Wednesday, November 16, 2011

Goldman to the Rescue!

By Bill Bonner

More pieces are coming together. Day by day, the puzzle takes shape. Not a pretty picture.

An epic battle is taking place. Between the forces of...

..inflation and deflation

..growth and depression expansion and credit destruction

..centralization and de-centralization

..politics and markets

..managed paper money and gold

..managed capitalism and the real thing

..control and wealth

..bull and bear

..greed and fear

..zombies and real working people.

Yes, dear reader, it’s quite a fight. Better than Frazier vs. Ali. And who’s gonna win?
Europe faces its “toughest hour since WWII,” says Angela Merkel. What does she propose? More centralization. Centralization got Europe into this mess — harmonizing interest rates so that the Greeks and Italians could borrow more. And now, more centralization, she believes, will get it out.

Europe is taking no chances. This debt problem is a slugger. What to do about it?

Who knows more about debt problems than anyone else? The people who cause them, of course. So, under great pressure from the centralized European authorities, Greece got rid of its Papandreou, after the man had the gall to suggest letting democracy work. He wanted the people to vote on further austerity measures. It replaced him with Papademos...a guy who won’t make the mistake of deferring to the masses. After all, he was vice-president of the European Central Bank for years. And he taught at the Kennedy School of Government at Harvard.

Meanwhile, Italy too has been forced to get rid of its popular, but difficult to control, elected leader — Silvio Berlusconi. It has put in a company man. Yes, a company man. What company? Goldman Sachs, of course. The new fellow, Mario Monti is an ex-Goldman guy. And so is the new fellow at the European Central Bank, Mario Draghi. Monti was also an EU commissioner. Draghi ran the Bank of Italy as the nation built up one of the world’s biggest piles of debt. Then, when Italy’s cost of borrowing shot over 7%, in came Monti and Draghi.

It is almost as if they planned it that way. Who’s the biggest seller of debt on the planet? We don’t know...but Goldman Sachs has to be up in the rankings somewhere. You’ll recall it was Goldman that helped Greece structure its debt so that it could abide by the letter of its treaty engagements with Europe but totally thumb its nose at the spirit of it.

And now the debt has blown up...and the Goldman boys are on the job, managing the mess they were so instrumental in creating.
What’s their solution? Oh come on...dear reader, you should know how this works by now. They propose more centralization, more management, more paper money, more debt, more inflation, more of everything you see on the right hand of our column above.

In other words, they believe that they know better than the people...or the market. They believe that their sanitized, homogenized, pasteurized Capitalism-in-a-Can works better than the real thing. Besides, they have a reason to believe it. This claptrap is the source of their power, status and money. Who knows, maybe their wives married them because of it.

Rather than renounce the program on which their reputations, careers and fortunes depend, they try to shore it up. They open up the can and see what they can use. They promise to reform the system, not reject it.

But every reform — unless it merely dismantles one of their previous reforms — is a manipulation...a price fix...and a scam. For example, they are proposing tax incentives to employers who hire youths and women. Good idea? Why not just drop some of the regulations and taxes that make it so expensive to hire youths and women in the first place? Nope. Then, they’d be giving up control. They’d be letting market forces decide who gets what.

Here’s another proposed reform, as reported in The Financial Times: “Wider social safety net to help those made redundant (laid off) and encourage labor mobility.” Typical rubbish. Spread a wider safety net and you discourage people from doing the hard work of finding new careers. But here’s one that will be popular with the managers: a “crackdown on tax evasion.” Are you kidding? Tax evasion is the only thing that keeps these economies going. People prevent their government from squandering their money. They spend it themselves. But the new Goldman guys won’t like it. They’ll want to get their hands on as much of that ‘black money’ as possible.
Meanwhile, what’s going on in the USA? Alas, the US economy is the hands of the same sort of people. The people who caused the mess...who did not see it coming...and who have not had a clue what to do about it. They’re still running US economic policy. These illustrious incompetents — such as Larry Summers of Obama’s National Economic Council and Tim Geithner, his Treasury Secretary — have proven that they wouldn’t know a Great Correction if it bit them on the behind...

So, they just keep adding more debt, more spending, more management, more ‘reform’ measures, and more centralization.

Ultimately, the elite managers of Europe and America all went to the same schools (Harvard, Yale, MIT...)...all read the same newspapers and magazines (The Financial Times and The Economist)...all worship the same gods (money and power)...all speak the same language (mid-Atlantic English)...and all want to control the world.

So far, they seem to be making great progress towards their objectives. They stuff the world with debt. It blows up. Then, they push out democratically-elected leaders...gain new power and authority...and take charge of the rescue.

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