Economic Collapse: Golem XIV summarises the situation again

On this historic day, Manuscripts Don't Burn would like to present Guardian commentator GolemXIV's excellent summary of the UK government's latest bailout plan. Thank you GolemXIV! The lunatics are indeed running the asylum; we see dark days of protest and bloodshed ahead.

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This could be the most expensive suicide note in history!

This plan is exchanging a possible run on the banks with a possible run on the whole country, its tax base, and its currency.

Let's be clear about what we are insuring. We are going to insure stuff that the insurance world refuses to insure. How great is that. Insurers such as AIG did insure this stuff. Only problem is AIG itself is bankrupt. Bailed out three times already for over $100B and still dropping like a stone.

We are going to insure securities and derivatives based on Mortgage and corporate debts. Very many, if not most, originated in the US. By definition all these debts are close to worthless. And yet we are going to guarantee to pay the morons who bought the assets - or derivatives based on the value of those assets - either the full price tey paid or something near to it.

Which raises the question - To what level are we insuring them? If it's up to the full face value then as a nation this is a suicide note. I can only hope the insurance is based on a much lower valuation of but shares. But my guess is that even if there is a lower valuation it will still be suicidally high. Only the higher value will please the 'markets'. AKA the people who created the mess in the first place.

Why are they doing this? The reasoning is that the banks are going to continue to take massive losses. They all know this. The governments don't want to have to pay huge lumps of cash to cover these losses before they have to. Cash injections are large lumps. Insurance is only paid as and when each 'asset' has to come to the market and be declare formally dead. So insuring means we don't have to make one vast lump payment.

The down side however, is that our potential losses are potentially unlimited.

I know Darling says they will look at the assets and declare a limit. Yeah fine. But in practical terms the insurance plan will only 'restore confidence' if it is seen to work over the long term going forward. Which means even if they declare a limit, when we reach that limit they will be force do t extend it. For if they don't then all the money spent up to that point will have been wasted. SO the government will tell us we can't waste all the money spent so far, we must 'see it through'.

I know they banks will 'pay' us a premium. But that premium will be paid with the cash we gave them 6 months ago. So they won't be paying anything.

We don't have any of the money we are pledging. And what is more we are not going to be able to borrow it. So we are going to print.

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The Great Depression Phase 2 - The Crash Quickens Pace

This morning, the British government announced its plans to insure all the crap debt the UK banking system has taken upon itself, effectively bankrupting the country. This is a historic moment: rather than a rapid, precipitous collapse, and a possible rebuilding in a 2-5 year timeframe, resulting in a new economic status quo where the reckless fat cats have gone to the wall in accordance with their beloved "market forces", our supine government has once again shown its loyalty is to big business, and not to the British electorate. It has elected to give unlimited guarantees to the debt-ridden financial sector, thereby turning a 2-5 recession into a Depression which will last a minimum of 10 years. The last time the UK took on a debt liability of this size was the Second World War: it took 50 years to pay that off. This at least is what we are looking at again.

Manuscripts Don't Burn has said this again and again: the biggest wealth transfer in history, from poor to rich, continues apace, reversing all the social egalitarian successes of the post-war era. When the dust settles, we will be back in 1910, with most of the population living as impoverished tenants working off indenture and grateful for the crumbs thrown from the tables of the rich.

But first - the collapse of sterling, hyperinflation, and national bankruptcy. Only now does the tip of the CDS iceberg begin to heave into view.

The fat cats are stuffing their pockets with what little is left of taxpayers' assets, and presumably leaving these shores like rats deserting a sinking ship. Manuscripts Don't Burn took its "assets" and left the UK years ago for saner climes - mene mene tekel upharsin being scrawled everywhere we looked.

And then, of course, the ship sinks. Sauve qui peut, because NOBODY else will.

Life on Mars

Quite a remarkable event is transpiring in the British media today. Yesterday evening, a NASA press conference announced they had "probably" found life on Mars. In typical NASA speak, they refused to give qualitative confirmations, banging on about the need for verification, confirmation, more research, more evidence, but as everyone knows, the only way NASA will ever confirm life on Mars is if they actually have a little green guy in a bottle they can shake at the cameras of the world.

So, everyone with an ounce of sense and perception - and a knowledge of how the scientific process actively mitigates against definitive statements - understood yesterday's press conference to be saying: "We think we've found signs of life. We're not absolutely sure, but we're really excited, and we think all other Mars missions should now be dedicated to confirming our findings".

Epochal. World-changing. And completely ignored in the UK (and, indeed, global) media with the exception of The Sun. Not wanting to be a conspiracy theorist, Manuscripts Don't Burn would like to ask: what the hell are the rest of you guys on? We've more than likely just found life on Mars, and you're banging on about Liverpool footballers and Foxy Knoxy's trial?

Congratulations, UK media. You have now achieved a state of permanent irrelevance. Life goes on elsewhere, apace, but not on your pages!

An Alternative New Year Message...

The media is awash with prognostication today, most drawing on some pre-war "all pull together" subtext either suggesting that everything's about to collapse and go to hell in a handcart, or that somehow, magically, a solution will appear if we all just knuckle under and do as we're told.

Manuscripts Don't Burn doesn't think any of this is anywhere near good enough. We have an emergent global civilization, enough technology and sophistication to resolve world poverty, hunger, destitution, and homelessness at a fraction of the cost of the cynical jobs-for-the-boys of the War on Turr, and instead we piss it all up against the wall and congratulate ourselves for being so liberal with our irrigational generosity.

We need a slap in the face, now more than ever. Just as our economic miracle is about to catapult us into poverty, civil unrest, and the danger of yet-another artificially instigated war (to wipe out the old surpluses and generate some REAL demand...), Manuscripts Don't Burn would just like to offer a lone voice, crying out amidst the censorship of cacophony that the modern world has become. In Kafka's The Trial, Josef K happens by "chance" into a cathedral, where a preacher is waiting for him in the pulpit. Josef K approaches, passive-aggressive, "what are you looking at", "I'm doing everything I can". The preacher leans over from the pulpit, his face an appalling picture of horror as though seeing a man walking blindly over a precipice, and cries "WHAT THE HELL DO YOU THINK YOU ARE DOING?"

Manuscripts Don't Burn would like to offer this post in the same spirit.

The time is overdue for us to realise that all of us in Western Civilization are guilty of a singular failure of imagination. The levels of technology and sophistication we have achieved could - TODAY - be being used to ensure that basic food, shelter, utilities, education, and healthcare for the whole globe should be unconditionally free and a basic human right. To ensure that once these rudimentary basics of life are finally given free, gratis, for granted, we could all get on with the real business of life - personal development, societal improvement, evolving into what we believe we should be, rather than floundering in the muck.

We should be disgusted with ourselves, that instead of embracing this bright new future, we have voluntarily opted to remain in a stagnant late Capitalism where a bunch of cynical criminals are allowed to manipulate our societies with artificial war, conflict, and scarcity, so that all of our wealth- and livelihood-creation is syphoned off into their bottomless fat cat pockets, and the rest of us have to keep buggering about spending all of our pointless days scrabbling around for a roof over our heads and enough food for eat - when in reality there is of course already plenty to go round.

The time is long past for a collective decision that this IS NOT GOOD ENOUGH, and we finally have to pull our fingers out, take responsibility for our civilization, and do something about this absurd situation of self-imprisonment and self-impoverishment in the name of some dodgy outdated ideology.

Our civilization has the power to GET BRAVE AND CREATIVE AGAIN; the strength to say no to crapness and cynicism, to dare to dream to aim for something better.

Sometimes in history we reach turning points, when a brave hand and a willing imagination could take our civilization a quantum leap forward. We had one after the Second World War; the history of the past 30 years have been one of the retrenchment of the old guard to try and tear down those hard-won social and cultural achievements in the name of a divisive inequality. Here we are again; this time, the odds are stacked against us, and the reactionaries have their pockets wide open to receive the last few drops of blood they can squeeze out of us. Hands up who's prepared to keep assuming the position?

Our Predictions for 2009...

In the spirit of "New Year Messages", divining from the entrails of the dead economy, and the general prognosticating fever of the end-year period, Manuscripts Don't Burn would like to indulge in a little lighthearted speculation about what the coming twelve months might hold in store for the UK.

In 2009, the media will become almost hysterical about how marvellous it is for everyone to tighten their belts, pull together, and learn to darn our own socks. Words like "tempered in the fires of adversity", "school of hard knocks", and "Dunkirk spirit" will turn most tabloids into soggy repetitive clones.

And all the while the newspapers and tv channels will be desperately trying to distract everyone's attention away from the huge, turd-bomb of an elephant in the room: that the UK is in the throes of economic collapse, and the rich bastards are desperately stuffing their pockets and getting the hell out like rats leaving a sinking ship. Bailouts will proliferate, funnelling public money into private hands at an ever-increasing rate. Banks will repossess willy-nilly, and there will be no recourse other than... another government bailout.

The ship probably won't sink in 2009 - that'll more likely be 2010-11, after a long period of near lawlessness, rationing, food queues, power shortages, utility breakdowns, hunger, disease outbreaks (which will never *actually* be found to be due to the uncollected rubbish piling up in the streets) and civil unrest, which will be dealt with EXTREMELY violently by the police and army and consistently blamed on "anarchists" and "terrorist sympathisers". Thousands of British, students, unemployed, and concerned subjects of her majesty will be locked up without trial during these grim days. Tasers will be used on anyone so much as waving a placard. "I've done nothing wrong so I've nothing to fear" will be exposed as the cowardly sham it is.

Finally, once all the wealth that can be extracted has been extracted and the corporate fascists are safely installed in their heavily-defended tax havens, the EU will be called in to mop up the whole sorry mess. Like with East Germany in the nineties, Europe, despite having suffered its own knocks in the global depression, will shoulder the immense debt burden of putting what's left of England back on its feet again.

The only remaining question will be: will the huge landowners in England, who basically "own" us all anyway, go peacefully, be bribed with new laws which let them keep their millions of tax-free acres behind gated compounds, or have to be strung up before they'll let the rest of us get on with rebuilding the country? That one remains to be seen.

Either way, next year is unpleasant. The year that everything starts to go to hell.

Oh - and "abroad": Israel, Iran, Pakistan, India, China, US... There'll be lots of emotive news programs on Sky TV telling us how we should feel about the citizens of country X getting blown up by country Y - horrified, justified, indignant, or just plain "it's all a long, long way away and doesn't affect me..." Likely we'll all be far too busy to care - same goes for climate change too.

The most terrifying thing about "abroad" will be the out-and-out refusal to engage productively with Russia, which will continue its slide towards aggressive national socialism, bashing everyone over the heads with threats to cut off the gas and eventually the oil. It's an unending irony that, just as following WW1 the victors hammered Germany into the ground rather than rebuilding and extending hands of cooperation, thereby reaping disaster two decades down the line, the international community, led by the nightmare BushCo, saw fit to avenge itself on the fallen giant of the Soviet Union in the 1990s and try to ruin and dismember it, rather than offering the hand of understanding and friendship. Now, once again, just at the moment when we should be really paying attention and engaging diplomatically, we'll leave the Russians to stew as they suffer their own "Consequences of the Wall Street Crash", and similar to Germany in the 1930s, we'll reap the whirlwind as their society lurches to a vengeful right-wing extreme government intent on restoring national pride, whatever the cost.

Historians will wonder how we were all so blind. But we weren't, were we? It's not rocket science. It's just that we didn't *do* anything about it, dithering tomnoddies blustering about bugger-all... The tragedy of humankind is that it is so easily induced to forget...

Chronicle of a Rape Foretold: Economic Collapse 2008

It's interesting that the majority of debates on the ongoing economic collapse start from the assumption that the task facing our governments is to manage our economies in the interests of the majority of its citizens, and that their actions and dialectics revolve around the best way to achieve this. And that, poor dears, they've made a bit of a mess of it this time.

A wider perspective gives us no grounds for this assumption. Governments rarely work for the benefit of their populations, but rather for the most effective exploitation of their populations for the benefit of the small minority of the faction currently controlling those governments, unless forced by threat of violence and social unrest to do otherwise. This isn't conspiracy theory; Manuscripts Don't Burn would argue it's the tacit common sense working agenda of the political classes, but one which our corporate- and government-controlled media do not like to see discussed.

The situation we're facing today is planned. It's been in the offing for thirty years; the gradual and insidious redistribution of wealth from bottom to top, reversing the more egalitarian redistributions following WW2 (in the face of the Soviet ideological opposition - however illusory that turned out in the long run). One has only to speculate on the relative wealth of a typical family between now and, say, thirty years ago to realise that today's families are considerably worse off, working harder, and carrying greater debt than our parents' generation. Money is flowing upwards, being concentrated into the hands of a small minority calling itself "big business", who themselves control the governments and electorates via "oligarchical intimidation" (witness Mandy's recent "interview") and media propaganda. The future is one of austerity and indenture for the masses, whilst the elite lounge on their yachts preaching about how it's important for us all to "make sacrifices". Haw-haw-haw.

The goal here is nothing more and nothing less than a return to the pre-WW1 status quo of quasi-fascist social organization, with a vast and easily-exploited workforce providing 99% of the labour in return for 1% of the wealth. Anything else foisted upon us by the mock-discussions in the corporate media is just smoke and mirrors to distract us whilst they rob us of our birthright.

We can engage in these pretend debates as much as we like (should we inflate our savings into non-existence or not? what kind of perpetual indebtedness and indenture do we want? which tyrant are we going to vote for - Mr Bad or Mr Crazy? ooh - the breathlessness of choice!), but we're simply parrotting the intended obfuscations which have been given to us in this distracting, irrelevant discourse. The real business of course continues apace, hoovering up the wealth and leaving us bereft, hyperinflating our currencies out of all value and centralizing the concrete assets - in the form of land and resources - in the hands of the "business" elites, leaving us with nothing but handfuls of worthless paper. There's nothing short of actual violence that we can do to change that, for all our self-important "debating" and hot-air. Witness Greece as a foretaste of what's to come in all Western societies in the coming years, when the security forces use lethal force to stifle anyone who dares protest. These anti-terror laws and snooping bills weren't there to "protect" us after all... who'd'a thunk it?

"The Federal Reserve is utterly terrified." Give us a break - yeah, Manuscripts Don't Burn is sure those private and discrete, unaccountable billionaires are quaking in their boots at the prospect of us having to give them all our possessions AGAIN. Terrified to bits. Wouldn't you be? What a joke.

Angry, us? Does it show?

Thanks to GolemXIV on the next wave of the crash...

Manuscripts Don't Burn hasn't posted here lately, as you'll doubtless be aware - but we'd like to post a copy of a fellow blogger, GolemXIV, from the Guardian website today. Thanks, GolemXIV!

"The point is there is nothing of any consequence the gov or the BoE can do about deflation. The deflationary forces are just too amssive.

Just take a look at the next wave appraoching the beach.

Next year, 09, we get the first spike of the next TWO classes of american mortgages to start defaulting. Sub-prime is almost all through by early 09 but Alt-A and the even more toxic Option ARMs will start to make the headlines.

Nearly 4 Million small businesses in the US have Alt-A and of them 1.2 Million are ALREADY 60 day delinquent. As for the ARMs you really don't want to even look.

For those who don't know ARMs are mortgages where for an introductory period you can CHOOSE how much to pay or not pay all the way down to pay nothing. WHat you don't pay gets added on to your mortgage up to 125% of the loan. Then this new HUGE amount gets put on to a MUCH higher rate.

The market expects massive default rates.

This will mean even more massive write downs. This is part of why the banks have been hoarding all the cash we gave them.

So cutting a percentage point or two or messing about with a couple of VAT points really is about as impressive as getting your todger out, thinking you'll piss on that forest fire inferno and show it who's boss."

Manuscripts Don't Burn has been reading GolemXIV's comments attentively throughout this historical crisis. So far, he's been spot on every time. Interesting times...