The Consequences Of 'The Big Lie'

Posted by Karl Denninger

The Consequences Of “The Big Lie”

It may be “politics as usual” to never talk about how bad the economy really is – never talk about the budget deficit in honest terms – and never talk about how revenues are and have been cratering across the board for governments.

But when you are facing a truly horrific situation in this regard, and you need everyone on board to make sacrifices – especially government positions where employees feel especially entitled – “politics as usual” is particularly dangerous.

This weekend Ireland’s largest public sector union has called the situation “explosive”:

Speaking today Peter McLoone, the general secretary of Impact and the chairman of the Public Services Committee of the Irish Congress of Trade Unions said that trust had effectively broken down between unions and the Government and that there was no basis that the parties would be able to go back into discussions in the short term.

Mr McLoone told RTE’s “This Week” programme that he could not rule out the possibility of all-out strikes as the reaction from members to the pay cuts was very strong.

He also indicated that public sector workers would no longer be prepared to engage with the Government on reforms along the lines of those proposed in the talks on an alternative for reducing the public sector pay bill without cutting pay rates.

And by the way, what’s “especially dangerous” mean?  Strikes?  Many government workers would do us all a favor if they went on strike.  That would solve budget problems, you see – you don’t pay people who don’t work voluntarily, and a strike is voluntary!  To that I say: Go ahead and strike as it will HELP the budget situation.

If this is a thinly-veiled threat of violence, well, we’re already seeing that in Greece.  I guess we can add Ireland to the mix without too much trouble eh?  Or shall we talk about Italy, where it appears Berlusconi was punched – that is, literally assaulted:

OME (AP) — Italian Premier Silvio Berlusconi was punched in the face at the end of a rally on Sunday by a man holding a small statue in his hand, leaving the 73-year-old media mogul with a bloodied mouth and looking stunned, police said. The 42-year-old man accused of attacking Berlusconi in Milan as he signed autographs was immediately taken into custody.

How far are we away from boiled rope and lamp posts folks?

The problem here, like in New York and other US States, is that Ireland, like The United States, refuses to confess to the full extent of the economic damage – nor will they confess to the fact that it is not getting better at any material rate.

Instead, we have the litany of “pumpers” and misleading (if not outright false) so-called “economic indicators” that are put forward with a smug smile, claiming that “we are out of recession.”

Oh really?

Then why is New York’s financial situation so bad that Governor Paterson has felt the need to do this?

ALBANYGov. Paterson will announce Sunday that he is taking the dramatic step of unilaterally withholding 10% in scheduled payments this month to schools and local governments, including New York City, the Daily News has learned.

“He’s basically paying out 90 cents on the dollar,” one source said.

This of course is going to provoke some pretty strong responses – including lawsuits.  Not that it matters; you can’t get what doesn’t exist, no matter how much you want to complain about it.

This is not limited to New York and Ireland.  Indeed, it is pretty much “pick your state” in the US, and among other nations, the list is long and distinguished – especially in Eastern Europe.

The distortions that governments (and traders acting on the “free money” paradigm) have applied to the markets in the last two years are unprecedented.  Oil, for example, is trading around $70 – but why?  Cushing (the main oil terminal in the US) is full to overflowing, banks are literally parking tankers full of oil at anchor rather than selling it, and every place you can buy and cram a barrel, it has been bought and crammed.  This has “created demand” for that oil, but since the oil has not been actually consumed it is false demand – and that supply must, at some point, go to the market. 

Kuwait’s recent announcement that they may pull their deposited funds (custodial funds) from Citibank is more likely due to their government’s knowledge of the book cooking (and oil demand cooking) and radical deterioration in their state finances.  Eventually the piper must be paid, and these distortions will disappear.  When they do, so will the oil price – and I suspect Kuwait knows this full well.

Never mind the usual government game: When challenged, simply black it out.

Yes, that’s an actual FOIA response.  I guess I should go long Sharpie markers?

Don’t even get me started on the financial reform bill.  Oh, I’ll have commentary on it – but my first read is that the lobbyists have once again done it to us, cold, dry and hard.  The most-blatant example that I found with about 30 seconds of skimming are subtle changes in the so-called derivatives “regulation” section that allows a person to be an alternative “exchange.”  That’s right.  That would include an artificial person (e.g. Corporation) since it doesn’t say otherwise, which means that our dear old big banksters (represented in their lobbying by “Do-we Cheatem and How”) have managed to actually remove what little regulation currently exists – while claiming to be for “strong and sound regulation of derivatives.”

That’s right – this “bill” will actually weaken financial supervision of the most dangerous part of the markets, and therefore increase, not decrease, systemic risk.

Pay no attention to Obama’s faux “anger”; he’s lying as well.

If he was actually pissed he would have directed Geithner to refuse to allow TARP repayments.  He didn’t and what’s more important, he and Summers are playing kabuki theater with you:

One of the White House’s economic advisors, Larry Summers, also stated his frustration with Wall Street on CNN’s “State of the Union” Program. Summers commented, “Here is what I think they don’t get…It was their irresponsible risk-taking in many cases that brought the economy to collapse.”

That’s why you and Obama have put a stop to that irresponsible risk-taking, right?  All derivatives are now on a public exchange, all positions marked to the market nightly with appropriate posted margin, the former 14:1 leverage limit has been re-imposed and Glass-Steagall is being put back together and enforced on the banks.

Oh wait – none of that is actually happening, is it Larry?  You’re a liar and so is your boss. You, in particular, were one of the chief architects of this mess with your “deregulate everything” approach to financial institutions.

How long will you sit for this folks?

Will it be before or after you are out in the street, jobless, homeless and hungry when you finally wake up and say “enough damnit!”