The End of Trust
Greek Bonds, Anyone?
The world is getting a little edgy when very few investors are willing to buy Greek bonds — given what they know about Greek politics and productivity. And so the interest rate has soared on ten-year-yields to above 7.5% — a chase-your-tail scenario, in which the bankrupt Greeks will have to increase the interest rate to attract capital, that in turn will go so high that they, the Greeks, will not be able to pay the debt, that again in turn will frighten bond buyers even more, that, of course, will send rates even higher.
California, take note. Some Stanford economists and analysts just refigured the cooked books at the various California public pensions and found a $500 billion shortfall. The state is already broke. Its taxes are the highest in the nation, the flight of its wealthy per week is unsustainable — and its teachers are apparently (please explain this?) furious that their salaries are the highest in the country and their students among the worst. So we either float more bonds, or ask retirees to take a cut or freeze. The latter is not even being discussed.
Who Said You Owed Anything?
Chris Dodd is pushing a multifaceted credit card bill that probably will up rates on all to allow some more deserving to refigure their debts. (I hope not in the fashion that Chris Dodd gets mortgages, or Timothy Geithner pays his FICA, or Barack Obama buys a lot, or Tom Daschle reports limo perks or Charlie Rangel adds up vacation rent). Dodd’s effort is a sort of relish to the administration’s own plan to ensure that some underwater mortgages (note, I said “some”) won’t have to be quite paid off.
I think you get my drift with these examples. If you don’t, just note whom Obama serially demonizes — doctors who lop off too much, insurers who are just too greedy, CEOs of non-government-run companies who jet to the Super bowl, “fat cat” bankers, and so on — and whom he worries far more about: anyone who was forced by the system to take out a debt and is again forced by the system into not paying it back. No wonder the Greeks are scrambling to find ways not to pay back their gargantuan debt.
Trust — How Quaint?
We are not just in a war on those who have capital and loan it to others, but a war on the entire sinews that hold together the modern system of global finance — trust.
Following the Greek explosion, we heard of everything from fraudulent bookkeeping to the German responsibility to pay more reparations for World War II to the dangers of belt-tightening. All were euphemisms for Greeks to find ways of not having to pay back what the government freely borrowed — essentially to pay millions of unionized Greeks at work and in retirement. So where is all the money? Long ago spent on salaries for millions to do little, who now want more from those who do a lot (e.g., Germany)
The New Versailles
The problem is not just the old “big government.” The public is now more focused. They are reifying “government” into millions of public workers and their technocratic overseers: all are far better tenured, salaried, and pensioned than their counterparts in the private sector. They are the new court hordes at Versailles. And we know their numbers have expanded almost geometrically, far faster than both the rate of inflation and population growth — most as rewards for paying off constituents, expanding the block of loyal entitlement-receiving voters, and in general ensuring a sort of pandemic government dependency in which 20 percent of the nation receives almost all of its monthly money from the government and another 20 percent receives a lot of it.
From what the administration announces almost daily, from the radio ads blaring now in the popular culture, and from congressional promising, I think I get the new narrative. “Trust” is an archaic construct established by capitalists to ensnare the more noble poor. When you buy that blue-ray DVD player or plasma TV (saw lots of that today at Best Buy in Fresno), in lieu of a catastrophic insurance plan, and add to it a night out at the Macaroni Grill and the multiplex, it is not all that certain you will have to pay all of that charge back. As you go from one maxed-up credit card to another, there will be a new company waiting to renegotiate your debt, and a demagogic congressperson to explain why you were snookered into doing what you did.