Cyprus is Europe's original failure. It was the first part of modern Europe to be invaded and colonized by Muslims, while its native Christian population was ethnically cleansed. Cyprus is to Islam what Czechoslovakia was to Nazism; the canary in the coal mine warning of worse things to come.
Now Cyprus has wound up in the middle of the European Union's meltdown as everyone scrambles to salvage what they can from an unsustainable system at the expense of everyone else. It's easy to look at what almost happened as another case of powerful elites abusing ordinary pensioners, but it's a good deal more complicated than that.
What we are actually seeing are the beginnings of bailout cannibalism as the Eurocrats manipulate entire nations into fighting each other while scrambling to gain some political advantage out of the mess. The real purpose of the deposit grab was to wreck Cyprus' banking sector and continue the centralization of international finance. At the same time it was meant to give German voters, who have been funding much of the mess, the feeling that other people were getting screwed as well.
Cyprus' government tried to salvage its banking sector by passing on the pain to ordinary depositors in one of those brutally unfair short-term/long-term decisions that technocrats like so long as they have the early warning to opt out of them. While the banks were closed to ordinary people, there's little doubt that plenty of insiders took the time to get their money out and it will be interesting to find out who they were.
But that largely doesn't matter. Bigger systems are bound to more corrupt and every regulation has its loopholes and exploiters. Everyone is badly overextended and betting on cleaning up once the rubble begins to fall.
In Cyprus, the Russian elite looking for a safe place to put its money when the people turn on them intersected with a Eurocratic elite trying to eliminate safe harbors and cheap places to do business. And they all bumped into British senior citizens looking for a cheap place to retire and angry leftists with no serious economic plan, but a determination to overthrow the government.
Cyprus is the place we go to learn that everything is tangled up with everything else and that there are no more answers left; just blame to be passed around and money to be stolen.
Everyone is deep in debt and no one is going to pay up. And why should they? Southern Europe may have dug itself into a hole, but the Eurocrats ordering them to dig out were the ones who provided the shovel because it seemed like a good idea at the time. Debt was a profitable and useful political tool. It still is.
American Federalism was built on the Federal assumption of state debts. Obama's two-term reign was built on massive bailouts used to consolidate power while reassuring the banks that they would be taken care of. The National Debt is headed into 17 trillion dollar territory because that too is a useful political tool. Driving the debt to the point where it can never be repaid is meant to transform the entire way we do business and spend money. And it's working.
Cyprus was a dirty little demonstration that you can kill two birds with one stone by giving a desperate government two impossible choices. And despite all the reassurances, there is no real reason to believe that it will stay in Cyprus. If anything the last few days have demonstrated how effective that particular tactic is. And once the money has fled Cyprus, the demonstration will be considered a success.
The problem with Europe, as with the United States, is that you can only assume so much debt and failure. German bankers may profit from pressing Cyprus depositors, but the German people are still in hock for far more than they should be. Similarly New York bankers and California Green tech entrepreneurs may be making money from the last four years, but their actual cities and states are deep in debt and floundering.
The European Union's interlinkage makes as little sense as tethering some of the most productive states in the United States to the least productive states. The sort of thing that outrages Europeans has long been taken for granted by Americans.
The two-term kleptocracy now in office was elected on an explicit pledge of wealth redistribution, but the process of moving money from healthy communities to unhealthy communities, from bad cities to good cities and from bad states to good states, has been underway for a while. And no one in the badlands ever has to pay a price for that.
Detroit, a city where hardly anyone bothers paying property taxes, has finally gotten an emergency financial manager, but there's no real reason to believe that the people sticking it out in Motor City who don't pay their bills, but do collect government cash, are going to change.
Someone else is going to have bail them out because Detroit is too big to fail, even though it has already failed, because the United States is too big to fail, and the United States is too big to fail for the same reason that the EU and the new Chinese capitalism and the Japanese gerontocracy are all too big to fail. Everyone is invested in everyone else and no one can afford for anyone to fail; unless it's small outposts like Cyprus that can be safely looted by the big boys.
But the real question is how long it will stay that way. For now everyone subscribes to the myth that a recovery is here and that all the really big investments that depend on working countries are safe.
China pretends that America isn't being run by lefty professors-for-life with worse math skills than manatees and America pretends that China's economy isn't one giant Potemkin village maintained with currency manipulation and slave labor. Everyone pretends that everyone wants to be in the EU, despite a pesky refusal to hold actual referendums on the topic (and to ignore those that have been held) and also pretends not to notice all the money in the EU budget that can't be accounted for.
All this is Cyprus and Greece, but on a much bigger scale. Everyone is spending money that they don't have as a return on future investments that depend on improved productivity and development; even as most of those countries commit to a Green worldview that exchanges development and productivity for austerity and malaise. China can still put pedal to the metal, because its middle class is still only forming. Once it has fully formed and the currency games end, then so will China's boom.
Whether or not other governments and their banking systems begin looting consumers as crudely as the Cyprus scheme attempted to do; loot them they shall. They have been looting them for some time already and there is no way that they are going to stop. The social and financial systems of the modern world are much too expensive and too unsustainable to do anything else. All this will be declared necessary. It will hit the rich harder than the middle class, on paper, though the reality will be different. And it will go on hitting the middle class, because that is, as a famous bank robber once said, where the money is.
The middle class is the economic heart of a nation. Building it up moves a country into first rank status. And then everything else follows, including a gargantuan government. Unbuilding a country requires trashing the middle class. And we are now in the unbuilding phase of human civilization.
The left likes to pretend that removing the middle class will make room for some clean regime of the oppressed. What it will actually do is remove the citizenry with enough power and wealth to keep government in check and replace it with beggars and rebels who depend on government subsidies while hating the government. If you want to see what an extended bout of that looks like, you can travel to the Middle East. These days you can try Europe as well.
Eurocrats fancied that the Arab Spring meant that the Muslim world was finally catching up to Europe. It's the other way around. These days Europe is catching up to the Arab Spring and not just because of the wave of Muslim colonists spreading across its shores. European countries are losing the vestiges of democracy and bouncing between unelected technocrats and elected extremists.
The Brotherhood phenomenon is not foreign to Europe. Not when Athens is tilting to the Golden Dawn and Italy's new power broker is a leftist comedian whose sole virtue is that he hates it all. Eventually the far right or the far left will get its ducks in a row and make a serious play for power and the Eurocrats will either be caught flatflooted or will be forced to invalidate elections. Either one is going to be ugly.
That is one more reason why American liberals should not be too proud of the Obama machine. What looks shiny and clever in 2013 may take on a whole different appearance as the malaise drags on and an angry jobless generation looks to get its payback and paychecks by voting for anyone who screams the loudest.
Beating Mitt Romney was no great achievement. Neither was beating McCain. But at some point the government-media complex of social welfare and crony capitalism will go up against an angry populist with an agenda and an organized movement, from the right or the left, and then things will get properly ugly. That man isn't on the scene yet, but he's probably hanging around meetings somewhere and imagining what he will do if he ever gets the chance. And if he ever gets the chance, it won't be pretty.
The establishment has no plan except to continue doing its thing while pretending that nothing is wrong. It can't fill the hole in the boat so it bails in more water from the ocean and calls it investment. It's a madness that will begin nearing its end once people are standing outside banks demanding their money back. And that is as true for the United States as it is for Europe.
The last century saw the development of a variety of unstable political and economic systems while this century tried to universalize them. Now we are all paying the price.
What we are actually seeing are the beginnings of bailout cannibalism as the Eurocrats manipulate entire nations into fighting each other while scrambling to gain some political advantage out of the mess. The real purpose of the deposit grab was to wreck Cyprus' banking sector and continue the centralization of international finance. At the same time it was meant to give German voters, who have been funding much of the mess, the feeling that other people were getting screwed as well.
Cyprus' government tried to salvage its banking sector by passing on the pain to ordinary depositors in one of those brutally unfair short-term/long-term decisions that technocrats like so long as they have the early warning to opt out of them. While the banks were closed to ordinary people, there's little doubt that plenty of insiders took the time to get their money out and it will be interesting to find out who they were.
But that largely doesn't matter. Bigger systems are bound to more corrupt and every regulation has its loopholes and exploiters. Everyone is badly overextended and betting on cleaning up once the rubble begins to fall.
In Cyprus, the Russian elite looking for a safe place to put its money when the people turn on them intersected with a Eurocratic elite trying to eliminate safe harbors and cheap places to do business. And they all bumped into British senior citizens looking for a cheap place to retire and angry leftists with no serious economic plan, but a determination to overthrow the government.
Cyprus is the place we go to learn that everything is tangled up with everything else and that there are no more answers left; just blame to be passed around and money to be stolen.
Everyone is deep in debt and no one is going to pay up. And why should they? Southern Europe may have dug itself into a hole, but the Eurocrats ordering them to dig out were the ones who provided the shovel because it seemed like a good idea at the time. Debt was a profitable and useful political tool. It still is.
American Federalism was built on the Federal assumption of state debts. Obama's two-term reign was built on massive bailouts used to consolidate power while reassuring the banks that they would be taken care of. The National Debt is headed into 17 trillion dollar territory because that too is a useful political tool. Driving the debt to the point where it can never be repaid is meant to transform the entire way we do business and spend money. And it's working.
Cyprus was a dirty little demonstration that you can kill two birds with one stone by giving a desperate government two impossible choices. And despite all the reassurances, there is no real reason to believe that it will stay in Cyprus. If anything the last few days have demonstrated how effective that particular tactic is. And once the money has fled Cyprus, the demonstration will be considered a success.
The problem with Europe, as with the United States, is that you can only assume so much debt and failure. German bankers may profit from pressing Cyprus depositors, but the German people are still in hock for far more than they should be. Similarly New York bankers and California Green tech entrepreneurs may be making money from the last four years, but their actual cities and states are deep in debt and floundering.
The European Union's interlinkage makes as little sense as tethering some of the most productive states in the United States to the least productive states. The sort of thing that outrages Europeans has long been taken for granted by Americans.
Detroit, a city where hardly anyone bothers paying property taxes, has finally gotten an emergency financial manager, but there's no real reason to believe that the people sticking it out in Motor City who don't pay their bills, but do collect government cash, are going to change.
Someone else is going to have bail them out because Detroit is too big to fail, even though it has already failed, because the United States is too big to fail, and the United States is too big to fail for the same reason that the EU and the new Chinese capitalism and the Japanese gerontocracy are all too big to fail. Everyone is invested in everyone else and no one can afford for anyone to fail; unless it's small outposts like Cyprus that can be safely looted by the big boys.
But the real question is how long it will stay that way. For now everyone subscribes to the myth that a recovery is here and that all the really big investments that depend on working countries are safe.
China pretends that America isn't being run by lefty professors-for-life with worse math skills than manatees and America pretends that China's economy isn't one giant Potemkin village maintained with currency manipulation and slave labor. Everyone pretends that everyone wants to be in the EU, despite a pesky refusal to hold actual referendums on the topic (and to ignore those that have been held) and also pretends not to notice all the money in the EU budget that can't be accounted for.
All this is Cyprus and Greece, but on a much bigger scale. Everyone is spending money that they don't have as a return on future investments that depend on improved productivity and development; even as most of those countries commit to a Green worldview that exchanges development and productivity for austerity and malaise. China can still put pedal to the metal, because its middle class is still only forming. Once it has fully formed and the currency games end, then so will China's boom.
Whether or not other governments and their banking systems begin looting consumers as crudely as the Cyprus scheme attempted to do; loot them they shall. They have been looting them for some time already and there is no way that they are going to stop. The social and financial systems of the modern world are much too expensive and too unsustainable to do anything else. All this will be declared necessary. It will hit the rich harder than the middle class, on paper, though the reality will be different. And it will go on hitting the middle class, because that is, as a famous bank robber once said, where the money is.
The middle class is the economic heart of a nation. Building it up moves a country into first rank status. And then everything else follows, including a gargantuan government. Unbuilding a country requires trashing the middle class. And we are now in the unbuilding phase of human civilization.
The left likes to pretend that removing the middle class will make room for some clean regime of the oppressed. What it will actually do is remove the citizenry with enough power and wealth to keep government in check and replace it with beggars and rebels who depend on government subsidies while hating the government. If you want to see what an extended bout of that looks like, you can travel to the Middle East. These days you can try Europe as well.
Eurocrats fancied that the Arab Spring meant that the Muslim world was finally catching up to Europe. It's the other way around. These days Europe is catching up to the Arab Spring and not just because of the wave of Muslim colonists spreading across its shores. European countries are losing the vestiges of democracy and bouncing between unelected technocrats and elected extremists.
The Brotherhood phenomenon is not foreign to Europe. Not when Athens is tilting to the Golden Dawn and Italy's new power broker is a leftist comedian whose sole virtue is that he hates it all. Eventually the far right or the far left will get its ducks in a row and make a serious play for power and the Eurocrats will either be caught flatflooted or will be forced to invalidate elections. Either one is going to be ugly.
Beating Mitt Romney was no great achievement. Neither was beating McCain. But at some point the government-media complex of social welfare and crony capitalism will go up against an angry populist with an agenda and an organized movement, from the right or the left, and then things will get properly ugly. That man isn't on the scene yet, but he's probably hanging around meetings somewhere and imagining what he will do if he ever gets the chance. And if he ever gets the chance, it won't be pretty.
The establishment has no plan except to continue doing its thing while pretending that nothing is wrong. It can't fill the hole in the boat so it bails in more water from the ocean and calls it investment. It's a madness that will begin nearing its end once people are standing outside banks demanding their money back. And that is as true for the United States as it is for Europe.
The last century saw the development of a variety of unstable political and economic systems while this century tried to universalize them. Now we are all paying the price.
Comments
Very good. Nobody had much heard of Oliver Cromwell in 1642. It did not take him long to take power. And that was very messy.
ReplyDeleteAll it is going to take is a "few good men" .I think this is what Cromwell said and how right he was.
In our case it may well be a few bad men
Dave S
Your words about the elimination of the middle class to produce a society of beggars, led me to remember the Soviet reaction of their financial collapse 15 years ago. They accepted it. Great post, as always.
ReplyDeletehttp://vinnysrants.blogspot.com/2013/03/the-future-state.html
Spot on.
ReplyDeleteIt interests me that there are suddenly so many experts in Keynesian economics, who will all insist that a countries finances are "not like your finances at home", and that the only answer to anything is spending money. Of course not theirs.
It is typical of the liberal mindset, believing what it needs to justify doing what it wants.
But is it the cause or a symptom of something else?
Germany wants people to fund the bailouts.
ReplyDeleteAlso the Euro was designed to fail like this.
' A common currency without a common government is an unstable halfway point on the way to becoming a superstate. Ordinary Europeans did not want to become part of a superstate. So they set up the euro, knowing that for it to work, the EU must complete the journey. Europeans would be forced against their will into a political union.'
The flat world of Friedman's dreams has become a nightmare. There is a reason why the entire globe is worried about the tiny Cypress. First of all, the US Treasury is involved in the confiscation approval via its voting rights in the IMF, second the US Press Secretary refused to say even a single disparaging word about it, and more importantly every plutocrat all over this interconnected world would rob anyone to stay in power if he could.
ReplyDelete"Nobless oblige" has turned into "we're there to binge", for as long as it lasts, and "absolute power corrupts absolutely" has turned into "it takes absolute corruption to even come close to power." As the German banks want to tax the Russian mob to save themselves, there are no good guys excepts for the savers whose hard earned money will be looted just as soon as a good enough justification is found.
There used to be local economies that were only loosely connected, and even then we had worldwide depressions. The reality of interconnectedness on the current scale coupled with the global immorality of he elites and the majorly confused electorates has created an unstable tower of Babel that is being held up by the voodoo economics of money printing and everyone borrowing from everyone else. When it all falls down, the consequences will be too terrible and too unpredictable to imagine, but since only a shock will change the "slowly boiled frog" approach to things, nothing but a complete collapse will suffice.
This is an object lesson on why a United One World Government is such a terrible idea. For the previous five thousand years of history, and even the prehistoric period before, human civilizations and cultures were fragmented and compartmentalized. If one civilization made a catastrophic decision, they fell ... but the damage was limited and did not affect other human experiments. Whatever caused the collapse of Harappan civilization had no effect on Rome. When Rome fell China didn’t even blink. In fact neighboring but separated cultures were invariably the means of recovery and replacement, even if the process took a few centuries. If a ruler became too onerous, people could flee to a neighboring land, until The Onerous Won was removed. IN a similar manner, separation generally limited epidemics. The New World was protected from smallpox, measles and several other diseases until 1492, and Europe was reciprocally shielded from Syphilis and other external diseases. Epidemics ravaged, but were localized. The Great Plague seems to have occurred when Venetian merchants and Mongol armies came into contact in the Crimea. Today, hordes of immigrants from the undeveloped world bring us new diseases, such as AIDS, and resistant strains of old familiars, such as the new resistant forms of tuberculosis.
ReplyDeleteAnd of course financial disease, which seems to be incurable. And which seems destined to spread to all peoples. At least for the time being, we are spared the political ministrations of a Global Secretary General. But perhaps it may also prove true that all the roads leading to Cyprus are two way streets, leading back to everywhere. Sometimes Isolation can be salvation.
-Rurik
Please forgive the gross exaggeration (and gauche flattery) but...
ReplyDeleteThere is the Shakespearean.
And then there is the "Knishean".
Ah...ever the quotable Knish!
While our blogosphere mutters "Keynesian" this and "Keynesian" that, you simply say (of the "other" blogosphere), "It can't fill the hole in the boat so it bails in more water from the ocean and calls it investment."
I love the way you thread the needle (or run the gauntlet) between our common, normatively human "conspiratorial" perspectives, and our common, "normalcy" biases---neither's of which can rightfully (or "correctly") be dismissed in an honest and penetrating critique of human society and its manifold associations.
You are making such a difference, Mr. Greenfield: thank you for your perseverance.
So many of us (even more than you know) manage to get just a little more sleep at night---because you don't.
Is there anything that we can we do, on our part (that we aren't doing enough of), to help you keep going?
You truly never cease to amaze.
The EU will take the citizens of nations that accepted bail outs for all they are worth and then want even more.
ReplyDeleteAll of this is an orchestrated collapse in order to usher in the new global monetary system.
ReplyDeleteThe prophet Daniel wrote about this final global government while he was in the first diaspora.
As Lenin said; You have to break a few eggs to make an Omelet and it's going to get messy once the middle class and the poor have to deal with starvation.
That's always been a powerful weapon used by tyrants and we've got our very first one here in the land of the dumbed down and now cursed.
It explains why the man chosen by the elite's to lead America's downfall is spending/wasting/stealing/throwing away money like no other U.S. president in history.
Order out of Chaos.
Uncle Janet at DHS has acquired those 2 billion round of hollow point ammo and all those armored personnel carriers for the urban and rural war zones and police forces across the nation have militarized for that certain chaos the Destroyer Obama is bringing when it all goes down so that their dead bird Phoenix can arise from the ashes.
My comment was the actions that I took for Daniel.
ReplyDeleteEvery print and broadcast outlet in America got a copy of this article
thank you Robert, that's an amazing sign of support
ReplyDeleteIt does not seem to me like the Eurocrats are trying to destroy these banks. Jon Corzine showed the way with the MF Global theft. This is just another case of bailing out the bankers, but instead of just printing up some euros to cover it, they saw an opportunity to steal some money while they were at it. The only people who are being made whole are the Jamie Dimons and Jon Corzines of the world. The Rule of Law is dead everywhere.
ReplyDeleteBrilliant as usual. But apart from the wonderful, insightful writing, it's just depressing as hell.
ReplyDeleteDG, you are a remarkable pundit! You have tied the whole creaky system with one rather short post. You have a gift!
ReplyDeleteyes Daniel can do objective ,quantitative analysis and articulate his case as well or better than most. Lets see if he can sink his teeth into this one and offend all the Banksters in NYC, Wilton Ct., The City of London and the ISDA.
ReplyDeleteBills to Permit Bailouts, Deregulate Derivatives
http://www.nakedcapitalism.com/2013/03/when-you-werent-looking-democrat-bank-stooges-launch-bills-to-permit-bailouts-deregulate-derivatives.html
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