Did you know 47 million Americans live under the poverty line and that figure has risen every year for the past four years? There are more Americans in poverty than at any other time during the past 52 years.
What about the fact there are the same amount of jobs in total in the US economy today as there were in 2000, and yet the population is 38 million larger? These are significant figures because the US economy is not creating jobs and, without jobs, these figures get worse. If they get worse, something will give.
Maybe the rise in US poverty is the reason why extremely rich Americans like Warren Buffett are imploring US President Barack Obama to tax the rich more. Maybe Mr Buffet reckons it is better to give away a bit of wealth now, than all of it in a massive political change later. We see the same thing in France, where the very rich are arguing to be taxed more.
This is unprecedented. For the past three decades, the major ideology in much of the world has been “greed is good” and income disparities are the result of superior talent and effort. Now even the rich are calling for more redistribution.
But it’s not just in the area of rich/poor politics that we are seeing changes to the status quo and establishment thinking. Take the Arab Spring or the Tea Party in the US, these are all reflections of great social changes that are ripping apart old certainties.
This sense that we are moving into a much less certain, much less predictable era is manifesting itself all over the financial markets, where fear has replaced swaggering self-confidence. For example, JP Morgan reported that in a survey last week of the world’s major money managers, 85pc said they were “neutral” as to where the world’s financial markets were going. “Neutral” is shorthand for “I haven’t a clue”.
When people have no idea what is going to happen next, they seek a safe haven. That safe haven is gold. Gold futures, the price where people expect gold to go in the next few months smashed through $1,900 (€1,380) an ounce last week. That is a rise of 55pc in the past year.
The establishment worldwide is on the defensive, old certainties are being assailed and no one is too sure what comes next.
In Europe, Siemens has just taken €6bn out of the major French banks and deposited this with the ECB against the background of the US Federal Reserve lending dollars to the ECB, to lend on to European banks who can’t find anyone to lend to them. When large companies lose faith in large banks and the Fed lends emergency dollars to the ECB, you know something is going badly wrong.
But why would European banks not lend to each other? Because, presumably, they are afraid that one will go bust and will not be able to pay the money back. Why would that be? Because they are afraid that banks haven’t been exactly honest in revealing what is on their balance sheets and therefore they don’t trust each other. When trust is gone, the system breaks down.
All the while, investors — as well as Siemens — are taking their money out. Investors are selling shares. It is only a matter of time before the ordinary Joe takes deposits out, as happened and is still happening in Ireland. If you doubt this is still happening here, just look at the deposit rates the banks are offering. They are offering almost as much on deposits as they are charging to lend out. This means they are petrified.
Of course, the reason European investors are fleeing the banks is that they believe that the banks will take huge losses, not just on their Greek portfolio but on their holding of bonds of all the peripheral countries.
For sure, Ireland has benefitted in recent weeks from traders following a bond arbitrage trade of selling Italian bonds and buying Irish bonds, but this too will unwind because the coming default in Greece changes everything.
When you take all the various piece of data and information together, from the poverty in the US and the anxiety of the very rich, from the lack of any real direction in financial markets to the lust for gold, we can see the world is at the edge. Add to this recent events in the Arab world where regimes that ruled for generations have been swept away; it’s clear something seismic is afoot. The old establishment is not credible.
Come back to Europe, where we see such a paucity of leadership and options on offer, where only a fool can believe that Greece will not default and only a fool can believe that once Greece goes, the contagion can be stemmed. So Europe and the euro are in a bind. It is clear that “austerity” imposed so that taxpayers pay for banks’ mistakes can’t work economically or politically. Yet this is all the establishment is offering.
The way out of this is that Greece defaults within the euro or Greece defaults and then leaves the currency and re-issues the drachma. European banks take a massive hit in this case and, to insure that Greece has a financial system after the default/ejection option, all former euro debt in Greece will be converted into drachma. This is what happened in Argentina and it is likely to happen again in Greece. Once you are down the road this far, this type of move is unavoidable. The question then is what happens to us. It is clear that Ireland needs to make a significant choice now. The options are not brilliant; they never are in a crisis. However, a return to the punt is now moving from the inconceivable to the entirely possible.
If there is one thing this crisis has told us, it is that “serious people” — the establishment figures rolled out to defend the status quo — have no idea what they are talking about. They were wrong in the boom and they are wrong again in the bust. The pattern over the past few years is with every new crisis, what was extreme becomes consensus and what was consensus becomes redundant. It is time to think the unthinkable.
When the very rich in the US are saying “tax me more”, it is not unrelated to the 47 million people who are below the poverty line. When the price of gold is sky high, it is not unrelated to the poverty of EU leaders’ ambitions or vision. And when the interest rate on Greek two-year bonds is above 50pc, it is not unrelated to the fact that the country is bust.
We are at a global tipping point.
David McWilliams has devised and will teach a new economics diploma, Economics Without Boundaries, from October 11. More details: www.independentcolleges.ie.
David, you don’t mention the fact that 20million blacks in America have always lived in poverty. Immigration into the states has to feed into this figure. How many strugglers have entered into poverty?
As someone who danced to the live Chubby Checker in the Pavesi a few years back, I consider myself something of an authority on Bernake’s latest idea: Twist and Shout. So here goes: ‘Long term bond yields are equal to the sum of future short rate expectations, plus a risk premium which represents the additional volatility and reinvestment risk in long dated assets. In order to flatten the curve, they need either to reduce the duration risk premium, or to convince markets that short rates will be lower for longer than currently expected. The markets call this “Operation Twist” and… Read more »
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Alex Jones on where we are headed and some of those responsible..
http://www.youtube.com/watch?v=Vg-5WgcMV_o&feature=share
Im curious David, for someone who is so well informed about whats going on in world finance, how can you not talk about the elites trying to set up a one world government? This has been exposed in the European Parliament and by many researchers, intelligence analysts, economists etc, etc, etc. I find it very hard to believe that you dont know about it. Anyone who has been following world financial and government affairs would have to have came across this conspiracy. Are you afraid to speak out or what? The people need to know what is going on.
@PropagandaBusta: shhhh… no they don’t :D
why have o2 got a “money card”? what is bitcoin? what is nfc and google wallet? qr codes anyone? doesn’t take a genius!
it’s like the chemical brothers said “heavens down, and hell is up, all rights reversed”.
not to worry though, it’ll “galvanise” the worlds population… what’s left of it, that is, after Becks Chemtrails!
Beck – Chemtrails I can’t believe what we’ve seen outside You and me watching the jets go by Oh, ooh, oh Oh, ooh, oh Down by the sea So many people They’ve already drowned You and me watching a sea full of people Try not to drown So many people So many people Where do they go? You and me watching a sky full of chemtrails That’s where we belong [ Lyrics from: http://www.lyricsmode.com/lyrics/b/beck/chemtrails.html ] All I can take from these scars is hope But all I can see in this night are boats sinking Oh, ooh, oh Oh, ooh,… Read more »
I love the cartoon, but would hopping from the euro to punt be a less painful option? The punt was set up to break the sterling link and tie us closer to Europe. Investors loved it and trade with the EU core boomed. As you point out elsewhere, there were devaluations and busts, and emigration, but the aim was convergence with Europe. Then Maastricht happens and everyone talked about the European train, destination euro. The punt had been a staging post on that journey. As you say, there was a vision, and none now. But while I see the sense… Read more »
@PropagandaBusta: “for someone who is so well informed about whats going on in world finance, how can you not talk about the elites trying to set up a one world government”
Is David McW Ireland’s equivalent to Alex Jones?
I hate to break the news to you all (including David) but the official US poverty level is based on three times the price of an emergency diet (emergency as in dried beans only, no expensive canned) — no basket of goods or services at all; a long outdated 1995 formula. I used to get vexed by the number being used by all over here in the states because everyone else was always using it. The formula left the poverty line at an ridiculous $18,000 for a family of three — and yielded 12.5% of Americans in poverty (not counting… Read more »
It seems as though we, and most likely the Greeks, although having nominal equal partner status in the EU, have rarely exercised this right and have been happy to be told what to do and by all means avoid any actual responsibility as partners, or god forbid express an opinion counter to the prevailing positions of the largest economies. If ever there was a time to do thsi its now. If the Eurozone disintegrates, its as much down to the selfishness and cute-hoor-ism of the Greeks and the Irish as it is to the selfishness of Germany and France. By… Read more »
David wrote: “we are at a global tipping point” Indeed we are. Let us consider an image used by Malcolm McClure in a recent post; the Archimedean image of the fulcrum and lever; and consider the question he posed; which will break first? The fulcrum or base upon which the lever operates is our real physical economy which is the product of the enterprise and work of our communities and nations. Upon this base of tangible assets and real living wealth the lever operates. The lever is the financial markets which use leveraged virtual capital and complex financial instruments to… Read more »
Technical Fault Report
I think the above article is not assessable to the public reader directly not using the invitation received from this blog .Please check.
Great article. I’m not so sure Punt Nua is a route to take anymore. I wonder if we’ve been so mauled by the banks and the ECB, that this is no longer an option. We may be in a Hobsons choice situation where the inevitable choice between two objectionable alternatives is between Punt Nua and joining a commonwealth relationship with the UK and adopting sterling currency. Only this way could our financial affairs be unwound with the leverage coming from UK and the ECB. Realistically our political establishment is too much infiltrated by the banks. We have no Olafur Grimsson… Read more »
I have been reading about the one world government and the fact that human slavery (Apparently were are all slaves) though subtle is the order of the day. Apparently and you can check it out on utube Jordan Maxwell who leads the field tells us that the Roman church is in cohorts with the mafia and the whole thing is a money racket.It seems ever since ancient Egypt we have been ruled by the same bloodlines and that the whole circus has got too greedy and we are all lost.I love reading up about the history of the church as… Read more »
“Sinn Féin Vice President and Presidential candidate Martin McGuinness has said he did not kill or shoot anybody while he was a member of the IRA between 1970 and 1974.”
http://www.rte.ie/news/2011/0922/president1.html
need to kill or injure a person without you actually doing the killing or the injuring? use a bomb! because “guns don’t kill people, rappers do!”
Good article. Yes the public has lost faith in the establishment because they know the establishment has not got one iota of what is what but they try to make out they know what is what. Basically the reality is this those who are supposed to govern and apply regulation are ignorant and at worst stupid. The so called free markets are in an end game to protect their wealth. And a lot of them have their wealth tied up in pieces of paper rooted in derivative markets and they cannot get out of the positions they hold in these… Read more »
Article is defining the facts and they read as if as we are back in 2008.
What have the *serious people* / insiders, what have they been up too for 3 years.
Sticking their sausage fingers and thumbs into the CDS derivatives ponzi scam dam is what.
The insiders have the most to loose if Greece default triggered domino effect collapsing the CDS derivatives pyramid scheme they are all trying to keep stacked up with their dennis the menace scaffolding spoofarama austerity they are spiv man like shystering onto the taxpayer.
Bunch of headbangers the whole lot of ’em.
*lose*
http://graphics8.nytimes.com/images/2011/09/04/opinion/04reich-graphic/04reich-graphic-popup.jpg
At the risk of being called a perseverant! Found this graphic neatly summarizes many issues discussed on this forum. A few minutes musing over it will give you more insight than many hours reading if you´re an amateur like me!
Many of us today seem to be viewing the world through a peculiar mental prism; a mental prism that controls our perceptions and obliges us to perceive the world in anti-human terms and tacitly support a proliferation of anti-human financial systems as acceptable economic behaviour. This mental prism is the neoliberal economic philosophy which has literally saturated the media for decades and sets the consensus parameters in which the unfolding economic disaster is discussed. We used to call it the Celtic Tiger. It is a global phenomenon; a global mental prison. The neoliberal mental prisoner sees the world as a… Read more »
Okay….. I dunno what the fuck ye all talkin about. Ireland has no money…. Greece has no money.. in fact nobody has any money anymore except those that print money that has no value to prop up a failing market. They do this to give the impression of wanting to help save us when really all their doing is getting all their “ducks in a row ” so they can be ready to step in when Euro Countries Collapse. This is not as big deal to them , it is the same as War , People make money gettin ready… Read more »
As I predicted last night 11:48 pm, world stock markets crashed today, but 3.5% War Loan actually gained 10.34% today.
– Just sayin’,
sorry , should read “Euro to fall again until flood of Dollars subsides “
Oh what a tangled web we weave,
When first we practice to deceive.
Mis- allocation of credit.
Mis-pricing of risk.
Unequal distribution of wealth.
Asymmetric information.
More unequal society’s.
I could go on but in the words of Beckett ” I must go on, I cant go on”.
With instant messaging, facebook, txt, twitter and all these other programmes it is proving almost impossible for the insiders to put the shit back into the horse………we have known that on this site for years…….game over….default…..recognise losses….write down assets to market….write off debts that cannot be repaid….and for God sake be mature about it, enough time has been wasted with all this nonsense and posturing.
Oh and while I’m at it, this bullshit that Merkel and Sarcastic are playing out, not wasting a good crisis, power grab for Europe and so on is built on very shakey foundations given the integrity and strength of both the German and french banking sectors.
If Angie and Nicky think that they will be the last to starve then they might want to reconsider that position.BNP is dogshit stock…I could go on, I cant go on…
Euro Contagion Lets look at the Space Satelite Prediction where it will land in the next 24 hrs .It will be a ton in weight when it re -enters the atmosphere and it will land somewhere and we are given a 1:3200 possibility it will hit someone . This is called a remote possiblity it will actually hit some one . ‘I don’t get the odds of 1:3200, that does not sound too good to me! There are supposedly 7 billion people on earth, if we all have a 1:3200 chance of getting hit then surely more than 2 million… Read more »
Fellow bloggers will sympathise with my writing of world peace here:)
http://wp.me/pBbF3-fT
Also, how come DmcW article above wasn’t published in Indo or SBP?
“the major ideology in much of the world has been “greed is good”” Would suggest it has been the prevailing ideology in elite circles and certainly not that of ‘much of world’ which sees the vast majority of people struggle on a dollar a day or less. Buffet is no fool, he knows from history what happens when the ultra-rich are inflexible but he is swimming against the tide, he also knows any statement is going to fall on deaf ears, so loses nothing from saying it but gains when people like yourself pick it up, it has been replicated… Read more »
The problem is self-inflicted. The recession/depression (whatever you want to call it) was started by our politicians meddling and it will not end until they stop with this bail-out nonsense. The more the government cuts and taxes the more the economy will shrink, the more the banks profits will be hit and the more further taxes and cuts will be ‘needed’. Bailing out the gambling debts is not just unfair, it’s the root cause of everything wrong in the financial world… and it won’t stop until politicians stop believing they can save us. They are creating a continuous recession with… Read more »
The brakes cannot be applied, nobody really knows where the pedal is and the steering rack has been welded in place. All the drug addiction in the world is far less harmful than the gambling addiction which is represented by our “Financial Markets”. If we are at the edge the first thing to realise is that we are going over it and there’s nothing anybody can do, even if they wanted to. Neoliberal Capitalism has arrived at the only destination it was ever headed to, it’s logical conclusion and when something reaches it’s conclusion, that means it’s over.
Our world is infected with a toxic mindset; an ideology called neoliberal capitalism. The idol of the Golden Calf; worshipped in the temples of greed — the financial markets. The gaping maw of Mammon into which our planets wealth is being heaped. That maw is a black hole; it can never be satiated. This global disaster cannot be solved within the mindset that is causing it. The world needs a change of mindset; and a change of heart. NOW before it’s too late. The only ones who can stop this disaster are the politicians. Only they have access to the… Read more »
The governments all from each member of the Euro-zone should declare a surprise bank holiday. Government auditors then show up at every bank and forcefully audit the books, search for any toxic derivatives and any unpayable gambling debts. An immediate write-down of bad debt must be made and an “on the spot” evaluation of each bank would be made. Each bank would be sound or bankrupt. Some bankrupts would be worth saving once toxic debt is written down and these would become temporarily state owned banks with cash injection from the ECB. Some will be totally bankrupt and worthless (e.g.… Read more »
We’re cursed with “interesting times”. It’s end-of-19th-century Vienna; von Hofmannsthal’s “das Gleitende”.
@BriMcS
I am sure politicians around the world are talking to each other; privately and discretely. Sounding each other out. Organising behind the scenes. They are waking up.
Perhaps the banksters will be getting the surprise visits Alf recommends above.
Disaster will be averted.
We have new Words
Drachmatised
Escudified
Puntified
It means that borrowers will have their bank loans depreciated when their current currency ‘the euro’ departs from their shores and becomes ‘local ‘..
How would Tull feel ? …….Perthtrified .
And The Winner Is
http://buyersbroker.ie/blog/
http://www.youtube.com/watch?v=TlBIa8z_Mts&ob=av2n
We are in the midst of a global war.
The enemies of humanity are waging war upon us; using the financial sector and the banking system to bankrupt and assset-strip our nations.
And they are doing a pretty good job of it.
Thing is – and they must know this – we’re not all media-duped fools.
[…] David McWilliams: […]
I was just wondering if we could get away with it,
If we told the ECB that it’s not about the Money! Money! Money!
We don’t need your Money! Money! Money!
We just want to make the World dance
Forget about the Price tag!
We need to take it back in time!
When music made us all unite!
Cha-ching, Cha-ching, Ba-bling, Ba-bling.
Take it away Jessie J……….Cleopatra in high heels……and Goodnight Ireland .Sleep well.
http://www.youtube.com/watch?v=tnw0mn_eYLM&feature=relmfu
The solution to this global systemic break-down crisis is in principle simple. Shut-down the financial markets; and restructure the global economy. Bailouts and Eurobonds and defaults and returning to the punt and all the other assorted desperate fixes being discussed in the media and on this forum cannot succeed so long as the current system is operational. The system is the crisis. The financial markets are insatiable and will destroy our global civilisation if they are not shut down very soon. There is no other possible solution. The only discussion at this point is — how to do that. That… Read more »
Of course this simple solution entails facing and overcoming the great challenge of this era for our species and planetary development. We must face and overcome the challenge of moving from the barbarism of neoliberal Darwinian economics to a new era of civilised global cooperation and integration. We must move from an era of competitive exploitative dominion of the planet and each other to an era of cooperation respect and stewardship. We can no longer abuse our planet and each other in these barbaric and destructive ways. We can no longer view our planet and each other as prey to… Read more »
Live stream from Wall Street.
http://www.livestream.com/globalrevolution
Spare a thought for the politicians facing the con job of Soros and Geithner here http://www.businessweek.com/news/2011-09-25/europe-faces-geithner-soros-pressure-to-defuse-debt-crisis.html Beefing up the EFSF is in breach of the Lisbon Treaty. They may have conned Obama into QE1 and QE2 for the banks to allow private interests suck more out of european economies. They may have conned Merkel and Sarkozy too into creating an even bigger mess down the road. Face it, its time to make senior bondholders pay for the shambles and make orderly default, the norm rather than pouring more fuel to further indenture already broken economies. We need a bailout for… Read more »
News Alert! from Wishful Thinking Media
President Obama has signed an Executive order suspending all US derivatives trading and shutting down Wall Street. He is calling on all nations to follow suit and for an immediate summit of all nations on the global economy.
The Wall St Journal says: Critical differences between European leaders threatened to stymie efforts to combat the euro zone’s debt woes, despite mounting international pressure to contain a broadening crisis. http://on.wsj.com/osfYO2 Things are moving too fast for IMF or politicians to have any effect on inevitable outcomes. They just hope to delay matters sufficiently so that their cronies can mitigate their downfall by short-selling etc. On Friday, Art Cashin, head of floor operations at UBS diverted attention from his real problems with this: “The Thursday/Monday Syndrome — We had suggested yesterday that we should probably explore the history of what… Read more »
The deadly banking zombie virus is back again. This time it looks as if Angela Merkel has fallen foul. It turns the brain into a bankers’ voodoo doll ready to do the craziest and most irrational will of unseen vampire bankers. No, Angela, Greece is not in danger, if she defaults, of creating a situation where nobody will invest in Europe again. Greece is in danger, if she doesn’t default, of creating a situation where nobody will want to invest in Europe again:) Meanwhile Elderfield of the Irish Light Banking Brigade, according to Business, Sun Indo, is ‘Regulator on a… Read more »
New Perception
Maybe we should look up and be confident .Lets look at the cartoon and think positive for a change it will definately be good for blood pressure .
Lets see it as a bare pan and now a pan of plenty and heat to cook it .That would be a great meal for many.