Wednesday, 13 July 2011

It’ll be a cold day in the treasury before they pay up

There was a classic Monty Python clip (The Money Programme) in which Eric Idle sang, “it is money that makes the world go around”. However if we are to believe many economic commentators it rather looks as if money might be about to cause the world to (at least figuratively) stop turning around.

With what is happening in Europe at the moment, and even more disturbingly, in the USA, it’s enough to make your head spin faster than a party hack.

I don’t claim to know much about money or economics as anyone who has seen my bank balance could readily deduce; however I have heard one or two things lately that put much of this stuff into some kind of context for me anyway.

Just recently a mate of mine put me on to a bloke whose name I have unfortunately forgotten, but the point was he had made a documentary about the Fed. For those not familiar with the term, this is the US Federal Reserve Bank, which in case you don’t know, is unlike any bank you have ever had a loan from.

The documentary was based around a book by G. Edward Griffin (don’t you just love the way the Americans put a first initial and use their second name – not?). The book is called The Creature From Jekyll Island and is about how the Fed was created. I have yet to read the book as it is not in any of the Tauranga libraries, however I have managed to see extracts from it and they make very disturbing reading.

For those who don’t know the history, the short version is this; the Fed was created by a group of private bankers with the backing of the US government. It determines US monetary policy and quite literally prints the money to fund it. This last bit is particularly important to understand, because what these guys are doing is magicking up money from nowhere for the US government to borrow and spend. Because this money has been invented rather than earned it actually has no true value (think Emperors and clothing). Thus the US has been funding a growing deficit with worthless bits of paper that purport to be of some value since the 1920s.

Now just to make things even more interesting the American Government is currently locked in a battle over spending cuts and deficit size. The Republicans want smaller government and for Obama to cut health care and social security. It’s a replay of our own (for all intents and purposes) two party system with Obama wanting to tax the higher earners instead. The main difference being that stakes are much higher than over here and the ripples from the bow-wave are much bigger. The lobbyists are also much bigger and richer and one such gentleman (if he is such) is a man called Grover Norquist who, according to The Washington Post, has successfully lobbied 41 senators and 236 representatives to sign a pledge opposing ANY tax increases.

This could all be very amusing were it not for the fact we're told that if the USA doesn’t get this sorted out by August 2, they will be in default over their borrowings. Further wailing and gnashing of teeth around the world is telling us that if the US economy falls over it will be a variation on that great Pat Metheny album As Falls Washington, So Falls The Rest Of The World (sorry about that Pat).

Currently the American national debt figure stands at US$14.3 trillion – that’s 14 followed by a comma and 3 followed by 11 zeroes! Old Backtrack wants to raise the debt ceiling (I would have thought it had already been blown to smithereens); and some of his supporters have proposed a scheme where it would be increased by a mere US$2.5 trillion in three instalments. Scary, huh?

But to return to my original point; what is all the bickering about? The money will come from the Fed and as we know that is illusory at best and possibly crooked at worst. And who says it will be the end of the world as we know it, (apart from Michael Stipe that is)? I realise that the Americans are not the only ones facing a so-called budget crisis; Ireland, Spain and Greece have all had their problems and Italy is the latest to begin wearing out the seat of its pants.

But there is another nation that has already hit that particular wall and they took the route few dare to travel. They said ‘up yours’ (or in their case “upp kveôja) and simply defaulted on their debt.  The Third World War did not erupt and this tiny nation is still supporting intelligent life, so maybe they are the only ones with a clear vision of what a crock most of this is. If you don’t buy into shit then perhaps you won’t find yourself up to your neck in the stuff.

That nation is Iceland. Go Íslendingar!

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