Britannia Radio

We Are, With Our Consent, Badly Governed

From the desk of George Handlery on Fri, 2011-04-15 08:18

Recent times have been bountifully producing noteworthy and revealing items that are, at first glance, merely a “small matter”. A number of these deserve to be classified as “absurd”. The idiocy, the lies and the confusion-generated tidbits illustrate the point that serious matters can be as entertaining as they are harmful. Furthermore, such items are proof that some unintended jokes are serious politics. As such, some of these gems deserve to be shared.

1. You have probably known that there is an oxymoronic Gaddafi Human Rights Prize. Probably everybody can be a candidate. The list starts with the dentist that drills without anesthetic. Turkey’s Erdogan has the award. The price had other prominent, and by official proclamation, respected recipients. One of these gadfly leftist celebrities was supposed to open the famous yearly musical festival program of Salzburg. To avoid a scandal and shaken by the recent developments in Libya, the organizers have disinvited Professor Ziegler. He claims to be “surprised”. Actually, “surprising” is only that this shady character has been invited in the first place. Meanwhile, the shunned preacher of virtue does not understand the “why”. His explanatory phrase is “witch hunt.” Explaining in such cases is futile.

2. Talking about awards and prizes makes one think of Hugo Chavez. Traveling in Latin America to sell his “Bolivarian Alliance” has led to a gem. In Argentina, Venezuela’s Leader has purchased for a princely sum food stuffs that, without Chavez’ Socialism, would not have been a needed import. The reward has been immediate. After all, the customer is king, especially if the man with the open purse happens to be President somewhere. A university quickly awarded the indigenous revolutionary with a prize. Incredibly, it appreciatively recognized a Chavez achievement that in reality rates high among the negatives of political art. Here the innocent might think of the talent to ruin whatever used to function in Venezuela. Wrong. The “medal” has been given for the effort to give people “without a voice” access to the means of “communication”. In doing so, he is said to have overcame the media monopole of the “dominant classes”. (Actually, the praise belongs to the people that have to endure Chavez’ long Castro-line monologues.) An impious Argentinean paper reacted by mentioning that 1700 Venezuelan cases involving the violation of the freedom of the press are on record. And why bother with the minor flyspeck on the picture of perfection that involves the closing of three TV stations taking 36 radio stations off the air? We suspect that never has the supposed struggle for transparency and openness led to more closures than in this case. The day will come when Argentina will make great efforts to forget the kowtow performed in her name.

3. Europe, that is the Euro-zone, has undertaken to bail out Portugal with about 80 billion Euros. The formulation and the effort are thickly wrapped in what amounts to an opaque farce. The terms are out of the ordinary. On the free market, cases like Portugal or Greece, can only find weary investors at high rates. These terms reflect the high risks incurred by buying such papers. These are so elevated that the involved countries can ill afford them. Therefore, the loans extended by the €-zone comes from states. These are themselves in debt. Therefore, they need to borrow at rates that reflect their own ability to repay debts in order to be enabled to hand out credits at a discount. That implies reduced rates given by the community under terms at which no individual would commit his own money. So, the question is whose money is being “invested”. If you live in Europe, the answer is short, simple and devastating. “Yours” as in “your money”, is the term. The funds are taken from what would be in the case of commercial banks their untouchable legally required reserves. The difference is that in this case the lenders happen to be states. The low rates for sovereign debt bonds by which individual investors are lured at low interest rates reflect the soundness of allegedly credit worthy states. Only that under the terms of the bailout, by repackaging bad debts risks are covered that, if perceived by the market, demand high returns. Through the trick, the investment ceases to be convincingly safe. Well, unless, of course, you like to take the magicians’ word for it.

The long-term consequence of the bailout might be that the debtors will remain debtors and the “investors” will ultimately discover that they are holding outwardly “safe” and “guaranteed” securities whose real content is worth much less than pretended. The operation reminds one of another one. Can you remember that insolvent credit takers were given loans to purchase real estate? Can you recall how these putrid papers were then re-packaged? Through that, they appeared to be sound investments. That assumption blinded the fools that were induced to pay for them an amount that they were not worth. The new story is the old story. Just substitute for “real estate and mortgages” the term “sovereign debt”.

Before the contrary is not proven, these transactions seem unsuited to heal economically limping states. If you peel some layers of illusions and fog away, you find that the indebtedness stays around. What the rescue does is that it repackages sovereign failure like bad real estate loans had been. Thereafter, the upshot is passed on like that famous hot potato to the next idiot standing further down in the queue. What such tricks achieve is to impair still sound economies, individual savers and retirement funds by burdening them with unrecoverable obligations. For the eye, the product offered is metallically sound on the outside. Approach the object from the inside and you discover a bubble. As an individual, you would never go for a deal like that. Your government, acting in your name, does.

4. The generalization that sound economies are unsoundly supporting profligate ones, which have no hope of recovering, makes one think of Germany. That guilt-ridden country’s tendency is to atone by tolerating measures that are tagged to serve the interest of some “community”. The case reminds one of the long tradition of some proximity to Socialism shared by most of the political groupings there. That idea prompts one to speculate that the collapse of the “German Democratic Republic” should not be attributed to the defunct Soviet system alone. The folding of Moscow’s German affiliate is a consequence of socialist collectivism that, instinctively, sees its mission in the separation of performance from rewards. This fundamental component of the GDR system has survived the Soviet Block. The tradition continues to thrive in numerous other societies that do not even realize what bacteria is ailing them.

5. The above items remind your correspondent of an Irish professor of his. Having kissed the Blarney Stone, he once blurted out “stating the obvious is difficult and useful because it serves the cause of clarity”. Taking money covered by the sovereign debt of a first rate debtor and then using those funds to back up the obligations of bad debtors is shocking. The case just sketched demonstrates not only something that is unpleasant but also forces one to admit it as it amounts to be the Professor’s “obvious”. Folks, the obvious sad concluding fact is that we are badly governed. When will be admitting that? And when will our majorities, under the impact of their self-imposed misfortune, act upon the insight? That is the question!