Submitted originally by Surly on Reverse Engineering with Hat Tip to CHS on Of Two Minds
Re: Go OPPOSITE the Flow of Traffic
Was reading the CH Smith blog this morning and found this in the point, with
plenty of echoes of past discussions in this forum. The writer, Zeus Y., is
someone whose work I have seen and appreciated before; a very perceptive guy.
The First Dominoes: Greece, Reality, and Cascading Default (Guest Essay)
February 13, 2012 (Mobile version)
I asked frequent contributor Zeus Yiamouyiannis to comment on the coming Greek
default. Here is his insightful response.
Greece is the epicenter of a drama that threatens to unwind with all the
intrigue and subterfuge of ancient Greek myths and tragedies. As with the legend
of Icarus, big, and now bigger, transnational banks provoked the gods with their
wax-and-feather financial fabrications to create the appearance of soaring
wealth. Now that they have flown too close to the sun and their wings have
melted, these banks are being brought to earth by the obligations and
consequences imposed by their fabrications.
Rather than take responsibility, these banks seek to appease the gods by
sacrificing taxpayers. In fact, if one looks closely, these banks aspire to be
gods themselves. They clothe themselves in their indispensability and shield
themselves from accountability with tales about how many innocent citizens will
be hurt if they don't get their next bailout. It is as if they say, "We are
above the law… We are the law." Mathematics, legal enforcement, restraint,
humility all must fall under the sword of their hubris.
In the end, just as with a Greek tragedy or a Yeats poem, this center cannot
hold and things fall apart. When one abuses the laws and principles of
mathematics and capitalism, claiming to be a faithful servant, consequence and
accountability eventually catch up. The breaking point inexorably nears.
Citizens are beginning to think, voice, and act: "We can do without the false
idols that call themselves banks. In fact, we need them to be dissolved for us
to survive and thrive."
Reality is the revenge of the gods.
Not just about fairness: Everything unwinds
This is not just about fairness anymore; it is about the exposure of central,
global illusions that affect everyone, not just banks. For the last three plus
decades, debt-fueled "growth" has instilled a life sense that everyone gets
rich, values always go up, and no one has to pay. If those illusions evaporate
than those citizens complicit in this failed fantasy may actually join forces
with the realists (those who knew it was a scam all along) to produce unified
citizen revolt. Hell hath no fury like the people spurned and lied to, even if
many had some responsibility in welcoming and fanning those lies.
The implicit deal was this: We will collude so everyone gets rich going forward.
We will collude so no one has to pay if there is any unwinding. (But, hey, it's
a new era, and that's not going to happen!) Open default breaks the illusion,
and austerity breaks up the collusion. This is why default has to be hidden,
deferred, restructured. It is not just about chaos around party/counterparty
risk (in particular, cascading claims that are not backed by anything). It is
not even just about finance. It's about all the other things that will unwind,
culturally, politically, and psychologically, if Greece defaults and sets into
motion the necessity of someone actually paying up. In short, recognition of
reality has disastrous consequences for the status quo and its control myths.
The infinite growth meme unwinds: The cancerous economic obsession with infinite
growth in a finite world is already unwinding, but will hit full force with
cascading defaults. It is one thing to have a "slowdown," and another to have
your economic brakes lock up on you and your gears slammed into reverse. About
the only thing that seems to be growing currently is the number of people
partially employed or permanently unemployed. As a humorous aside, the situation
is getting so pronounced that quality of life might actually have to replace
quantity of possessions as the cultural indicator of the good life, and what
would that do to the economy?
Politicians' power of the purse unwinds: Greek politicians, like many other
Western politicians, will do almost anything to get re-elected. The easiest way
to do this is to pay people off, particularly government workers and
constituents, in the form of generous benefits or pet projects. What happens if
your tax base will not support this? You sell your political soul, defer, and/or
hide the true costs of your largesse behind undisclosed derivative deals with
Goldman Sachs that eventually put your entire country's sovereignty in jeopardy.
As a result, Greece's former prime minister, George Papandreou, is now out after
a very short term in favor of a unity government. Shady deals funded
unsustainable perks that not only inflated popular expectations but created
catastrophic debt and risk.
Guaranteed entitlements unwind: So now that the illusion of infinite growth is
being exposed, the corresponding ballooning entitlements that enticed the larger
public to become complicit in the illusion are becoming unglued. It would take
almost a decade of gross national product to pay off the U.S. unfunded
liabilities for Social Security, Medicare, and Medicaid, which exceed the
staggering sum of 100 trillion dollars.
Retirement and health benefits cannot be paid out of fake prosperity and
"notional" (i.e. imaginary) values. They require real services and products and
an accepted public medium of exchange. (I will leave off the argument as to what
constitutes "real" and "accepted" since even fiat currencies are dubious in this
regard.) People will be forced to adjust their expectations and adapt their
realities. With public and private pension plans also complicit in derivative
scams to fund benefits, it will be no surprise if many pensions simply declare
themselves bankrupt in the next decade.
The maximum profit mandate unwinds: We have reached such heights in our hysteria
about growth and our psychological addiction to more-more-more, that we have
seen stock prices fall, even with record revenues, if the corresponding company
doesn't meet expectations of even higher growth and revenue. It is getting to
the point where a company cannot simply have a solid year and just pay out its
dividends and maintain its good health. Instead companies have to be ever
hopped-up on economic steroids and cost-cutting (i.e. shipping jobs to virtual
slave labor in China) so as to not fall short of expectations.
These steroidal practices are destroying the companies and the means by which
consumers can afford products and services. A relentless short-term focus serves
no one in the end. "Maximum" less and less corresponds with "optimum," because
present assets can be cannibalized or revaluated to give short-term boosts to
numbers, creating systemic and foundational deficits that destroy the health of
a company and its surrounding society. Hopefully the idea and practice of
optimum profit will replace maximum profit as the Great Unwinding continues.
The central question:
The central question, obscured by all the hand wringing and crocodile tears is
simply this: Why should public citizens who have no stake in private
enterprises, who received no profits or dividends, who had nothing to do with
creating losses, be forced to pay for private losses? The only legitimate answer
is, "They shouldn't." Anything that does not acknowledge this tenet is not
functioning capitalism, and if it is functioning capitalism it cannot violate
this tenet.
Yet we witness apologist expert after expert excusing this fatal breach in
capital practice as "regrettable but necessary to save the system." They seem
not to have noticed that the system has already killed itself by violating its
own foundational laws and principles. If anything, current conventional practice
might be accurately described as an all-out anti-capitalist assault on
democratic free enterprise.
So now the follow-up question is easy to answer: "Why are we paying for
something we did not buy and had no hand in creating?" The answer: We no longer
have functioning capitalism. Call it what you want— corporate socialism, crony
capitalism, cancer capitalism, plutocracy, kleptocracy, oligarchy, neofeudalism—
the system we have now is the equivalent of a private person going up to a
stranger on the street and extracting "protection money" to pay for that private
person's underwater house mortgage.
As this simple fact grips the population, and people wake up to the present
economic reality, there will be increasingly organized moves toward civil
disobedience and alternative economy. "Cannot pay" will merge with "will not
pay" since the only way to re-establish health and integrity in a corrupted
economic system is to starve the cancers that have taken it over. This has
already started with Occupy Wall Street, strategic defaults, and riots in
Greece.
So if someone asks you, seeking to appeal to your fear, self-interest, and need
for approval, if you are willing to "be responsible for bringing down the global
system," your answer should be an emphatic, "Yes." "Are you asking if I want to
bring down fraud, theft, abuse and the cancer that global finance has become for
me, my neighbors, my children, and my children's children? Are you asking me if
I want to replace the current broken system with something that serves actual
people? Not only, `yes,' but `heck, yes.'"
By Zeus Yiamouyiannis, copyright February, 2012
If this recession strikes you as different from previous downturns, you might be
interested in my new book An Unconventional Guide to Investing in Troubled Times
(print edition) or Kindle ebook format. You can read the ebook on any computer,
smart phone, iPad, etc. Click here for links to Kindle apps and Chapter One. The
solution in one word: Localism.
Topic: Greeks Get Souvlakied (Read 1509 times)
April 18, 2012, 10:21:05 PM