Wednesday, 16 June 2010
Spanish Bail Out and the propaganda machine
We are rapidly approaching another massive bail-out. This time of Spain.
Of course it will not be called a bail-out. That is now too contentious a term. It will be called something technical and reasonable, like, a 'European borrowing facility'. It's officially stated purpose will be , 'to facilitate and provide reasonable borrowing terms to EU member states when private debt markets cannot be accessed'. Something like that.
But make no mistake it is another bail-out of gargantuan proportions.
Two signs tell us this is being prepared. First an IMF mission arrived in Madrid to 'work closely' with the Spanish Government, to assess its austerity plans and 'recommend' tougher ones if the IMF and the EU deem it necessary. Necessary to achieve what for whose benefit, is not alluded to. The IMF doesn't make house calls to pass the time of day. It arrives early to show you the instruments of torture and so you can think about how wise it would be to confess quickly.
The second tell-tale sign is the propaganda machine getting into a higher gear. John Monks, former General Secretary of the TUC and now General Secretary of the European TUC (ETUC), was this week treated to a briefing by the President of the EU Commission, Mr Barroso.
Now for those who aren't familiar with Mr Barosso he is firmly on the side of Free-markets, liberalization of markets in poor countries, did nothing to regulate banks either in the run-up to nor during, the present financial implosion, despite his own experts warning him about financial risks, and has been more than happy to comply with/cover-up using Europe for US Rendition flights. In short he's a peach of a man with high moral standards, a sharp and brave, forward thinker who has a deep sense of looking out for the interests of the ordinary citizen over the interests of the monied class. He also would never be swayed by a foreign power to do their bidding over the interests of Europe. Never.
So what did he say to Mr Monks? Well the Daily Mail was on hand to let us know. I don't know who was the mouth-piece in other countries. The Daily Mail is the orifice for disseminating petty moral outrage at ..well everything, the bastion of little Englanders and a shallow short of consumerist, materialist 'I don't know much about it, but I know what I like' view, of what it means to be alive. I think that's fair don't you?
Anyway the Daily Mail was on hand to let us all know that Mr Barosso said that unless the full austerity cuts were implemented in every country where they are needed, without let or hindrance from unions, then we would see a domino effect of countries running out of money and falling prey to military coups and/or - horror of horrors - popular uprisings. The end of democracy and decency and a new dark age. And people would be eating each other's children and the black plague would return and...no actually he didn't say those last things but he will if he thinks it necessary to get you to be afraid enough to comply with everything he thinks must be done.
This is a direct re-run of the build up to passing TARP in the US. Think back to US Treasury Secretary Paulson saying TARP was necessary to "stave off economic Armageddon." Both Paulson and Bernanke were explicit in telling a reluctant congress that the bail-out had to happen without discussion or oversight or people would be put out of their hoses in the hundreds of thousands, all the banks would collapse, the ATM system would stop working and their would be civil disorder. It was passed.
Then we were told how this bail out would fix everything and were then treated to green shoots and recovery. And such has been the recovery that here we are again.
Only this time, the financial world will tell us, its not banks who are in trouble it's irresponsible nations. Who if they are not bailed out with public, ECB money will fail and Mr Paulson's threats - sorry, warnings can be dusted off and waved at the public again.
Look a little deeper. Would Greeks go hungry? Well actually no they would not. Well surely they would not be able to access the bond markets ever again? Well actually Argentinian defaulted and is rehabilitated. But this isn't the issue. If we are contemplating bailing out a broken and dysfunctional financial system and the banks who own it, why not save the cash and use it to lend to Greece after said system is taken to the abattoir and slaughtered? Greece would not need to go to the bond markets. This is a plan that would work. How can I know? Well mainly because it is not that different to what the IMF and Mr Barosso want to see happen. With one important difference. I would put this money into a CLEAN system that had been cleared of its rotting bad debts. They want to put this money into the same failed system that has already eaten and shot back out two or three previous bail-outs. And will shit this one back in our faces if we let it.
Why is the IMF, Mr Barosso and all our financial experts so sure that we must put this money into the present banking system? Well it could be because if we don't and instead let Greece and Spain flush their debt poison out, then Germany would have to bail-out at least one of its largest banks and several of its Landesbanks. France would have top bail out Credit Agricole and possibly Soc Gen. If Spain defaulted as well as Greece, many more banks would implode and would probably be beyond any help.
End of the world? Not quite. Certainly end of the world for those who lent money to the banks that collapse - the bond holders. They would be bankrupt along with the banks whose worthless bonds they would be holding. Would other banks survive? Well, yes they would.
In Greece most banks would be toast. They would be sold for a song. In Spain the Caja's would burn down. That would take out the wealth of a narrow strata of Spanish society. Would Spain and the average Spaniard lament their demise? I don't know. But I suspect Spain and Spanish society might manage without them. And might not descend into barbarism without them. Most of the regionally powerful families would be ruined. Spain's two big banks might survive.
Now here's a thought for you. The pro-bail-out cheering machine is talking about a €700 billion Euro fund at least. This money would be used to buy all the Greek banks bad debts and their nation's worthless bonds as well. It would also fund Spanish banks going forward. Let's step outside the officially sanctioned one-way logic for a moment. Imagine we let the banks die and watch as they took with them all their bad debts. No rescheduling, no saving the bond holders. Their money is used to pay off the debts until the debts are paid or the money runs out. Either suits me fine.
Then once the stench clears a little we take that 700 billion Euros and use a little of it to recapitalize a few new, debt free banks. We could ask the Chinese if they would like to invest in something in Europe that isn't riddled with debt. The rest we take and begin to invest in productive industries.
We are contemplating spending 700 billion Euros, why stick with the belief that the ONLY thing we can do with it is invest it in bankrupt and dysfunctional banks? Why not invest that money in something that works? Something that might employ people to make or do something that will actually have a future?
At the moment we are being told and will soon be bullied not told, that the only thing we can invest in is banks. And we are being told this by the people who own the banks, who lent the banks their money and the political class who are often the same people or hoping to get a plush sinecure form them upon being voted out of office. WHY BELIEVE ANY OF THEM?
They have no reason to tell you the truth and million and billions of selfish reasons to lie to you.
Instead of being bullied by those who are massively in debt and facing certain ruin, we should be focussing clearly on the real question - what do we want to invest vast sums of public money in? Bankrupt banks and a corrupt political elite who serve them, OR something productive?
Think clearly now before the din of propaganda lies and bullying gets too loud to hear yourself think.
