Let’s Play ‘Capitalism’!! The Bizarre World of Western Financial Markets

For me, yesterday was a bizarre day.  On the one hand, a BBC interview with a European trader was making its way through the financial blogosphere where the trader basically said he believed a large, global meltdown in the stock markets would happen in the next twelve months and that politicians worldwide are helpless to really do anything as the financial industry (Goldman Sachs) basically rules the world.  On the other hand, rumours that the European zone might come up with some ungodly large amount (I heard 2.5 trillion, which is supposedly not enough) to basically insure that the global banking system will not go belly-up.

Of course, and showing their complete disconnection with reality, the stock markets shot up (hey, rumours of band-aid solutions are as good as anything to trade upon I guess).

And then, this morning, markets are already up as much as they were yesterday because the Greek P.M. went begging, telling potential investors (bail-outers) that they would be investing in the ‘new’ Greece.  Consequently, clueless media-talking-heads on the radio, TV, and online are confidently gushing and in Canada this is especially worrying since there are a lot of people that believe the country is fundamentally sound and well-run (even though we have a similar debt-to-GDP ratio as many other countries, governments cannot balance the books (even in Alberta), and most people are themselves over-leveraged).

All this tells me just how much we rely on wishful thinking and good news… and just how much economic activity is based on small amounts of poor quality information.  It also shows to me that we have no idea what ‘capitalism’ and ‘free-market economy’ even mean anymore.  Let’s survey the situation.  Western governments everywhere are living completely beyond their means and when you include future liabilities like health care and pensions, we are essentially bankrupt.  The financial/banking system, which is on the hook for billions because of bad loans to governments, has also created an unregulated, derivatives market that is basically one giant casino… except this one deals in the hundreds of trillions (with a ‘T’) of dollars.  If this system is not bailed-out by taxpayers world-wide, it will fall in on itself, taking with it the savings and investments and pensions of millions of people across the globe.  This system fits the definition of a Ponzi scheme to a ‘T’ (which is of course measured in trillions).

So, for the Western system to continue, we need to have further bailouts… that is, on top of the bailouts of three years ago.  And then you have to think of all of the quantitative easings (basically, injecting more monopoly-money into the financial system and stock markets).  And, of course, there are all of the government loan-guarantees that are given out regularly (this morning, the promised loan-guarantee for the asbestos industry in Canada is in the news).  Oh, and then there are the subsidies and tax-breaks for massive industries ranging from petroleum to agriculture to biotech.  And, then there are those industries–communications, aerospace, weapons, defense, etc.–that are dependent upon government spending for the majority of their annual sales.  When you add it all up, it seems we capitalists are indeed socialists… or corporate-socialists.  (Hmmm… isn’t that partly the definition of fascism?)

At any rate, that pretty much sums up the world economy.  I do see more capitalism and competitive markets around me but these are mostly restricted to local, small businesses and entrepreneurs.  Anything on a larger scale (where one can afford lobbyists) seems to feed almost entirely from the public trough of make-believe money and the future wealth of taxpayers.

Peace.
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