Current economic model collapsing. Business as usual.

The Devil is very much in the detail of our economic problems

As the British Chambers of Commerce downgraded their UK economic forecast, both Mervyn King and Ben Bernanke came under new pressure to raise interest rates. In Greece meanwhile, the Athens Government will effectively have to agree to being ‘taken over’ by a consortium of the EU and foreign sovereign lenders as the quid pro quo for giving them further bailout monies. Top of the agenda for intrusive action is creditors moving in to forcibly sell Greek assets.

This week will also be a crucial one for Italian and Spanish bond auctions, both countries needing to get the money away and show demand for their debt. And there are signs that the Obamites are already engaging in ‘expectation management’ about upcoming growth and unemployment statistics.

But for the fat cats in the black hats, things go on the same as ever: grabbing, cheating, lying, controlling and influencing.

Chief executives of FTSE 100 companies saw their median earnings rise by a third to £3.5m last year. Not surprisingly, this evoked widespread cries about top wally rewards being out of line with share prices and employees’ pay. The median increase – the midpoint between the top and bottom earners – was more than treble the 9% rise in the FTSE 100 index over the period, according to a survey conducted jointly by MM&K and Manifest.

The findings came as ordinary earners endured the longest wage-squeezefor ninety years. Average earnings grew less than 2% last year, about half the rate of inflation. But FTSE 100 CEO average earnings were 120 times that of the average employee, a multiple that has risen from 45 times since 1998.

With no performance-related argument to fall back on at all, there truly are neither commercial nor moral grounds to support such greed. Like the Whitehall Sir Humphries who voted themselves huge pension benefits without reference to a single elected representative, these folks are taking the piss.

But they’re not alone. Abbott Laboratories’ anti-cholesterol drug Niaspan secured a US FDA  patent in 1997. The chaps at Abbott have been selling shedloads of the drug ever since, and today it’s in the  global drug sales Top 50. In 2009, global revenue came to $717million, and last year it was over $900m in sales value.

The drug is, however, useless. It doesn’t work, and it never has.

The US National Institute of Health has just announced the results of a 5-year study of Niaspan’s clinical performance. NIH official Jeffrey Probstfield M.D. told the media last week (my italics) that, “The lack of effect on cardiovascular events is unexpected – and in striking contrast to previous trials and observational studies”. 

It is often thus with pharmcos. Sales trials and results are sort of accepted, but then looks of offended innocence are offered to the FDA when such ‘results’ are contradicted later and/or elsewhere. I wonder if Bin Laden’s hideaway – Abbotabad – was named after this company.

And so we wend our merry way back to the banks….where else? Like Newscorp, Goldman Sachs places a huge premium on having total control of a high level of influence upon the political process. Goldman announced late last week that it had hired Senator Judd Gregg as an adviser to the bank. The New Hampshire Republican will “provide strategic advice to the firm and its clients, and assist in business development initiatives across our global franchise,” said the firm in a somewhat triumphalist statement. And just in case you were wondering which lever-puller was behind this hiring, Lloyd Blankfein added, “Judd Gregg’s experience and insight will contribute significantly to our firm, and our continuing focus on supporting economic growth”.

That must represent the broadest definition of ‘economic growth’ outside of France. Anyway, in the wake of the 2008 global crisis (at the very least partly down to the excesses of Wall Street firms such as Goldman) Gregg was an outspoken critic of the Obama administration’s effort to tighten oversight of the financial industry. He was also a staunch defender of Goldman during the heated congressional debate over the $700 billion bank bailout. You remember that one, surely? It was the episode in which Hank Paulson got on his knees to beg for the money in order to stop the sky falling in. The money was then used for another purpose entirely (underwriting corporate mergers) but spookily, the sky remained intact. Only last year, Gregg said that Democrats were ‘over-reacting’ to civil charges filed against Goldman for securities fraud.

“I hope that I can bring to Goldman Sachs some ideas and perspectives that will help the firm continue to be a leader in supporting its clients in their pursuit of the capital, credit and advice they need to be successful,” Gregg promised. Seems to me he’s just spent the last three years delivering that promise free of charge anyway.

Could it be (some scurrilous muck-rakers are asking) that former Senator Gregg had a retirement stipend in mind when he gave Goldman Sachs all that undying loyalty? Nah – course he didn’t. A US Senator bought by a defence, tobacco, oilco, pharmco or banking concern? It’s unthinkable.

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There is, in most Western societies, a tendency amongst the skilled majority to go along with an elite earning obscene amounts of money – if they’re doing pretty well too. There is even a shrugging indifference to wealth discrepancies if – despite one’s standard of living falling a bit – there are still some arrogant pricks getting Bollinger delivered on draught to their £140M  mansions in Chelsea Harbour.You might still believe that such folks are essential.

But when adversely affected by varietal bad tidings, sooner or later even the most reality telly-fixated morons are going to get a bit uppity about other incompetent twerps living the high life at their expense.

Losing your job, not being able to afford to buy a property, not being able to afford the rent, inability to get a mortgage, having the house repossessed, and watching the value of pension, house and salary plummet. All or most of these going on at the same time is unlikely to evoke a Christian response. When your own country goes to the wall and suddenly finds itself swarming with high-rolling alien lenders (many of whom helped cause the problem in the first place)….well, that’s the point at which even the most mild-mannered citizen snaps.

 

9 thoughts on “Current economic model collapsing. Business as usual.

  1. “When your own country goes to the wall and suddenly finds itself swarming with high-rolling alien lenders (many of whom helped cause the problem in the first place)….well, that’s the point at which even the most mild-mannered citizen snaps.”

    Quite so …and he/she will vote for a socialist Strong Man who promises to redistribute the obscene wealth accumulated by these crooks and spivs in the banking industry …and a growing number of other industries.

  2. Perhaps the true example of how our world works are the debt management companies that emerged to help the very many people badly in debt meet their obligations who then kept the money the people paid them and did not pass it on to the creditors. I suspect most of this went off shore. So many people’s lives have collapsed and it is unlikely anyone will be charged with fraud.

  3. I’m lost for words.
    Business as usual. Shrug. They should be ashamed of themselves, but they’re not. The devil has got into them, that’s why…….The devil.

  4. My 83 year old mother wanted to give a substantial gift to charity to feed people in east Africa. I explained I could do it by internet transfer, or Bpay, or credit card debit, or other electronic means on the charity web site, but she said it wasn’t real money. She suffers advanced dementia and often can’t find her way to her bedroom or the loo, but how come she knows more than Ben Bernake and the London paper shufflers?
    We finally settled on sending a hand written cheque, though that is several levels of abstraction away from real currency. Please discuss.

  5. Whats going to happen in October, William?
    The council, where I live, is threatening to close the secondary school my daughter will go to in two years time. No money they say. They have already threatened to end all music tuition in the city and my daughter plays three musical instruments. Lack of money they said. Fortunately there was an outcry and the closure was postponed. My daughters primary school had to beg round companies for some vinyl to cover a classroom floor that was just an all-over trip hazard – the council said it couldn’t afford the repair. I am in the 5th year of a pay freeze and my wife has been told she must now work a minimum of 12 hour shifts in the hospital where she works, (so less staff are required in total). The oil company that operates the rig I work on made key staff redundant after our government raised the taxes on the North Sea offshore industry and I now have to carry one of the jobs as well as my own, for the same pay of course.
    And all this in an area whose affluence is second only to London, apparently. Goodness knows what its like for people living in poorer areas of UK plc.
    Quite what the straw will be that breaks the camels back I don’t know, but I think rioting voters are are not far down this road we are on. Still, as David Cameron and Nick Clegg tell us, “we all in this together”!

  6. David,in October those bankers are all back from their summer hols,and notice that the money has run out,and that’ rioting voters’ has spread from Athens,Dublin,Madrid,Paris to Rome,and that being really short the euro is a one way bet.You and your wife have jobs(cf. Spanish unemployment),but things will get better quite soon,as we all pay the price for the abolition of the economic cycle.

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