Financial Cannibalism

Ty Andross writes about "Something for nothing societies", where we become unwilling, or unable, to produce more than we consume.

"Unwilling to support themselves, they set off to consume those that do, to feed on and support themselves. The takers of wealth eat the  makers of wealth, Cannibalism of the worst sort"

He goes on to say:

Once they have achieved voting majorities, the economies they inhabit, are much like a farmer's field. They eat everything down to the roots and next years seed corn. Nothing is left to create future wealth and total destruction of production of wealth is the result. "Something for Nothing" societies are a  product of a number of factors which combine to destroy the lives and future prospects of the majority of its citizens. Creating desperate mobs of citizens easily manipulated by fear. It drives the final descent into economic and societal collapse.

I have been reading similar things.

James Delingpole wrote much the same recently. Historian and conspiracy theorist, WebsterTarpley calls it "Internal Looting", describing it as the natural progression of aggressive expansion.
In this case, western capitalism has reached its geo-political boundaries of China and Russia. With nowhere left to loot, the elites turn inward, devouring the very source of future production.

E.U. Debt: Default the Only Solution?

Her is an excerpt from an article by Graham Summers for Market Oracle:

"At the end of the day, there is really only one solution to this whole mess: DEFAULT… both by the banks and by EU nations as a whole.

What happened to Wall Street in 2008? Banks that were over leveraged (meaning they borrowed far more money than they actually had on hand) went bust because the assets they bought with the borrowed money fell in value to the point that it erased the actual money they had on hand

Think of it this way, if you borrow $30 for every $1 you actually own, and you invest that $30 in various assets, you only need those assets to fall 3% (0.03 * 30 = 0.9) before you’ve wiped out almost all of your actual money (the $1 you owned and which you borrowed the $30 against).
This is what took down Lehman. And it’s what is taking down Europe today. The entire European banking system is leveraged at 26 to 1. Lehman was 30 to 1, Europe as a whole is only slightly below that,

And where did they invest the $26 in borrowed money?
EU sovereign bonds… (as well as garbage mortgages in the various EU housing bubbles).
When you are leveraged at $26 to 1, you only need the assets you’ve invested in to fall 4% before you are totally bankrupt.

This 4% drop in asset prices has already happened across Europe, the only reason that we haven’t seen a systemic collapse there is because Mario Draghi, the head of the ECB, said he’d buy unlimited amounts of EU bonds.

Note, Draghi said he would buy these bonds, he hasn’t actually bought anything since he said this.
So why did Draghi’s statement matter?
Because the primary assets owned by EU banks are EU sovereign bonds. And if EU bonds keep falling, it results in the dreaded 4% drop in asset prices that would wipe out all the EU banks’ capital.
So Draghi stepped in last summer, promised to buy EU bonds, EU bonds went up, and EU banks could breathe a sigh of relief… for a while.

But anyone with a modicum of common sense can look at this situation and say, “but wait, nothing was actually fixed, all that happened was Draghi promised something and the markets reacted.”
PRECISELY. And that is what Cyprus just proved: that the ENTIRE EU “fix” was a huge lie. Nothing changed. Nothing was fixed. The banks are still leveraged at 26 to 1 and sitting on loads of garbage debts. And the EU countries are all still totally bankrupt.

So what happens when EU bonds start rolling over again… and what happens when EU banks start seeing their asset prices falling… falling… falling to -4% or even more?

SYSTEMIC FAILURE IN EUROPE."
 

Delingpole's Despair

I posted this snippet of an article up on FB last week and apart from a comment from Bill, it has been largely ignored so I thought I would post it here to be ignored as well.
The author is James Delingpole. James is well known for his Telegraph Blog in which he openly shares his views on climate change.

Here is his impassioned, frustrated, and despairing piece:

"I'll tell you what I fear. I think we have now reached that stage of last-days-of-the-Roman-Empire intellectual and moral depravity where almost no one in our dominant corporate/political/financier/lawyer class believes it's worthwhile or even possible to do the right thing any more. Some of them may be vaguely aware that, yes, the only way the world is ever going to recover from the economic mess we're in is through a radical agenda of cost-cutting, contraction of the state, sound money, and lower taxes. But they've made up their minds that none of this is a vote winner in our heavily socialised Western economies and that therefore the only hope is simply to grab what you can while you still can – and forget any fancy, idealistic notions you may have had about making the world a better place."

The reason I have returned to this article is because it has been resonating with me so strongly over the last few weeks. Every time I read a commentary or news item reporting on the dreadful state of affairs we find ourselves in, I mentally refer back to the piece. Not only that, but James' thesis can be expanded further, although sadly, the conclusion is still pretty miserable.

Time for some more pictures of kittens.