The future stealers
There is much talk of a plan emerging for addressing the Eurozone’s current economic problems. The broad terms of the plan are that Greece may be permitted a partial default on its debts. But given the consequent impact this “haircut” would have on major banks in other European countries (such as France), plus the risk of default becoming the economic equivalent of herpes, we learn of the strategy for implementing a grand fiscal firewall (a modern day Maginot line as it were!). This takes the form of the European Financial Stability Facility (EFSF) being expanded to something like three trillion Euros.
Not much of the mainstream media has explained where this funding will come from, except for a perceptive interview on Radio 4 by Paul Mason this Sunday. The Eurozone plans to put forward something in the region of four or five hundred billion Euros, but leverage this up to the three trillion. It will achieve this by raising the money in the (private) Capital Markets by pledging various assets (presumably sovereign) as collateral against future tax revenues. In the words of Zerohedge “Europe has just boldly gone where even Goldman’s Abacus has not dared to go before courtesy of the ECB’s acceptance of a CDO squared Enron Special SPV”.
To anyone who has studied the wonders of modern finance, this shares some similarity to the Capital Asset Pricing Model (CAPM). The theory goes that the price of a company share (stockholding) reflects the summation of all future dividend payments (incorporating the dilution of dividends expected further in the future owing to money being devalued over time). Therefore the price of a share now, reflects all future income generating capacity of the underlying company. In a way, it states that you can have the full cash worth now which is equivalent to the amount it would take the company to earn in something like 10-15 years. So the mere act of selling the share realises this future value and you have the income that the real world hasn’t actually produced yet. All wrapped up with the almost zealous denial of uncertainty surrounding whether the future could turn out better or worse than expected. The theory says that the price now IS a complete and true reflection of the future.
Amazing! Finance has proclaimed itself capable of undertaking time-travel, alchemy and telepathy, all in one simple move.
But we know it isn’t really alchemy, telepathy or time travel. Instead, the future income of these sovereign states is about to be mortgaged beyond belief, rendering them perpetually (and undemocratically) in hock to the buccaneering money changers. This is in effect just another side door bailing out of the banks and their reckless lending. Not a true default as such (i.e. no debt destruction has occurred) but a further transfer of debts onto taxpayer shoulders. And this time a supra-national example of that poisonous strategy of “privatised profits and socialised losses”. But there is something even more sinister about this recent stab in the back to taxpayers. They are not just stealing the built up wealth, income and assets of the ordinary people of these countries (as in the privatisations and asset stripping of Greece), but they are cunningly filching the European citizens’ future too.
The ECB is probably being leaned on by Washington to do everything in its power to prevent debt destruction. Whenever any stresses occur in the system the Washington modus operandi is to fail to accept the losses and double down the bets. Ever since the financial crises of the 1980s onwards (e.g. Mexico, 1987 crash, S&L, LTCM etc.), the strategy has been to expand dollar liquidity & financial sector leverage. The cost for servicing this build-up of unsustainable debts is pushed outwards to the innocent citizens of periphery countries and onto the shoulders of future generations.
If the EU approves the plan to expand the EFSF then they are embarking on a gigantic Collateralised Debt Obligation, taking the yet-to-be earned income of European taxpayers and throwing it at the banks to prop up their traumatised balance sheets. Ultimately just lining the pockets of the wealthy bankers from this leveraged up booty.
In short, they are plundering from the future for its not around to protest against it.