Home > Economics, Finance and money > The future stealers

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.

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  1. ahimsa
    September 28, 2011 at 10:15 am | #1

    Hi Hawkeye,

    The mind boggles that governments are so totally beholden to the markets for their funding. Governments make the law yet refuse to bring money creation under their control opting instead to borrow from private financial interests. Makes no sense to me..

  2. David Lilley
    September 28, 2011 at 11:46 pm | #2

    Dear Hawkeye,

    I do not like to be the only commenter on your site. Especially when I have to jump on your print from a great height and put up with some impedence from visitors to your site.

    I have been bold enought to put a rational theory forward for the origin of the caticismic problems that the world faces in the expectation that your readers may comment, disagree, correct me and we could go forward with proposed solutions. But none of your readers have come forward

  3. September 30, 2011 at 7:01 am | #3

    Hi Ahimsa

    Drafted a reply a couple of days ago but it seems to have disappeared!

    Certainly it seems that Gvts are either under the spell / control of the “markets”, or there is an unhealthy co-mingling between the two such as there is no real distinction anyway. Simon Johnson’s book “13 Bankers” covers both the aspect of excessive lobbying power by banks (it was not the masses of consumers that petitioned for relaxation of financial regulation and excessive credit creation!) as well as the revolving door between bankers & Treasury officials (mainly focussed on the US but could apply to the UK too – for instance why is Tony Blair now consulting for JP Morgan?).

  4. September 30, 2011 at 7:17 am | #4

    Hi David

    Last count there was about 10 unique commenters on this site and about 1000-1500 visits per month. You are indeed the most frequent commenter, and I am very grateful for you time and effort. The site isn’t quite the BBC though, so I doubt the traffic will ever get close to the big boys (we’re at the end of a very Long Tail…..).

    I constantly do whatever I can to drive traffic to the site, and encourage people to comment, but as the saying goes “you can lead a horse to water, but you can’t make it drink”.

    I’m adding a short synopsis to your post in the hope that it could help stimulate further debate.

    All the best

    Hawkeye

  5. Tellsometruth
    October 15, 2011 at 6:41 pm | #5

    The flapping of gums and borrowed promises from the future are alarming to someone with most of their life ahead of them.
    Hopefully Ron Paul can get the republican nomination and put an end to the current status quo

  6. October 17, 2011 at 9:04 am | #6

    I guess that’s you BP??

    How’s life in the US?

    Ron Paul seems to be polling well by debate viewers yet ignored by mainstream media. Maybe he and Kucinich should get together for a dream ticket – the cross-party anti-crony Capitalism duo!

    Day by day, as the false promises fail to get delivered, the masses will wake up to how they have been lied to by Gvt, economists, bankers and the media.

    I just hope that any revolution is bloodless.

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