In this, the final crunch match between the Eggheads and the Crash, team spirit among the Eggheads is not all it might be. Ben Bernanke looked almost truculent following Christine Lagarde’s man-the-lifeboats speech at Jackson Hole last Saturday, and the boss of the EU’s piggy bank Jean-Claude Trichet said she was “quite wrong” to call his little piglets wobbly. Although she is of course quite right about their fragility, in one mighty leap she has gone from driving the French nation into debt, to complaining about the amount of cash in European banks not being enough to cough up for disgracefully accumulated sovereign debt in the EU. Quietly seething in the Elysees Palace is Nicolas Sarkozy, a man already behind in the polls, and thus not exactly crying out for a collapse in the public finances on his watch.
Trichet doesn’t like Lagarde, and he doesn’t like Frau Merkel much either. But Merkel herself is in a deal of trouble, because a head of steam has been building up in Germany that, as I’ve long suspected, is going to call the next round of bailouts offside – including the one being lined up for Greece – and very probably defeat Merkel in the Bundestag. The Greek people in turn aren’t getting on too well with their ‘government’, which has effectively been neutered by events; and after requesting emergency aid for its banks last week, the Athens Government facilitated the fastest merger in banking history by allowing its second and third biggest institutions to join forces – the better to pile up the sandbags against the coming waves of foreclosure.
So apart from US and French Presidents distracted by re-election, a revolution on the boil in Greece, a constitutional crisis about to sweep Merkel away in Germany, the Italian leader Berlusconi beset by charges of under-age sex and corruption, and at least one major bank already on a drip feed from US FX emergency dollar funding, the Eggheads team is focused and ready to face the challenge ahead.
Yes, well – not really: the Eggheads are Arsenal in this encounter, and Crash 2 a rampant Manchester United. I feel sure that in the various White Houses, Downing Streets, Elysees Palaces and Beijing mausoleums around the globe, only the truly dense people at the top are in the slightest doubt as to the eight-goal rout that is coming. The main task ahead now, for the politicians who facilitated this mess, is one of finding the best things to blame – via which, they hope, any responsibility attaching to them might usefully be shrouded in heavy mists of alleged serendipity.
Last time around, Bush blamed the ease of access to alcohol on Wall Street. Eric Daniels of Lloyds Bank blamed Greenspan, and Gordon Brown blamed Esper & Marlene Hillbilly of The Tree-House Branch, Tennessee, for their unwisely successful $2.3M mortgage application of September 2004. Adam Applegarth of Northern Rock blamed the rates for going up, Hank Paulson blamed Congress for not giving him absolutely all the money in America when he asked for it, and Goldman Sachs blamed Clinton for forcing banks to give black folks mortgages they didn’t deserve.
This time, the Chinese were first out of the blocks, naming and shaming the US as the prime culprit. Washington didn’t have to look very hard before alighting upon S&P, the ratings agency that had downgraded its debt; although some time before this, Obama had fingered the GOP for its audaciously irresponsible attempt to stop him launching a free National Wealth Service during election year. The Tea Party blames Washington because it’s there, but at the moment Greece is in the lead by apportioning equal blame to Goldman Sachs, the ECB, the previous government, the IMF, Moody’s, Fitch, and anyone who was nuts enough in the first place to ever expect them to pay the money back.
Last Saturday was Christine Lagarde’s bid for freedom, and it’s clear she has two targets in mind: the banks for not recapitalising, and the taxpayer for being too mean. Both are incredible as objects of blame, but its never stopped her before, and it certainly won’t now. So it only remains for me to size up what the late starters will do….once even they have spotted the inevitability of le deluge.
The Labour Party will blame the UK Government’s programme of cuts – except for Harriet Harman, who proposes to lump all the guilt onto the EMA scandal, as she’s taken to calling it, and gender inequality. The Guardian will probably blame everything done since May 2010, and toss in a conspiracy theory involving James Murdoch for good measure. George Osborne will blame the EU for not getting a grip, and – if things turn really tough – David Cameron for giving in too much on expenditure cuts. Cameron himself will naturally blame Brown, but single the banks out for special praise and complete absolution.
Angela Merkel will blame lazy latinos outside Germany and electoral agitators inside Germany, prior to finding a Dutch UKIP militant setting fire to the Reichstag, and then declaring a State of Emergency. Sarkozy will blame the Germans for exporting (and exorting) too much, and the British for not stepping up to the negotiating table. President Herman Van Rompuy and President José Manuel Barroso will blame Brussels for wanting two Presidents, and EU citizens for not loving the EU passionately enough. Sarah Palin will blame the Russians, and flouride in the water supply. Putin will just pip Greece at the post by blaming the weather, the Ukraine, the Mafia, South Ossetia, the Chechens, anyone from Georgia, and Boris Nemtsov….assuming he avoids committing suicide by falling off a Moscow tower block before Crash 2 finally gets into its stride.
And finally, what of perhaps the two most influential players on the stage of this third-rate farce – Ben Bernanke and Jean-Claude Trichet? Bizarrely, I’d imagine that Bernanke will blame consumers for deliberately refusing to consume, as they were meant to do in his models….although he will be patronisingly sad, rather than angry, in making this judgement. And Tricky Trichet will blame all 27 EU member States for their insolent disobedience to the dictates of his Central Bank. For they unpardonably sabotaged his one big plan…to retire before any seriously smelly stuff got chucked at the fan.
What we are about to see is the Search for Sanctuary that always accompanies a screw-up. And out of all the blamestormers, perhaps only one will lay the blame squarely at the door of deregulated banks: Mervyn King, the Governor of the Bank of England. He won’t be entirely right (and he certainly must shoulder at least some of the blame for his dilatory attitude in the boom years) but he will be more right than the rest of those miscreants listed above. As with the BBC, King is a curate’s egg who nevertheless gets far more of a whipped backside than he really deserves: just as the Beeb became anodyne after the Iraq unpleasantness involving dead doctors and dire threats from Alistair Campbell, so too King’s opening observation – that Northern Rock should be left to fail – was greeted with the sort of pernicious vitriol from Brown and Darling that made a mockery of the BoE’s ‘independence’.
But what of the rest of us? I suspect we will remain as clear as we were three years ago about what has caused us to be back in the cess pit, only deeper than ever. On a planetary canvas, it’s terminally obvious that globalist exporting is not the answer – and globally based banking does little except shove paper around while underwriting megamergers. Export mercantilist mania will one day lead to catastrophic war unless it is reined in. Derivatives threaten the fiscal survival of every nation on Earth. And the never-ending shareholder quest for Bigness kills more jobs with every month that passes.
Equally clear is that a globalist business perspective removes all respect for, and loyalty to, national needs. As Homo sapiens is a pack animal, this too is a very bad idea. Further, national politicians are running scared of business, banking, and media power. We can laugh at their silly strutting, but the erosion of sovereignty is an even worse idea.
At a level more local to Sloggers, an administratively strangled EU has failed miserably on the twin bases of creative entrepreneuralism and wealth creation. The growing suspicion of wannabe superstates per se is based on the same old social anthropology so often ignored by politicians: they are too big and prone to being hijacked by unproductive functionaries. But primarily, the EU will eat itself because it has failed to grasp the concept of a varied Europe creating eclectic businesses and products that the rest of the world might want.
Specifically, the European Union’s crazy disregard for focused investment – and an equally mad commitment to cheap, unsecured credit alongside polemic wealth redistribution – is at a tipping point. Put simply, the EU tried to put unaffordable and undisciplined fantasies into reality. This is by far the factor most likely to infect the US, and thence the world economy as a whole.
I doubt if, in the end, there is any point to blamestorming. There is, however, a lot to be gained from a reasoned post mortem. The results of such an investigation ought to mean an end to globalist, neo-fascist conformity in favour of varietal self sufficiency….invention on a global basis, wherein exports are a bonus other markets can enjoy – rather than the be-all and end-all of everything.
In such a business context, domino-falling investment banks would be a bad dream from the distant past, and the business of financing entrepreneurs or mezzanine concerns would be a far more diverse process. The aim of most nations would be self-sufficiency in everything from food and natural resources to energy. We will never achieve that of course, but in a way, that’s the point: without an ideal to aim at, humanity will always be tempted to languish in a ditch.
Aspiration is the main thing we have lost after 35 years of Friedmanism. Protection of what we have, obsession with the material, and short-termism have replaced the great quest….until we are indeed in a ditch of our own making. We have rewarded lazy shareholders, as opposed to investing in the future. The tiny minority has sought to profit from monopolies, rather than a majority hell-bent on their ideas and labour offering reward for them, and fulfilment for others.
The mutual, varied community will one day replace the Big one-size-fits-all society. When it does, we will all be the better for it. But it won’t just happen: we have to make it happen. Once the Judgement Day has passed, and the blame has been apportioned, it’s up to us to take charge in the community that replaces the society.
The UK bank holiday is over, as are most of Europe’s August vacations. From tomorrow, the debt pantechnicon rolls ever nearer. There will be no place for negative blame in this new future. Instead, a positive learning process must take over. Actually – whether the elite like it or not – cultures usually learn far more from mistakes than from success. If they can no longer do that, then every sensible citizen should desert that culture in search of a better one.