John Ward – The Saturday Essay: How Ted The Fake And Milt The Flake Created The Deadly Disease Of Neoliberal Globalism – 22 March 2014

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A leading globalist speaks

The disaster at Fukushima continues to rumble on, but unfortunately 95% of the world can’t hear the sound of toxic materials entering the Pacific Ocean….and 50% of the 5% are fully employed lying about it, while the other 50% are dying from it. So for the moment, it’s on the back burner having its calamity flavour intensified, before being freeze-dried and placed in the Too Difficult to Solve drawer.

But trust me, it could be a lot worse. Do not dismiss this as either humour or smugness: I’m serious.

Imagine a world in which, in order to fire millions of people and inflate 15,000 egos, all the badly-built Russian and GE-designed Fukushimas on Earth had been joined together to create an enormous global chain of infinite energy – such that all the reactors in China getting Brazil syndrome would communicate it within days (or even hours) to all those Japanese reactors engaged in accelerating meltdown. Oh my goodness me, you think. How silly would that be?

Energy is one of the few dimensions of contemporary life not joined up like some form of pandemic waiting to happen. But globalist mercantile capitalism, European fiscality, the stock markets, currency trading and investment banking are joined up exactly like that.

Every day now, the main problem facing those at the top (hereinafter referred to as the Headless) is the epidemiology risk of passing infection from one debtor/recession/bank scandal/sovereign borrowing binge/plummeting currency region to another. Even the Headless themselves call this contagion. It is madness..or as last night’s blog here suggested, Bedlam.

The ‘solutions’ suggested are just as mad, because it’s only the mad people who come up with them. Neoliberal dogma says cut taxes and fire bureaucrats, but in ClubMed their solution involves raising taxes and moving bureaucrats around. The idea is that this accelerates the speed at which the workforce becomes destitute, and thus lowers wage costs. Once this process is complete, foreign investment pours in and jobs are created. Throughout ClubMed, this is not happening. The answer from the Headless? More of it.

This has been regularly dubbed in recent years financial repression, and for once this isn’t fluffy 1968 student Marxist claptrap: it is precisely what the Headless want. But without repression, censorship, dictation, banning protests and then stealing the populace’s money directly, the whole system must fail….as it will in the end whether the Hobgoblins get up to more devilment or not.

So to sum up thus far, globalist neoliberalism is an infectious disease transmitted by any and every means….a sort of Fascist Avian Kimura Ecoli virus (FAKE).

But this is the ‘brand’ of product, we are told, to which there is no alternative. Only ze gut Frau Doktor Angele Mengele knows what to do. You know that really, so stop complaining and let me stick this Caterpillar-tread digger-grab into your bank account. Get real, get FAKE.

To catch FAKE you first of all need to be exposed to it. You will have noticed that exposure too is a very common banking term applied to everything from debt via derivatives to moral hazard. As the Ukraine crisis unfolds, for example, exposure to FAKE may well prove to be the deciding factor. This little outbreak was covered by Reuters two days ago:

France’s second-biggest bank had exposure of 22.4 billion euros to Russia at the end of June, according to the European Banking Authority’s (EBA) data. That equated to 15.7 billion euros in risk-weighted assets.

 SocGen Russia, which includes Rosbank and other insurance and financial operations, made operating income of 239 million euros last year, almost double 2012 but with a 41% in losses from bad debts. The bank said it had 13.5 billion euros of outstanding loans in Russia, and deposits of 8.5 billion in the country at the end of 2013.

Now I could be fined (see above under ‘censorship’) for writing this about a French bank while I’m resident here in France, but the case wouldn’t stand up, because Reuters used SocGen’s own figures, and I’m merely repeating them. The sole point I’m making here is that the bank is in danger of catching the Russian strain of FAKE, which is a particularly virulent form of the virus from which RBS also suffers, albeit so far in latent form.

But probably the fastest way to catch FAKE is by investing in an overheated stock market. Boston-based James Montier, one of America’s most respected ‘value trader stock investors, said the following things to Zero Hedge in an interview earlier this week:

“When we look at the world today, what we see is a hideous opportunity set. And that’s a reflection of the central bank policies around the world. They drive the returns on all assets down to zero, pushing everybody out on the risk curve….[in Europe] we have increasing concerns about the prospect of deflation in the Eurozone….That’s a big issue for European equities…Utilities, oil & gas, some telecom, some industrials. Names we like in that field are Total, BP, Royal Dutch, Telefonica and the like. The problem with all those sectors is that they tend to be debt heavy, which is why the prospect of deflation is such a big issue….The time to be buying broad European equities was two years ago.”

So you see, the Central banks infect the institutional investors, who then get infected by everyone in the Ezone having the same dumb currency, and as that currency has saddled ClubMed with debt, money is running away from the EU – and that means pretty soon China will catch FAKE. This next is what Montier concludes – as a strictly value-based trader with immense experience:

“The exit from [Fed QE] is going to be extraordinarily difficult to handle….emerging markets are the canary in the coalmine, the first signal….I don’t see much evidence of people being overly cautious, but a lot more evidence of people getting exuberant….Several valuation measures suggest that the S&P is overvalued by 50 to 70%. Every piece of valuation I do says this market is too expensive.”

In short, it’s completely FAKED. Or another vowel after the F, depending on your level of pessimism.

Were there to be a correction of that magnitude in the Stock markets (and one day, there must be) it would be hard to imagine Janet Yellen doing nothing. The problem is, what could she do? As Sober Look writes today, “The US monetary base is now near $4 trillion, with some $2.5 trillion of it sitting on banks’ balance sheets in the form of excess reserves – a situation with no precedent. Removing it would require the Fed to sell its securities holdings – something the central bank is not planning to do.”

This is the summation:

Linking all potentially toxic things in series vastly increases the transmission of contagion. Contagion comes from contact, and contact comes from globalised commerce. Globalised commerce was the idea of an anti-empirically clueless theorist called Ted Levitt. It is entirely apt, therefore, that his theory has produced a denial of systemic flaws that future historians may well dub Levittation: the pretence that all Laws of Gravity have been superceded by the wacky alchemy of Milton Friedman.

Last night at The Slog: Top tips for motor-Homers seeking the philosophical attitude to travel

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