Archive for December, 2008

Sound Economics: The Robert Greene Bail-Out

me1I wish I’d paid more attention at school when my physics teacher explained the Law of the Communicating Vessels. As I remember it, it had something to do with a number of tubes of various shapes, open at the top and linked to each other at the bottom. Fill the tubes with water and, by dint of the fact that they vessels2communicate, the water will reach the same level in every one of the tubes. Pour more water into one of the tubes and the level will rise in all of them to the same height. If I forget something, let me know. Of course, if one of the tubes is cut off from the others, the principle no longer applies. Water poured into the isolated tube will not affect the level of liquid in the rest, and vice versa.

bus201As I see it, that’s what is wrong with the world of finance. Huge sums of taxpayers’ money are being poured by governments into the world of banking, in an attempt to restore confidence and get the economy ticking over again. The banking tube should communicate with the other tubes (with names like ‘manufacturing’, ‘consumer spending’, ‘high street retailing’, ‘mortgage lending’ etc.) for the benefit of the whole. But it doesn’t. Of the zillions of our cash that have found their way into the vaults of many large financial institutions little or nothing has so far be used to relieve the pressure on the rest of us. All that huge capital just sits there; some of it is syphoned off into the pockets of the very greed-driven bobos that got us into our current predicament but that’s it.


In the absence of any sign of largesse from Mister Banker, governments -having fleeced us first- are now trying desperately to improve the economy and stave off a slide into deep recession by means of a raft of what are called ‘stimulating measures’. Apparently, Britain’s Prime Minister Gordon Brown has some very useful ideas on the subject, or so he believes. While the bankers, sated with our cash, have closed the shutters and gone for a well-earned nap it’s now industy that’s clamouring for assistance. Car makers in particular are in need of financial transfusion (although if you see what my local Opel dealer charges for a simple service job you might wonder why). General Motors, Volkswagen and Chrysler -once emblematic of corporate success- are in dire straits, as are car makers in China. Manufacturers of microchips and semiconductors, ditto. Computer makers, the same. Share prices are plummetting, thousands of lay-offs announced and all because consumers are not buying.

bus51I, of course, am one such consumer and I resent the accusation that, through my enforced frugality, I am stunting the growth of my country’s economy. Yes, I AM buying less. I haven’t made a major purchase since just before the 2008 World Cup, when I treated myself to a new flatscreen TV. There’ll be no presents at Christmas and the new car will have to wait until the current one falls apart. Eating out has been curtailed, with a surprising side effect: when you do it twice a month you enjoy it more than if you do it twice a week. Less, I assure you, is more. Doesn’t apply to absolutely everything, but there you are.

So what is Gordon Brown doing to get the Brits rushing to the shops again?  Not to put too fine a point on it, he wants them all to spend as if there’s no tomorrow. If they haven’t got the cash to do it, they are encouraged to buy on the never-never, overload their credit and storecards and raid their childrens’ piggybanks. The government itself is leading the way. Already in debt to the tune of trillions, it intends to borrow even more, in the hope that, some day soon, the wheels of the economy will start turning again. Countries around the world, the Netherlands included, are looking on in awe as the British put their grannies up for sale on Ebay and then rush to the shops to buy the latest Blackberry. Will it work?bus6

No, it won’t. You see, the suggestion that all of a sudden the whole world is plunged into financial crisis is complete baloney. Communicating vessels, you see? If things go down the pan in one part of the world, they must be rubbing their hands in glee somewhere else. There wasn’t, from one day to the next, x-zillion dollars’ worth of wealth less in the world. OK, so a lot of national economies are down on their uppers. That means that somewhere, some really smart people with no conscience are sitting on a mountain of unearned cash. Let’s go get these guys, whoever they are, and send them to Guantanamo Bay before Obama closes it down. Those guilty of this astronomic theft pose a greater danger to our way of life -and indeed our actual lives, just wait for the suicides- than Al Qaeda ever did. Yet we spend endless financial and human resources on exchanging pot shots with the Taliban  in the Afghan X-box than on bringing these criminals to justice.

Until I see some sign that my government is ready to stop pumping my money into the pockets of undeserving bankers and jet-setting captains of industry I will be sitting on my savings, guarding them with a loaded gun. No, wait. Better yet: I think I’ll buy myself a villa in Spain, a yacht, an entire vintage of Bollinger and that Ferrari Testarossa I’ve always wanted and then go to The Hague to ask Finance Minister Wouter Bos to pay the bills for me. Fifty million euros will do it. How’s that for the cheapest bail-out ever? Fifty million wouldn’t keep the General Motors boardroom in Courvoisier and Romeo y Julietas for more than a week. I, on the other hand, would never bother Wouter Bos ever again.


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