Sunday, May 9, 2010

When Will We Ever Learn?

This week was old-home week for InvertedAlchemy. The week began with the further unmasking of the Greek bankruptcy which, per my earlier post, was prevented “at all costs” with the €110 billion solution. This emergency financial package lit the streets of Greece aflame with protesters who see their government and the Eurozone failing to deliver on the illusions that it once promoted.

Then, we found out that the Pension Benefit Guaranty Corporation’s 2009 Annual Report showed that the PBGC is in a worse insolvency than earlier suggested and they have at least a 10 year horizon of deficit operations. In the Inspector General’s commissioned report, a “no-confidence” assessment is given to the PBGC’s ability to know what its true financial position is and what liabilities it actually faces. So, when one reads their annual report and learns that there is a 50% chance that they could be fully underwater with actuarial liabilities that cannot be funded, the whole “Guaranty” part of their name seems to come unraveled.

The one that missed the scrutiny of the media but was one of the great admissions of the Ponzi-style collusion holding up our illusory economy was the financial report from MBIA - the insurer of bonds. The major single contributor to their profits was - drum roll please - collecting on "insurance" on their credit default swap exposure. The whole AIG bailout cover story is gradually showing up in financial statements and, you guessed it, THEIR profits are coming at your tax expense (and the debt that the Chinese continue to support). If there was accountability, there would be white collar jail terms...

And then, my favorite. Wall Street’s tumble that the public was told was the result first of a “trader error” and then “runaway computer trading”! Did anyone actually see what this really was? Did anyone see that this volatility was not an accident at all? Rather, now that the market has sucked the last it can from the giant asset reallocation program that has been buoyed by the helium that the Treasury has pumped into the Zombie Economic Recovery (ZER – a term I’ve coined for the propaganda-based recovery promoted by those who have hidden the real liabilities and exposures under the cover of “stimulus” while propping up the illusion of economic activity by government spending of debt-financed money), what this really was, in my estimation, was a test. This test was to see the degree to which mass contagion can be used to pull off the equivalent of the fabled Rothschild London Exchange asset grab following Waterloo. Ten percent of the value of the largest exchange on Earth gets wiped out in the matter of minutes and we blame it on a “glitch”. Worse than that, we believe the “glitch” story. Let’s be clear about one thing – computers (even really big, smart ones like the ones running the quant funds – covered here before) are programmed by HUMANS who tell the machines what to do. The computers didn’t “glitch”. People did the Thursday, May 6, 2010 coup attempt and they’ll do it again.

Ignorance Arbitrage (the ability for misinformation management by a few to acquiesce the masses into complicity for their detriment) is the oldest trick in the economic playbook. It is why churches and temples are richly adorned while worshipers starve. It is why New York, Toronto, and London flourish regardless of the economic conditions of the paper they trade. And it is fueled by a worldview which is inextricably religious in its origins – namely, the fear of mortality.

Let’s examine the following. Interest is the animating fuel for debt. By its very nature, interest (known more accurately by its historical term “usury”) makes an assumption which cannot hold. The assumption is that there will always be more in the future than there is today. Now there’s no way that we’d be willing to believe that this assumption can hold if it weren’t for our nostalgic fantasy about a promised “hereafter”. Isn’t it ironic that the two primary mechanisms supporting our current economic system are pensions (a belief that there will be more at the end of life allowing us to die well rested) and life insurance (explicitly created to cover our debts post mortem)? Take either of these financial products out of circulation and our economy collapses. Without these, there’s no statutory demand for the perpetual supply of fixed income financial products. “Debtors’ Prison” is not a nostalgic figment of a Charles Dickens’ London – it is the animating paradigm of our economy. We’re just posting bond through life and calling it more palatable terms. Oh, and by the way, our tax systems are set up for acquiescence. If we want the privilege to avoid taxes now, we “defer” our tax liability by fueling – you guessed it – the pension schemes which pump money into the hands of the usurious.

When Christians pray their “Lord’s Prayer”, why do you suppose that they forgive “debts” as they as “debtors” are forgiven? Was this what was said in Aramaic, Greek, or early Latin? Why did we choose economic terms rather than an equally viable and more inclusive “offense”? Marketing! When temples and churches are gilded while worshipers starve, you see the value of marketing. No Prophet would ever endorse what the industry of religion has done to promote their brand. But, that’s another topic.

We have debt and interest and we have pensions because we’ve been sold a bill of goods. The false promise of the “wealthy hereafter” which is somehow better than the “now” cows us into blind obedience. Don’t question the anti-gravity of perpetually increasing resources supporting an “interest” constant growth. Don’t question the anti-gravity of a leisurely end of fruitful engagement retirement which is buoyed by the pensions and entitlements which disengage our wisest minds. Remember that life insurance – set up by the Scottish church to cover the post humus debt of clergy under the nostalgic name of “Widows and Orphans Fund” (which by the way co-opts the church’s mandate set forth in the Book of Acts in the Christian Bible) – was justified as an acceptable industry because of the growing issue of insolvent estates of vicars. In short, the purveyors of the “hereafter” had here and now fiscal mismanagement issues. As a result, an industry was born – not surprisingly justified by and for the same interests – which now serves as the bedrock for our monetary and economic system.

Fear of mortality is at the root of our current economic system. And it is this root that must be acknowledged, confronted, and cut. No matter what laudable objective we seek to finance, no matter what cause we wish to animate, the use of the systems created on fear of mortality will always include the curse that comes free inside – enslavement to an illusion which demands perpetual growth. And no matter how much we try to dress it up with fancy words like “tax deferred”, “pension”, or “retirement”, it’s all the same – a projection of a future that is always better than the present.

Well, I for one, live in a simple reality. That is that all we have and all we need is here now. Our fiction about a future with “more” actually enslaves our creativity, our enterprise, and our destiny. Ironically, the current projection of a future with “more” is a self-fulfilling prophecy. The cost of the “more” that benefit a few in North America and Europe predominantly actually mean that there are “more” in poverty, slavery, and wont than at any point in human history. Our need to support the illusion mean that more women are trafficked, more children indentured, and more resources extracted than ever before. And the reason why the illusion can be maintained is because we choose to see ever less of the world. We ignore the environmental and social devastation of extractive industries until they hit our retirement real estate. As the Gulf of Mexico oozes, can we find in our consciousness the wake-up call for the environmental carnage in Nigeria and South America? As we see the ocean foul, can we intervene before Nautilus Minerals destroys Lassul Bay in East New Britain Papua New Guinea? Or will we let the Australian, Toronto, and London Stock Exchanges continue to pump money into an anonymous corner of the globe because it’s good for long-term investors?

Is it possible that the “Streets of Gold” in the hereafter could mean that gold is so meaningless that it is used as a building material? Could the wisdom actually be calling us to consider a future where what is seen as material wealth in the present is Irrelevant? When we work to build the economic “next”, can we contemplate a world in which fortunes can rise and fall without devastating consequence? Choose now, Choose to live, Choose to be stewards of Liberty!

And before next week, ask yourself the following question. “What was it about 1215 that gave rise to the Magna Carta, the Charter of the Forest, the Fourth Lateran Council, the Catholic Inquisition and the Expansion of the Chinese Expeditionary Fleet?” The answer to this question will begin to unravel another economic puzzle.


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Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave