Thursday, October 26, 2006

The Vortex Of Debts

Anyone pondering about the economic trends with an open mind will quickly notice that the term “financial instruments” is a mere definition invented to keep the intelligentsia safe. The more convolute and intricate or even abstract the vocabulary sounds, all the better. So the same intelligensia too came up with definitions like: red hot, stagflation, inflation and deflation, dangers of 'overheating' or needing to 'cool off, minimum wage, purchasing power, liability, economic indicators, surplus and deficit, credit score, rating and history, interest rates, confidence index, cheap money and bad loans; reform, lenders of the last resort, softness, expansion and growth, irrational exuberance, bubble, systemic risk, record-breaking level, volume, hedging, credit-default swaps, transparency, shortage, buy low sell high, to name a few. Interestingly the word “depression” is no longer in use but has been replaced with severe recession or currency crisis.

Far beyond the above, the terrifying truth is that despite the highly praised monetarist lexicon at our disposal today the world is in dire shape. The screw named “credit” is being tightened inexorably and setting in motion the dreadful pattern of a liquidity trap, along with a series of world moral hazards governed by the dollar hegemony. Should you doubt what is bieng said, please consider this: why are the elite banks building distressed debt teams, or let’s put it differently: readying themselves to reap huge profits from the aftermath of our financial distress? What a nice way to collapse prices by the way! Why is there a crackdown on the “exotic housing loans” when it is too late and which now are endangering 60% of the homeowners who got into the market place since 2001? As if it weren't enough, why is there also a sudden anxiety about the derivatives market, which Warren Buffet branded as “financial weapons of mass destruction - the kiss of death” in 2003. Even a columnist in Le Monde Diplomatique got an ephifany the other day when concluding that our financial reality is now out of control.

Here comes the cherry on the cake: not only are those at the top responsible for the slow but certain demise of the world economy, Joe and Jane Average are as nearly much guilty of committing the sin of lying to live richly, getting loans they did not deserve or cannot repay in other words. Many got caught by the money envy and peer pressure. How couldn’t they see the game of their credit cards firms and/or they real estate brokers? Mainly because they were blinded by the psychological wealth effect. Not living richly in time of booms generally means that you have missed the boat due to a lack of recklessness and worst are a total loser. They refuted the sound advice “one penny saved is a penny earned” and embrace mantra “buy now, pay later”. They believed it as if it were the word from God. What is particularly appalling is that the population in the so-called rich countries have deliberately acted against their own financial interests while in the 3rd world it is imposed upon them coercively.

At the control panel of our Vortex of debts, we find the monetary scientists, who just like middle-age alchemists-wizards believe in the philosophal stone which has in fact the chemical capacity to turn lead into gold. It goes without saying that they tried for centuries - to no avail. To make this fraudulent wish come true, our modern-day alchemists have thus created a system – for profit – they can flush with debt-money, of course under the guise of being charitable. For profit, there lies the very deep core of issue. The result is that we not only borrow money that doesn’t exist but also bet on its fictive value while distorting the current one gravely. This is called the miracles of flexibility, an elastic system in financial jargon. If this sounds too surreal or do not see anything wrong here, please try to forecast the future while using 1 as 8, 5 as 2 and 7 as 4 … and so on for example. The fudge factory at its finest. What is going to happen do you guess eventually? Even the very conservative Stephen Roach at Morgan& Stanley admits that world central banks have created a monster. Of course those sticking to the monetarist lexicon will seize the occasion to brand him as the worst doomsayer ever, claiming that if the Dow has reached new heights recently it surely is because of the solid world investors's confidence in the USD itself. Insanely hilarious, indeed!

This web of deceit is the root cause of the current cannibalistic behaviors and the decay of society. From the bottom to the top, the world economy today is about exchanging and recycling IOUs, we do not know anymore who owes what and to whom. One does not need a PhD in economics to forecast the eventual end of this highly elaborated debt laundering . Just as Michael Rowbotham puts it: If a monetary system is invalid or flawed, then the entire economy is based on the mathematics of error, and must be riddled with the effects. If the financial system upon which our economies are built is defective, and yet monetary considerations dominate our economic decisions, should we be surprised if the results are less than satisfactory?

Time has come to enforce usury free and sound money. This is the only way to have a financial system that serves We The People instead of some at the switch of the printing press machine. This great evil must end.President Andrew Jackson has been quoted as saying the following to a group of bankers as they approached him in the drawing room of the White House:

... You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal God, I will rout you out!”