CRASH 2: The Fat Lady may not be singing, but all seven veils have been removed.

It’s a quiet news week (as they say) so far. But as I posted last Saturday, a lot of the élite’s diaphonous veil of defence is being lifted. The World Economic Forum’s 2013 report talks of a widening gap between rich and poor, and unsustainable government debt, as the overriding problems we face – an interesting sign that the WEF is prepared to almost say “Yup, this neocon stuff is indeed complete tripe”. But then, it said the same thing a year ago, and for those of the brass neck-fittings, it cuts little or nothing….especially not slack.

Mohammed El-Arian, however, wrote a piece in today’s (paywalled) Financial Times openly admitting that sovereign and central bank fiddles had made almost every market a mug’s game for the investor. El-Arian – one of my top four insighters in the world today – noted that ‘unusual central bank activism has artificially elevated certain asset prices…Several asset classes now have highly manipulated prices due to experimental central bank activities’. You’re right Mo my man, and no mistake: expanding central bank balance sheets tell a pretty obvious tale – and not always of elevation. Gold suppression is now so obvious as to be almost a thing that needs mathematically factoring in. As Pimco Man adds, ‘Have no doubt: central banks are both referees and players in today’s markets. With 2013 starting with so many liquidity-induced deviations, investors would be well advised to take greater care when pursuing opportunities that rely mainly on the “central bank put”.’

Of course, one could phrase this opinion more bluntly, as in “The whole deck of marked cards is also rigged just to be sure”, but that’s the job of a free press, not Mohammed El-Arian. More often than not, the press has avoided being free by tying itself in knots to date. But Jeremy Warner broke out today to write this:

‘Britain has not enjoyed a trade surplus in goods since 1981, or more than 30 years ago. This long-standing weakness has been partially compensated for by a relatively large surplus on services, and on overseas income, but even so, Britain has been in overall current account deficit ever since the mid-1980s. In other words, the UK has been persistently spending beyond its means. Despite the crisis, it shows few signs of changing its ways.’

Based on previous form, it could easily be true that nobody told Jeremy the order of the day is to shut up and take orders (much of his output suggests that Mr Warner never consults anything much beyond a 1954 Ready Reckoner) but I have to admit that his piece today did act as a slap across the face for anyone in denial about the depth of poo in which we find ourselves.

So sports fans, the segue into complete chaos is becoming increasingly obvious, the spin decreasingly convincing. The awareness of  Greek embezzlement, Spanish bank insolvency, Italian misreporting, British water-treading, Russian roulette, Chinese not very inscrutable hard landing outcomes, and American deckchair rearrangement is spreading…..and the counter-arguments are fading away. There’s a long way to go before Debbie Culcha awakes from her sofa-induced slumber – and the distractions are still myriad – but deception is now becoming much more difficult. And although the distortion factor is constant (‘the Basel Committee has decided to opt for a “graduated approach” to avoid “disruption to the orderly strengthening of banking systems or the ongoing financing of economic activity”) once the price of pizzas, Malibu and Southern Comfort starts to climb, none of the jargo-bollocks will amount to a hill of beans.

Up until this point, the inevitable future could be hidden behind the detail of today’s news. No more: the gloves are off, revealing the hairy hands and wolverine fingernails beneath.

Earlier at The Slog: Nick n Dave’s 180-degree burns

39 thoughts on “CRASH 2: The Fat Lady may not be singing, but all seven veils have been removed.

  1. I realised this earlier today when I read that Barroso had claimed that the existential threat to the Euro had been resoundingly defeated and things could only get better from here on.

      • Minutes in my case! Shades of his co-muppets quote of “When things get serious…”
        As for ‘Have no doubt: central banks are both referees and players in today’s markets.”… they are also in radio control of the ball…
        Apart from the darts match at my local, name me a game in town that is not being fixed? Gold, bonds, equities, LIBOR, government statistics…I could go on…
        Obfuscation is the name of the game. The press may choose to ignore what is coming down the pipe but like most folk out there they just don’t understand the half of it and the few that do are tied in to the increasingly common loop of bribery and corruption…
        Unfortunately railing against the machine is also counter productive but the quote from Margaret Read resonates – “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” OK small group – stand up and be counted…on the fingers of one hand.

      • I’m bewildered by Mr Barroso’s frankly ludicrous claim and even more curious as to why he has made it given that it could easily end up as his political epitaph. Is he really this stupid? Has he gone mad? Maybe he knows its all complete bollocks and want to simply ram it down the throats of his plebeian EU subjects in much the same way Eric Honecker used to behave in the days of the old DDR. The only thing missing from his speech was an added soundtrack of applause and cheering.

      • His kind have always been prone to the disease of conceit, or hubris or even just plain old fashioned assholeness. The markets were suitably unimpressed.

        I also detest Berlusconi but at least he was elected & once had me in stitches after reading a description he once made of Merkel & he might just totally screw things up for the Euro doughboys or at the least necessitate the occasional wearing of brown suits.

  2. “once the price of pizzas, Malibu and Southern Comfort starts to climb, none of the jargo-bollocks will amount to a hill of beans.”

    Excellent point.

    The hundreth monkey will awaken then it’s head for the hills time.

    • I can’t remember the exact percentage, but it is circa 4%, which, when achieved, reaches critical mass and things start to change. At around 1% we have a way to go, but nil desperandum good monkeys!

  3. I said about 6 months ago we would still be here discussing the ‘crash’ and we are still here discussing the ‘crash’. There are a few conditions that need to be satisfied before that’s going to happen. They are ‘SIC’ In no particular order, Sequestration, Integration, Confiscation. Until one or more of those conditions are satisfied, nothing is going to change. Oh, when’s Germany leaving the Euro?
    Nope, it is as it is, no wishful thinking, imaginative essay’s are going to change the running order.

    • Good point, and with such a large proportion of the population utterly transfixed by trivia who is going to notice that the fabric of the economic system that runs the world is torn beyond repair.
      To be honest I don’t think the number of critical thinkers will ever reach the level required to make the manipulators think twice and stop their gaming of the system.

      • It’s not that they’ll ever stop their gaming, it’s more that their game is clearly a game. We don’t have to understand how the illusion is performed, we just have to know its an illusion to break the spell.
        And then hopefully we can at least promote alternatives – the co-op was started by just 7 people. And they didn’t have t’internet.. :)
        Clive’s 4% from above isn’t beyond us, surely? And the drivers of economic change are always in the margins – in this case, redirecting more of our own economic activity outside of corporatism.
        Keep it outside of corporatism and it circulates much more efficiently – not just our marginal propensities at work but also far less escaping into tax havens etc.
        Pretty sure our fine local butcher isn’t using a head office post box reference in Switzerland :)

    • Yep very much agreed kfc. But the voices of the public are beginning to get louder and the excuses are starting to get more transparent.

      The reset might happen a little ahead of schedule if they can’t keep the plates spinning and the people distracted.

      After all, x-factor won’t start again until the autumn! The

  4. ‘Britain has not enjoyed a trade surplus in goods since 1981′
    So two years after the last Labour government left power.
    Thatcher really does have a lot to answer for…

    • The whole rotten political class over the past 50 years has played a big role in this and its rather unfair to single out Margaret Thatcher. The biggest decline in manufactured goods was during the 13 years of the last Labour Government (and the rise in Chinese industrial might).
      In 1981 during the Thatcher era the biggest problem was the high value of the pound to the US Dollar which famously forced British Leyland to largely abandon the US car market and end production of that great British socialist design icon the Triumph TR7 (sarcasm fully intended).

      • Very true, it is the high value of the pound that effectively finished the Meriden Triumph Motorcycle workers co-operative, along with no political support from the Thatcher govt. as it was politically the antithisis of the conservative ( deliberate small c ) ethos. I believe it was the only industrial co-op that was in any way successful; why buy an ancient design of Motorcycle for $2k when you could buy the latest from Japan for $1.500?

    • “Thatcher really does have a lot to answer for…”

      In one sense, but, as Mark says, only a little of the blame could be laid at her door. It was really only the car and coal industries she had a hand in destroying, although it would be more honest to say the coal industry destroyed itself through the medium of Scargill. British Steel was loosing £1m a day and so were the auto and other companies. There were several reasons for this, the most important being the failure to invest the post WW2 UK Marshall aid we were granted (more than was given to any other European country) in retooling and rebuilding our industrial base in favour of funding the NHS, Education, Nationalisation and other social programs. Nationalisation was indeed a social program because it was intended to ensure full employment and largely led to the gross overmanning, demarcation and Spanish practices that destroyed whatever remaining competitiveness our 1920s based manufacturing systems retained and was directly responsible for those £1m a day losses. It also fostered the mindset of waste and inefficiency that had companies like British Gas locked into multi-year contracts for imported gas at 3 times the spot price and the GPO taking up to year to supply a telephone connection, often a shared line, and regulated so that only their own equipment could be used. These were the ills Thatcher attempted to sort out, successfully in some cases, not so in others. Her biggest failure was in not doing the right things setting the conditions to generate value jobs to replace those culled, just as the current government are failing in exactly the same way.

      • @Peter C +100

        A very good post and this subject is covered very well in a book by the author and historian Corelli Barnett – The Lost Victory. It makes very uncomfortable reading for the political left and the political elite in general.

      • @Peter C: I agree with your observations regarding failure to invest in the updating of outdated manufacturing methods/equipment/ etc. However, this largely resulted from banks/management/shareholders, predominantly politically conservative, saying no and preferring to opt for profit in the near term – in contrast to Germany for example, the reasons being fairly obvious, of course. The British motorcycle industry and, of course, the car industry are classic examples – there was never any shortage of good ideas from engineers and designers, just a reluctance to invest in them. I don’t believe that Margaret Thatcher had anything like the degree of vision that would have been required to address the problems we faced then, and neither did Labour. The woman was not far short of being a pathological egomaniac, and proud of it. Claiming exclusive ownership of the moral highground is rarely a viable path to resolving any sort of disagreement and she was as guilty of this as was the opposition. Personally, I experienced her government – and all those since – as being in large part dependent on the politics of spite and self-enrichment. She may have killed some dinosaurs, but to replace them with what? A new breed of raptor which takes every bit as much out of our pockets as the previous one and, furthermore, keeps it to themselves. The state of the utilities now, for instance, is an absolute disgrace – they were nationalised in the first place,as much as for any other reason, because they didn’t sufficiently serve the public good in a multiplicity of private hands, a situation we have been made to revisit. Certainly, the roots of our current financial morass can be laid as much at her (and Ronald Regan’s) door as much as at anyone else’s. I am no apologist for either party but find it quite impossible to find anything that Thatcher did as worthy of congratulation, more the start of an exponentially rapid descent into ignominy.

  5. And now on a not entirely unrelated note 8 HBOS banksters charged in connection with a 35 million pound fraud in involving kickbacks on loans. Happy days

  6. I am often told that the debt is “unsustainable” but this simply is not true. Bond holders don’t want an end to government debt it’s the income from these that keeps the 1% in the manner to which they are accustomed, at our expense of course.

    QE is proof positive that no sovereign nation state needs to borrow. The guys over at positivemoney.org make the case very well. Without debt there is no money so it doesn’t make any sense to cut it. It does make sense to cut out the bond holders who cream off billions with few people realising it.

    There will have to be a debt jubilee at some point it is capitalisms time honoured way. I am rather taken with SIC by that rouge Kfc. When we get angry enough a few dozen people will realise they aren’t as rich as they thought.

    I don’t think it will unravel in my lifetime but I do hope so.

    • bill40 : You say
      “There will have to be a debt jubilee at some point it is capitalisms time honoured way.”
      I hear this many times, and I’m not saying it is wrong, I just don’t understand how the mechanics of it will work.? Debt Jubilees tended to occur, when it merely amounted to some 30 goats being owed, between two Arabs, and written off as a debt.
      But under today’s global financial ‘tangled ball of string’, I just don’t see how the ‘nuts and bolts’, of a debt jubilee, will work?

      • Bill40 :
        Did a bit of a speed -read of the link you gave but still not clear how it would work?
        Also, South Park Stan’s unlimited credit card, seems to have turned him into a one man QE, but I’m still not clear where it goes from there ?
        Mortgages? Let’s take two houses, of value £250,000 each.
        One couple approaching retirement, and due to ill health, struggle to pay the last £20,000 of their mortgage. But they retain 230,000 equity.
        Second young couple, have overstretched themselves, and with a new toddler and one less income can’t make the mortgage payments. They owe £210,000 on the property.
        How would a debt jubilee scenario work for these two families?

  7. The seven veils may have fallen but the seven army-surplus blankets are still in place. I know something about alcoholic denial, the real thing, as I still have to live with it – albeit not under my roof. Research shows that overly ambitious people are the most susceptible group when it comes to alcohol and denial is the cornerstone of this addiction for all groups. For a while I attended Al-Anon, for friends and family; the current behaviour of those ‘calling the shots’ would be intensely familiar to anyone who visits those rooms.

  8. “As Pimco Man adds, ‘Have no doubt: central banks are both referees and players in today’s markets.”

    That’s why the intention of the writers of the Bank of England Act 1694 was: “… to avoid the serious oppression of Their Majesties’ subjects, the Corporation is not to trade… the fine is triple the value of the trade…”

    But then the FED was born and the Central Bank of Central Banks in Basel and one Central Bank per Nation State, as the West went on a ‘divide by war and rule by Central Bank’ campaign …

    And now the Central Bankers think they can ‘save’ us with One World Government and One World debt-based Currency, Thank You Very Much.

    Keep de-mystifying, John!!!

      • Also manipulated by the Central Banks for THEIR purposes of manipulating NATIONAL currencies. Check GATA http://www.gata.org

        And a credit-based one-world-currency would give the issuers full control.

        The assumption has to be: when people discover that they can help themselves to the honey pot, they do. Creating currency is the ‘sweetest’ honey pot there is.

        That’s what Anselm Rothschild realised when he created his family’s empire.

  9. John,

    A debt jubilee would be more for world finances than for individuals. The same people would still be rich but with a nice new haircut.

    QE for the people would be a card with say £50k on it for every adult. This must be used to pay off debt where it exists and rewards the thrifty. This is very simplified and I suggest you read steve keen for a more detailed analysis.

    Can’t reply direct the site seems a bit fuc….. broken.

  10. The fact that the billionaires at PIMCO are upset by the rigging of the game gives you some perspective of how high up the pyramid this thing goes.

  11. Pingback: Every man for himself, episode 3 | The Slog. 3-D bollocks deconstruction

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