stasi alumni, and belonged to the “Christian Peace Conference”, a communist camouflage organisation funded by the KGB in Moscow. Another member of the CPC, Albrecht Schoenherr, had supplied him with the job as manager of the pastoral college.

Merkel is not, as is so often claimed, a physicist: she is a chemist specialising in the atomic physical nature of chemicals – a subject at the cutting edge of scientific development. Shortly after graduating in 1976, on a trip to Leningrad she met a fellow scientist, Ulrich Merkel, and they were married the following year. While Merkel completed a doctorate, her husband paid the rent on (and renovated) the flat they shared. The doctorate complete, Angela left her husband, taking the only thing of any value in the flat – a fridge – with her.

Ulrich had not the slightest inkling that his wife was about to leave: she hired a small van one morning and took the fridge. There was no discussion and no note. She divorced him in 1982. Her first husband has never remarried, and lives quietly in Frankfurt.

Angela meanwhile went from strength to strength in her career as a valued scientist and loyal DDR citizen. By now, however, Merkel’s fascination with power and political communication was becoming a big part of her life. Her specialism was youth propaganda: she became politically involved in the Freie Deutsche Jugend (Free German Youth), the politicised youth  East German dictatorship. She rose quickly within the organisation, becoming  Secretary of Political Education – the most important role in the organisation.

Today, Merkel insists that her job was menial, involving “organising  theatre tickets and the like”. But this is simply untrue: she was an ambitious political activist. School-friends from her childhood town Templin remember the German leader still as a “Marxist loyal to the Party line”, in the furtherance of which she held a formal position within her class. A student who knows Merkel from the Karl Marx University in Leipzig, remembers a “convinced communist who brought her class-mates into line”.

We have no idea what the ambitious young Communist really thought when the Berlin Wall came down in 1989, but she wasn’t slow to respond to events. Within three weeks, she  joined the Demokratischer Aufbruch (Democratic Revival), a Party modelled on the Centre-Right CDU in the West. She immediately took over the same function as she’d had in the old FDJ  – redefined in democracy-speak as “Press spokesperson”.

It was soon revealed that her boss in the DA, Wolfgang Schnur, had been a Stasi collaborator. Although Merkel denies this today, most of those there at the time are sure she leaked this information to the press. She took over his job.

In the first and only democratic East German elections that followed, leader Lothar de Maizière became President. (Merkel’s father Horst was a close friend of Lothar’s father – himself a senior Stasi accolyte). The 1990 Reunification saw him get a Cabinet post under Helmut Kohl, with a job as his Deputy for protege Angela. Two months later, he too was suddenly found to have ‘connections’ with the Stasi. He resigned in disgrace….and within two months Merkel was in the Cabinet. De Maizière intimates still maintain today that he was ‘fitted up’ based on very flimsy evidence. Merkel denies any involvement in the affair.

By now, the rapidly rising young Osti – ‘Mein Madchen’ – my girl, as Kohl patronisingly described her – had a new partner, Joachim Sauer. Like her, he too is an extremely eminent chemist working in the sought-after field of atomic and sub-atomic physical chemistry. From the moment their relationship began, Angela Merkel adopted her husband’s very pro-American views: the nation she had been brought up to see as The Enemy rapidly became her inspiration.In December 1998, they married. A few months earlier, her mentor Helmut Kohl had lost the election, and Merkel called publicly for the ‘old leaders’ of Germany to give way. In the media furore that followed, she stepped into the vacuum, and became the CDU’s leader.

Joachim Sauer’s scientific specialism, and his influence on the German Chancellor, are both highly significant. He too was a prominent Osti: in 1977, he joined the Academy of Sciences Central Institute of Physical Chemistry in East Berlin, one of the leading seats of learning in the former DDR. The record is silent on when he met Merkel, but he divorced his first wife in the same year that the German Chancellor got self-awarded custody of her first husband’s fridge.

Shortly after German reunification, Sauer became the Deputy Technical Director of BIOSYM Technologies, San Diego USA. He remained an advisor for BIOSYM until 2002. The company makes practical use of biopharmaceutical design, and was by then (1990) a strong player in what is mysteriously described as “the broader field of scientific information services”. One of the main buyers and supporters of this technology at the time was the Pentagon. Says a source in Washington:

“There has always been a sense that Sauer was a former East German Scientist who was, in the post Soviet collapse period, an important guy to debrief. He wasn’t a spy, but he was the best in his field. It’s not dissimilar to what the Pentagon did with Nazi rocket scientists after 1945.”

During October 2011, The Slog posted that the US had decided ‘to bet the farm on Germany as the key European ally’. I also posted last year about the number of Bourse alliances that have been proposed and signed between Germany and the US since Merkel came to power six years ago. The Berlin/Washington relationship became very strong after her accession, driven by her husband, and a ‘good fit’ relationship with George W. Bush and his close advisers.

The latter part of Merkel’s meteoric career progression in well known. But it does no harm to observe her behaviour. Although firmly  on the CDU’s Right at the time, when the German electorate decided in 2005 that it didn’t like any of the Parties that much, Merkel was quick to sup with the Devil, forming a ‘Grand Coalition’ with the SPD and CSU that made her Chancellor. She was also quick to shaft the SPD in the 2009 elections, accusing Schroder of being anti-American…a slur designed to make him look out of date, whereas she had embraced the free-market ideal and could take Germany to greater heights. With the help of FDP support, she won.

The FDP is not a eurosceptic Party, but it has consistently opposed deeper involvement of German money in the solution to ezone problems. Together, Merkel and her Finance Minister Wolfgang Schauble have consistently made and broken promises about the issue to their FDP partner. (Merkel also shafted Schauble with the same yardbrush she used to get rid of Kohl in 1998, when he too was an ‘old leader’. Now she needs his advice, he is back in place again).

Angela Merkel doesn’t like Nicolas Sarkozy, and appears to have been influential in persuading the US that they should drop him as a close ally. This is today seen by the State Department as extremely sound advice. She detests the media nickname ‘Merkozy’, primarily because she sees herself as totally in command. She is in fact much closer to Mario Draghi, a former Goldman Sachs chief now in charge at the ECB. Her view of him as a great technocrat was also influenced by Joachim Sauer, who is a big fan. And although Draghi’s clever establishment of an ECB independence dismayed her late last year, she sees him very much as ‘correct’ in the sense of paying debts, and tight central fiscal management.

Effectively, the US Government and its key agencies now have all the major posts in the EU/IMF/ECB leadership occupied by ‘our people’. Last year The Slog posted about the Strauss-Kahn affair, and how secret American support for Christine Lagarde had ensured her completely undeserved appointment as Managing Director of the IMF. In turn, of course, there are American-trained bankers running Italy and Greece. And as of Friday late afternoon, the Germans have a plan on the table to remove Greek sovereignty.

But perhaps most important of all, the European Union is headed by a former Communist control freak, with a penchant for ruthless disloyalty in order to get what she wants.

The single-minded objective of American ezone diplomacy for the time being is to do whatever it takes to firewall the US against catastrophic ClubMed defaults. They have a very obvious ally in Angela Merkel, but one is left wondering whether they fully appreciate the profundity of her power-mania. She is a technocrat who believes in nothing except ‘good order’ and obeying the rules….so long as she is making the rules. There is little evidence from her career history that she sees the rules as applying to her. There is also no evidence at all that she is either libertarian or democratic: and as such, therefore, she is the perfect Fuhrerine for the European Union.

EU SKETCH: From this point, anything is possible

The Slog interviews some experts on the subject of Sovereign Identity

Following the German proposal for a system of Gauleiters throughout the eurozone, merchant and investment banks have been quick to respond with ideas as to how the EU as a whole could be monetized, and thus wipe out its sovereign debt problem. Already, leading lights in the New York Stock and Chicago Mercantile Exchanges have begun to involve the Frankfurt Dax in a scheme to create the world’s first Sovereign Exchange Market (SEM), in which shares in the 27 EU States might ultimately be offered on various bourses, subject to the success or otherwise of the Initial Public Offering (IPO) planned for Greece on two new Singapore and Shanghai SEMs later this year.

“Basically, I think we have to view this new space as, you know, kind of like when VW bought Skoda,” explained Todd Runtwolski, newly appointed Head of Nation State Marketing at Metro-Goering-Norodny in New York. “So although nobody wants to buy Greece right on account of it’s just donkeys struggling under the weight of obese tax evaders, now the actual sovereignty has been the subject of a takeover by Merkel, Schauble, Draghi, then we think investors will see this as a one-off mega-mezzanine opportunity.”

Runtwolski…’mezzanine opportunity’

Critics point out that The Gauleiter Memorandum* represents a hostile takeover widely opposed by Greece’s current owners the Greeks, but Mr Runtwolski brushed this aside as “negadive thinking”.

“Look, we’re all here for the shareholders in the end, right?” he asked assertively, “It’s all a question of ‘are you in or are you out?’ There’s 11.5 million of these guys and they’re starving. They’ll take the money if we cut them in. And if they don’t, then we’ll cut them out. It’s a win-win from our perspective”.

Asked about how MGN would set about the knotty problem of valuation, Runtwolski added, “It’s all a question of directional money-flow. Traditionally, the German State has been associated – unfairly in my view – with a one-way upstream surge of stuff that cynics might call asset-stripping. But really that only happened in minority sectors like Renaissance paintings, national treasures and slave workers. This time we expect the wealth of Germany to trickle down to Athens. It’s simple tried and tested Reaganomics really.”

But Todd was more circumspect on the subject of rebranding.

“That’s an area of some sensidividy,” he conceded, “Greece is a fairly well-established brand with strong associations of holidays, and a very strong smell of kebabs. But in the sovereign investor space, it mainly has connotations of crooks, food-poisoning, and a widespread lack of paperwork. So I guess we’re gonna need a liddle consultancy input on that one”.

I spoke about this issue to leading Sovereign Image advisers Bellend & Pottingshed. High-flying account director Jeremy Gnome-Orrals ran the lucrative Gadaffi account until its unfortunate demise last year, but from his newly-created position as Rogue State Business Developer, he gave us the benefit of his experience.

Gnome-Orrals….bottom-feeder

“Rebranding would be essential,” opined Jems, “And off the top of my head I’d suggest something like New Hellenic Enterprises or whatever. But that’s just dealing off the top of my head. Dealing from the bottom of the pack – do we have a salute here? – Zorba Creative Industries.  We’d need to go back to the classic history as a feint to help the target market forget, well, pretty much everything after 1670 really.”

Further down the line, I asked him, could other rebranding be adopted as the Berlin-dominated EU gradually took over fiscal responsibility for every sovereign member?

“Absolutely,” he enthused, “I mean, gosh, the possibilities are endless. Belgium, you see, is pretty useless and largely thought of in terms of bureacrats, mayonnaise and chips. But rebranded as Lower Goldman Saxony…..well, the sky’s the limit.”

After the events of the last week, I’m not sure there are any limits now. We shall see.

* The Gauleiter Memorandum, soon to be a Hollywood blockbuster starring people who don’t look anything like Tim Geithner, Angela Merkel, Mario Draghi, Wolfgang Schauble, Nicolas Sarkozy or Lucas Papademos.

TESCO SLEIGHT-OF-HAND STRIKES AGAIN

  Here’s another Tesco belter seen in the Alfreton store:

Special offer – two stone-baked pizzas for £6, one stone-baked pizza for less than half the price of two.

All using official head office stickers.

This is another dimwit staff problem I suppose?

 

A GREEK TRAGEDY REACHES ITS DENOUEMENT: but in the UK, there is only the triumph of polemics over news.

A study in obsessive compulsive disorder

Greek nationalism answers Germany’s fiscal imperialism

At 14.30 precisely today, Athens categorically rejected the German proposal to cede control over its budget to the European Union as a precondition for the second bailout package for Greece. “We can never accept this. A similar proposal was made in the past by a  Dutch minister. We will not even discuss it” senior governmental sources told Athens News Agency. This is an encouraging sign. If only the same could be said for the British media’s near-zero coverage of Teutonic neurosis. 

To requote Franklin Roosevelt, “Today is a day that will live in infamy”. This is not to be melodramatic about Germany’s hysterical call for Athens to hand over its sovereignty: after the abrupt replacement of Democracy in Greece by a Goldman Sachs/EU appointee last year, it was obvious to anyone with a feeling for history – and some common sense – where this would end. What’s happened is appalling; but the British response to it makes me, yet again, ashamed to be British. Our response is not so much appalling as apathetic.

Of the two most anti-Europe newspapers here – the Mail and Express – neither has printed a word about the German proposal circulated during Friday late afternoon. The main eurosceptic paper, the Telegraph, has similarly been in denial about its existence. The Independent ran a small panel about it this morning, since dropped in favour of a slight piece about Davos. The Guardian – silly old tartar – headlines Cameron’s ‘U-turn on fiscal enforcement’ without bothering to mention that Germany has moved beyond enforcement to financial annexation.

We are a strange race: our isles may no longer be sceptred, but they remain sceptical about everything. Unfortunately, our scepticism too often erodes into selfish disinterest and fixed ideas. Thus my own take on why the German proposal to take the job of Government away from Greece has gone unreported here is that all the right-wing papers hate foreigners (who gives a f**k about the Greeks?) and the liberal press hates anyone criticising the EU (It’s all for the best dearie, the Greeks – I mean, yah? – I love their dancing and all that, but who else other than the Germans can sort them out?).

I’ve been reminded today by wise comment-threaders at The Slog of Chamberlain’s disgraceful remarks about Czechoslovakia after the Munich ‘agreement’ in 1938: “a country far, far away with which we have little or nothing in common”. This was very much in the tradition of British assumptions about superiority: ‘Large Earthquake in China – not many Dead’, as the Times once reported in the 1890s.

But either way, today marks something of a turning point for me. A real Buddhist truth is that good comes from bad. The good for me today has been to realise that no good at all is going to come from me wittering on about how terrible something is any more because, as a form of civilisation, the West has lost the ability to feel what one means by ‘terrible’. All those precepts with which I was raised about justice, equality of opportunity, national self-determination and liberty have fallen down the crevasse that yawns between “Yeh…whatever” and “The markets must decide”. It takes me back to a great Shavian quote from Pygmalion, where Liza’s feckless Dad says, “Morals sir? I can’t afford ‘em”.

Two things are obvious from the non-reportage of today’s massively significant European developments:

1. Lone bloggers aren’t going to have any effect on these deeply disturbed people we call our leaders. I’ve been saying this for over a year now, so it’s about time I took my own advice: only concerted and mutual efforts by influential writers – in a collective, a virtual haven, a cloud or whatever the bloody hell else one chooses to call it – can ever act as a bulwark against this witches’ coven of sociopathic belief in the idea that money is the object, and the human race the subject.

2. As I’ve posted endlessly before, we are witnessing a step-change – one of those periods of history in which not only the way the game is played changes….so too does the ownership of The Club. This is why, ignoring even those who say football is “just a game” (may Matt Busby help them) I will keep reporting about its dissolution: for it is part of the problem, and presages broader developments. As braindead foreign players have made the UK’s Premier League the last word in fine footie, the wages paid indirectly by the Beastly Murdoch  have ensured that all self-restraint, grass-roots development and decency have disappeared from ‘The Beautiful Game’. In and of itself, it is a very, very beautiful game: but perverted beauty is a profoundly sad thing.

There seems to me little point in getting an ‘inside track’ on the news any more: doing so is merely playing to the generic news gallery of f**kwits who think this is what the media should be about. From here on, the only games in town worth playing for a thinking blogger are (a) taking the merciless piss out of all those characters who’s one defining character trait is that they lack character; and (b) writing with as little didacticism as possible about how much better things could be without all these people and their entirely valueless values.

This is going to lose me thousands of readers – I accept that. But in the end, I’m confident the mainstream will come to us. It will take more annexations of power by the financial psychos, more humiliations of nation States, and further destruction of those hundreds of years of achievement devoted to protecting real people from dictatorial gargoyles. It will involve the eventual collapse of the globalist ideal, the dysfunctional banking system, America, the EU and pretty much everyone up to China.

It may take a hundred years (although I think five would be nearer the mark) but in the end there will be a reaction. History never was and never will be a tediously extrapolated straight line: it is rather a continual learning process – held back only by poor little Homo sapiens’ dullness when it comes to learning. The three Rs and the slate beckon, and we will – in the end – all be the better for it.

 

GREEK SOVEREIGNTY HEIST: why the scale of injustice here is mind-boggling

Christine Lagarde…somewhat serpentine

Below is the BBCNews website’s second lead this morning. The main splash is Stephen Hester and his reward for achieving nothing bonus.

Greece debt talks ‘close to deal’

Greece could reach a deal with its creditors over the weekend, according to the EU’s Economic Commissioner, Olli Rehn.

• Flanders: Greek solutions
• Q&A: Greece debt write-off talks
• Draghi warns on eurozone credit
• Call for IMF funds from UK and US

The Telegraph, Mail and Guardian also have nothing at all about the German proposal. The Indie has it on the front page, but only as a minor feature. The author didn’t seem to see ethics or legality as an issue.

The story is the lead in German Spiegel  but absent from the English version.

It’s the lead at Reuters (which broke the story) and also in the FT; but the Wall Street Journal and Bloomberg don’t have it. The Americans are asleep: I think they’ll catch up.

All quite extraordinary. But I think that, for now, it would be as well to focus not on the threat to liberty, democracy and sovereignty (because very few people out there are interested, to be honest) but simply instead to state clearly and calmly why the IMF-Berlin led proposal is one of the most unjust and hypocritical ‘suggestions’ in European history.

The first and overriding injustice is that the people of Greece are being punished for acts undertaken by a Government they voted against when last given the opportunity. While I’m fully aware of the fact that taxes and the Greeks are virtual strangers, they didn’t suddenly start paying even less four years ago: the Greeks were allowed in to the ezone paying hardly any tax; now they’re not allowed to leave…but will be penalised for paying pretty much the same very littleness of tax.

Second for me comes the question of how Greece gained access to the eurozone in the first place. The answers overall lie at various points along a smelly back-alley called corrupt eurocrats, even more corrupt politicians, Brussels hubris (big = good/the more the merrier), French manipulation of the German position, and the Germans making a mistake. As there is little or no sign now of any of these players bailing Greece out in the proper manner, I must regrettably reach the conclusion that they wish to cover up their guilt by starving a nation, and taking away its legal right to exist.

Third is the obvious mammoth in this small back-room of Europe: had this EU/IMF operation been mounted to repay the original investors and get Greece back onto a sound footing, the ECB could at the outset have repaid all the bondholders in full – an amount of around 350bn euros – when Greece faced default for the first time last year. This would not in any way have been beyond its remit, as it would have been aimed at guaranteeing the currency and financial institutions of the global system…but it was the beyond the wit of Trichet to do it. M. Trichet is now retired on a six-figure gold-plated EU pension. We would then not have seen the spikes in Portuguese, Spanish and eventually Italian bonds that caused us to need (as of last week) in the region of 2.2 trillion euros to sort the mess out: 2.2 trillion euros that we haven’t got.

At the absolute maximum, keeping other bond markets buoyant for a few months would’ve cost 150bn euros, tops. The crisis would be history…..and the Brussels people could be introducing the ezone-wide regulations that Merkel now desires. Ah but ah but, people say, that would’ve left the ECB dangerously exposed. Quite likely, I agree: but has anyone been to look at the toxic wasteland that is the ECB’s balance sheet lately?

No: what happened – and here comes the fourth point – was that banking firms overlent to Greece (and other ClubMeds) ridiculously, and the ECB did absolutely nothing to oversee and control that. Quite the opposite in fact: Jean-Claude Trichet grasped the post-2004 cheap credit with both hands, and showered every new ezone entrant with it.

“You can’t blame banks for lending, it’s their business,” argue the apologists. Wrong: a banker’s business is to lend money responsibly to business and its employees – in a way that doesn’t threaten the shareholders or members. It is not to overload sovereigns with debt – knowing they can then trade the the bonds to Hedge Funds (or central banks) and get away scot-free.

Consider: the Greek GDP in 2011 was $312bn dollars. At the end of that year, it had outstanding sovereign debt commitments of £410bn. Was it really beyond M. Trichet’s abilities to notice that? Well, the answer to that question is, “maybe”…..because someone had been helping the previous Greek administration disguise the debt mountain in the national accounts. And that company was Goldman Sachs. The Greek PM Lucas Papademos used to work for Goldman Sachs. The Italian PM Mario Monti used to work for Goldman Sachs. The ECB Head Mario Draghi used to work for Goldman Sachs. This year the senior directors at Goldman Sachs shared a $12bn bonus pool. Goldman Sachs has never been indicted for the seminar it gave, in Athens in 2006, on the subject of lying to Brussels and the ECB. What do Goldman Sachs people have that the Greek people don’t have? Silly question, purely rhetorical.

Fifth, let’s return to a story The Slog and other bloggers ran a few weeks back. One of the first things mentioned on Geli and Wolfie’s list of Things thou shalt not spend Taxpayers’ Money on until the Debt is Serviced is ‘Defence’. Will France and Germany now accept Greek cancellation of those contracts as part of the sovereignty loss? Yes, hmm…..well. Quite. Er….

Many of us wondered what all the sabotage in Athens was about during the week. Well, now we know what it was all about. A nation of unwisely laid-back people is being sold to a pack of anti-social bankers in return for the continuance in power of their fraternity – and that of the elites that depend on them more and more. They are being sacrificed on the altar of Mammon and his greatest servants, Der fleissige Deutscher and The American Way. And my vote goes to guest-American Christine Lagarde as Serpent of the Century: she would rather her little kip at the wheel and beaming incompetence in France after 2008 went unnoticed than help 11 million largely innocent people. She is indeed La vache qui rit.

This morning, David Cameron finds himself a victim of the old adage ‘be careful what you wish for’. There’s certainly no dithering involved in the Troika takeover ‘proposal’, so what does our Prime Minister feel about it all? Well, he doesn’t care about anything except money and power really….so yesterday he quietly rolled over as the Coalition signalled that it will not challenge the fiscal enforcement role for European commission. Whether that includes sovereignty-snatching we don’t know as yet. Perhaps he’ll comment on the German ‘proposal’ later. Perhaps he won’t.

The only thing necessary for the triumph of injustice is for good men to do nothing. Mr Cameron is a bad man doing nothing. He is beyond the pail, sorry, pale.

Related: When will we get a Davos for Stavros?

                  Lots of lervely leverely Franco-German defence contracts