SKETCH: The madness of billionaires, central bankers, and Chancellors.

The Titanic, the Quantitative Easer, and the Austerititor System

The way in which you grasp just how disturbed the super-rich and powerful are is by observing what they do with stacks of money when given half a chance.

Australian billionaire Clive Palmer is going to build a 21st-century replica of the Titanic with his pile. He plans to sail it from England to New York – accompanied by the Chinese navy –  some time late in 2016, once a Chinese dockyard has built it for him.

Mr Palmer has signed a first-stage agreement with Nanjing province’s CSC Jinling Shipyard to build the ship as part of a planned fleet of luxury liners. As Palmer’s investments include property, coal, metals, soccer, and horses, you can see that he’s a philanthrope only in the sense that his definition of philanthropy is pretty eccentric….and eclectic.

It’s not clear what the Chinese navy’s role in all this is going to be, but one must also wonder about several other imponderables. These would be (1) What speed will Titanic II be doing off Nova Scotia (2) will the same approach to unsinkability be employed  (3) will there be enough lifeboats this time and (4) who’s going to be in charge of iceberg discipline?

The only time I’ve agreed with Andrew Marr this year was when he said three Sundays ago that the entire Titanic centenary jamboree is boring, tasteless and merely another disgusting attempt by Mammon to grub up some money. Looking in a WH Smiths at the weekend, I was stunned by the repetition of the word ‘Titanic’ on every shelf, in every magazine, and on the cover of every film review. And almost as tedious, hardly a day goes by without at least one financial writer referring to one economy, bank, government or another having ‘its Titanic moment’.

What they should of course be writing is that the governments and central bankers of the West face a titanic struggle. Mervyn King is another man in charge of lots of money (albeit ours) and he too is an object lesson in what not to do with it. The Bank of England Governor has just 10 days before he and his MPC drones meet a week on Wednesday to decide, as Bloomberg put it this morning,  ‘whether he can risk halting stimulus for an economy trying to shake off a recession’. I would’ve phrased it slightly differently, as in ‘whether he can justify chucking taxpayers’ hard-earned money at banks so they can stay alive without lending us any’, but maybe that wouldn’t be particularly constructive.

The point one should really make about Bloomberg’s dim-witted observation is that it is based on roughly the same amount of evidence as that supporting the existence of the Loch Ness Monster, minus only the grainy photographs. Neither QE nor Zirp have made the slightest difference to the US or UK economy, because that was never the idea in the first place. (Bernanke himself is still trying to persuade observers to forget his paper of 1988, in which he rejected QE as unproven and ineffective).

Anyway, data that starts pouring in tomorrow on manufacturing, construction and services, as well as consumer credit and house prices, will lead to his decision on May 10 to almost certainly continue doing it. Put it like this, given we are now officially back in recession, what bigger number could possibly come along to suggest he should stop doing it?

Well, perhaps I should answer my own question re that one. You see, it’s not just that Merv’s money-lobbing marathon is completely pointless for 99.5% of the citizenry and 71% of the economy: it’s every bit as much a problem of the quite remarkable endurance and stamina he has displayed in throwing vast amounts of our money at the firewall.

This is where the debate going on in the columns of the FT and on the floor of the Commons at the moment really begins to sound like something Jonathan Swift might have come up with while chewing some fresh new leaves of Mescalin. By the government’s own reckoning (and the Bank of England agrees) Mr King has spent £325,000,000,000 on the project thus far. That’s 325 billions, by the way: I know billions are old hat these days, but it’s more money than Imelda Marcus could’ve spent had she lived to be 7,800 years old, and had the internet to go at. In fact, the age I hail from was one where 325 was a pretty big number too.

Compare and contrast this number with the Treasury’s estimate of what net savings are to be achieved by Draper Osborne’s cost-cutting scissors between 2010 and 2014: £13,000,000,000. Same number of noughts involved, but in front of them is a number which, research shows, is one twenty-fifth of what the Bank of England’s Governor has spent propping up the banks stimulating an economy in the last eighteen months…an economy that mulishly refuses to be stimulated.

The whole idea is predicated on an inability to understand basic mathematics. Not only are these targets absolutely irrelevant to Britain’s survival or insolvency – we are talking about saving over four years a sum that represents very little more than the deficit per annum, and a mere 1.4% of the National Debt – even these aren’t being achieved: the current running annual budget deficit rose to £11.1 billion last February, and borrowing rose to £15.2 billion.

But just take in the mismatch here: Sir Mervyn King has spent 96% of the Get out of Jail pot on strengthening the financial system, while Little Osborne has patched just 4% of the hole in the bottom of the pot:

THE OSBORNE AUSTERITITOR SYSTEM. Legend:

A – Hand of M. King inserted into neck and £325bn removed to help Needy Banker Benevolent Society

B – £20bn going to Internation Bankers in debt repayments over same period.

C – The Chancellor’s pot-hole suspension-bridge. (Under construction, due for completion 2078)

D – Bottomless bucket previously referred to as National Debt. (Only 1% visible above the waters)

It really isn’t going to work is it? No, it isn’t.

But here’s the truly terrifying part: Ed Balls has an idea for another machine, the Bollockometer. It consist of his mouth emitting spittle and bollocks. That’s it.

Enjoy the rest of the day.

 

61 thoughts on “SKETCH: The madness of billionaires, central bankers, and Chancellors.

  1. As to the icebergs that’s the navy’s job to blow them out of the water if they don’t follow orders
    All those on the promenade deck will then have ice added to their cocktails even if they didn’t want any

  2. We’ve had the QE debate here before.
    – since Merv is creating the money, it can hardly be £325b of “our money”.
    – as far as I know he isn’t propping up the banks with it, he’s funding govt spending via the back door. Demonstrated by what his QE splurge has been mostly spent on (Gilts).
    – I think the current BoE bias is towards QE and the only thing which will cause him to end it is if consumer inflation takes off more than it already has.

    • “…. since Merv is creating the money, it can hardly be £325b of “our money”

      Quite right in theory. The government buys back gilts it sold to the banks with magic money which turns into real money in the banks’ hands which they can use to do all kinds of wonderful things; pay themselves huge bonuses because it is after all a profit; they can buy more gilts, after all the government makes sure they can’t lose; they can buy more shares, keeps the Footsie up and makes everyone feel confident; they can fund mega takeovers, after all they’re rolling in cash. Of course, they can’t lend it as private mortgages or loan it to small business because it then becomes magic money again and the plebs haven’t got real money to pay it back with and turn it from magic into real money.

      For the government they can’t lose. Their banker friends have gotten richer; the stock market bubbles along happily instilling confidence that all is well; they can still borrow and spend like there is no tomorrow (well there isn’t really); the plebs have had another good bit of what money they have ripped away from them so government and banks can spend it properly rather than see it wasted and best of all, when we return to ‘growth’ all those QE bought bonds can be sold back to the banks and all the magic money just disappears again without any harmful effects like devaluation or inflation.

      Aren’t they clever?

      • Not as clever as they think they are.
        The BRICS are not amused.
        That’s what holding off QE4.
        QE 3 is alive and well,just called dollar swaps instead of QE.
        The jig is up.The ECB and Fed are in a box.
        Something has to happen soon, before the BRICS have
        their own alternate SWIFT system in place.

      • Wonder what that could be, seeing as the Chinese could easily wheel out their reserve of Treasury bills and start waving it about – “Coooeeee see this guys? anyone like to guess what it is?”. I think they know how a fox gets rid of fleas.

  3. I’m not a great fan of Microsoft, but I respect Bill Gates for his philanthropy. It harks back to another generation when Andrew Carnegie sponsored libraries and there were things like Guiness and Peabody Trusts, Mr Rowntree built an entire village for his workers and so on.
    To waste billions on vanity projects brings only shame and marks you down as a d***head.

    • You might want to find out a little more about Bill Gates
      senior before praising Jr’s philanthropy.
      The apple never falls far from the tree.
      Some respected scientists claim the vaccines provided
      by the Gates Foundation contain a virus that causes cancer.
      Stealth genocide or philanthropy ?
      That is the real question.

      • @Winston. Don’t know if it’s still the case, but when Vera Scheiber (1990’s)was denouncing vaccines as containing, among a cocktail of other crap, mercury, monkey genetic material and agrochemicals, nothing surprises me. (Scheiber’s lectures cited and projected on the screen peer-reviewed articles in British and US medical journals actually quoting the above as fact.)

    • @MaxC: The problem I have with your theory is that Gates (who really is not a very good person) is acting like a socialist government: ripping your money off you and spending it as he sees fit. Wouldn’t it be better for you to keep your money and spend it as you see fit?

      • Yes ive heard a few things about Mr Gates as well, im glad im not an African child!!

        As for something happening? “wait for mid may”

        And finally “show me a millionaire and I will show you a crook” Ithankyou.

      • @Bankrupt. I was only trying to be nice about Microsoft, for a change, FFS :-) Please tell me there is a philanthropist out there somewhere, somebody.

  4. I know it’s boring ,but the Titanic analogy is appropos.
    The bridge crew are playing a combination of;
    Irish pass the parcel, and musical chairs on the “poop”
    deck,.as the global ship of banking flounders.

  5. [OT]
    John, dunno if this will please you or not, but watching Cameron right now in the HoC about Hunt…he’s wiped the floor with Red Ed and shown him up for the pathetic little bandwagoner that he is. Hattie also got a dose of his wrath.

  6. Titanic was just the first fluttering of a great year of orchestrated distractions. The Will ‘n Kate show last year hasn’t really lasted (the old Royal Wedding Trick, first pioneered by Sailor Heath in the 1970s with Anne & Foggy Phillips), so this year’s blunderbuss of Titanic, Jubilee, Euro Football and Olympics represents throwing everything Desperate Dave has got in his armoury at the problem.

    He’s holding the ultimate ‘Harry Weds Pippa’ weapon in reserve, but don’t count on that one not being used in 2013 anyway. Much depends of whether World War III starts on time………

  7. “Bollockometer” love it, think scrotum will have to ask susan boyle oops I mean Gondor Broon for permission to use it though as it was his invention

  8. Actually, the Chinese Navy is to escort Titanic 2 from China to Southampton, not from Southampton to New York, in case any one cares.

    And, as Bankrupt Taxpayers notes, QE is to finance government spending not banker spending. And it is achieved by buying bonds in the open market from anyone who happens to hold them, including for example, the Bank of China, or John Ward, or anyone else. Any money received by London bankers is simply in return for the money the paid when the bought the bonds.

    The idea that QE involves giving money to bankers is silly nonsense.

    The reason for the depression and the perceived need for QE is that Europe is not competitive with China because their wages are ten to thirty times higher. No amount of blather about bankers can entirely obscure that fact.

    QE is helpful because it keeps prices rising while wages are held more or less flat, so that real wages fall. Give it another ten years or so and Britain may be competitve with China, Vietnam, Indonesia, etc. Except by then the industrial workforce, and all its skills will have been largely dissipated.

      • BOLLOX yerself.

        There would be no need for the creation of money if the government slashed spending from say 50% of GDP to the monumentally huge amount spent by government in Margaret Thatcher’s day, i.e., about 45%.

        But that would cause a depression, so they print money and go on pissing it away on useless programs and wars of criminal aggression.

        Eventually, the British GDP will consist of nothing but bullshit government programs that are considered in the national accounts as being of equivalent value to making cars, computers, furniture and clothing — the sort things Britain used to do quite well but cannot do in competition with four billion third worlders earning $350.00 a month.

      • As for you Ratcatcher, don’t know where you’ve got your long nose poked, but better to put your brain in gear instead of making stupid comments, unsupported by the slightest evidence, intelligence or argument.

    • What about the bank “carry trade” ?
      This is a Two fer.
      Finance Govt. debt, and recapitalize the(all of the)
      insolvent banks.
      Lets all just follow the Icelanders, and be done with it.

      • Does anyone here have a shred of evidence that QE has anything to do with bank recapitalization? I don’t think so. And if they do, why won’t they be explicit about it?

        QE is in fact about stimulus. Pumping money into the economy through stupid government programs, which means beefing up the civil service, pouring more billions into non-functional schools, hospitals providing poor to appalling service, and other programs to enlarge the white collar welfare class upon whose loyalty the government depends to dispossess the productive of most of their wealth, disseminate propaganda and spy on every citizen.

        Austerity just means cutting the insane waste of the last government by a tiny percentage, while leaving the government still in massive deficit — covered by money printing.

      • @CS
        QE is in fact about stimulus. Pumping money into the economy….

        Did Merv ask you to say that ?

        pouring more billions into non-functional schools, hospitals ….

        So why is the economy in such a poor state with £325bn of QE sloshed into it ?

      • I suppose the approximate 850 billion to bailout the banks didn’t happen either, Oh…………. I’m forgetting that this sum of approx. £13,600 per every man woman & child in the UK was a wonderful if compulsory investment & will eventually make us all rich…………In my estimation – around about the time it takes for pigs to evolve wings.

      • @folks: Follow the money. Everybody’s right and wrong!

        The BoE has magicked up £325 billion of new QE money and bought old gilts off the banks with it because it can’t buy new gilts directly from the Treasury…due to rules, legal and laughing stock issues.

        The banks don’t want to lend the proceeds of sale of their old gilts because their balance sheets are in a mess *and* they’ve been told to increase their capitalisation by govt and Basel III. So they do with it what they always do with their cash stash in the cupboard: they buy NEW gilts from the Treasury. Govt gilts are the prime prescribed investment for bank capitalisation stashes. Hey presto. The Boe QE is funding government spending indirectly. Merv is exposed as a same old same old money printer like any other banana republic.

  9. It’s not clear what the Chinese navy’s role in all this is going to be,

    A. Collect on their IOU,s
    B. Get within cannon range of Wall St.
    C. Escape from China.
    D. Visit their new colony.

  10. …”Enjoy the rest of the day…”
    You bet we will.
    We will be in the stadium watching the Red Devils giving the ‘Quatar upstarts’ a thoroughly good spanking….
    heh heh heh ho ho ha hahaha…..

  11. Bravo
    They truly are directionless, leaderless, incompetent, useless. clueless, dumb, stupid…….please feel free to add, this is a VERY long list!
    By the way, is this the very same pot that was turned into an umbrella?!

  12. A little off topic here. But anyone have any news of the “holdout” Greek foreign bonds due for payment on the 15th May?

  13. ” the entire Titanic centenary jamboree is boring, tasteless and merely another disgusting attempt by Mammon to grub up some money.”

    I absolutely agree.
    These “people” are just vile.

    • Its not so much about money – as the smoke and mirrors required to keep the x factor crowd suitably oblivious to what is on the way.

      As to vile – I think that is a tad understated :)

  14. @CS
    Just dig into those ‘assets” on the TBTF banks balance
    sheets.If those ‘assets” were mark to market, and
    not mark to unicorn shit as currently,you will see who is
    being ‘eased’..Which is why no money is being lent to anyone
    else except those self same Govt’s and the ECB or Fed.
    You are a troll or shill, and not even as bright as Krugman,which is
    not saying much for your intelligence.

  15. Pingback: LABOUR POLL LEAD: A loss of faith in the Coalition, a loss of face for Camerlot. | A diary of deception and distortion

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