My Big Fat Greek Default

BREAKING NEWS: Greece has defaulted on its debts! Oh, wait. Apparently it hasn't happened yet. Most media commentators are still talking about a second bailout of over 100 billion euros (it may be a gazillion, I can't quite remember). This will arrive if the Greek prime minister, George Papandreou, who survived a vote of confidence, can push through yet more austerity measures, of the sort only previously imposed by the IMF on banana republics whose rulers dispense financial advice to their people down the barrel of a gun.

Many wise words have been spilled explaining the dangers of 'contagion' to the rest of the eurozone and the whole banking system. We are supposed to believe that a Greek default would be a catastrophe for mankind: something like a massive asteroid that could wipe out all of Europe's bankers, politicians and media pundits at a stroke. Only the thing is this: it has already happened. For the Greek people, it has been happening for the past year already and the pain will continue indefinitely.

What would Socrates do?

Now for a lesson in semantics. Q: What is the difference between a 'bailout' and a 'default'? A: Nothing, except:

1) It is the ordinary citizens of Greece and Europe generally who are paying the whole price, instead of the bond holders - i.e. the banks who hold Greek debt and whose irresponsible lending created the crisis. The wealthy bond holders don't lose a cent. Isn't that nice? They get all their money back, with increased interest, and their risk is nil. Nada. Zilch.

2) A 'bailout' does nothing to wipe the slate clean. It's like going on a savage cocaine bender just to get over the terrible depression that followed the last one, knowing full well that the black dog will return again tomorrow, with a whole pack of its mates.

To take the drug analogy further, who do we blame? The seedy dealer, peddling empty promises of endless sunny illusions? Or the poor sap who believed those promises? The analogy isn't quite precise, in this case, because politicians act as a kind of middle man between the bankers and the people. It's the politicians who sell those promises and take a cut on the deal, which is why they are always on the side of the bankers, of course. Both parties to the deal are somewhat to blame, but most people can see that it is the drug pushers who bear the greater share of responsibility and deserve to be punished (whilst the addict goes into rehab).

In this case, the drug pushers, far from being punished, are put in charge of solving the problem. Funnily enough, they prescribe another dose of drugs, only the price has gone up - way up - and the addict has to sell all his possessions just so he can afford to keep taking the drugs. Meanwhile, the addict's friends and family (who are also on the same drugs), have to chip in to help him pay.

What is the real solution to this problem? It is called the Red Pill, my friends. The Red Pill dispels illusions. What is that great big fat mountain of debt, really? It is nothing: an illusion, a simulacrum, a scam, a confidence trick. Where did it come from? It was created by banks (97% of it) out of thin air. That which is created from nothing can go back to nothing. So what if a lot of imaginary money disappears from whence it came? Give the problem back to the banks. They created it. They can sort it out. A lot of rich people will get slightly miffed. Default.

Footnote: In the case of Greece, the drug also goes by the steet name of 'the euro'. This drug releases a steady stream of cheap credit into the user's blood system, causing a feeling of intense euphoria and a craving for German imports, which can last for years.

Update 28/6/11: I hope I made it very clear above that the EU/IMF/ECB bailouts are not designed to assist the Greek economy at all, but simply to allow private bondholders to cut and run before Greece inevitably defaults. This is easy to see if you understand that 70% of Greek debt was in private hands last year, but this is now down to about 50% and falling. Here is another article explaining how Greece is being hung out to dry, by former Citibank economist, Michael Burke. The people of Greece, thankfully, are not easily fooled any more. They have had enough of venal, worm-tongued politicians in league with fraudulent bankers. The corporate media is mostly arrogant and complacent about the extent of popular anger, as well as the causes of the crisis and I suspect they will be in for a shock. It would not surprise me at all if the Greek government were toppled by force within the next two weeks.

Epitaph to Brian Haw 1949-2011. RIP

My personal tribute to Brian Haw, campaigner for peace, truth, liberty and justice, who died yesterday, aged 62 after a battle against cancer. His greatest battle, however, was against the politicians who lied in order to take our nations to unjust and unnecessary wars around the world. These wars are still in progress even as new ones begin, justified by fresh lies:

Epitaph to Brian Haw

If one lone fool in Parliament Square 
could speak the truth, then cast
an army of such fools - and dare
that peace be yours at last.

---

Unlike the politicians and war-mongers against whom he protested, Brian Haw will be missed by millions around the world. There is a Guardian obituary here and Haw's own website is here. There is also a tribute from film maker and activist, Chris Atkins, on Youtube here. Deepest sympathy to Brian's family.

Brian Haw 1949-2011. Photo from Socialist Unity 2009.

Thought for Food

Looking for a sound investment? Maybe I could interest you in a cheese sandwich? Perhaps Sir or Madam would prefer a foie gras, washed down with champagne? The latter might be more to the taste of the directors of Glencore, the world’s biggest commodities company, which has just listed on the London Stock Exchange with an estimated value of $60 billion. Glencore’s valuation reflects the fact that the prices of commodities, including basic foods, have shot up dramatically in the last couple of years and now stand at 30-year highs in real terms. The consequences are hunger and social unrest in much of the world, but an opportunity for profit in others. What is causing the problem, and is it really a problem?

The Economist magazine suggests that rising prices are driven mainly by supply-side factors such as drought and wildfires. The increasing use of land for bio-fuels may also be a factor, together with demand side causes like population growth and the growing purchasing power of the Chinese. However, the Economist is deluded if it thinks that speculation is not the main factor in the current commodities bubble. Their argument is exactly like saying that speculation had nothing to do with the recent property bubbles around the world. They forget that every asset price bubble is driven by debt creation in banks and the flight of 'hot money' around the world. Right now, commodities are where it's at; they are literally the next big thing. There's nowhere else for the hot money to go: property prices are falling, shares are volatile, bond rates are rock bottom. Hot money always wants the hottest returns.

The bubble may have started with supply-side factors but it is now being driven by speculation, financed by banks (especially Goldman Sachs). This is driving up inflation and could plunge the global economy back into recession, all for the sake of further enriching a handful of 'top' bankers, who are still receiving state hand-outs after committing massive fraud over the past 10 years (see the Oscar-winning documentary film, Inside Job).

The Economist suggests that the solution is to increase food yields. Again, they miss the point entirely. There is more than enough fertile land and food in the world to feed everyone in abundance, without any need for increased yields. The real problem is its distribution and the distribution of the wealth required to buy it. If food were equitably distributed, there is enough to provide 2,720 calories every day to every single person on this planet (far more than most people need), which is 17% more than 30 years ago, despite population growth. Whilst Westerners stuff their faces on junk and succumb to diseases of obesity, hooked on sugar, meat, celebrity culture and advertising, the majority of the poor world starves, purely to sustain a bankrupt global capitalist system of institutionalised slavery and theft.

If you read textbooks on economics (sadly, I do - you should do yourself a favour and not bother), you will find that they say that commodities futures markets exist to provide price stability over the longer term and that the role of speculators is to smooth out the short term shocks and fluctuations. This is indeed exactly how it works in the fantasy world of free-market economic theorists, where the market is largely made by the primary producers and consumers, whilst speculators play only a minor role.

The real world situation is the opposite of this: Glencore controls around 10% of the entire world's wheat market and even larger chunks of several other vital markets. Together with other huge speculative players like Goldman Sachs, they are now the tail wagging the dog. When the speculative money absolutely dwarfs the money belonging to the actual producers and consumers, derivatives markets become weapons of mass destruction, whose purpose is simply to create a massive casino where real lives are nothing but chips to be gambled. The winners will get even more fabulously wealthy whilst the losers (if they're too big to fail) will get bankrolled again by the taxpayer (you). The biggest losers, as always, will be the poor, especially in the developing world.