Global Econo-Fiscal Crisis…

Off the keyboard of John Ward

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Published on The Slog on January 18, 2015

The fiscal surrealism and economic mendacity of supranational globalism has abolished the right decision

Discuss this article at the Economics Table inside the Diner

…If nobody knows the truth, then nobody knows what to do. Now it’s your turn to have a go

I thought we might have a change this bright and sunny, freezing-cold windy Winter’s morning here in agrarian France. You see here – down among the agricultural equipment dealers, maize farmers and fruit orchards – most people are busy at the really important tasks in life: bringing up kids, feeding the soil, pruning trees, having a jolly good drink-up at the salle des fêtes, and evading tax. They don’t do derivatives, currency wars, open-market squeezing, spin, gold manipulation and Libor rates: they chop, they mow, they grow, they sow and they crop. It’s dead simple: plant, water, prune and collect.

The downside of all that is the failure of most conversations to move beyond rainfall, the Meteo, shooting things, and the price of tractor oil. But you do not need an IQ in four figures to work out why one decision is almost certainly better than another. The biggest, most life-changing drama they’ve had down here since the Second World War was the collapse in the tobacco market, and consequent switch from causing cancer to easing constipation. From the highest in the medical profession via the Mayor to the smallest orchard keeper, that was a bit of a no-brainer.

Compare and contrast this fundamentally boring but at times idyllic life with that of the benefit dependent, lab-rat, securities trader, marketing director, retired adman, politician, commodities consultant and business journalist archetypes out there trying to work out what to do “for the best” – given that even the best feels increasingly like the least appalling Hell on offer. Various of them could buy a house, sell a house, take money out of the bank, take it out of the markets and put it in the bank, buy gold, hold gold, pile into Bear notes, see eurozone QE as another bull to ride, get rid of the mortgage, extend the mortgage, take a casual job, take in a lodger, poison grandma, vote UKip, vote Tea Party, vote Pub Landlord, sell Sterling, sell euros, sell the Dollar, buy the Rouble, prepare for hyperinflation by hoarding tinned peas, or prepare for corrosive deflation by opening a market stall and selling tinned peas previously hoarded.

The vast majority of people do nothing, because both life and time are too short to decide whether one should be long in assets, or collecting cash ready for the big rates hike. When the Swiss Central Bank decoupled the CHF last week, something in excess of 40-50 million European citizens, businesses and bourse traders were caught out. All those Poles with Swissy mortgages, for instance, discovered overnight that they were going to fork out an awful lot more szlotys than previously advertised.

So the question I raise in order to ruin your digestion this morning is not to salute or fire at predictions on my part. Rather it is to present two things for real people around the world to propose and/or think about:

1. Do you know WTF is going on – and answers must be databased not insanely assertive.

2. Is this reality of permanently confused uncertainty a good or bad thing for greatest contentment of the greatest number?

I shall eschew the route of “pay attention – this is the real story”. The cacophony of crisis that follows is merely a guide to the stimulation of discussion and generation of serious interpretation.


While a big  me buys into the idea that Draghi, once he had the ECJ judgement firmly in his pocket (as opposed to up his sleeve) then contacted the Zurich Gnomes and told them to do “whatever it takes” (yawn) in order to leave his little bit of euro-printing for the easing of liquidity in the ezone – rather than for the fiscal-cleansing of those euros into CHFs.

But there are two bits I can’t get my brain around. First, investors don’t just go for income – they also follow rising valuations. The Swissy may well now be offering negative interest, but has already surged 35% since decoupling from the zero: I doubt very much if it has, as yet, dun surgin’. And second, I don’t accept Frances Coppola’s argument that the Swiss are massively outgunned here.

Hint: two rules in life. (a) never cross the Swiss, you’ll regret it; and (b) I cannot believe that such a ridiculously damaging CHF value (in export terms) will be tolerated for long inside the mountain cantons. Philanthropy is not a word in the normal lexicon of Swiss motives. My ex-wife is no doubt stockpiling Britain’s supplies of pre-surge Toblerone bars, but I can’t see this ‘deal’ holding.

Right now, Salvador Draghi looks like a very desperate man indeed. In short order, he has given the Bundesbank a bloody nose, and turned Swiss pockets upside down. Does he need to be more careful in his choice of enemies? Or does one take the view that Draghi wants a seat at the top table in a post-euro world: that he is, in fact, working for Wall Street’s Dollar – not the Frankfurt euro?

Discuss. Use both sides of the paper.


Here’s a very simple double-axis of important things I constructed yesterday while not feeling terribly well:


It is, as I promised, very simple. The tricky bit is trying to work out what will happen to the relationships between them, given that (a) the Rublenimbi doesn’t exist yet, (b) gold is rising but so is the Dollar (c) oil should continue to fall because demand is falling but (d) if the Saudis decide to call it a day and Putin presses on with his pressure on EU gas supplies, it could rally and start to go up again and (e) the central banks still need gold to be cheap, so surely they’ll pile in/doctor the trackers to stop it rising away to infinity while (f) if the Rublenimbi gets born, the Dollar should fall and gold rise as a safe haven but (g) as China holds huge mountains of Dollar debt, she wouldn’t want the Dollar to be damaged by the Rublenimbi.

I left the Swissy out because if you include its decoupling in this diagram, it requires one to have a 3D-printer for a brain.


Again, just simple thoughts:

The following are deflationary forces:

Rising currency valuation….depresses exports

Cheaper transport and heating costs

Sovereign debt bonds….bigger Sovereign debt begets bigger borrowing costs begets austerity

Cheaper borrowing costs ONCE DEFLATION HAS STARTED….because very quickly, people decide to hold off purchasing stuff – as next year, it’ll be cheaper. Reduced borrowing costs actually reduce borrowing in that context, because they further highlight worsening deflation – reducing consumer confidence. So once the slump gets a grip, people reduce all outgoings: a debt at even 2% is still a capital/interest sum to be paid each month.

Reduced workplace security….see above.

Reduced welfare…because that reduces demand at the lower end.

Poor export performance….because you need taxes to pay off deficits, and…

Higher taxation….because that too reduces demand across the board…which…

…stimulates buying of cheap imports (cf retail/elec growth foreign/chinese brands)

The UK coalition is doing all these things at the moment, yet claims to be keen on avoiding deflation. Um…

The following are inflationary forces:

Money printing

Falling  currency valuation….increases real import costs….especially when the Sovereign has a sizeable trade deficit and imports most of its food.

Government spending/investment increases based on money-printing (but not borrowing)

Wage rises

Rising interest rates (buy it now at a fixed rate)

Inflation itself – buy it now because next year it’ll cost more

Tax cuts at the lower end of the social scale….increases mass demand

The UK Coalition is adamant that it’s being jolly clever by avoiding all of these things. But there is an obvious argument here for doing the exact opposite. And bright sparks everywhere will have spotted that, in order to keep society vaguely glued together, reduce the time it takes to get to Manchester, and keep up the QE/OMT, the Government is being forced to borrow more and more….which, despite Giddy Frogspawn’s idiotic denials, is why the UK national debt continues to rise.

It has struck me several times over many months now that pretty much all of this last collection of Midas in Reverse is going on because there is a fundamental disconnect between what citizens need and bankers want. What does everyone else think?


It’s a funny thing missus, but whatever their political hue, very few Opposition Parties around the ‘democratic’ world really have any new answers to the confusion at all.

Why, for example, is Labour not saying, “F**k what the neoliberal pointy-heads say, this entire system is bollocks, and a combo of experience and instinct suggest Britain needs two things: massive investment in high-margin export manufacturing, and wholescale reflation. That is going to cost money, and so what we’re going to do is soak the rich, cut all taxes on the poor, and print the stuff willy-nilly without borrowing anything at all….which debt will be worth nothing at all by the time we’ve finished”?

Just forget 1923 for a minute and think: why not? Answers on a comment thread at this address.

Why in the US is the Republican Party not saying, “F**k this global policeman crap, let’s get back to entrepreurial isolation, farming subsidies and balancing the books: we don’t need anyone else if we can sell to ourselves, feed ourselves, and profitably export the excess”?

I’m not a Republican, but I’d vote for that. What about you?

Why in Japan is the anti-Abe axis not saying, “F**k the BoJ buying Buckingham Palace garden party bonds and Gruyere window shares, let’s give our consumers tax relief for buying more than 2000 yen of non-food stuff a week, and out-develop the US where they’re lazy: cars and really useful hitech”?

It sounds dangerous….but it is what made them winners in the first place.

Yours in continuing confusion and hapless search of the answers

Monsieur Le Slogfrog x


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