Lies, Lies, Lies

My aim in this blog has largely been to give my best and most rational perspective on the reality of the economic situation. I have tried (and I hope) mostly succeeded in avoiding emotive and partisan viewpoints, and have tried as far as possible to see the actions of politicians as misguided. Of late, that perspective has been slipping, for the UK, the US and also for Europe.

I think that the key turning point was the Darling budget, in which the forecasts were so optimistic as to be beyond any rational belief. The budget was built upon these forecasts, and I simply do not believe that either Darling or Brown might even begin to believe such willful nonsense. Under such circumstances, it looks very much like Brown and Darling are willing to risk severe damage to the UK economy in order to prop up their electoral chances.

There are even more worrying signs, and these are more of a broad concern which extends beyond the UK into the whole Western world. Regular readers will know that I do not buy the conspiracy theorists, or that there is a nascent New World Order. I am far more inclined to the view that incompetence and idiocy are greater drivers of events than hyper-intelligent Mr. Evils plotting world domination. Furthermore, many of the conspiracy theories are nothing more than anti-Semitic nonsense, and if you are regular reader you will have seen many examples where I have highlighted such nonsense.

As for the idea that the evil bankers might have engineered this mess as a route to world domination, it is simply a laughable and implausible joke. As the major banks teeter on the brink of insolvency, with only government between them and oblivion, any notion that this might be a conspiracy for world domination looks positively delusional.

Having said all of this, it is not to say that there is nothing wrong at all. There are some very worrying aspects to this financial crisis, and that includes the role of both the financial institutions and the governments of the Western world. I am still not clear, even at this stage, whether the actions of governments are a combination of misguided thinking and power corruption, or just plain power corruption. What I am ever more certain of is that there is an unholy alliance between the financial institutions, central banks and government. To call such an alliance a cabal, or other such names, would be to dignify a rag-tag of self-interest and 'clubbiness'. However, that economic policy has ceased to serve the electorate, and is increasingly serving the large financial institutions is increasingly clear.

I do accept that the initial bailouts of the financial system might have been a panicked reaction to an emerging crisis, in which the politicians might have groped for any solution to try to stave off disaster. In order to do so, they inevitably turned to the heads of the central banks for advice and guidance, and may not have realised that the central banks were far too cosy with the institutions which they were supposed to 'supervise'. As such, we can safely put the initial reactions to the economic crisis down to a misguided and panicked reaction, though this can not be certain.

A good perspective on the relationship between banks, government and central banks has been provided by a commentator. The former Chief Economist of the IMF, Simon Johnson, has written an excellent article entitled 'The Quiet Coup', and he also includes how academic economists have been seduced into the orbit of influence of the major financial institutions. He paints a picture of the to and fro between government and the banks, from academia to the banks. For example, he has this to say of the close world of banking and politics:

One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.

My intention is not to rework an article that expresses very well and very clearly the clubbiness of this world. I would suggest that you read the original article, which is long, but worth the read. Instead, what I would like to do is put this in some kind of context, to explain how the unholy alliance between the politicians, academia, the central banks and the financial giants is leading the West down a road to destruction.

In my last post on the state of the US economy I discussed the fact that there was something very, very wrong with the bailouts in principle. From the very first bailout, I have consistently opposed the actions. In particular, I pointed out in my earliest posts on the subject, that the first bailouts would be followed by further bailouts as the economy spiralled downwards. It was very clear from day one of the bailouts that the banks were in worse shape than anyone was admitting. At that early stage, I just thought that the politicians were misguided, that the central banks were misguided. It may indeed be true that this was the case, but I am not sure that we will know for certain. Perhaps they always knew that the situation was only going to get worse - much, much worse?

So what is the fundamental problem with the bailouts? Quite simply, as I pointed out in the early posts, the bailouts will, one way or another, be paid for by other businesses and ordinary tax payers. We were told, from those early days, that the financial system must be saved, or see the economy collapse. This is the justification for this unprecedented and gargantuan attempt to support these insolvent financial institutions.

Back in the early days, there was sufficient confusion and shock for this point of view to gain traction, and to allow for the bailouts to progress forwards. However, the scale and scope of the bailouts has continually been obscured, and what has never been widely apparent is just how much of the total economy is now directed towards saving these insolvent financial institutions. Quite simply, the entire Western economic system now appears to be pointed towards rescuing these insolvent institutions. It is, to say the least, the most shocking economic madness.

Another article, from the same magazine as the Simon Johnson article, details the astronomical figures for interventions by the Federal Reserve. A summary of these, as well as the bailouts from the government, can be found here. It is worth a long look. The author of the article has this to say:

Through a dozen programs introduced since the crisis began, the Fed will be on the hook for trillions of dollars in loans, bailouts, and asset purchases. The government expects to be repaid for most of these commitments, of course, with interest. But that’s the tricky part. Largely unencumbered by congressional meddling, the Fed has in most cases refused to reveal the beneficiaries of its largesse—or what assets they’ve used as collateral—lest panicky investors and depositors lose faith. As a result, outside the walls of the Eccles Building, almost no one knows how sound those loans really are.

In one very effective interactive graphic, the scale of the overall combined US government and Federal Reserve assistance becomes apparent. Again, spend some time on the chart. It is quite simply astounding.

If we then look at the UK, we see a similar pattern, but I have yet to see a source that pulls all of the costs together so neatly. From the Guardian, we have a graphic which shows the direct bailouts as £25 billion Northern Rock, £42 billion Bradford and Bingley, £37 billion HBOS/RBS/Lloyds, £22.5 billion more for RBS, and up to £10 billion for Lloyds. On top of this is the Credit Guarantee Scheme which is to:

make available new capital to UK banks and building societies to strengthen their resources, permitting them to restructure their finances, while maintaining their support for the real economy; and ensure that the banking system has the funds necessary to maintain lending in the medium term.

The scheme provides up to £250 billion worth of guarantees (the page linked to says 'at least £200 billion), and the users of the scheme are dominated by the 'usual suspects' such as RBS, but also includes Tesco Finance. We then have the Asset protection scheme, at £525 billion, with (you guessed it) RBS already having £325 billion insured under a scheme to insure risky assets, described by Vince Cable as:

“fraud at the taxpayer’s expense” and that it was weighted heavily in favour of the banks, who were being invited to dump their worst assets on the Treasury.

To these bailouts we need to add the Special Liquidity Scheme, 'to allow banks to swap temporarily their high quality mortgage-backed and other securities for UK Treasury Bills', which adds up to another £185 billion lent by February of this year (the Bank of England claims that there is no risk in the scheme - but why was it then necessary?). Finally there is the Asset Purchase Facility (£50 billion at the outset), which has subsequently morphed into the £150 billion quantitative easing scheme.

All told, these facilities add up to a massive government/central bank response to the insolvent UK banks, with many of the facilities creating massive potential liabilities. We are looking at a total that amounts to around £1 trillion of support for the banking system.

In both the US and the UK, the scale of this activity has seen a massive growth in the balance sheets of central banks, and a huge increase in their potential liabilities, as well as huge expansions in government debt.

It is at this point that we need to pause, take a long breath, and actually consider what it is that the banking system is for. In the many bailouts and rescues, we simply hear that the financial system must be saved, but do not hear what it is supposed to actually do. The standard line being trotted out is that the banks must be saved to get credit moving again. The question here is why it is that the limited numbers of banks that have received most of the various support measures are so important, and that is the question of what financial services are actually there for.

It is when we ask this simple question, this blindingly obvious question, that we can see the level of the fraud that is being done to the taxpayers and the damage to the wider economy. The financial system is indeed important in the provision of credit, in particular it is important in the provision of mortgages, investment in business and so forth. The core function, the real function of financial institutions, is to take the savings from person A, and make the money available to person B, or company C. As part of that process, the expectation is that the bank will lend the money with a level of care which is appropriate to the level of risk expected by the saver.

Here we have the problem. That is it. That is the only function of a bank/banking system in a healthy and well balanced economy.

As long as there are banks able to undertake this role, then the banking system is operating. In no way is any individual bank necessary for the underlying function of the financial system. Banks are intermediaries which should be there for the investment of savings, and provided that banks are able to function in this way, then the system is operating.

I am sure that this point of view will inspire objections (I look forward to the comments), such as the idea that the failure of the 'too big to fail' banks would have seen major bank runs, and a period of financial chaos. I do not, and have not, disputed this. The inevitable result of the failure of, for example RBS, would have been lines of people at every major financial institution, and a systemic failure. There would also have been social disorder and a period of great stress. However, the pain would have been short and sharp, and far less costly to the wider economy. It would have cost, but the bill would have been so much less than that which is now accumulating.

But here is the problem. We are now in a situation where our economic future is now being poured into the bottomless pits of financial institutions that are still insolvent, and which are going to need ever more support on an ongoing basis. The insolvent banks are quite literally eating up our present and future wealth, and threatening the very integrity of the Western economic structure. It is turning an economic crisis that turned into a financial crisis, and now risks turning these crises into a economic crisis of a magnitude that will threaten everything that the Western world has represented.

These are strong and dramatic assertions. However, as I have watched this crisis unfold, I have at various stages seen opportunities to turn the situation around. At every point in the crisis I have seen ever deeper digging of the hole in which we find ourselves. I now think that we are reaching the stage where the nature of the bailouts, the nature of the eventual cost to the economy, are so great that the very faith in systems that have supported Western democracy might be undermined.

In particular, the amount of support for the banking system is a ticking time bomb, and a time bomb because, quite simply, those that are governing us are lying about the costs to ordinary people - the cost for their support, and the denial of the risks that they incur with each round of bailouts.

I have come to this conclusion over several months. I have watched as insolvent banks are allowed to declare profits when they are insolvent through accounting tricks - supported by governments and central banks. All we have to do is see the massive support that has been poured into the banking system to see that any notion of profits must be a lie, but governments, central banks, the media, and even academics are all supporting this lie.

More recently, we have seen the so called bank stress tests in the United States. As one analyst identified (sorry, I can not find the link), even under optimistic projections, there is a massive amount of losses coming the way of the banks. Apparently they only need $75 billion of new capital, even though this is nowhere near enough to cover such losses. As the analyst pointed out, for the stress tests to be set at the right level, this would mean that the banks are currently massively over-capitalised - a complete absurdity. A brief review of the news stories (e.g. here) showed that the banks were negotiating on the levels of capital that were required of them. How can this be justified?

Quite simply, we are being lied to in a systemic way. The banking system is still insolvent, and ever more support will be needed to hide this reality. This is support at a cost that is creating ever greater strains on the rest of the economy - and which will eventually sink the rest of the economy to a low that we can not imagine.

All built upon lies, lies, lies.

As if this were not all bad enough, we have what has become a subject of great interest to this blog - the weasel worded quantitative easing, or printing of money by central banks. As I have pointed out endlessly, this is one of the most outrageous policies that is being undertaken by the central banks, and can only end in ruin for the economic well being of the countries undertaking it. The explanations for the policy all follow a line that says that it is to ease credit in the marketplace, but the problem is that - once started - it seems to rapidly move into the purchase of government debt. Whilst there are technical explanations trotted out for this, it seems more than coincidence that the central banks undertaking this are those who are issuing huge mountains of government debt.

If you doubt this, take a look at the debate for the European Central Bank's move to the policy, and you will find that it is the southern countries of Europe and Ireland, countries in economic freefall, true bubble economies, that have pushed through the policy against opposition by Germany. Whilst government debt is not on the list for purchase yet, viewing the countries that pushed the policy it can only be a matter of time.

As if this is not bad enough, that central banks are indirectly monetising government debt, there are rumours that governments are now buying their own debt. This is still unsubstantiated, but this from Ambrose Evans-Pritchard:

Traders already whisper that some governments are buying their own debt through proxies at bond auctions to keep up illusions – not to be confused with transparent buying by central banks under quantitative easing. This cannot continue for long.

Quite frankly, I suspect that the rumours are true. When discussing QE, this was one of the themes, or scenarios, that I considered. If true, at some point the truth will eventually emerge, and the consequences can only be dire.

Once again, we have lies, lies, lies.

And then there are the economic forecasts. We have the infamous Darling budget, a work of fiction, a new sunny forecast from the Bank of England (but nevertheless a suggestion of continuing extension of quantitative easing??), Bernanke and his optimism for recovery in consumer spending and the housing market and for the banking system. I hope that I showed in my recent review of the US economy that, quite simply, there is no prospect for any imminent recovery - at best a brief uptick or an inflationary 'recovery'.

Lies, lies, lies.

Above all else, we can see the lies working their way through the stockmarkets. If ever there were a suckers rally this is it. From one blogger, we have lists of 'insiders' buying and selling, with insiders selling hard (see here, here and here). Quite simply, this rally is built on lies, as no recovery is in sight. No doubt, those that will be hurt in the rally will be the outsiders, or ordinary people.

And the truth? In the UK, there are bloggers like myself, and a small number of commentators who question what is going on. For example, there is Fraser Nelson at the Spectator who, whilst a partisan commentator, is highlighting the 'fishiness' of quantitative easing. There is Liam Halligan at the Telegraph, who highlights in his most recent article that the end of QE will create a problem of how to sell bonds into a saturated market. There are more, but overall there are far too few commentators who are confronting what is going on, and questioning the underlying lies.

In the US, the situation is slightly better. Although there are legitimate critiques of Austrian economics, at least they are highlighting the nature of the lies. The Mises institute is pouring forth a steady stream of articles highlighting the madness of what is going on, with Ron Paul pulling that critique into practical political action (such as his campaign for an audit of the Federal Reserve). On top of this, there are the maverick bloggers, and the influence of people like Peter Schiff.

Most alarming of all, the greatest and most listened to cynicism is coming out of China - who see the QE policies of Western governments for what they are - harbingers of inflation. How desparate is it when it takes a totalitarian state to ram the truth home?

This is why I am writing an unusually angry post. I am sick of the lies that issuing forth, and I am sick and tired of the way in which the insiders appear to win, regardless of the cost to the rest of the economy. I have watched in horror as these bailouts have chewed up the wealth of the Western economies, both present and future wealth. I have watched in horror as governments have issued ever more debt to support their profligacy and support insolvent banks. I have watched in horror as central banks have commenced monetising government debts, and likely engineering inflationary defaults whilst risking eventual hyper-inflation.

Above all, it really does appear that governments and central banks are willing to sacrifice ever greater swathes of the economy to rescue incompetent and insolvent financial institutions. The only explanation that fits the facts is the grubby clubbiness of the system. It is not the great New World Order conspiracy, but rather the conjunction of interests between well placed individuals. Each, in their own way, moving forwards for their own personal gain. It is not the activity of great conspirators, but rather the collective movement of little men, of people who can think only of their personal gains. Money, vanity, power.

And the cost....

.....for there surely will be a cost.

That the economy will be left in tatters, I have no doubt.

That will mean unemployment, insolvency and hardship for many. But the cost will go much deeper than this. When the situation resolves to its eventual conclusion, and the real hardship starts, then the questions will start. The first and largest question to be asked will be to determine where our wealth went. Where did all of our wealth go?

At that point, as the lies are shown for what they are, there is the risk of the greatest cost of all. The risk is that people will start to question the legitimacy even of our form of government. The risk is that democracy is now in the firing line.

In the UK, a scandal is unfolding, a petty and mean scandal over how MPs have cheated their expense system. The status of politicians is at an all time low. If we look to the US on the other hand, the situation looks more benign. Obama is receiving widespread approval from those that he leads. In the case of Obama, I can see only the motive of personal vanity - that he believes his own mythology of being a saviour. However, in painting himself as a saviour, he risks the anger of dissillusionment when disaster comes in place of salvation. That is a dangerous thing.

When people are angry, when they feel disillusioned, and when they feel cheated - as they surely have been - that is when the crazies gain traction. The promises of brave new worlds, of new beginnings, the pied piper tune of 'if you just follow me...' This is the risk. I have alluded to this risk in a few early posts, and it has been part of my drive in writing this blog. I think we are now close to a point where such a risk is becoming real.

The extent of the manipulation, the cheating, the lies is now extending beyond what might be accepted. I think that people will become very, very angry.

An unhappy post.....

Note 1: I hope that this post does not offend regular readers. I have paused on hitting the publish button on this occasion. However, I think that this is worth saying. I believe that now might be the time for anger, as a way of possibly forestalling a greater anger later. As I wrote this post, I kept in mind that one of the commentators on the blog, Steve Tierney, is a politician. I think that even those that disagree with Steve would accept that he is a sincere and decent person. As such, I have some optimism - that perhaps there is an opportunity for a more decent and honest politics. My underlying worry is that perhaps there are too few of such people.

Note 2: A big thanks for the links against my last post, which led me to some articles that helped me pull this post together. As ever, very good comments, and my apologies for my lack of replies (as this post took a while to put together).

Financial Conspiracy and the New World Order - The Truth

I believe that I may have accidentally unearthed the secret behind the New World Order conspiracy theory. Regular readers will know that I posted on this subject some weeks back, and that I expressed a cynical view towards the conspiracy theories. As part of the post, I requested that people send me evidence of the conspiracy.

To date I have been sent a link to a video of a white supremacist bouncing a coin an 'Amero' coin on a table whilst claiming that $US billions of the coins were being shipped to China (why ship coins - why not notes?). A second post recommended a Canadian journalist who was writing about the conspiracy. Before reading anything, I checked his details in Wikipedia:

'More recently Fulford has stated that the US have been able to alter the climate, and using high power microwave energy induce earth quakes including the Asian Tsunami, Japanese and Chinese quakes. The program he refers to is known as HAARP High Frequency Active Auroral Research Program'

I read no further. So what is the secret that underlies the New World Order conspiracy theories?

The secret is actually revealed in the traffic statistics for this website. I have found that my original post on the subject is now the page that, by far, generates the most traffic from Google. No doubt this page will do the same, as it includes the words 'New World Order' and 'Financial Conspiracy.' In other words, there is a massive appetite for these conspiracy theories out there, and anyone who writes about it will receive traffic in return for their efforts. As a result, anyone seeking attention, wanting to boost their traffic, make money from writing a book, will do well from conspiracy theory.

Furthermore, it is much easier to generate content based upon allusions to conspiracy, than to do the hard work of actually trying to understand what is really going on. If you want instant fame, want to get attention, then a good conspiracy theory offers an excellent shortcut.

The real worry in the ease with which these conspiracy theories spread is that they distract people from looking at the reality of the situation. An even greater worry is that there are, in fact, real conspiracies out there. History shows us that occasionally people do conspire, and the problem with this ever expanding tide of conspiracy theory is that, when a real conspiracy does occur, nobody will believe it. Each of these faux conspiracies will undermine the credibility of individuals when they actually reveal a real conspiracy.

Enough on this subject. Unless somebody posts something which offers credible evidence, I will leave the subject alone. For the conspiracy theorists who land on this page, you may want to read here for a perfectly rational explanation of the financial crisis, though I offer the link more out of hope than expectation that it will be read. After all, it contains no men in smoke filled rooms conspiring.....

On a slightly related subject, I noted that Gordon Brown is making a trip to the Middle East. I say that this is a related subject as I will speculate that his public motive might be questioned, which is that he is requesting Middle Eastern countries to step in to help finance a recovery in general, and to step in with finance for UK business. It does make me wonder whether the underlying reason for the trip is to shore up lending to the UK government. For regular readers of the blog, they will know that I am suggesting that the UK government (and likely the US government) are probably going to have a severe crisis in a couple of months (effectively going bankrupt). I may be reading too much into Gordon Brown's trip, but it would fit the scenario that I have suggested. It may be that he sees the looming financing crisis, and is seeking funding for the government. However, this is only speculation.

Note 1: Thank you Kecsse for the comment and link.

Note 2: Another thank you for some interesting comments from Death To Bubble Addicts

Note 3: An anonymous poster has asked whether hyperinflation might be the outcome of the current situation. This is an interesting point as many commentators are suggesting a deflationary spiral. However, if there is a government financial crisis, then there is a real possibility that they will try to print more money as the only way of financing their activities, in which case hyperinflation will be the result.

Note 4: I have had a comment from an anonymous poster who asks for comments on the following options:

a. borrow more money from the Asians and Arabs and keep the party rolling ?
whats wrong with debt ? how much debt is too much debt ?
UK debt much lower than Italys ..but they seem to plod along just fine ?
what level of debt is sustainable ?
b. sell some family silver to the above gentleman and keep the party rolling ?
c. governments print some more money ..and just hand it out to the the desrving and needy(ie. senior bankers)
d. cut our cloth to match our pockets..shrink our lifestyles and shrink the state

Option a: The simple answer is that you should only borrow what you can expect to pay back. My problem with the borrowing is that it is going into spending, not investment. There is no sector of the economy that currently offers any prospect of growth in real wealth generating capacity to allow repayment of the debt. In other words, there is no way that the debts that are being generated now can be paid back. In such a situation, it is possible to continue borrowing for only so long before you are effectively bankrupted.

Option b: I am not sure what family silver there is. If you mean selling UK companies, this is already happening with, for example, Baclays being financed by Middle Eastern money which, in the long term, will mean more companies will be at least partly owned by non-UK investors. This is not something new, but may well accelerate.

In the long term, foreign ownership often translates into loss of wealth for the destination country. Investment means expecting a return greater than the capital invested, which quite literally means that outside investors will, in the medium to long term, take out more than they put in. Were the investment going into wealth generating industry (e.g. exporters), then there would be a gain for both sides, but if the investment goes into, for example, retail then there is going to be a loss for the UK. This is a complex subject, which can not be summarised, but I have written more about it in 'A Funny View of Wealth.'

Option C: I have already commented on this, but the impacts of hyperinflation are pretty nasty. A quick look at the parlous state of Zimbabwe is a salutary lesson in why this is a bad idea.

Option D: This is the only realistic answer for the medium and long term. At some point the UK must learn to live within its capacity for wealth generation. The first problem is that the current level of spending by the state is hobbling the capacity of companies to compete with the emerging economies, and makes the cost of doing business in the UK too high. The second problem is that the state is only able to finance the current spending levels through borrowing. This is unsustainable, and the borrowing and spending is artificially propping up the economy, distorting the economy in the process, and distracting from the need to move to real wealth generation. Individuals will also need to learn to live within their means, but an economics blog is not needed to make this point.

Note 5: Thank you to all of the other commentators and the positive feedback. I am afraid that I have had to reduce the number of posts, due to other commitments, but hope to have more time in a couple of weeks. However, if there are any major situation changing events, I will try to post more.

Economic Crisis - Conspiracy and the New World Order?

I have had some comments that have suggested that the crisis is all a big conspiracy for a new world order. As regular readers will be aware, I am more inclined towards the principle of foolishness and stupidity. I followed a link to the Daily Kos, and had a quick look through an article to get a feel for a feel of how these theories are being presented. I remain unconvinced that this is all the result of a plot, but do have concerns at the power that might be taken by government resultant from nationalisations, and the cosying up of world leaders to 'fix' the problems. The latter brings to mind a quote from Adam Smith:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." (1)

Whilst not entirely apt, I think that the idea carries over to this well. This leads neatly into the current state of the panic that is driving countries to act in unison. There is this from the IMF Chief Economist, reported in the Times:

'“Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown.” Countries would need to take further measures, including interest rate cuts and steps to bolster the banks. '

And the result of this panic can be found in another Times article:

'THE government will launch the biggest rescue of Britain’s high-street banks tomorrow when the UK’s four biggest institutions ask for a £35 billion financial lifeline. The unprecedented move will make the government the biggest shareholder in at least two banks'

As the conspiracy theorists have correctly identified, there is the G7 agreement that there will coordinated action, and it is looking ever more likely that the action of the UK government will be a template for the actions of other governments. I will not rehash all the latest news on the crisis from around the world, as I think the IMF Chief Economist has neatly summarised the situation, and the rest is a matter of detail. Meanwhile, one of the interesting outcomes is that several commentators have noted that this crisis and the international grandstanding have been helpful for Gordon Brown. In the US, the lame duck presidency of Gerorge Bush is now probably beyond any such boost.

The question is whether any of this supports the idea that all of this was a conspiracy? If we view the records of those who would have to be 'in' on the conspiracy the records do not inspire much confidence in their ability to manage something so complex (and fiendish?). However, a more valid point to make is that, if we trace the underlying causes of the current crisis, as I have done on this blog (see here for an introduction) it is apparent that nobody in their right mind would have engineered this crisis. In particular, in the case of the Western world, they would have had to not only have planned the financial crisis, but also accepted as a price the loss of power and long term economic decline for the West. This is not a scenario that would appeal to conspirators, who I am guessing would seek to enhance their power overall. After all, far better to have control over an uber-powerful state than a diminished one. If they were that 'cunning' and powerful, I am sure they would have engineered a far better outcome.

Whilst it is always very exciting to imagine smoke filled rooms (think of the X-Files), filled with old guys plotting an planning their evil schemes, there really is no need for such a scenario. Stupidity, wishful thinking, herd thinking, and all of the other foibles and weaknesses to which humans are so prone are more than sufficient to explain the origins of this crisis. For the conspiracy theorists out there, sorry to disappoint, and I am sure that I will lose readers for saying this, but there has been no conspiracy. The only exception in all of this may well be China, which I believe has deliberately sought to gain economic power through whatever means, fair or foul (see post here which discusses the subject).

On the other hand I do believe that the new concentrations of power going to the state are a matter for genuine concern, as is the idea of world leaders and central bankers trying to co-ordinate the world economy. For the former, it will certainly give the state too much power, and for the latter, it should be remembered that these are largely the people that presided over the build up to this mess. However, all of the grand plans for the nationalisation of financial systems rest on the idea that the Western economies are going to be able to continue to borrow their way out of trouble, and I have often expressed my reservations about how long this can continue. There have been stories circulating in the news of other organisations going cap in hand to governments for bailouts, and it is impossible to see how governments can, through borrowing, support this level of damage.

Overall, my largest concern is that government intervention in the markets is a large part of the cause of this crisis. In regulating the banks, they allowed everyone to become complacent about the operations of the banks. For those who are not regular readers, and have been hearing endlessly about lax regulation, you will need to read my post here. Essentially, in trying to regulate away the risk of bank failure, governments have set up a system in which failure is likely to be catastrophic. An occasional bank failure serves to remind us all that the banking system needs careful attention. On top of this the poor measures of GDP, the misuse of interest rates, and many other factors suggest that governments are a large part of the problem (I discuss some of these problems here)

As such, based on the record of governments, my worry has consistently been that governments will do more harm than good, and governments acting in concert is therefore an even more worrying development.

I think that I will leave it there for the moment. It will be interesting to see what events the start of the week will bring. How will the concerted action be enacted, and will it create a momentary calm, or will the storm continue unabated? If it is calm, it will simply be the eye of the hurricane, and the full force of the storm will resume in time.....

(1) Adam Smith., The Wealth of Nations, Book V, Chapter I, Part III, Article III

As a note, have others seen the conspiracy theory predicting the 'Amero' (I think) as a replacement for the $US. I have seen it referenced a couple of times, but would like to get a good reference on what it is all about. It is more than likely as unfounded as the other conspiracy theories, but I try to keep an open mind. As such, if you have one, I would appreciate you posting a link in the comments.

Note 2: For some reason something went wrong with the formatting on the blog - thus the changes. For a little while, about an hour or two, the home page was not showing correctly. Apologies if you found it with this problem.....

Note 3: I have had a long comment from an anonymous poster (see below). He apologises for a long comment. However, there is no need to apologise as I welcome all comments. Another poster comments that they had problem leaving a comment. I am not sure why this would be the case, but my editorial policy on comments are that they are all posted, provided that they do not use abusive language or spam the blog. To date (happily) I have not encountered either of these problems, so have published all comments. As such, I am not sure what prevented the publishing of the first post from the commentator, but would assure those who wish to comment and disagree with me that their comments will be published (within the limitations I have just mentioned). In the meantime (for the commentator who had a problem) please accept my apologies that you had a problem in getting your comment published, and I hope that you will accept my assurance that this was not due to my editing it out. As a final note, one commentator posted a link which was somehow chopped. The link is as below:

http://disclose.tv/action/viewvideo/9899/NAU__Hal_Turner_Shows_New_AMERO_Currency/

Note 4: Yet more glitches here. I have just noted that the home page is showing zero comments on the post, despite there being several comments. However, if you click on the comments link below, the comments are there. I have also checked in other parts of the blog, and the comments are fine. Please accept my apologies for all of these problems, and I will try to work out what is going on. I am hoping that the problems are just with this post (though I can see no reason why this would be the case).

Note 5: I have viewed the link provided on the Amero, and dug around a little bit, including viewing the blog of Hal Turner. The first point of note is that the only evidence provided is a coin which he claims is the Amero (having a coin made I would guess is not very difficult). No other evidence. The next point is that he is a white supremecist, and that gives me cause to doubt his motivations. I followed some of the links, and none of it was backed by evidence. However, the one thing that I believe is correct is that there is likely to be a $US collapse, but that is a different thing from saying that the 'Amero conspiracy' is real, or something that has been planned. In short, I have seen nothing to persuade me of a plot. As such, I invite any hard evidence (leaked documents verified as genuine by a reputable source etc.) to support the Amero conspiracy.