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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China… the Saviour of Declining Western Economies?
Sometimes I wonder just how we got to where we are. It’s amazing to see how, as a species, we have evolved and not only do we number around 7 billion but we have developed our culture and technology beyond anything that resembles the vast majority of life on the planet. But it is also amazing, given the buffoons and fraudsters who are more often than not in 
charge of everything, that the human world actually runs at all. You just have to look around. At the people running your government(s). At the CEOs of the major corporations running the world. At the utter stupidity and naiveté that we regularly indulge in. Case in point… the fact that Japan is about to implode and Libya, explode… and when people bother to look up from their Facebook page they are faced with endless stories of ‘royal’ weddings and journalism that seems to only care about Twitter ‘twends’ and the latest tween whose music video has gone viral. Another case in point? China.
China? The saviour of the many, declining Western economies? Yes, that China… the centrally-planned, command economy run by a bunch of corrupt party bureaucrats in what is the world’s largest, totalitarian Communist country. Why no one sees the irony, yet the absurdity, in such a state affairs is further proof–as if any more should be needed–that we are utterly dependent upon the illusionary facades and paper thin veneer that is modern society. Well, there are some people out there… a few journalists, some financial types, a handful of politicians and academics… who in my estimation seem to be able to cut through it all and at least make a reasonable attempt to understand what is really going out there. And many of them, despite what we regularly hear in mainstream discourse, think that China could very well be, and most likely is, a giant real estate bubble. No one knows when this bubble will burst but it, like all the others, surely will and it will not be pretty. It might even be that China’s bubble will dwarf the recent bubbles in the West which themselves have consumed trillions in bail outs, quantitative easings, injections in the economy or whatever euphemism we use to hide the fact that corrupt, Western, pseudo-market economies are really nothing more than giant Ponzi schemes.
I have heard rumblings about China’s building boom, which is led by corrupt party functionaries and built on the backs of (and over the houses of) China’s poor, and it seems largely fueled by the Communist Party’s desire to keep the country’s GDP numbers high. Not unlike the West’s Ponzi schemers but one difference was that rumours indicated there were entire building projects, even an entire city, that were just sitting empty. This might indicate that the economic “miracle” that is China might not really be true; that the “astonishing” rise of a Chinese middle class (read: ‘consumer’ class) was not as astonishing as we might hope. Well, there is nothing like ‘seeing’ it and this SBS Dateline piece from Australia was a lucky find while eating lunch today. It turns out that it is not just one empty GDP city… the contagion has spread.
(In good Facebook, narcissistic fashion… I was alone, at my desk, eating (as usual) curry sliced beef and veggies over rice… yum.)
Mainstream Media… AKA, the Elite Propaganda Machine
Today, my lunchtime reading included some articles about technical flaws with the new iPhone (and the apologist media like Engadget who dismiss them out of excessive fanboyism… and healthy product placement deals or outright payola) as well as some finaincial news.
I came across an article which confirms (as if it needed any more confirmation) that when it comes to mainstream media (free media, commercial media, or whatever you want to call it), their function is not to provide individuals with information but, instead, simply exist so that powerful interests in society can push propaganda and disinformation on the public. Here is the article and the title pretty well sums it up:
Mike Shedlock, “Inane Thoughts of the Day: CNNMoney Article says ‘Housing Shortage is Coming’; Coldwell Banker CEO says Now is the ‘Absolute Best Time’ to Buy a Home,” June 25, 2010. http://globaleconomicanalysis.blogspot.com/2010/06/inane-thoughts-of-day-cnnmoney-article.html.
The author, Mike Shedlock (or ‘Mish’) does a very good job of picking apart such outright propaganda but I wonder just how many poor saps are sitting in front of CNN and hear this and think they are somehow getting the ‘inside dope.’ (For me, one of the truly confounding effects of mass media is that some people evidently think that the mass mediated messages they hear on, say, radio or television are in some way insider information.)
This process of mass communication is nothing new but surely does explain why we find ourselves in the global mess that we do financially. For the past decade, the mainstream media have been letting loose a constant stream of financial koolaid, filling people’s minds with huge expectations and the belief that money somehow grows on trees (or on the magical equity in houses*). And the questionable reliablility of the mainstream media is something that we should pay moer attention to. If you look at your local news, it is probably filled with people who went to journalism school, are decent human beings, but are probably overworked and oiverly worried about the everyday worries that come with employment (career, office politics, etc.). If they say something like “And this could just be another sign that the global recession is a thing of the past…,” what should we make of it? More often than not, this is not a statement that comes from any empirical analysis or a wealth of knwoeldge or experience. Instead, it is likely one part cliche (repeating what they hear around them, sometimes coming from the ‘experts’ they interview) and another part fear (they don’t want to rock the boat-full of advertisers and elites who depend upon the status quo). Now, if you look at national news, things might be a little different but probably only in that the amount of influence that powerful interests and elites play is that much more prominent. Most newscasters, especially on the mainstream news, are there because they are good looking and because they are willing to play within the rules of the system in order to achieve that position. (Note that this does not mean they are lacking skills as journalists or newscasters.) This explains why those people (and there were many) who warned of bubbles and fraud in the housing/mortgage/finance markets were mocked and belittled by the many journalists/pundits/experts who are attached to mainstream news.
Like so many things in life, if it sounds to good to be true, it probably isn’t. With the media, if it is free, there is a good chance that it is simply to good to be true.
*This reminds me of a commercial from a few years back which depicts two small children, one of whom is on his hands and knees, with a flashlight or magnifying glass in his hands, inspecting the floor. The other kid asks him what he is doing. To which the first child replies: “Wooking for ekwidee… Dad says da howse is full of ekwidee and dat makes us vewee wich.” I have to find that commerical as it pretty well sums up the naivety of the last decade (… or half century for that matter).
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