Dear reader, in 1729, Jonathan Swift suggested in his “Modest Proposal” that, “‘in order to Prevent the Children of Poor People From Being a Burden to Our Parents or Country, and for Making Them Beneficial to the Publick”. He encouraged the starving Irish people generate income and reduce expenses by selling their babies to the rich to be consumed by the rich as new source of food. This Juvenalian satire disgusted his readers but was successful at bringing the plight of the Irish to a wide audience. Perhaps it is time for the Baby Boom [BB] generation to recognize the plight of our children before they decide that we BBs should be sauteed, fricasseed, or boiled and served for dinner.
Guess who is being served for dinner?
I modestly propose that the children of baby boomers [BBs] prepare to eat their parents in order to prevent them from becoming a burden on society. Whether our children fry, boil, roast bake or BBQs all us BBs, the end result would be to put a stop to the BBs incredible and wanton accumulation of global government debt that will be passed on to future generations. In the unlikely event you disagree with my proposal let me explain my rationale.
You got some ‘splaining’ to do!
Dear reader, As Ricky Ricardo often said to everyone’s favorite redhead, “Lucy, You got some ‘splaining’ to do” I feel that the BB generation, like Lucy, is going to find themselves being asked some hard questions by our children and, like Lucy will have some ‘splaining’ to do avoid being converted into a soufflé or a stew.
You are not the boss of me
My conviction that we, the BBs will find ourselves under harsh lights in the interrogation room [or the kitchen] came to me gradually. As an imperfect father I felt my children should take responsibility and control of our own lives.
Watch what I do and don’t do it
When each of my two daughters turned five, the age at which they felt I was no longer ‘the boss of them’, I acquiesced and left them in charge of our own destiny. The only advice I gave them was to look them in eye, fully aware of my own imperfections and tell them that if they wanted to be successful they should watch what I do and don’t do it. Fortunately for them, their mother is a goddess who kept watch over them.
Our children’s future will be significantly less than they could wish for
Flash forward twenty years to the present and to a recent family dinner at which my daughters were sharing our hopes and dreams for the future. Careers, goals, buying a house starting a family were all part of the lively conversation. Much to my surprise they asked my opinion on the myriad choices they faced.
Sadly my compulsive study of economic and financial events left me in an awkward position. I naturally wanted to share their excitement and enthusiasm for all the opportunities and experiences that the future can hold. However there are two gifts that we BBs are leaving our children that will likely ensure our children’s future is significantly less than they would wish for.
To my daughters and your children as well: you owe $50 trillion.
The first and most important gift we baby boomers are leaving our children is, according to the highly respected Economist Magazine, is a staggering $50 trillion global government debt. [Canadian federal and provincial debt amounts to a combined eye popping $1.5 trillion, and you thought it was just our southern neighbors who had a problem] There has been no economic miracle while we BB’s have been in charge. All that BBs are, all that we have, all that we are proud of, is simply the result of a giant global credit card that the BB’s have used with reckless abandon to satisfy our desire for more, bigger, better. Giant stimulus programs, bailing out large companies, no problem, higher pay for bloated civil servants, absolutely. Health care, you got it. Jet fighters and battleships, all BBs would say, Aye, aye sir. Bizarre foreign wars, you betcha! Circuses, stadiums, Olympics, there is no end to the BB’s shopping spree. [Unless you have the misfortune to be a BB in a lesser developed country in which case you enjoyed neither the bread nor the circus, only the debt.]
Baby boomers never had a wish they would not grant themselves
The BB generation never had a wish they would not grant themselves even if there was no hope that the BBs could pay for it. You see the BB generation discovered the magic of consume now and let the next two or three generation pay for it. Replace crumbling infrastructure, renew power grids, reduce energy consumption, etc, well not so much. The BB’s have no interest in these boring necessities. The borrowed money should be used for museums, Olympics, bizarre wars in foreign lands and in Toronto in 2010, $1.5 billion, 2 day long, G-20 group hug. Those are the items that we BBs like to spend our money on. [Or should I say our children and grandchildren’s money] I stand to be corrected but I believe that of you look in the Merriam-Webster dictionary under the word self indulgent you will see a picture of a BB. [Yes, one could argue that narcissist is a more appropriate description of the BB generation but dear reader let us save that debate for another day.]
It is only fun until somebody gets hurt
What this means to our children should be self evident to anyone who has ever been in debt personally. As our mothers used to remind us, “it is only fun until someone gets hurt”. Like a family who has arrived at it’s own fiscal cliff by taking on too much debt the BB’s are desperately scrambling to ensure that the fiscal cliff arrives only after the last BB is dead.
A Tsunami of Cash
The most important tool BBs have to postpone our financial Judgment Day is the printing press. BBs discovered that if our governments could not borrow money they could simply print money. Wisely, to ensure there was no comparison to France’s John Law inspired Mississippi Bubble or Germany‘s Weimar disaster, BBs do not call it money printing. Rather BBs call it Quantitative Easing or Long term stability funds. France in 1720 and Germany in 1930 experimented with the concept of unlimited printing of money to create wealth, In France’s case it bankrupt the country, in Germany’s case it resulted in WWII. The combined amount of money these two countries printed on their respective roads to disaster would be a mere ripple in the water when compared to the Tsunami of cash BBs are printing. This will land badly but hopefully after all BBs are dead.
The second gift we are leaving our children is ourselves.
BBs will live well into our eighties. More than one study has indicated that the cost to society of heath care for aging BBs will place an unbearable burden on our children and grandchildren.
Hurry up and die
This inevitable crisis recently caused Taro Aso Japan’s then 72 year-old deputy prime minister to call the elderly who are unable to feed themselves “tube people,” then he proceeded to say the elderly should be allowed to “hurry up and die” to reduce the burden on a country tasked to pay for their medical expenses. This story, reported in ABC news should act as a cautionary tale to baby boomers who expect love and affection and tender care from our children and grandchildren. I suspect our children will view euthanasia, not as an issue for moral or spiritual debate, but as a mandatory form of health care. In all likelihood our children will consider a sneeze sufficient justification to pull the plug on us BBs.
Truth and Reconciliation
Dear reader, these two gifts, our debt and our health care, are I believe enough to ensure the BBs a rather ignominious place in history as well as the contempt of our children and grandchildren. One could argue that the BBs contribution to global warming, peak oil, pollution, crumbling infrastructure, and myriad other social and economic ills should be included in any list of ‘gifts’ we are leaving our children when one is trying to account for the inevitable enmity toward the BB generation. I am not the arbiter of these issues. I suspect our children will one day organize a Truth and Reconciliation Panel to listen to the evidence against the BBs. That august panel will, I am confident determine which gifts from the BBs made the most difference to the destruction of our children’s future.
That is our story and we are sticking to it
In order to ensure some faint hope that I do not end up as some form of stew in the future I would like to apologize to my children and your children for the debt we will be leaving to them. I would suggest that you do the same. In order to ensure that we BBs keep our stories straight, let us simply use the excuse that it seemed like a good idea at the time. That is our story and we should stick to it.
Dear reader, I have been given access to shocking information regarding the upcoming G-20 Summit in Moscow. I am going to share with you the announcement that our leaders will be making at the end of the summit. Using the revelation soon to be provided in my commentary you will be able to adjust your portfolios and undoubtedly earn significant profits for yourself based on the inside information I will share worth you. [Since trading on inside information is illegal if your net worth is less than $100,000,000 dollars I must ask those of you with a net worth less than the prescribed amount refrain from acting upon the information I will provide.]
Shock and Awe
The announcement will shock and awe you with its sheer brilliance and innovation. Never before have our leaders displayed such imagination and determination to confront and conquer the economic challenges facing the world.
Only €20 million more to join the “Oligarch’s club”
I became privy to this ‘inside information’ thanks to my close relationship with Gustavo Laframboise-Pierre, the Director of Statistical Creation at the European Central Bank [ECB] . Gustavo’s ascension to this lofty position was earned the old fashioned way. While working in New York as a bookie and loan shark providing his services to discerning individuals such as myself, he had the good fortune of having a senior member of the ECB as his client. This individual had the misfortune of making a staggeringly large and incorrect bet on the outcome of the most recent World Cup. The only way the debt could be settled was to offer Gustavo an extremely highly paid tenure at the ECB. Gustavo was only too happy to move to Brussels and use his skill with numbers to aid the recovery of the global financial system and to enhance his personal wealth. Dear reader, as you are aware Gustavo and his fellow central bankers have to date, been unsuccessful at solving the “Rubik’s Cube” that is the Global Economy but I am pleased to report that Gustavo only needs to accumulate another €20 million before he can officially be declared an Oligarch . [At his current rate of wealth accumulation through bribes, kickbacks, collusion, graft, skimming, theft, insider trading, tax evasion etc, Gustavo should join the club within the next three months.]
A Pulitzer Prize with my name on it
In any event, as I sat down yesterday trying to think of a topic for my next commentary I was pleasantly surprised to receive a call from Gustavo. “David,” he said, his words somewhat slurred from the effects of an overindulgence of Cristal Brut 1990 champagne [$17,000 per bottle] part of the traditional ‘Breakfast of Champions’ enjoyed by Central Bankers around the world at their daily breakfast meetings where they grapple with the world’s economic challenges such as poverty, unemployment, famine, wealth distribution and austerity. “I am going to make you famous; I know how desperately you want to win a Pulitzer Prize for your economic commentary. Here is your big chance. I am going to share with you the conclusions and economics plans that will be announced at the end of the summit.
Who has time to read all those boring and dismal reports about the economy?
“Gustavo”, I replied, “while I am immensely grateful for your act of kindness, don’t the leaders actually need to meet and discuss the big issues before they reach any conclusions and make any plans. I kind of thought the sharing of ideas and brainstorming was the whole purpose of these meetings.” Gustavo sighed, “I don’t know what gave you that idea David, between photo ops, Karaoke parties and group hugs, no one has time to read all those boring and dismal reports about the economy? Anyway, it is not like any central banker has experience or ideas how to control all the major inputs to the global economy.”
So many crimes so little time
Despite my consternation about Gustavo’s description of bankers and the activities at the G-20 summit my excitement was palpable. My mind was already preparing my acceptance speech for my inevitable Pulitzer Prize. Would Gustavo tell me that they were going to start sending bankers to jail for the ‘Libor Scandal’ ? Were bankers going to do the ‘Perp Walk’ , for the money laundering scandals ?
Can bankers do the ‘Perp Walk’ Gangnam Style ?
Were the credit rating agencies going to see their staff behind bars for the subprime ratings scandals ? Trillions of dollars had been lost by Main Street because of these nefarious activities. Would the world see individuals held accountable for these transgressions? Would governments finally admit that banks do not commit crimes; people who work for banks commit crimes? Would governments no longer fine the bank where the crime was committed, rather they would agree to start prosecuting the bankers who committed the crime? What a story this would be. Would politicians now be required to explain how $50 billion circuses such as the Sochi Olympics were an appropriate way to spend the public’s money? Would the defense industry be required to justify $8 billion expenditures on aircraft carriers such as the USS H.W. Bush , or Canada’s $100 billion purchase of planes boats and submarines?
Finally, answers for Main Street?
Finally, Main Street was going to get answers to questions such as why does a man in California who steals an I-phone , a television, and a vacuum cleaner in three separate burglaries go to jail for life while a banker who personally profits immensely while destroying the global financial system does no time in jail. [Note to the Pulitzer Awards committee, please have my full name etched on the trophy in this format, ‘David S. Hague’, Thank you,]
Protect the drug lord, prosecute the dealer
Imagine Main Street’s satisfaction when it explained to them why an individual who sells a couple of grams of cocaine goes to jail for life while employees of a bank that launders money for drug dealers and criminals on a massive scale do not suffer any consequences. Would our leaders explain why brave NATO soldiers in Afghanistan are tasked with job of protecting drug lords/members of the Afghan Parliament while our local police forces at home are busy arresting drug dealers?
A failure to communicate
Dear reader my commentary will be read around the world and studied at universities for years. Imagine the impact on the global legal system when, thanks to Gustavo’s insight I am able to explain why one goes to jail for murdering your neighbor but if you kill someone 30,000 miles away using a drone , that is merely considered effective use of ordinance. When does murder lose its negative connotation and morph into the more benign and palatable term ‘collateral damage?’ Were the G-20 leaders going announce a Global War on Government Corruption to stop the bleeding of precious financial resources [I won’t offer a particular citation for this topic dear reader, I encourage you to Google this topic and at you leisure, and browse through the 21 million hits that Google will provide.] I shared my thoughts with Gustavo and eagerly awaited his comments on these topics. Gustavo groaned, “David, I think there has been a failure to communicate here”.
Same old same old
Gustavo continued, “All I was going to tell you was that the G-20 summit leaders were going to announce that they are going to keep printing money, borrowing money, lending money, shuffling money from one country to another, you know, the usual stuff”. My visions of a Pulitzer Prize quickly vanished. Same old same old was not going to win any awards. But wait, perhaps I could get Gustavo to provide additional thoughts that might be newsworthy. “Gustavo”, I offered, “Are any central bankers concerned about the inflationary impact of all this money printing”? His response was stern, “That is the least of our worries, David. Since governments control the calculation of inflation rates we just make sure that we only measure the prices of things nobody buys and, if a price does actually rise we do not include it in our calculation we simply chalk it up to technological advances”. I shared with Gustavo, John Browne’s excellent explanation and analysis of inflation and its impact , hoping I might elicit a quote worthy response. “David any chump on Main Street who looks at their insurance bill, their food, electrical or gas bill, their medical expenses, day care you name it, knows that the true inflation rate is about 10%. However that number is unacceptable for publication. It would seriously exacerbate our current economic plight if we admitted that particular reality”.
Plan A or Plan B
Hmm I tried another approach, “Gustavo don’t our leaders think that our massive global government debt is a problem”. Gustavo responded sharply, “Of course it is a serious problem David but it a problem for our children not for any politician currently in office. That is the beauty of democracy, you can sail the ship to the edge of the abyss and then retire and turn the tiller over to the next generation and let them sail over the cliff. I do not understand why you obsess about this topic”. I felt thoroughly chastised. Perhaps I was being overly naive in my reportage of economic and social issues. “OK Gustavo I give up, debts, deficits money printing criminal banking conspiracies, ludicrous defense spending, social inequities, none of this matters, so where do the G-20 leaders see all of this ending.” I asked. His response will not help you sleep at night. “Plan A is a belief that Greece will discover huge reserves of oil that will be their financial salvation. Spaniards and Italians will peacefully accept a 40 % decrease in their standard of living, for the greater good of a United Europe”.
Their children’s sad future is already preordained
Gustavo elaborated on Plan A, “Republicans and Democrats will put aside their differences. For the greater good of the country, Americans will accept a lower standard of living. They will not complain when they receive less Medicare and Social Security payments from the Government. They will endure a significant reduction in defense spending. Americans will peacefully ‘bite the bullet’ and stoically endure these privations to ensure a prosperous future for the grandchildren. They will accept that their children’s sad economic future is already preordained. [This passive behavior will also ensure that Americans turn in their guns to a designated government agency making gun control laws redundant.] All around the world citizens will gladly accept these adjustments due to their confidence in their leaders and their belief in the wisdom of their governments.”
Holy @#%%
“Holy @#%%, Gustavo, are all our leaders using ‘Crystal Meth’ for toothpaste? The citizens of G-20 countries will not peacefully accept that reality. What you are describing would cause either anarchy, chaos, or civil wars throughout the world. I hope there is a plan B.” I was almost hysterical. Gustavo remained calm and responded. “Well David, there is a Plan B but it is a little more complicated. “Oh really, Gustavo, do tell”. “Well please don’t publish this in your commentary David, but the G-20 leaders recognize that democracy is not a permanent condition. If Plan A fails, Plan B involves an acceptance that Democracy will need to evolve into something more akin to an oligarchy, police state, or dictatorship.” [“benevolent, of course”, he laughed at that thought.] The new form of government will need a strong police force to ensure the civilian population behaves in an appropriate manner, meekly accepting the dictates of their new, all powerful, unelected leadership. Most countries already have the laws in place to suspend all civil liberties; in Canada it is called the ‘War Measures Act’ , in the United States the ‘Patriot Act’ . In Russia laws suspending civil liberties are called Vladimir Putin. In Europe, the power of the people and their elected officials has already been ceded to the unelected and all powerful European Central bank and the International Monetary fund. It is only a matter of ‘turning on the switch’ for all countries to activate similar laws and programs to put an end to the messy and ineffective form of government known as democracy and usher in a smoother, more efficient, more effective form of government such as a dictatorship.”
The people have a right to know but they also have a right not to care
“Gustavo”, I responded quickly, “I cannot accept your request not to publish what you have just shared with me. The public has a right to know that their life, liberty and pursuit of happiness are in jeopardy.” Gustavo yawned, “Go ahead David I dare you. The public may have a right to the truth but the public also has a surprising reluctance to accept the truth. Your commentary will be ignored.” Dear reader your help and guidance will be appreciated I pondered Gustavo’s comments. He is probably right. Perhaps I need to take a different route on my journey to the annual ‘Awards Dinner’ hosted by the Pulitzer committee.
Factoids and Factettes
Dear reader, I will ask you for your help and guidance. Below are a number of economic and social factoids and factettes. [A factette is something that is probably true] Please consider the information below and contact me on Twitter @david_hague with your suggestions as to how we can draw these issues to the attention of Main Street, the masses, the 99% or perhaps more simply, the people.
And the survey says
How many Americans are in jail for drug related crimes? Answer: 400,000
How many bankers went to jail for laundering billions of dollars of drug money? Answer: O
How many members of the NATO protected Afghan parliament are drug lords? Answer: most of them
How long must Bernie Madoff spend in jail for his $50 billion fraud? Answer: 150 years
How many bankers, lawyers, and accountants, have been convicted for the multi-trillion dollar subprime fraud? Answer: 0
What % of Canada’s $605 billion national debt does Canada’s recent $100 billion purchase of fighter jets and fighting ships represent? Answer: 16%
How many deeply religious individuals who passionately believe in the ‘right to life’ and the ‘sanctity of human life’ also spend their days working in the defense industry making weapons of mass destruction? Answer: a lot
How much has the Dow Jones Industrial average increased since WWll? Answer: It has increased from 206 to 14,000.
How much money have governments around the words borrowed since WWll? Answer: $49 trillion dollars
Is the increase in the Dow Jones Industrial Average related to the increase in global government borrowing? Answer: Yes
How many innocent people have been killed by drone strikes? Answer: as war has not been declared all individuals killed by drone strikes are innocent. You know what I mean, that whole pesky, innocent until proven guilty, jury of your peers thing etc.
In global finance who actually owes what to whom: Answer: It is really complicated but this chart helps
How much has the Global War on Terror cost? Answer: give or take, $5 trillion
How many bankers , economists and investment professionals understand the risk in the $1,200 trillion derivatives market ? Answer: 0
Can we find a time in history when unlimited printing of money by a government or governments did not end in disaster? Answer: No
How much does it cost to stage a three day G-20 summit? Answer: In 2010 Canada spent about $1 billion to host the G-20 summit in Toronto.
I await your help and guidance
Dear reader I look forward to your input. Do these factoids and factettes matter? Should they be studied more closely? What have I missed that needs to be said. Was Rhett Butler right when he said “ What most people don’t seem to realize is that there is just as much money to be made out of the wreckage of a civilization as from the upbuilding of one. Your assistance will help me on my quest to win a Pulitzer Prize. Perhaps we can improve the world. I patiently await your response @david_hague. Perhaps together we can prove my cynical friend Gustavo wrong
Dear reader, I am on assignment at the World Economic Forum in Davos, Switzerland. Unfortunately my previous commentaries irked the organizers so profoundly that I was not allowed the intimate access usually accorded friendly members of the media. No matter, I am staying at a pleasant bed and breakfast about an hour and half outside of Davos. {Which for you geography buffs means that I am actually staying in Lucerne .}
Not for the 99% at $250,000 per ticket to attend the World Economic Forum
I was eagerly awaiting the pronouncements of the economic and financial Gods attending the forum. {Dear readers do not despair at my exclusion from the inner circle of attendees.} Truthfully, I could not afford the $250,000 ticket price to attend the Forum. [Unbelievable of course, but click the link provided to verify] It is quite amusing, when you think about it. The worlds alleged best and brightest are gathering to discuss unemployment, deficits, austerity, money printing, taxes and the 50 Trillion dollars in global government debt. They have chosen to have their discourse at a tax payer subsidized party whose price of admission is $250,000 per person. Dear reader sorry about that diversion. Let us get back on message.
Politicians, bankers, economists, all the usual suspects
Like you I am overwhelmed and baffled by the prognostications, statistics and opinions inundating us from all the usual suspects, economists, politicians and bankers. The messages we are receiving are obfuscated by terms and expressions such as Long Term Stability Fund or Quantitative Easing that did not exist 5 years ago. In order to enhance my ability to offer cogent and relevant economic commentary it occurred to me that perhaps I might read an economics textbook to enhance my knowledge of the topics that are central to my remarks. Little did I know that my foray into the world of economics would prove to be more humorous than Montreal’s ‘Just for Laughs’ festival [$99 per ticket]
And you thought they were talking about the global financial crisis
I selected the book, “Everything You Need to Know about today’s Economics” written by my good friend Gustavo Laframboise-Pierre, the Director of Statistical Creation at the European Central Bank [ECB]. My friendship with Gustavo traced its roots to that period in his life when he was my main bookie. His ascension to his lofty position at the ECB was not so much the result of a diligent work ethic coupled with academic credentials and work experience. Rather it was the result of a senior member of the ECB management team of making an extremely large and incorrect wager on the result of the most recent World Cup. The magnitude of the debt was so great that the only way the debt could be settled was by offering Gustavo a lifetime, highly paid sinecure at the ECB. {Please curb your cynicism, dear reader, in answer to your question “Are not all jobs at the ECB or any central bank, ‘highly paid sinecures’? I would assure you that some [well three to be exact] employees at the ECB make less than €500,000 per year. } This is the result of the Central Bank Wage Parity Treaty that was signed at the G-20 summit in 2008. [And you thought they were talking about Global Financial Crisis.] The treaty was to ensure that globally, Central Banks were able to attract the alleged best and the brightest financial minds to guide us through the crisis. It also ensured that the same bright minds that had caused their respective banks and countries to implode were able to find employment and maintain their gilded lifestyles.
I take the study of economics seriously
But I digress; let me assure that I took my desire to learn about economics seriously. As I leafed through the 48 pages of my chosen economics textbook I steeled myself for what lay ahead. I even refused to sweeten my morning coffee with my usual hit of Jack Daniels to ensure my powers of concentration were at their peak.
Lay, Law, Lustig, Ponzi, Madoff: Who will be the first to win a Nobel Prize?
As I read through Gustavo’s weighty tome {well 48 pages if you include the glossary, foreword, afterword, table of contents, dedication and note from the author} on economics I was stunned by the information it provided. Rather than the anticipated discussion of various schools of economic thought such as Keynesian, Austrian, Saltwater and Freshwater etcetera, Gustavo had chosen to focus on the more avant-garde schools of economics. There was no debate about the merits of trickle down, supply side, or Voodoo economics. Keynes, Freidman, Krugman, or Hayek did not even rate a mention. Gustavo had chosen to focus on those great economists whose theories were currently being strictly adhered to by governments and central banks around the world. I am of course referring to Charles Ponzi, Bernard Madoff , Kenneth Lay , Victor Lustig {of selling the Eiffel Tower fame} and the most revered of all economists, John Law . John Law, of course was the Scottish Economist who almost bankrupted France in 1720 when they adopted his notion of perpetually creating wealth by printing money.
Shocked and appalled
Dear reader, Like you I was shocked and appalled that my good friend Gustavo would insult the noble science of economics by referencing the world’s most notorious and infamous fraudsters as if they represented the most relevant examples of modern economic thinking.
Thank you for your support on this delicate matter
I immediately picked up my Huawei Smartphone and took advantage of its Android operating system to contact my good friend Gustavo. {Yes dear reader I admit I am trying to boost revenue from my writing by incorporating product placements in my commentary. While Huawei, Android and Jack Daniels have not agreed to pay me yet [or even respond to my emails] I am sure if you all go out and buy their products they will see the benefit of being mentioned in my articles. Thank you in advance for your support and understanding on this delicate matter.}
Bunga- Bunga @ Davos
“Gustavo”, I exclaimed when he finally answered his phone; “I have just read your book on economics. Are you insane? Your book is an insult to politicians, economists Central Bankers and just about anyone in a position of power and influence in the world”. “David”, he groaned, “this is not a good time to speak, I am attending the World Economic Forum in Davos. Right now I am at a Bunga-Bunga party that was arranged for the bankers by the Italian government”. Dear reader I will not offend your sensibilities by telling you what a Bunga- Bunga party is, you may click on the link previously provided if you are curious [and you should be curious]. Suffice to say that Bunga-Bunga parties rarely result in solutions to global economic problems. It is no wonder that outraged women are demonstrating topless outside the venue to protest the mindless male domination of the event.
Our Brilliant minds
“David, be brief” Gustavo implored with barely hidden animal excitement, “My ECB team is next in the pool after the American delegation. “Gustavo, I have read your book and it is as if you believed that our modern economic system is nothing but a fraud perpetrated by brilliant minds whose sole motivation is the preservation of their positions of power and the accumulation of personal wealth.” “David” Gustavo laughed, “I want to thank you for reading the book. You are first person to read it. The book was written with the sole purpose of discretely being compensated for doing favors for friends and governments.”
If a bribe happens and no one knows about it, is it really a bribe?
“Say what, Gustavo, how does that work?” I asked, a little stunned at his candor. “You are so naïve. David, for many years, politicians and people of influence have published introspective drivel using a Vanity Press . Once published, the books are purchased by whatever government or interest group is trying to gain their favour. As a published author the politician or individual appears cerebral to the public, and makes a fortune on the book, the personal financial gain and profit appears legitimate to the public so no nasty accusations of bribery or influence peddling occur. The government or interest group gets the disposition that is most favorable to their cause. I sold 1 million copies of my book to a European government who did not want me to publish a report that indicated that they would be bankrupt in two years. I pocketed $4,000,000 on that deal. The report was buried and my books are sitting in a warehouse in Marseille.”
Bernard Madoff addresses the World Economic Forum
“So you do not believe that Madoff and Ponzi and other assorted fraudsters are representative of our current economic system?” I stated firmly. Gustavo’s response was classic. “David of course I do. Yesterday at the Forum we were enlightened by a video conference call from Bernie Madoff on the topic of sustainability. He very kindly took time from his busy day in prison to help us understand how to keep a fraud going for much longer than one would think is reasonably possible. His key take away was that one should always remember that people desperately want to believe”. [ Or as PT Barnum famously said ‘There is a sucker born every minute.’ ] I felt sick to my stomach.
The illusion of wealth
“Gustavo” I begged, “Please tell me that the illuminati of global economic thought are not becoming acolytes of Bernie Madoff.” “David” Gustavo smirked, “That ship sailed a long time ago. Leaders around the world worship Mr. Madoff’s ability to keep the illusion of wealth active in the minds of his clients for so many years. Only Kenneth Lay of Enron notoriety is held in higher regard by today’s leaders for his ability to create the illusion of wealth. How do you think the leadership of the United States is able to wake up in the morning without retching at the thought of their unfunded liabilities for various entitlement programs ? Like a Ponzi scheme, the US dollar and all entitlements will only evaporate when people no longer believe. [Or if some anarchist has the temerity to say that the emperor has no clothes.]
The Annual Salute to John Law Dinner
Tomorrow is our annual ‘Salute to John Law’ Dinner. All attendees at the dinner will be given a one dollar bill in the morning prior to the dinner. Whoever can photocopy and produce the most bogus one dollar bills by 6 p.m. and thus create wealth will win the coveted John Law Award. The Greek contingent used to win the award all the time but for the last five years Ben Bernake has blown away the competition. Mario Draghi, though has indicated that he has a cunning plan to ensure his victory in this year’s competition. He is a 5 to 1 favorite this year.”
Master of the House
“By the way David” Gustavo indicated, “I am making book on the competition for the ‘John Law Award’ and your credit is still good with me if you want to place a bet. The minimum bet is $10,000 dollars. The bankers have placed over $10 million in wagers so far. I am going to make a fortune.” I thought to myself, Gustavo always was an entrepreneur at heart. Like the Innkeeper in Les Miz , Gustavo was always Master of the House wherever that house might be, even at the World Economic Forum.
Get the Hell out of Dodge
Gustavo continued, “All the money printed by the competitors will be used to pay the professionals who provided their services at the at the Bunga-Bunga party. Needless to say the organizers of the Bunga–Bunga party will be ‘Getting the hell ot of Dodge’ faster than a Central Bank printing press after making the payment. The professionals who worked the Bunga-Bunga party will not be amused when they discover they have been paid in bogus dollars”
Should we laugh or cry?
I felt as if I was going to cry as I realized that our global economic order was being directed by the philosophies of Bernie Madoff, Ken Lay and John Law. Then I realized one should not cry, one could only laugh at the absurdity of our situation. My laughter was loud, long and not influenced by the giant doobie I had fired up while speaking with Gustavo. { Malawi Gold if you must know].
For Future economic debate: Ponzi , Pyramid or Shell
Our global economic system seemed to have become Pyramid/Ponzi/Shell game. I told Gustavo as much and was stunned by his reaction. “David” Gustavo responded pompously, his voice affected by the snorkel he was adjusting for his turn in the Bunga-Bunga pool. “You seem to be confused. The largest employers in the world are governments, the banking industry and the defense industry. None of these sectors produce growth or value. The purpose of this meeting in Davos is discern and implement new ways to convince the public that giving these sectors perpetual and eternal supply of money is the path to financial salvation. If not, the money might find its way to entrepreneurs and small business owner who would surely end the reign of the Davos attendees as global arbiters of wealth distribution.”
Does everyone really need a fleet of F 35’s gassed up and ready to go?
Gustavo continued, “Imagine a world where every country did not have a fleet of F-35s or Euro-fighters on the tarmac gassed up and ready to go.” Actually, as I imagined that scenario it seemed pretty good to me. “David, the money not spent on jet fighters that can fly faster than the speed of light would only be wasted on education, infrastructure and silly projects to make the world a better place. If we educated the public they would never allow us to spend billions of dollars on aircraft carriers, jet fighters, money printing and Global Economic Summits that are highlighted by Bunga-Bunga parties.”
We can do lunch
“David, This conversation has been a slice but it is my turn to Bunga-Bunga, I will call you in a couple of days and we can do lunch”. He hung up abruptly.
You can understand my dilemma
I was left to ponder how I was going to assimilate all that I had learned during my conversation with Gustavo regarding the current state of Global Economics into my commentary. Charles Dickens described deplorable conditions in the workhouses of his time in his novel ‘Oliver Twist’. However, even he was afraid to accurately describe the true depravity and horror of those workhouses due to a fear that no one would read his book. I can imagine how he felt. {Dear reader, please, get real, I am NOT comparing myself to Dickens}.
Nothing to see here
If I report the true state of our global economic system, the money printing, the runaway debt, the shell game of swapping debt from one pocket to another, the egregious spending of treasure on bigger faster more expensive and absurd Weapons of Mass Destruction , the looting of government coffers by hugely over priced dubious, disastrous projects {for a laugh click on the link] the income inequality, I risk being labeled an anarchist or a Cassandra . My work will be deemed irrelevant. Therefore I want to report to you dear reader that my attendance at the World Economic Forum has taught me that there is ‘Nothing to see here, move along, nothing to see here.’ I like to think of myself as the Frank Drebin of economic commentators. As this highlighted clip from the movie Police Squad demonstrates, it is all good.
Dear reader, I am feeling optimistic today that there is a light at the end of the tunnel for our global economic crisis. To be sure it is not going to be straightforward or easy but it does show us a way out. Before I relieve your angst regarding the global economic crisis and share the change that will guide the world into a new economic renaissance, please indulge me and allow me to explain how I uncovered this optimistic vision of our future.
This is going to be ugly
The day that I received my economic epiphany started out quite badly. My bank had contacted me and explained that they had reviewed my file and felt that I was heading for my own personal fiscal cliff. The bank indicated that they wanted to meet with me and review the actions I might take to avoid stepping into the abyss. I felt a little queasy at the thought of having this conversation with my bank. The dialogue always seemed to revolve around spending and borrowing behaviors that I should modify. I always felt that lower interest rates, debt forgiveness and smaller payments would be the path to my financial salvation. Today’s meeting, I suspected, was going to be ugly.
What would a banker do?
As a financial professional I knew that I should be prepared. I powered up my laptop and prepared my personal financial statements. They looked grim. However I asked myself, “What would a banker do when confronted with such unappealing financial data in their own financial statements?” The answer was obvious. I revisited my balance sheet and modified the numbers to reflect Financial Account Standards Board [FASB] approved ‘Mark to Make Believe’ values rather than the more reality based ‘Mark to Market’ values that made my financial statements so appalling.
It seemed like a good idea at the time
By doing this I could, for example, show my Blackberry shares, that I had bought for $137/share, not at their current value of $9/share, but at their anticipated future value of $628/share. [Yes dear reader, I admit I was the ‘last guy’ who bought Blackberry shares that day in May of 2008 at the high of $137] In my defense it seemed like a good idea at the time. Applying ‘Mark to Make Believe’ standards to my assets increased my net worth to a more impressive $3.8 million from the previously gloomy negative net worth of ($432,000) that ‘Mark to Market’ accounting had dictated.
Governments do it. Why should I not do it?
The second modification to my financial statements related to the cash flow. Using the time honored techniques of governments around the world I spread my cash flow statement over many years, in my case 50 years. I assumed, as governments do, that my revenues would dramatically increase. Governments usually assume that revenues will increase in 5 or 6 years [after the next election cycle] based the arrival of new economic nirvana that is the anticipated result of their current deficit laden fiscal stimulus. Projections always show that budgets will be balanced in the 5th year of a government’s 4 year mandate.
I learned how to be an accountant on Fantasy Island
Similarly, my cash flow, no doubt, will significantly improve based on the inevitability of my winning a Pulitzer and/or a Nobel Prize for my writing. This stunning increase in revenue would allow me to pay down my debt in a methodical fashion starting in year 15 of my analysis. Over the full 50 years of my cash flow analysis, similar to proposals by Republican and Democratic lawmakers in the US, my plan would increase revenue and reduce my spending by the astounding amount of $5,000,000 over 50 years. While not quite the 4 trillion dollars the Democrat or Republican plans would save the US, it was a very impressive number. What I particularly liked about the plan was that, like most governments, the real reductions of debt and of spending did not start until year 15 of the plan. Dear reader I realize that you might feel that my plan [or those of all G-20 governments] were prepared by accountants who received their training on ‘Fantasy Island’ .
Extend and Pretend is like a hangover
I would remind you that your knowledge of high finance may not include an understanding of the complex concept of ‘Extend and Pretend’ .
Well Fiddle dee-dee, Tomorrow is another day
Extend and pretend, in simple terms, is similar to the circumstance felt by any individual who has ever awoken with a hangover. With a hangover one can choose to endure the pain and resolve not to drink that much again [Plan A]. Alternately one can start drinking again and one postpones the hangover for another day [Plan B]. Society, its leadership and yours truly can choose a similar approach to the debt problem. They can endure the pain and resolve not to make that debt mistake again [Plan A] or they can borrow more money and roll over current debt. They can twist, ease, stabilize, sanitize, and ring fence, their debt. In other words, they can extend and pretend. This will postpone the denouement of the financial crisis for another day [Plan B]. My affinity for whisky and good times always made me choose Plan B when I was confronted with a hangover. I would reach for a bottle of Jack Daniels and make the pain go away. As the great philosopher Scarlett O’Hara said ‘Tomorrow is Another Day’ . Similarly governments, and I, opt for Plan B when it comes to economic and financial matters, ‘extend and pretend’.
You are an idiot
I went to the bank and presented my revised financial statements to the Bank Manager. Imagine my shock and dismay when her only comment after a cursory examination of my financial statements was to indicate that I was an idiot. She informed me that I would be hearing from the bank’s lawyers. Clearly she did not understand high finance . I thought it was unfair that my plan to reduce the rate of increase in my spending by 10% per year over the next 50 years did not meet with her approval. Dear reader, as I left the bank, I realized my mistake. It was not that I had borrowed too much money; my mistake was that I had not borrowed enough.
The David Crisis
Had I owed the bank $50 billion and had my debt been covered many times over by Credit Default Swaps , governments and banks around the world would be tripping over themselves to come to my rescue and throw money at me. There would be summits every month to discuss the ‘David Crisis’.
I sipped my enhanced latte
I left the bank feeling understandably depressed. I wandered into the local Starbucks and ordered my usual mocha-frappucino latté with foam and sparkles [$6 plus tax] and contemplated my unhappy reality. I looked around and reached for my flask and poured the remainder of its contents into my latte [The content of the flask, was of course, Jack Daniels , Whiskey to the Stars.] As I sipped my enhanced latté and contemplated my bleak future I could not help eavesdropping on the animated conversation taking place at the table beside me.
There is a way out of our crisis
Dear reader your patience will now be rewarded. It was this conversation that led me to believe that there was a way out of our global economic crisis. There were several young people discussing their business ventures. Clearly I was sitting beside a group of young entrepreneurs. Their ideas and business ventures were discussed in rapid succession. Their ideas would revolutionize e-commerce, industry, education, and the delivery of government services. The individuals whose conversation I was now privy to were all part of ‘Start-ups’ that would save the environment while improving the process for manufacturing everything from cars to ‘Swizzle Sticks’ . These entrepreneurs’s discussion covered the gamut of business challenges from regulation to finding investors for their respective ventures. It was obvious from the conversation that they were part of a much larger movement of young people who were not locked into the current economic paradigm where prosperity is determined by lopsided, egregious, management compensation, massive civil service payrolls, and generally living off the government as a consultant or contractor. They had no desire to get a guaranteed for life, high paying job, working for the government or working for a company that lived off the government.
Making money the ‘New Fashioned Way’ they earn it
Their vision was to make money in a ‘new fashioned’ way. They intended to earn it. They intended to change the world, create jobs, contribute to positive social change, help society, and earn lots of money at the same time. Clearly Entrepreneurs don’t take jobs, they make jobs
There is an App for that:
They discussed ‘Apps’ they were developing and marketing that would improve post secondary education while reducing the cost. They would make education accessible to all. My mind reeled as they continued to describe all their business ventures from early day start ups to more mature organizations. They had designed Apps that would replace Wall Street. Dear reader, imagine a world without Wall Street. The common denominator for all of them was energy, vision, social consciousness, success, opportunity and profit. Dear reader, their enthusiasm, confidence, and positive attitude indicated to me that all was not lost. The Good Vibrations this group was emanating almost made me regret my reduced mental clarity caused by the effect of the enhancement I had made to my latté. My brain was now a confused jumble of synapses pondering the information and the implications of the discussion I had overheard. Could it be that the entrepreneurial spirit that clearly existed in the younger generation would be able to guide us into a new economy?
Calling Gustavo LaFramboise- Pierre, Director of Statistical Creation, ECB
I hit the speed dial on my Smartphone and contacted my good friend Gustavo Laframboise-Pierre, Director of Statistical Creation at the European Central Bank [ECB]. If anyone could understand the implications to the global economy of the entrepreneurial spirit that was becoming endemic in our youth it would be Gustavo. My curious relationship with such a senior member of the ECB was due to the fact that Gustavo had been my bookie for many years until an absurdly large bet on the outcome of the recent world cup by a highly placed member of the ECB’s management team went horribly wrong and left Gustavo in the fortunate position of accepting a highly paid sinecure at the ECB to settle the debt.
Banker’s hours
“Gustavo, I am sorry to call you so early, [I knew that it was barely 3pm in Belgium and Gustavo kept bankers hours. I am so excited my friend; I believe that the solution to the global economic crisis can be found in the entrepreneurial spirit of our youth.” I breathlessly shared the ideas and excitement that I had heard from the table beside me, the dreams, hopes and plans of these young entrepreneurs. I told Gustavo that these young people and other like them around the world could be the change we ‘can believe in’ “Who is this?” Gustavo replied. His foggy tone and gruff demeanor indicated that I had caught him a little too early in the day. “It’s me Gustavo, your best customer from back in the day”. “David”, he mumbled, “I hope you did not wake me up just to tell me that you think our youth can save the world.” “Well Gustavo” I responded, “That was sort of why I called.”
The True Mission Statement of Central Banks
Gustavo abruptly launched into what could only be described as a tirade. “David, listen to me closely so that you never bring this subject up again. I am going to share with you the true mission statement of central banks around the world. The job of central banks is to protect the interests of the baby-boomer generation. Central banks have a singled minded focus to preserve the jobs, welfare, benefits and lifestyle enjoyed by the baby boom generation. Whether we rob prudent retired seniors by keeping interest rates abnormally low or pile on the debt for future generations, we must ensure the well being of baby boomers. Even if it means a 50% unemployment rate for our youth we must protect the jobs of baby boomers.
It is just collateral damage
The pain that must be endured by other generations is just collateral damage. These entrepreneurs that you speak about are a threat to the status quo. We strive to ensure that there are no funds available to them. Instead we give all the money to the banks. Entrepreneurs spend their time dreaming, thinking and doing. We need our youth to be oblivious to reality. We strive via our connections in the media and education to ensure that our youth do not focus their attention on economics and current events. Jersey Shore, Halo 4, Call of Duty and an education system that has not changed in 2,000 years have been wildly successful at distracting our youth from reality”. “Say what?” I exclaimed, “Gustavo, don’t we want them to create jobs and take over the reins of power?”
An ‘Entrepreneurial Spring” uprising
“David you are dumber than a brick.” Gustavo replied, “Of course they can assume power but only after the last baby boomer is dead. If they knew how much of their money we are spending every day to protect our own generation there would be a global ‘Entrepreneurial Spring’ uprising. These entrepreneurs are leaders; they understand social media and could quickly turn the youth of the world against the baby boom generation. They would insist that precious capital be devoted to improving the world, not protecting the baby boom generation.” I somewhat angrily asked, “But what about the economic crisis, the debt, don’t we want to make the world better for our children Gustavo?”
Let them Eat Debt
“David, you are starting to bore me”, he groaned. “I wish you had been at the Global Central Bankers recent conference in Dubai. The subject of the debt we are leaving our children came up. One of the bankers from France did a spot on parody of Marie Antoinette. However unlike Ms. Antoinette’s belief that solution to France’s economic problems at that time was to ‘Let them eat cake’, the banker suggested our solution for the next generation is to ‘Let them eat debt’. David, I have never seen a roomful of bankers laugh as hard as they did when this statement was delivered.”
Clearly Gustavo had gone over to the Dark Side
“Gustavo”, I stated, “Central bankers, politicians and baby boomers are making a big mistake if they think the youth will remain asleep forever. When they wake up and start to take control, the behavior of central bankers, [and politicians and baby boomers in general] will not be looked upon favorably. We should not be afraid of the next generation. We should embrace their entrepreneurial spirit, their leadership and enlist their help in solving our problems. ” “David”, he replied, “As I said, we don’t need our youth to remain asleep forever; we just need them to remain asleep until the last ‘baby boomer’ is dead.”
Calling all Entrepreneurs
I should have been depressed but I was actually feeling inspired. The entrepreneurial spirit of our youth would not be curtailed despite the best efforts of bankers, politicians and baby boomers. I felt confident that leadership, social media and common sense would ensure that the young entrepreneurial class will be the catalyst for leading the charge out of the valley of debt and into a positive economic future. I looked at the entrepreneurs at the table beside me; I stood up and asked if I could join their conversation. Gustavo may have joined the “Dark Side but I knew that ‘The Force’ was with these young people.
Youth will be served
It was my intention to do what I could to help these young people to ‘Awaken the Sleeping Giant’ that is the world’s young people. Youth will be served . Dear reader, the baby boomers have had their day, and mine has been a fine one. Please share this article if you dare, with all the Gen X and Gen Y individuals in your circle of friends. It is time for baby boomers to be part of the solution, not part of the problem.
Dear reader, by now you will have read at least 10,000 articles discussing the debt crisis, the banking crisis, the employment crisis, and ‘Gangster Bankers’ As well, you have endured a never ending cacophony of discussion about the endless number of fiscal cliffs challenging us. You have been overwhelmed by a steady barrage of weighty tomes offering disparate views on the miscellaneous ‘crisis du jour’ affecting our global economy and our banking system.
This surely is enough to make one’s eyes glaze over
Cyprus, the US, Japan, Portugal, Spain, the banks, this tsunami of mismanagement, corruption, denial, greed and incompetence surely is enough to make one’s eyes glaze over. This depressing, incomprehensible, conflicting and boring reportage is what motivates one to change the channel to the latest episode of the ‘The Bachelor’ .
This will land badly
Like me, you have probably concluded that the all our assorted cliffs, crisis, corruption scandals, employment exigencies, political turmoil and general malaise will land badly with severe consequences to the global economy. {Not to mention our own pocketbook}
The smart money is betting on either, Egypt, Portugal or Japan to be the first to lead the parade of debt repudiation
Let us dispense with any more debate about our predicament. Collectively, central governments owe 51 trillion dollars . It will never be repaid; there will be a cascade of defaults by sovereign nations. [The smart money is betting on Egypt, Portugal or Japan to be the first to lead the parade of debt repudiation.] According to most reputable Bookies, Japan with a debt of 240% of GDP is inching ahead of Egypt, whose transition from dictatorship to democracy to military rule to [fill in the blank] has left the country’s economy in ruins and would make it unlikely to service its 230 billion dollars of debt.
Only a useful idiot or a Nobel Prize winning economist would deny
The defaults will cause chaos in the global banking system. As well, the sovereign defaults will trigger dramatic social and economic upheaval on an epic scale. There will be no capital available for the private sector for a very long time. To argue against these outcomes is nonsense. Only a useful idiot or a Nobel Prize winning economist would postulate that other outcomes are possible.
I was feeling quite chipper
Dear reader, I apologize for my hardhearted interpretation of our collective economic reality. I was actually feeling quite chipper when I awoke this afternoon. It was not until I took a call from Gustavo Laframboise-Pierre, the Director of Statistical Creation, at the European Central Bank [ECB] that my mood changed. That call made me realize that presenting you with more charts and statistics to prove that there was a problem was a complete waste of time. And, according to Gustavo, time was of the essence.
I am privy to many of the internal machinations occurring not only at the ECB, but at Central banks around the world.
My relationship with Gustavo made me privy to many of the internal machinations occurring not only at the ECB, but at Central banks around the world. My special relationship with Gustavo Laframboise-Pierre was due to the fact that Gustavo had been my principal bookie until an appallingly large and bad bet by a senior member of the ECB on the outcome of the 2010 World Cup left Gustavo in the fortuitous position of accepting a high paying sinecure at the ECB to settle the debt.
Standard operating procedure
Apparently, offering high paying jobs at the ECB to their personal antagonists, whether they be pimps, bookies, loan sharks or blackmailers, was standard operating procedure when senior members of the ECB found themselves in a delicate financial or personal situation.
TOP SECRET
Dear reader, what Gustavo shared with me was nothing less than the ECB’s Top Secret report entitled: ‘Analysis of the World when the Debt Crisis Explodes.’ That this report was denoted as ‘Top Secret’ by the ECB indicated that only senior members of the ECB, their staff, their family members, selected members of the banking industry and their families, the janitorial staff at ECB headquarters, as well as the employees at a variety of FedEx print stores around the world were privy to the information in the report. Dear reader I must ask you not to share what you are about to learn with anyone. The contents of the report are disturbing.
Platinum and Lace Gentleman’s Club
“David” Gustavo began, “you will not believe the report I am looking at. What this report says is extraordinary’’. “Gustavo, why are you reading reports? I did not think that you had actually had any responsibilities other than as the ECB’s resident wine connoisseur and as a bon vivant.” “David”, he responded, “I wish that were true but the stress here has been so intense that most of the senior members of the ECB are in rehab. The party hosted by Sylvio Berlusconi, at the exclusive Platinum and Lace Gentleman’s Club in London after Andy Murray’s victory at Wimbledon left most members so inebriated that it only made sense for their chauffeurs to take them directly to a clinic for treatment. The soiree at ‘Platinum’ was attended by veterans of Mr. Berlusconi’s Bunga-Bunga parties which meant that almost all of the ECB’s senior management, visitors to London from the Federal Reserve Bank, notable political luminaries, financial pundits, and Nobel Prize winning economists were all in attendance.” This naturally meant that world’s financial elite were all in rehab trying to recover from years of overindulgence. Mr. Berlusconi’s party simply guided them up to and over their personal alcoholic cliffs. {Dear reader, if I may digress for a moment: As the nature of the Platinum and Lace Gentleman’s Club may offend some readers I have not provided the customary hyperlink. You will have to Google the club yourself to find out more. I will now get back ‘on message’.}
You have my attention
Gustavo chortled, “In fact, I am in charge of the ECB today. There is an expectation that the acting head of the ECB should read all reports.” “Alright Gustavo, you have my attention, what does the report say?”
Half a league, half a league,
Half a league onward,
All in the valley of Debt
Rode the G-20 : with apologies to Alfred Tennyson
“David the report indicates that the last five years have been a sham. Central bankers have known all along that there is no bridge to take us over the valley of debt and into the next global economic renaissance. The report acknowledges that the glue that holds the G-20 countries together is the largesse of each central government that provides services and employment to the population. Furthermore this largesse from the central government helps dictate the behavior of provincial, state and municipal governments.” Ben Bernanke and Mario Draghi are amazed that their permanent mantra of telling the world that they will keep printing money and lending money as part of their ‘do whatever it takes’ strategy, still has people believing that all will be well and that their actually is an exit strategy.”
In simple terms Nations will come unglued
“When the debt crisis explodes and central governments are no longer able to print or borrow money this relationship will end. The central governments will no longer have a function. In simple terms the sovereign nations we recognize today will come unglued. This will inevitably lead to a fracturing of many of the G-20 countries. The report anticipates that Greece will split into three countries, Northern and Southern Italy will go their separate ways. Catalonia will split from Spain, Scotland will say good bye to Great Britain. The list goes on forever.”
It turns out that Ontario was never that popular
Gustavo rambled on, “Quebec will bid adieu to Canada”. He chuckled a bit and said, “Not only does the report indicate that Quebec will separate from Canada but it suggest that within a month of Quebec’s separation, Canada will hold another referendum and the people of Canada will ask Ontario to leave Confederation.” [It turns out that Canadians never did like Ontario all that much.]”
I do not believe a word of what you are saying.” Or did I?
“Gustavo, what you are suggesting is heresy. I do not believe a word of what you are saying.” Or did I? “I took a long pull from my bottle of Jack Daniels that I kept on my bedside table. “Gustavo, calm down, surely the report indicates that there is a plan to cope with this potential upheaval.” I suggested. “David”, Gustavo moaned, “There is no plan. Every action taken by central banks over the last few years has only had the goal of delaying the inevitable.
Greece is nothing more than a test tube
Gustavo continued, “There is no money left. Greece has been nothing more than a test tube to give other governments the opportunity to see how events will unfold once the debt crisis explodes. France, Germany Portugal, it doesn’t matter; they are all heading in the same direction as Greece. France has not balanced their budget since 1974 . France’s fate will be no different than that of Greece. We estimate that France will split into 5 countries after a nasty civil war.”
It appealed to my pretentiousness
I was getting a little nervous. I reached under my bed and was reassured to find my two emergency bottles of Jack Daniel’s were still there. “Gustavo”, I asked, “I do not understand, we seem to have been muddling along OK, why the sudden urgency? “What is the big panic?” “David”, he sighed, “our projections indicate that the US two party system, dominated by entrenched Republicans and Democrats will deliquesce. [Dear reader, I apologize for my pretentious inclusion of the word, deliquesce. Until I googled for a synonym for disintegration I had never heard of the word deliquesce. Once discovered I could not resist using the word as it appealed to my pompous nature.]
Parties representing the right, the left, the Tea Party, the Religious right, the Secularists, and the Latinos will emerge. The parties will ensure that the world’s largest economy is completely ungovernable. The gridlock will be even more intense and decidedly vicious regardless of who ends up on Pennsylvania Avenue.
‘Red States, Blue States, Spanish States?’
The hatred between the various groups will intensify to the point that the red states and blue states will begin to discuss splitting America in to three separate countries comprised of Red States, Blue States and Spanish States.” I started to relax and laugh, Gustavo’s prognostication was the dumbest, most preposterous and stupid observation I had ever heard. The empire that is the USA was a rock, a bastion of united exceptionalism, forged in steel, united by their love of their flag and their country. The USA would never disintegrate into disparate and smaller nation states. I told Gustavo that he was being absurd. “Am I David, Am I really?” he responded cryptically.
Empires can evaporate
“Our study reminded us that in 1980 the USSR was the biggest, toughest Empire history had ever produced. No one in 1980 would have suggested that the USSR would evaporate in 10 years leaving the two Germanys reunited and create 15 new, notionally democratic countries. We checked our history books, all empires, Roman, British, Soviet, to name a few, came to an abrupt end after a period of military over reach and political and economic hubris.
It is in the DNA of an empire to rise….and fall
The USA is not different. Their government is effectively bankrupt; their military is still a voracious money gobbling machine that will ensure that any attempt at fiscal sanity will be unsuccessful. We project that the last dollar spent by the US government before it collapses will be spent on another aircraft carrier in a sad attempt to ensure that they always have 10 more aircraft carriers than the rest of the world combined. Empires are not permanent David; they are temporary structures whose demise is contained in the DNA that was implanted in the Empire at its birth.” It started to dawn on me that this was serious.
I will be joining the senior members of the ECB in rehab
I reached for my secret stash and lit a giant Doobie to calm my nerves. [Dear reader, I am aware that if I am not careful I will be joining the senior members of the ECB in rehab.] I was desperate for some happy news so I suggested to Gustavo that China might save us. Gustavo groaned “David the moment Europe and The USA run out of money and are unable to buy all the gadgets and toys that China manufactures, China will endure its own economic crisis. China will begin its own evolution to become a collection of smaller nation states. There will be no more construction of the legendary and fabulously bizarre empty cities that dot the landscape of the world’s most populous country.”
You are ‘harshing my mellow’
Without European and American consumers to purchase Chinese products, China cannot create the required 25 million new jobs per year that ensures the country’s stability. There will be political unrest and a movement for the various territories to take control of their own destiny.” “Gustavo,” I responded angrily, “You are ‘harshing my mellow . Can you wrap this up and give me some good news?” “David”, he offered, “the good news is that the world is not coming to an end. It is evolving. What will be hard is for the world to accept change. A world dominated by an empire is not a permanent condition. In the world of globalization there is no such thing as the status quo. The world will likely evolve back into a series of city states or provinces. Trade will become less global and more local.
Nothing new, history has seen the evolution of empires many times.
The concept of passports and borders will diminish as the movement of people will mirror the movement of goods. There will be no barriers to the free movement of goods or people between various states and provinces.” Gustavo continued, “David, what this report suggests is actually nothing new, history has seen the evolution of empires many times. It is no big deal. It just means change. Change can sometimes be difficult. It will be most difficult for the baby boomers who have benefited most from the debt binge and who will be most affected by the change.” “So what should I do with my money Gustavo, can you suggest some good stocks to buy to profit from the change your report suggests is inevitable?” Gustavo hesitated, “I really should not tell you David, but senior members of the ECB are moving their personal fortunes to physical gold and diamonds, as well as water and farmland.”
Map Maker, Map Maker, Make me a Map
“Please do not share this with anyone”. Gustavo pleaded, “The senior members of the ECB are also investing heavily in the creation of map making companies. With all the political change that will be forthcoming map making will be a huge growth industry.”
Brave New World
Dear reader, I took a long drag on my doobie and pondered what Gustavo was telling me. Despite the effects of the doobie and the Jack Daniels, it was clear to me that changes were coming. Every generation has had to struggle through a crisis. The Great Depression, WWI and II, famines, plagues, they have all challenged mankind. The debt crisis will be the historic challenge for the baby boom generation. The baby boomers , for better or for worse, are going to be in charge when the debt crisis reaches its climax. That much is certain. What is uncertain is whether the baby boomers will rise to the challenge and lead the world peacefully out of the debt valley. What kind of Brave New World will baby boomers leave to future generations? How will the baby boomer generation be remembered? I thanked Gustavo for the information. I thought about what he had shared with me and decided to have a nap. The crisis would have to wait.
Dear reader, you probably said to yourself self that the title of this article is absurd and preposterous. Canada is a paragon of fiscal responsibility and is a bastion of good governance in a confused world of financial instability. I would have agreed with you until I received a very disturbing early morning phone call from Gustavo Laframboise-Pierre, the Director of Statistical Creation, at the European Central Bank [ECB]. My relationship with Gustavo LaFramboise-Pierre went back many years. He had been my bookie since 1980 when I began my career in the investment industry. His life took a significant turn for the better when a senior member of the ECB bet large and incorrectly on the outcome of the most recent World Cup. The only way the senior member of the ECB could settle the debt was to offer Gustavo a high paying sinecure at the ECB.
Why would the ECB care about Canada?
Gustavo sounded desperate, “David I need your help, I have just been handed a top secret report that expresses deep concern about Canada’s financial stability. The report indicates that Canada could default on its debt and trigger a global meltdown in the world’s debt markets”. I laughed and asked Gustavo how much wine he had consumed with breakfast.” He was not amused. “I am serious David; this report indicates that Canada is on the edge of the abyss and ready to step off. I need you to do some research for me and help disprove this report.” Gustavo, why does the ECB care about Canada, isn’t that a little out of your purview. Shouldn’t you be worrying about Greece, Italy, Spain and France?” “David, if Canada’s economy has a meltdown and its debt becomes a problem, it will trigger a domino effect around the world. Canada’s meltdown would be catastrophic to the global debt markets. Europe would be dragged into the abyss”.
Standard consultants fee of $10, 000 [USD] per day to a maximum of $500,000”
I thought he was being preposterous but as a consultant to governments and their agencies I had a keen eye and I saw an opportunity to make some money. I sounded sincere and indicated that I agreed that it was an important issue that merited analysis. I enquired delicately on the subject of remuneration. Gustavo was quick to respond. “We will pay you the standard consultants fee of $10, 000 [USD] per day to a maximum of $500,000”. [I always found it amusing that the ECB insisted in doing business in USD. Do they know something we do not know?] Gustavo continued, “As usual I expect you to hire my sister and my son as your assistants and pay them each $2,500 per day.” I groaned, Gustavo always did this to me.
Game on
His son was 4 years old and had already accumulated enough money from these types of contracts to put himself through Harvard Medical School. His only contribution would take place if a client wanted the report done in crayon or finger painted. However that still left $5,000 a day for me so it was ‘game on’.
The crack of noon
Gustavo, this project will be difficult and time consuming but I will squeeze it in to my busy schedule. I hung up and got ready to work. I went out my front door and took my neighbours recently delivered copy of the Globe and Mail, Canada’s National Newspaper, so that I could begin my research. Dear reader I was not stealing the newspaper from my neighbor. My neighbor was a Member of Parliament. He never awoke until the ‘crack of noon’; I would return the newspaper long before then. I sat down at the kitchen table, prepared my breakfast, [cold pizza left over from a party I had last week end], poured some coffee in my glass of whisky, [Jack Daniels, of course] and opened the newspaper to begin my research. Dear reader we can, I am sure, all agree that in order for a country to step over the edge and into the abyss of the debt crisis six key elements must exist as a precondition to economic disaster.
Six preconditions for disaster
- A dysfunctional and inefficient government
- Huge government debt and deficits
- High household debt level
- A bubble formation in the real estate market
- A state of denial must exist in the country
- Corruption must be pervasive throughout all levels of government
This was going to be the easiest $500, 000 [less expenses] I ever made. Canada is the world’s leader in good governance and efficiency. Everyone knows this fact except the anarchists at the ECB that produced the report that had Gustavo so upset.
Prorogation, there is a word you do not see very often
However I got a little queasy when I read the first headline in the newspaper. Prorogation is an abuse of power . Prorogation should not be confused with Pierogi , [which as we all know is a tasty dumpling. ] Prorogation of Parliament is a procedure to discontinue the meetings of a legislative body without dissolving it. In simple terms, all elected members of a government go on a paid holiday for an undetermined period of time. There is no one in charge. Unbelievable as it sounds this is Ontario’s reality. Due to prorogation, the legislative arm of Ontario has decided to shut down indefinitely while one of the political parties shops around for a new leader. This would be akin to Citigroup shutting down head office for 6 or 7 months while they searched for a replacement for Vikrim Pandit. Ontario’s is Canada’s largest province. It owes 280 billion dollars, and its deficits are out of control. It is now sailing towards the debt abyss with no rudder, helmsman or crew.
How do you spell boondoggle
Thank goodness this was not happening in Quebec, Canada’s second largest province, whose debt issues are even worse than Ontario’s. Quebec’s only issue is that, like Spain’s reluctant province of Catalonia, Quebec’s government has Separation as its main objective. I googled ‘government boondoggles over a billion dollars in Canada’ and came up with a startling number of hits. Gun registry, E-health cards, energy plants and I realized maybe Gustavo had a reason to be concerned. OK So Canada’s governments are dysfunctional and inefficient. One precondition met and five to go.
That was quick
Dear reader I did not need to do any research on the second precondition, huge debts and deficits. By now we are all familiar with the global debt clock . It shows Canada in a very bad place. Canada has .0048% of the world’s population and 3% of the world’s debt. Two down and four preconditions to go.
I owe I owe, It is off to work I go
I was no longer queasy I was distinctly dizzy. I reached for my cold pizza and took a long sip from the bottle of Jack Daniels as I viewed the next article. It related to the third precondition required for a country’s economic meltdown, high household debt. Canadian’s debt soars into the danger zone . Canadians household indebtedness is now worse than our American cousins debt level was just before they jumped off the subprime cliff and into the abyss. Canadians it seems have a very, dare I say it, American appetite for debt. The third item on our list has been taken care of.
Why are bubbles easier to identify after they burst?
I dipped my pizza in my whisky and turned to the next page. Surely there was some good news. Yikes, I thought as I looked at the next headline. Canada’s real estate market has been fantastic for the last few years. Prices have soared. There is no way that Canada’s real estate market could be a bubble that would soon burst. However the headline condo sales plunge, prices stagnate made me think perhaps there was trouble in paradise. Canada’s real estate market was showing all the signs of a classic bubble bursting. It also occurred to me that I could actually make Gustavo’s son work for his portion of the fee. He could use his crayons and draw me a nice picture of a bubble bursting for my report. In any event, I put a checkmark beside precondition #4.
Don’t tell me I am in denial, I refuse to believe you
Gustavo’s sister, a psychiatrist in Ireland might help me with precondition # 5. Denial is a very complicated issue. It is the reason that so many diseases and disorders are not treated. In order to get better one must first recognize the problem. If my AA meetings taught me anything it is that you must recognize the problem before you can fix it. Imagine my consternation when I read the next headline. Canada barely misses deficit targets, Finance minister points to strong economic fundamentals
Canada’s finance minister is declaring it as a remarkably positive achievement that Canada was unable to achieve this years budget targets. My emotions as I read the article reminded me of the reaction of the audience at my most recent AA meeting when I announced that I had reduced my alcohol consumption by 10%. No words were said, but it was clear that everyone in the room was saddened, worried and disappointed with my declaration. Unfortunately denial is still the main component of Canada’s economic strategy. [Dear reader I appreciate your concern, it is possible that I have my own denial issues to resolve’] However I had to admit that precondition # 5 had been met. Denial was alive and well in Canada.
The Big Owe
I cheered up a bit as I knew that corruption was not relevant in Canada. Our government and our citizens are honest and hardworking There is no corruption of government in Canada. I did not need to worry about the final precondition being met. But wait, the next page of the newspaper turned my world upside down. City engineer admits to taking kickbacks on public work projects ‘The article detailed massive, pervasive and long lasting corruption in Quebec’s construction industry. It makes one realize that the taxpayers of Quebec have paid hundreds of million of dollars for work that should have cost a fraction of the amount. The speculation is that this behaviour is rampant throughout Canada. Government overspending and corruption has existed in Canada for years. There is a reason Canada in addition to inventing the term ‘Eh’ [pronounced ‘A’] also invented the term ‘the Big Owe’ a reference to the ‘Mother of all Corrupt Boondoggles’, the multibillion dollar construction and collapse [well sort of a collapse] of Montreal’s Olympic Stadium. [ The Big Owe ]
While I was now thoroughly saddened by the fact that precondition #6 had been met, I must admit I was also a little excited. It was times like these that governments reach out to consultants for thoughtful research, analysis, and recommendations. I sensed there would be some significant paydays coming my way.
I looked at my watch. I had been hard at work for almost an hour. My only challenge now would be to delay submission of my report for 49 days so that Gustavo’s sister, his son and I could collect the full $500,000 fee.
Wasting away in Margaritaville
I called Gustavo, he was almost incoherent. The luncheon he indicated I was interrupting was clearly taking place in Jimmy Buffet’s Margaritaville, a popular destination for many bankers. He was quite drunk. “Gustavo I just want to clarify something. If I do this research and find out that your internal report is actually correct will I still be paid? Gustavo, angry at being interrupted in the middle of his luncheon said, “David, if your analysis supports the findings of our internal report and indicates that Canada is quite possibly going to implode and drag Europe and the rest of the world along with it, you will not receive a penny. Are we clear?” Crystal clear I thought to myself, like Tom Cruise, I can handle the truth. Gustavo screamed into the phone in exasperation, “We want an honest, in depth analysis that concludes that Canada is great shape and that there is no cause for alarm. Now stop bothering me and ‘Just do it’ ”. As Gustavo had not seen the inside of gym in 20 years I found his reference to the Nike slogan amusing.
I am a consultant not an idiot
Dear reader, I am a consultant not an idiot. I must ask that you disregard and forget everything you have just read. I am putting the finishing touches on my report, that much to Gustavo’s delight will declare Canada as the worlds most economically stable and well governed country. You must view some of the facts that you have just read as rare exceptions [no matter how many times these exceptions occur.] Furthermore you must not ask yourself the following question? If Canada is in such precarious shape how many other countries that are believed to be stable, are actually staring into the credit abyss.
Move along, nothing to see here
Please dear reader, if anyone asks you about Canada’s economic circumstances please just tell them to ‘move along, nothing to see here, just keep moving.’
I wiped the pizza crumbs off the newspaper, folded it neatly and returned it to my neighbor.
Dear reader, I recently conducted the most important interview of my nascent journalistic career. The information I uncovered in my interview will, I suspect rival Woodward and Bernstein’s Watergate revelations. My interview with Gustavo Laframbroise–Pierre, newly promoted Director of Statistical Creation, at the European Central Bank [ECB] will surely earn me a Pulitzer Prize. I will share the information I gleaned in this interview. I caution you, dear reader that the topics discussed in the interview will challenge the very core of your understanding of economics and the role of government. As well, it will clarify in your mind, the likely resolution to the world’s debt crisis.
Le Verre Volé (The Stolen Glass)
My access to a personal interview from the usually reticent Mr. Laframboise-Pierre was the happy result of my recent trip to Paris combined with Mr. Laframboise-Pierre’s legendary affinity for French wine. Oh, and did I mention that Mr. Laframboise had been my bookie until a bad bet by a senior member of the ECB left my former bookie in the curious position of accepting a high paying job at the ECB to settle the debt. As soon as I arrived in Paris I looked him up. He suggested we meet at his favorite wine bar, Le Verre Volé (The Stolen Glass) near the Quai de Valmy.
What is Statistical Creationism
As we sipped our wine, [Domaine Jolly Ferriol – Chai Moi, a nice mix of syrah, Grenache, and carignan that is always ready to drink] I took out my notepad, and steeled myself to ask Gustavo the really tough questions that needed answers. I started the interview by asking Gustavo to explain what exactly a ‘Director of Statistical Creation’ did? With great pride Gustavo indicated that unlike statistical analysis and regression analysis, Statistical Creationism was the process of, first determining a conclusion and then creating statistics that support the conclusion. Statistical Creationism has three important components, volume, velocity and variance. I must have looked puzzled because he went on to say, “Let us assume that a Central Bank wants to prove that their actions are not devaluing their currency. My job is to circulate a blizzard of created statistics that make the issue seem hopelessly complex. That is the volume. Furthermore I need to circulate the statistics through the media, the analyst and economic community, and of course the general public. That is the velocity. The next step is to change some of the numbers and re-circulate the numbers so that any meaningful discourse becomes mired in series of conflicting comparisons that make thoughtful analysis and discussion almost impossible. That is the Variance. It is quite straightforward, Volume Velocity and Variance. Finally I need to ensure that the numbers are released at an ever increasing speed to amplify the volume of the discussion to the point where the confused conflicting and contradictory discussion of the issue and statistics leaves the general public covering their ears as the white noise of the discussion becomes so loud the human brain can no longer process the information.
Volume Velocity and Variance
Amplification of any or all of the velocity, variance and volume of statistics helps to ensure successful obfuscation of any message. At that point the general public will accept what they are told based on the color of the tie or scarf worn by the ECB member who is presenting the information.”
Garcon, more wine please
I took a sip of my wine. [Truthfully I also reached into my pocket and pulled out my flask. I drained the flask its contents, Jack Daniels, of course.] Gustavo was making me very nervous. “Not to put too fine a point on this Gustavo but isn’t what you are doing disingenuous at best or lying at worst.” “You are very unfair and naive David” Gustavo responded, “Statistical Creationism was first discovered on Wall Street in the mid 80’s as analysts evolved from being research technicians to rock stars. Over the last 20 years it has been, refined and adopted by Central banks, politicians and corporations. Just listen to the discussion taking place in the American election. Every debate or speech includes statistics that are released in high volumes with periodic variation and with an astounding velocity. Despite two years of discussion the public has no understanding how either party will spend or save money over the next four years. The next president will be elected based on the easier to understand issues of likeability, snappy non sequitur sound bites and the color of their tie.
Debtors’ Merry-go-Round
My journalistic DNA made me realize that I was on the verge of breaking the ‘Story of the Century’ The headline would be ‘Statistics Manipulated to Medicate the Public’. Gustavo must have read my mind, he flipped his lap top around and showed me a chart of the Debtors’ Merry-go-Round “David, these numbers are relatively accurate and might alarm people. Fortunately my department has created enough statistics on this topic, to ensure that the issue will be relegated to the recycle bin of the public’s mind.” At this point I started to drink directly from the bottle of wine on our table. Gustavo, “Why are you doing this? Why can’t you be honest with the public?” He looked at me as if I was insane. “If we did that people would panic, they would stop buying things, they would throw their politicians out of office, there would be anarchy. Our strategy is to medicate the public, print money, expand debt and most importantly, pray for a miracle at some point in the not too distant future to solve the crisis. We feel, this is a much more responsible course of action.”
We are not Stupid
He sipped his wine and continued “Politicians are not stupid. As Jean Claude Juncker famously said, “We all know what to do, we just don’t know how to get re-elected after we’ve done it.” .
We are on a Mission from God
Gustavo opined, “We at the ECB, feel that, like the Blues Brothers, we are on a ‘a Mission from God’ to save the world.” My mind flashed back to the carnage the Blues Brothers left in their wake as they completed their ‘Mission from God’.
You make it sound so Nefarious
I reviewed my notes and said, “So if I understand correctly Gustavo the strategy of the world’s Central Bankers and politicians is to effectively apply a powerful sedative to the general public using a baffling array of created statistics, money printing, perpetual debt and doublespeak to ensure that citizens do not start a revolution. At the same time the central bankers and politicians will collectively pray for a miracle. Have I got that right Gustavo?” Gustavo sighed and said, “Well you make it sound so nefarious, but yes that is the essence of the plan to end the debt crisis.”
Would you like to create 30 billion Euros?
I was sweating profusely at this point as it dawned on my simple mind that we were @#%@&^%. Gustavo must have sensed my unease. He smiled to reassure me and said. “Don’t worry David we have an unlimited supply of medication. While we wait for the miracle we can postpone the crisis for years”. Let me show you. He typed on his computer for a couple of minutes and then turned the laptop to me again. “Would you like to create 30 billion Euros? I am online with headquarters, all you need to do is key in the amount and hit enter”. Skeptical but excited I typed in 30 billion Euros and pressed enter, magically 30 billion Euros appeared on the ECB’s balance sheet. “Now David, to who would you like to give the money to?” “Don’t you mean lend the money, Gustavo?” I suggested. “Sure David if that makes you happy” he responded, “just use the drop down menu and select a destination. The alternatives are already preprogrammed. Your choices are European banks, European countries, the IMF, The Federal Reserve, the ECB payroll department and my Swiss bank account, just kidding David”, he laughed, “We don’t really send money to the Federal Reserve.” I chose European banks and pressed send. You could almost feel the soothing euphoria as the medication entered the veins of the European financial system. “How do I know which banks I sent the money to Gustavo?” He shook his head, “You ask too many questions David. As we do not expect to ever see that money again we do not need to keep track of it”. If Adam Smith were alive today he certainly would have to add a few chapters to the Wealth of Nations to explain modern economics.
The one Exit Strategy Central Bankers have mastered
Gustavo was anxiously checking his Smartphone and texting furiously. Clearly he was losing interest in our conversation. Undoubtedly he was already planning his ‘exit strategy’ so that I would be left with the bill for our wine. [This is probably the only ‘exit strategy’ that all central bankers have mastered]
Karaoke anyone?
David he said, “I need to prepare for the EU’s next summit October 18th. It should be a great party. They will have a karaoke machine, jugglers and a magician.
Que Sera Sera
“Say What”, Gustavo I pleaded, “I thought the purpose of these summits was to brainstorm on solutions to Economic and Debt Crisis.” Gustavo looked at me impatiently, “David we having been having these summits every 5 weeks for two years now. At the end of each summit we announce that we will print more money, lend more money and borrow more money. Don’t you think we would have proposed an alternative solution by now if we could think of one? It is very stressful. Karaoke helps everyone relax. You should see Angela Merkel’s rendition of Que Sera Sera ”
To infinity and beyond
As our interview came to an end I noticed Gustavo looking out the window and staring at the stars. “A penny for your thoughts Gustavo” I muttered, as I stared at the 120 Euro tab he was going to stick me with. David he whispered “never forget that we are on a Mission from God. We will travel to infinity and beyond to protect the euro and save the world.” He then winked and said, “unless of course our strategy proves to be the wrong strategy, in which case Europe will once again become a collection of individual countries who, for better or for worse, will each control their own destiny and, more importantly, I will be out of a job.”
The Subprime Crisis will be contained
My confidence level was somewhere below zero. I could not help remembering another Central Bankers reassuring words, indicating that the subprime crisis would be contained .
Reality is a difficult place. We should all live in the alternate reality that Central Bankers have discovered.
Dear reader, it will not be necessary for Wall Street and Main Street, or the European Union to be concerned with budget deficits, world peace and the debt crisis any longer. While in New York recently I had an extraordinary revelation on these issues that I will share with you. My revelation will shock and awe your senses. It will solve all of the world’s economic problems. It will signal the arrival of peace in our time.
Next stop, the UN General Assembly
Normally this type of information would be delivered to a General Assembly of the United Nations; however I choose to share it with you directly. Dear reader before I share my revelation and the path to global economic harmony let me first relate the incident that triggered my revelation.
The City that never sleeps
I was in New York recently to spend some time worrying about the global economy and to enjoy the ‘City That Never Sleeps’. Sure enough, New York’s sobriquet proved accurate. It was 3 a.m. and I could not sleep. I did what any visitor to New York would do in this situation. I called the concierge and asked if he knew where I could find an all night poker game. [Truthfully as I was paying $40 a night for my room the concierge was really a security guard/janitor.] He was no help. I then reached out to my former bookie, Gustavo Laframboise-Pierre, who currently works for the European Central Bank. I was relieved when he texted me back immediately with an address and a password for a 7/24 poker game. Before you could say ‘New York Minute’ a cab delivered me to the sub-basement of a parking garage in a rather sketchy part of town.
His name was Basil
I found myself seated at a table in the corner with four of the most, how shall I say it, unique individuals I had ever met. The chap beside me was the biggest, ugliest smelliest, meanest, looking person I had ever had the pleasure to throw down the cards with. His name was Basil.
‘Game on’
In any event my desire to play poker overcame my fear and it was ‘game on’. [You have probably deduced by now that I have a gambling problem, let us discuss that another day]. As the game progressed it was apparent that Basil was to put it kindly, an unabashed cheater. At first his cheating was subtle, sneaking a peek at my cards. As he consumed more of my ‘Texas Mickey’ of Jack Daniels he lost his subtlety and would take my cards out of my hands and play my hand for me.
J’accuse, you cheater
Since his tattoos looked as though had been inked with a machete rather than a needle I was not about to stand up and say “J’accuse, you are a cheater, you dog.” Patience dear reader we are moments away from the revelation and world peace. Finally Basil grew bored, tired and drunk. He stood up and simply took everyone’s money from the table, from their wallets and from their shoes, smiled and began to walk out the door. We stared at the erstwhile ‘Floor Boss’/Bouncer/ Bartender expecting him to stop Basil. However when the Floor Boss saw the anger and danger in Basil’s eyes he curled into a fetal position on the floor and called for his Mommy. I felt used, ashamed embarrassed, broke, humiliated, disappointed and generally as Jed Clampett would say, ‘Lower than a snakes belly in a wagon rut’.
Wall Street is just like Basil
Dear reader your patience will now be rewarded. I realized that I had felt this way before. This was the same way I felt after any dealings I have ever had with Wall Street or the ECB. Wall Street starts by subtly taking your money, but as they grow more familiar and more impatient with you, just like Basil, their hands reach directly into your pocket. Finally, when they are bored or tired or out of ideas they just take your money. The regulators, like the Floor Boss, simply cringe in the corner and hope for an indulgence as Wall Street leaves the room. Dear readers at this point I saw a bright light and heard music. It was clear to me what needed to be done to save the world. We did not need to bomb our enemies and go to war with them. All we need to do is allow Wall Street and the ECB to participate in the financial system of our enemy and, at the speed of money, our enemy will be suffering from a bloated banking system, a debt crisis, and potential systemic financial collapse. All the battleships and missiles in the world could not do more damage.
No light bulbs required
Dear reader you are not convinced. Let us examine my revelation a little more closely. Sadly for the people of Iran, Iran seems to be the enemy du jour. [Except in Mitt Romney’s world where Russia is still on the menu as Public enemy #1.] Imagine if you will, if Wall Street had been training a generation of Iranians on structuring an economy and a stock market. Does anyone doubt that by now Iran’s nuclear reactors would have been taken over in a leveraged buyout, broken up into its component parts and the land sold for a massive condominium development? The fact that no tenants would require light bulbs as the area still glowed at night in a radioactive haze would be presented as a remarkable free cost saving bonus to the prospective buyers. It would also demonstrate the developer’s commitment to a greener environment.
How do you make 50 billion dollars disappear?
Still unsure of my conclusion, let us investigate further. Can you imagine if Iran’s enemies had the ability to make 50 billion dollars of Iranians hard earned money disappear? Iran’s Wall Street trained money investment bankers managers could do that before lunch.
Wall Street Summer
Imagine if Facebook had been an IPO exclusively available in Iran. $50 billion of Iran’s wealth would have disappeared in what the media would surely have called a ‘Wall Street Summer’.
Is there a way to share information with millions of people?
The ability to make your enemies treasures disappear in blink of an eye should not be underestimated. Few of us can make billions of dollars disappear in an instant, yet Enron, WorldCom, Dot.com, Nortel, and Facebook prove that Wall Street has mastered this skill. As a case in point, let us discuss Facebook. As it turns out there are hundreds of lawyers who will make a living off this IPO for the next 20 years. I do not want to get caught in a legal vortex so I will simply draw your attention to a recent article from Bloomberg Facebook Fought SEC to Keep Mobile Risks Hidden Before IPO . Apparently one of the issues that left investors perplexed was an unequal dissemination of information that investors might have found useful prior to making their investment decision. Specifically from the Bloomberg article “officials who, days before the IPO, privately advised securities firm analysts to lower earnings and The losses were acute for retail investors. They were allocated an unusually high proportion of shares after institutional investors balked. And they didn’t get the same flurry of warning calls from Facebook profit estimates — largely on the dearth of revenue from mobile users.
“It has been clear from the beginning that the insiders were bailing given that they sold $10 billion of shares and continued to sell as the lock-up period expired,” said Francis Gaskins, president of IPOdesktop.com, an independent IPO research firm in Marina del Rey, California. “They clearly knew that the company’s best growth rate was behind them and the stock was overvalued.”
The Usual Suspects
This is too funny for words. I am imagining a group of Wall Street bankers, lawyers and accountants along with Facebook executives sitting in a board room as they puzzle over how to share this new information with a wide audience rather than just the ‘usual suspects’, namely the big money clients. ‘If only there was a way to reach 800 million people with a message containing this information. If only there was a way to give us the power to share this information in a more connected and open world’. This would have been the question circulating the boardroom. The silence must have been deafening. Surprisingly it did not occur to anyone to post a message on Facebook and instantly inform 800 million people that new information had come to light. Facebook’s mission is to give people the power to share and make the world more open and connected To misquote Winston Churchill, “Wall Street can be counted on to the right thing only after they have exhausted all other alternatives.”
Weapons of Mass Financial Destruction
It is clear that the real ‘Weapons of Mass destruction are not found in the arsenals of the military. The true weapons of mass destruction are found in our global financial system. [Yes, I am sort of taking Warrens Buffet’s observation regarding financial derivatives and twisting it a little to make my point.] There is no enemy in the world that can defend itself against weapons of mass financial destruction. The military, defense spending, nuclear weapons are all obsolete. Guns or butter is no longer a difficult decision. We do not need guns any more.
The ‘Royal Flush’ of armaments.
Ask the people of Greece about the efficacy of weapons of mass financial destruction. Whether it was the dubious accounting that was used to allow Greece to join the Euro or the perpetual pain that will keep Greece in the Euro, money manipulation, not guns clearly is the Royal Flush of armaments. Greece of course was never an enemy, however unbeknownst to Greece they were designated as Weapons Testing Facility by the European Union.
Wall Street is the ‘Exit Strategy’
You may have misinterpreted my comments regarding Wall Street and been left with the impression that I question the positive contribution made to the world by Wall Street and its junior partners such as central bankers and other stock markets around the world. Let me be perfectly clear, Wall Street will be our savior. One of the most vexing problems that cause many observers of the financial system sleepless nights is the issue of a ‘Central Bank Exit Strategy’ from the massive liquidity created by the money printing and borrowing of the world’s governments. How can these trillions of dollars be discreetly removed from the financial system in a timely and effective fashion?
One day the Central Banks will make a phone call
Dear reader do not be concerned. One day the call will go out from the Central Bankers asking Wall Street and other global exchanges to remove the liquidity [money] from the system. Does anyone doubt now that Wall Street will be up to the task of making trillions of dollars disappear in an afternoon? Exit strategy complete. Excess liquidity will no longer be a problem. As you can see the world needs Wall Street. Central bankers need Wall Street. Main Street needs Wall Street, well not so much.
If they don’t fatally injure themselves first
Today the European Union was awarded the Nobel Prize for Peace. Europe has reduced military spending and replaced guns with financial weapons of mass destruction. The only slight problem is that these weapons are very tricky to master. The European Union has shot off a few of its own toes, fingers and other body parts as it attempts to master these weapons. It may seem that the European Union is like ‘The Gang that could not Shoot Straight’. However, if [and it is a big if] Europe can avoid fatally wounding itself as they learn about money they will be a dominant force in the world.
Walk Softly and let Wall Street be the Big Stick
Dear reader, as America reduces it expenditures on traditional weapons and relies more heavily on weapons of mass financial destruction, it will be able to devote the saving to debt reduction and investment in the future. It will begin an enduring recovery. Wall Street will become the ‘Big Stick’ in its foreign policy. Nations large and small will cringe with fear, terror and compliance when America threatens to do to their enemy’s economy and financial system what American’s have done to their own economy and financial system.
.
Dear reader, I believe that after thorough investigation and great expense I have discovered to the solution to the debt crisis and the economic malaise that currently afflicts the global economy. My ‘Nobel Prize Worthy’ effort will, I believe provide guidance to our leaders to navigate out of the economic swamp we find ourselves in. Before I unveil the solution to the world’s problems I beg your indulgence. I ask that you allow me to explain the methodology I used to arrive at my conclusion.
The answer was hiding in plain sight
It occurred to me that the solution to our problems was hiding in plain sight on the internet. I ‘googled’ the words ‘economic commentary’ and received 204 million hits in 2.2 seconds. This was of course my Eureka moment.
A Beautiful Mind
All I needed to do was to read through all this commentary, and determine a consensus from the collective beautiful economic minds that had produced the commentary. If I could do this I would surely have the correct course of action for the world to follow. After reading the first three commentaries though, I did some math and determined that at a rate of 5 minutes per website it would take me over 900 years to properly review the information. I needed the capability of thoroughly analyzing millions, if not billions of pages on information and then deriving rational conclusions from all the data. Clearly this would not be possible. But wait, maybe it would be possible. Surely there was someone in the world who could analyze this much data and then provide me with a coherent summary in a short time span. Then it hit me like a lightning bolt.
Data analysis, our specialty
I immediately dialed the three major bond ratings agencies and asked of if I could speak with the students who had been retained to rate the billions of documents that were lovingly referred to as subprime mortgages. These students had a proven track record of being able to comb through millions of mortgage files in an afternoon and pronounce the mortgages Triple A before leaving for soccer practice. My hopes were soon dashed as I was informed that the students had all graduated and were now working for the Congressional Budget Office helping to analyze Republican and Democratic budget proposals.
Dismayed and disheartened I despaired that I would never be able to unlock the information contained in the 204 million websites related to economic commentary.
Dances with Numbers
Then, in an inspirational moment worthy of Thomas Edison, I decided to call my good friend Gustavo La- Framboise-Pierre, the Director of Statistical Analysis and Bank Stress Testing at The European Central Bank [ECB]. Gustavo, or ‘Dances with Numbers’ as he is known to his friends, had been my bookie for years until he was offered the job at the ECB two years ago. [According to Gustavo, a senior member of the ECB bet large on the wrong side of the recent world cup and could only settle his obligation by offering Gustavo this highly paid job.] I suppressed my temptation to ask Gustavo who he liked to win the World Series and quickly explained my predicament. Gustavo, “I need someone who can analyze millions of documents quickly and provide a summary and conclusion. I was wondering if the members of your team, who had analyzed 38 million loan files while completing the stress test on Spanish banks were available.”
You don’t need to speak Spanish
I was relieved when he said that the students responsible were available as they had a reading week coming up and would not be at school. Then he explained that due to concerns about the stability and safety of the Euro, the ECB would need to be paid in dollars for the students work. The fee would be 30 million dollars. Gustavo, I pleaded, “There is no way I can afford that fee; I am paying it out my own pocket”. Gustavo’s response was music to me ears, “David why didn’t you say so. I thought you were representing a sovereign nation, if the research is just for you, just call the students directly. They will probably do the work for about $250.” “OK Gustavo”, I replied, “That would be great, and by the way in addition to Spanish what other languages do these students speak?” Puzzled Gustavo asked me, “Why would you think they speak Spanish?” “Well Gustavo” I responded, “Were not all the documents at the Spanish banks in Spanish?”
Here is where it got strange
Gustavo paused for a moment and then swore me to secrecy. What I am going to tell you David must never be made public.
The ‘Weight Watchers’ Stress Test
“David, perhaps I better explain how a stress test is done. We first determine that a good loan file weights 1 kg. We then weighed all the loan files at the Spanish banks. Once we had determined the total weight and number of all the loan files we subtracted from the total projected weight of an equal number of good loan files. Each kilogram variance between the projected weights of an equivalent number of ‘good’ loan files was multiplied by $10 million Euros to determine the capital deficiency of the Spanish banking system. You do not need to be able to speak or read Spanish to weigh 40 thousand filing cabinets full of loan documents. This speeds up the time required to complete the stress tests. As well, it ensures that we do not need to pay extra for someone who actually speaks Spanish to review the files. Furthermore no one could possibly review 38 million loan files”. I was so relieved that it was only going to cost me $250 to have the work done for me I did not bother questioning Gustavo regarding the accuracy of the ECB’s methodology.
Good enough for the ECB is good enough for me
I contacted the students as Gustavo suggested. They were most helpful. Their only question was whether the work needed to be done at a high school equivalency level of quality or at the ECB quality level. Naturally I asked them to explain the difference. They indicated that to perform at a high school level would require a great deal of work, due diligence and accuracy. A report of that nature would take a couple of months to prepare. Alternately, if I just wanted to have it done at ECB standards I could have the report in a couple of hours. I always say “What is good enough for the ECB is good enough for me”.
Given the urgency of the global economic crisis I opted for having it done to ECB standards.
Sure enough two hours later the students emailed me their complete synthesized analysis of 204 million websites relating to the search term economic commentary.
And the Survey says
Dear reader the following is a summary of what 204 million economists recommend needs to be done to solve our problems:
- · Reduce government debt and deficits
- · Stimulate the economy by increasing debt and deficits
- · Reduce regulation and let free enterprise blossom, unbridled and unfettered
- · Regulate industries to prevent behaviors such as polluting, bribing, scamming, underpaying employees, making employees work in unsafe and unreasonable working conditions, overcharging on government contracts, and utilizing child labor
- · Reduce the size of government by laying off civil servants
- · Maintain the purchasing power of the general public by keeping the civil service head count at its current level.
- · Reduce government expenditures on the military
- · Increase government expenditures on the military as this industry employs just about everyone who does not work for the civil service.
- · Pursue a growth strategy
- · Attract foreign investment
- · Increase exports
Reality Bites
Dear reader like you, I turned the page over to find out more but sadly there was no more. 204 million economists had done an excellent, albeit, confusing job of identifying the ‘What’ but had no suggestions relating to the ‘How’.
Growth comes from Mars and exports are to Venus
We can not all attract foreign capital, increase exports and grow our economies simultaneously Attract foreign investment, good idea but with every country in the world trying to attract foreign investments, unless we start trading with Martians that will be problematic. Increase exports. Absolutely, but unless residents of Venus discover an appetite for shopping at Walmart, that could be a challenge. Reduce the size of the civil service, worth considering but most of civil servants have jobs that are ‘guaranteed for life’.
You should see someone about your broken leg
Pursue a growth strategy. I must admit I chuckled a bit at this one. An economist saying that a country needs to pursue a growth strategy and ending their advice at that statement is a bit like a Doctor telling a individual in the a hospital’s emergency room who has a broken leg that they ‘should have someone take a look at their leg’. Increase military spending, actually this one is easy. Every government is able to whip up a little fear and nationalist sentiment to justify the purchase of more jets and aircraft carriers to battle a motley, yet fierce and dangerous crew of insurgents 10,000 miles away. Imagine if the insurgents started to build their own aircraft carriers.
Perhaps honesty, [just kidding]
While I am impressed with the work done by the students recommended by the ECB, and I am of course dazzled by the brilliance of the recommendations provided by the world’s 204 million economists, I cannot help wondering if there is a more realistic solution.
We ‘the People” are in deep on this one
Perhaps the world’s leaders could begin to explain honestly, that, we ‘the people’, are ‘in deep’ on this debt crisis thing. The standard of living we have enjoyed can no longer be sustained.
Dial it down
We are going to have to significantly dial down our lifestyles and expectations for the next 5 to 10 years. It will not be pleasant but it is inevitable. If the population is forewarned it will make the transition slightly more palatable. At this point the world’s population is still under the impression that governments will be able to fix the problem. Ask yourself this dear reader is your government, in their current form the solution or are they the problem?
Socialist Rubbish and Hippie Groupthink
Before you start mumbling socialist rubbish and hippie groupthink I should say that I believe that as Winston Churchill said, “Democracy is the worst form of government except for all others.” The simple truth is that democracy must evolve into a system where the government and its people must live within its means even if it means less aircraft carriers, less corruption, fewer ‘Bridges to nowhere’, less jobs for life, less gerrymandering, more one person one vote, more free and fair elections. Whether you want more health care for everyone or more battleships you can be assured that democracy can deliver both. However without debt and deficits the electorate will have to make some rather significant choices as to how many battleships and how much health care they want. Deficit spending has removed difficult decisions from the democratic process.
There is a Reason they call it the Dismal Science
As you can see from the previously highlighted summary of conflicting and obtuse advice from 204 million economists, permanent deficit spending has made the study of economics obsolete. The transition back to a representative responsible democracy that makes difficult decisions to determine the type of society one wants will not be easy. Maps will be redrawn, but in the end democracy will prevail. The electorate will be forced to make difficult decisions to determine their future.
Denial really is just a river in Egypt not an economic strategy
The key to our future starts with honesty. Denial as a strategy will not succeed. Dear reader, rest assured the world will prosper again. The study of economics will be replaced with the study of reality and a new Golden Age will be upon us. [Eventually]
Dear reader, Paul Getty once famously said that ‘a billion dollars isn’t worth what it used to be’. Clearly one could now say that ‘a trillion dollars isn’t worth what it used to be’. We have become numb to the ever larger numbers that are used by politician and economists to describe our current circumstances. It made me wonder what comes after a trillion. My initial thought was a bazillion or gazillion. Much to my surprise several friends were able to correctly identify that after a trillion, the next number is a quadrillion. Give yourself a pat on the back if you were able to correctly identify this number.
A very big number
To help understand this number I will use it in context. For example, the combined debt and unfunded liabilities of Europe and the United States is estimated to be ¼ of a quadrillion dollars. That is a very big number. I do not wish to be an alarmist but is it not credible to believe that budgets, prognostications, and commentary that discuss trillions and quadrillions of dollars should be viewed with anything but derision and laughter [or tears]. If you need proof of this fact consider this. The manufacturers of calculators all over the world do not give their calculators the space to calculate numbers such as a trillion dollars. The manufactures correctly recognized that humans could not seriously track or comprehend a number of this magnitude.
How do they do it?
Ask yourself this dear reader, if the world’s calculators do not allow the input of numbers in the trillions, how then are our leaders keeping track of their budgets? Are they using their fingers and toes? Perhaps an Abacus, [Actually, that might work]. The answer is logically, that they are not keeping track anymore, they are making it up as they go along. Q.E.D.
Forrest Gump touted to head the ECB
When Mr. Draghi announces unlimited bond buying the markets cheered the news. Even Forrest Gump would recognize that infinite bond buying is absurd unless one believes that capital is infinite. Mr. Draghi is not unleashing a bazooka; he is pulling the pin on a grenade in a crowded room.
Lower the mainsail, Full speed ahead
Any attempt at serious economic analysis of money and debt that includes discussion of trillions and quadrillions of dollars is a delusional attempt to convince ourselves that the economic system is still in our control.
Dear reader, as it relates to the loss of control of our economic system, may I respectfully say, “That ship has sailed.” We are now steering a course deep into the ‘Bermuda Triangle’ of global economic risk. Greece is currently leading the fleet but there are many countries, large and small tacking hard, to catch up to Greece. Did you know that France, that pillar of economic reason, responsibility and leadership in Europe, has not balanced its budget in 40 years? Yikes!
Budgets and bailouts that include trillions, quadrillions or numbers that rise to the level of ‘infinity and beyond’ are no longer relevant. They are ridiculous and should be greeted with derision and laughter. By all means continue to have discourse on the policies of central banks and government finances. My only caveat is that these discussions and presentations by the world’s economists and wise people should take place in a local Comedy Club rather than being the allowed the gravitas attached to presentations made in the halls of government.
Why do they call it debt?
It is extraordinary that governments are still allowed to refer to their borrowings as debt. According to Investorpedia debt is defined as ‘A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.’
The world seems to have mastered the first part of the debt equation, that is permission to borrow money, the second part, to pay it back at later date is proving to be somewhat vexing. Perhaps I am being too subtle. The second part, to pay it back a later date is impossible. 50 trillion dollars of government borrowing that can never be repaid can no longer be classified as debt.
The never-never
However, if we do not call it debt, then what should we call it? The British have, perhaps, an appropriate phrase. It describes a form of borrowing called the ‘never-never’. The term never-never implies that the borrower may or may not make the required payments and will certainly never pay back the borrowed capital. If economists started referring to the government debt as government ‘never-never’ the public might start to understand how close to the rocks we are sailing. Another option to the word debt could be the word ‘poof’. Merriam Webster defines ‘poof’ as follows: Poof is used to say that something has happened suddenly or that someone or something has disappeared For example ▪ I took a pill and poof—my headache vanished. And my own example, ‘When Greece declares bankruptcy then poof their debt will be gone.’
Global government debt cannot and will not be repaid to the lender. It will spontaneously disappear as nations willingly or unwillingly repudiate their debt.
No calculator required
Dear reader let us acknowledge this reality. In future, let us ask our leaders to refer to government debt as government poof. Furthermore, since there is no hope of any of the capital of the 50 trillion dollars of global government debt ever being repaid we should not require governments to attach a number to the amount of poof they are utilizing. Since the money will never be repaid back it should certainly be sufficient for a finance minister to simply say that government will take on some more poof to meet their country’s needs. Mr. Draghi can simply say that the ECB will buy as much poof as Spain or any other country wants them to. Poof!, the debt crisis is over. No more calculators required. Whether you favor calling it government ‘never-never’ or government ‘poof’ you must agree these terms more accurately reflect current circumstances.
David Hague 