Financial Armageddon – the end of money?

Financial Armageddon – why it won’t ever happen and why it has already happened:

First, we need to understand a bit about quantum theory. An electron may certainly be in two places at the same time; which will depend on the observer alone…Are you with me? Anyway that is how it is and if something cannot be proved to be untrue then it may be true; in fact under certain circumstances it must be so. So where are we going with this? Well we are about to go down the rabbit hole and into the murky world of central banks and commercial bonds. In short we will take leave of ordinary common sense and enter another dimension where: “if you want to get somewhere else you will have to run twice as fast as that” (credits to Lewis Carol and Alice and Wonderland, Mark Carney and Mario Droghi, et al).

On 6th September 2016 the FT reported that the French pharmaceutical giant, Sanofi, sold EURO 1 billion of 3 ½ year debt (IOUs) at a yield of minus 0.05%. Not to be completely left behind the German consumer goods group, Henkel, sold EURO 500 million of 2 ½ year debt (IOUs) also at a yield to maturity of minus 0.05%. However, with the European Central Bank apparently offering commercial depositors minus 0.4% p.a. these bonds must surely be a bargain in a world where you lend to get back less than you started with…

So when did we cross the rubicon of financial insanity? This happened on 3rd October 2016. I know that this is correct because the Sanofi and Henkel bonds might just have been one offs and central banks negative interest rates a temporary aberration, and what is more it was predicted that this would be the date of the financial armageddon…In fact it matters not the exact time when it happened as this is impossible to ascertain. So what happens now?

Scenario one: at a secret meeting of the central bankers (dressed in bunny rabbit outfits) held at the Hilton Hotel in Pyongyang, DPRK a meeting is held and it has been decided to attempt to give money value again. Interest rates rise!!! The effects are that the above mentioned bonds go deeper into negative territory, not because they won’t be repaid (that is not known yet) but because money has ‘value’ again…and being an IOU risk is factored into it. Overextended property speculators go bust, properly prices fall (dramatically in places like central London), overleveraged and weak companies fail, the over production and supply of goods decreases, jobs are lost, banks fail and cannot be bailed out this time and there is a recession, a modest (or more likely a high level of inflation due to all the money that has been printed)… Governments try to control withdrawals of cash, a black market economy gains momentum and there is a full blown 1930s style depression.

Scenario two: the central bankers stay at home and wait for the first of them to put up interest rates but no one does… The effects are that the above mentioned bonds go deeper into negative territory, not because they won’t be repaid (that is not known yet) but because there is a very real risk that they will not be repaid….Overextended property speculators go bust, due to their commercial tenants going out of business and renter moving out of town and living with extended family,  properly prices fall (dramatically in places like central London), overleveraged and weak companies fail, the over production and supply of goods decreases as companies fail, jobs are lost, banks fail and cannot be bailed and there is a recession, a high level of inflation results due to all the money that has been printed… Governments try to control withdrawals of cash, a black market economy gains momentum and there is a full blown 1930s style depression but there is still money, it is just worth a lot less.

Scenario number three: the central bankers stay at home and ‘wisely’ do nothing, they have another plan; they will stop the running of time altogether to allow time for the creation of a perpetual money making machine (PMMM). A secret research laboratory is set up to this end jointly by the Bank of Japan, The European Central Bank and the Bank of England, located 2 miles under the Arizona desert and is now hard at work…

Of course an altogether different scenario is possible, but it is unclear at present what this might be, and the likelihood of one of the above scenarios occurring, at least the first two, has increased…at the very least things will and must change and that change can in the long run be for the better.

The monopolisation of money

“Do not pass go, do not collect £200…” Monopoly it seems is somewhat like real life, the money is only worth something if everyone’s playing the game and of course if there are still properties left on the board to buy…Moreover, if you own Mayfair and Park Lane you may have few friends but will probably win the game by bankrupting everyone else, that’s what’s it’s about after all, isn’t it?… Let’s read that again, “DO NOT pass go, DO NOT collect £200”, well in the low interest, money printing era each year (read round of the board) your money is worth less, in effect you are paying £10 each time you pass GO, moreover, the banker, let’s call him Carl Marney, is printing more money all the time to give to Rakman Spiv (he’s the one who has Mayfair and Park Lane) by way of cheap loans so that he can put up more hotels and increase the rents. The third player, Paul Workman, used to hire a bit of pavement next to Park Lane so that he could run his shoe shining business, one of his customers was Carl Marney, but he booked in at the Mayfair hotel last week (a mistake you understand, it was all done on line!) and has now gone bankrupt. There are others like Paul still struggling round the board, those surviving have taken to not paying taxes, keeping their cash away from the bank and staying at friends’ hotels rent free, they have started using a loaded dice to avoid Rakman, the latter is starting to worry as no one stays at his hotel, no one rents his pavement and no one will shine his shoes. But hey, the other Pauls are thinking if the system’s fixed what’s wrong with cheating?… Rumours are circulating that Kelemy Jorbin will be elected prime minster and will confiscate all the money and redistribute it, no one will be allowed to leave the room, at least not with more than £25 (it only buys $20 these days anyway). 1970s memorabilia is back in fashion…

Welcome to the age of negative interest rates and quantitative easing (the Bank of England will have you believe it is a scheme for buying Government Debt from its existing balance sheet). The terminology may be confusing but essentially HM Government is cancelling its own debt and giving an equivalent amount of new money to banks and insurance companies so that they can buy / finance more real estate and stock market share purchases…This is what the economy needs surely?… higher asset values, a low exchange rate and a general population that no longer trusts the financial system…At present there is still a difference between ‘real’ ‘sovereign’ money and the monopoly version as the former has the Queen’s head on it and the chief cashier’s signed statement: “ I promise to pay the bearer…”, but what exactly is that promise now worth?

The mad hatter says in Alice and Wonderland: “If you want to get somewhere else you will have to run twice as fast as that.” However, perhaps it should be – If you want to support the economy you will need to print new money twice as fast as that…

About SELF

The purpose of the forum is to encourage the discussion of social, economic and legal issues relevant to the UK. In particular I wish to encourage exploration of the connectivity between these fields and viewpoints, how they intermesh and create each other.

Society: social conventions, starting with the sanctity of family, community traditions and religious practice go towards what make a society what it is, in 2016 Britain, a multi-cultural society. The Economy: in its widest sense encompasses money, central bank policy; commerce, trade associations such as the EU; and fiscal policies imposed by local and central government. The Rule of Law: takes in Parliamentary legislation, the Court system, civil and criminal, as well as law enforcement.

The objective is to encourage people to question ‘accepted wisdom’ and convention and the belief that the mainstream media view of the World presents an accurate view of the World. Just as a gold fish in a bowl might not know why he is there and why when a mirror is placed next to his bowl there appears another identical fish. In the same way we are born into a particular era, a culture and time that results in a particular mind set. It is not that we accept the system, we are the system and we cannot easily understand how it came about. Even if we can find some history books or have time to listen to our elders or have lived overseas for some years we are liable to accept that because the other gold fish in the bowl with us are doing the same thing as us that all must be well and normal and just how it is. The aim is to empower the reader and participant and demonstrate that the goldfish bowl is an illusion; that we have power to direct our destiny in the wider sense, we are society, we are the economy; we are the law makers and enforcers; like a million ants building an ever higher anthill, but for what?

The site will make available information that is out there but not in readily digestible form; pose awkward questions as to why things are as they are, if things should be as they are, and how things might be changed for the better. My motivations are many. Perhaps the catalyst has been the fiasco of the Brexit referendum and the realisation that the majority of our so called ‘leaders’ (politicians, civil servants, economists, heads of industry, religious leaders) are, “ in the age of spin”, a mirror reflection of the society’s wish for short term gain, staying in the job, hitting sales targets;  secondly, the lack of critical thinking by today’s mainstream journalists who need to satisfy the media moguls who ‘own’ them; thirdly that ‘elite’ of society are often experts in the art of knowing how things work in a very narrow field only. This lack of wide field vision and critical thinking skills is a trait of today’s society, which like a hamster on a wheel runs ever faster trying to catch up with itself, knowing not where it is going or how to get there, only that the faster it runs the more distant seems the destination. I will aim to drag into the light of day what is going on and provoke free thinking, understanding and finally action by posing the right questions. With education comes knowledge, with understanding comes reflection, and with reflection the ability to act rationally for the wider good.

More to come soon…