Dangerous Counter-Narratives: Our Global Finance Ponzi Scheme and Iranian Cooperation

According to this post, this op-ed in the WSJ got badly edited after it was originally published. The bolded words are just some of what WSJ axed after the fact. (h/t Naked Capitalism)

The official wisdom is that Greece, Ireland and Portugal have been hit by a liquidity crisis, so they needed a momentary infusion of capital, after which everything would return to normal. But this official version is a lie, one that takes the ordinary people of Europe for idiots. They deserve better from politics and their leaders.

To understand the real nature and purpose of the bailouts, we first have to understand who really benefits from them. Let’s follow the money.

At the risk of being accused of populism, we’ll begin with the obvious: It is not the little guy that benefits. He is being milked and lied to in order to keep the insolvent system running. He is paid less and taxed more to provide the money needed to keep this Ponzi scheme going. Meanwhile, a kind of deadly symbiosis has developed between politicians and banks: Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever-more money back to our governments, keeping the scheme afloat.

In a true market economy, bad choices get penalized. Not here. When the inevitable failure of overindebted euro-zone countries came to light, a secret pact was made. Instead of accepting losses on unsound investments—which would have led to the probable collapse and national bailout of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs such as the European Financial Stability Fund, Ireland’s NAMA and a lineup of special-purpose vehicles that make Enron look simple. Some politicians understood this; others just panicked and did as they were told.

The money did not go to help indebted economies. It flowed through the European Central Bank and recipient states to the coffers of big banks and investment funds.

The edits are interesting in their own right. But I couldn’t help but think of an op-ed Flynt Leverett wrote back in 2006. Though the entire op-ed was, according to CIA officials, unclassified, during the review process the White House decided the parts that described Iran’s cooperation with the United States after 9/11 had to be redacted.

Back in 2006, the fact that Iran had made significant efforts to reach out the US undercut the Village’s entire narrative about national security.

It’s not clear whether WSJ’s editors decided on their own that revealing that the serial bankster bailouts benefit just the banksters was too dangerous for WSJ’s readers, or whether someone in Timmeh Geithner’s neighborhood called to complain (as they did when an Irish Times columnist revealed that Timmeh was behind nixing the IMF’s efforts to restructure Ireland’s debt).

But when a counter-narrative comes to be viewed as this dangerous, it’s usually a testament to the fragility of the narrative it threatens. In Leverett’s case, the counter-narrative threatened the stupid efforts to shore up US hegemony in the Middle East by attacking Iran; in this case, the counter-narrative threatens our continuing willingness to embrace austerity so the banksters can get richer. Of course both narratives are about the same thing: sustaining US power.

I can’t decide whether it’s pathetic or funny that our power continues to rest on such fragile narratives.

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  1. 4jkb4ia says:

    EW has showed that the WSJ editor kept in that the money went to the banks and not the affected countries. What is most interesting is that everything about the antidemocratic political character of the bailout was left out. Also, the paragraph about Spain was left out. It would be as if the WSJ editors were afraid to frighten US investors by showing them that Soini believes that Spain has to fail.

  2. earlofhuntingdon says:

    Some brilliantly Orwellian rewriting there:

    a kind of deadly symbiosis has developed between politicians and banks

    And so, unpurged, the gangrene spreads. The Spanish property sector is much bigger and more uncharted than that of Ireland. It is not just the cajas that are in trouble. There are major Spanish banks where what lies beneath the surface of the balance sheet may be a zombie, just as happened in Ireland for a while. The clock is ticking, and the problem is not going away.

    That last item is particularly threatening, as major bank balance sheets are still full of crap, with no plan to unwind it but the passage of time, even while bankers have taken their usual excess compensation out of the system already. I wonder how many would take it all in their employer’s stock, with a mandatory 2-3 year holding period.

  3. earlofhuntingdon says:

    I hope EW’s has time to comment on Julian Assange’s Australian Peace Prize award, and yesterday’s ACLU report on its longstanding FOIA suits against the DoJ, which Glennzilla discusses today.

    Their responses were heavily redacted, but one honest comment made it through. One reason the government doesn’t want the public to know which telecoms companies might have/be “assisting the FBI with its inquiries” – by revealing customer data to the government – is that “those businesses would be substantially harmed” if their customers learned of that cooperation and responded by terminating their contracts and/or filing suit against them for violating their constitutional rights.

    Too right.

  4. prostratedragon says:

    Word’s been out on Spain among the investors for many months —that’s more likely to be a political snip.

    On the erosion of not only the narrative, but the actual facts, people with cred are starting to treat the notion of Greece leaving the euro, because of the overburden of debt that Soini discusses, as a serious idea. Mark Weisbrot said it in an op-ed. Paul Krugman, also here, thinks it’s worthwhile to work out the consequences, if only to understand what Greece might get pushed into by events.

  5. 4jkb4ia says:

    Right. It is a political snip. I said “Soini believes”. Soini is a political figure who will have the power to prevent Spain from getting a bailout if the requirement remains unanimous.

  6. Garrett says:

    The official wisdom is that Greece, Ireland and Portugal have been hit by a liquidity crisis, so they needed a momentary infusion of capital, after which everything would return to normal. But this official version is a lie.

    Timo Soini, Why I Won’t Support More Bailouts, 2011

    It is very amusing to see how the views of business commentators in the bourgeois press change in accordance with the current state of the business cycle. In the German press, the recent crisis was attributed almost exclusively to dear money or to the scarcity of money capital. Now that the depression persists in spite of the continuing international liquidity they are slowly discovering that prosperity does not depend solely upon the condition of the money market.

    Rudolf Hilferding, Finance Capital, 1910

    It is very amusing to think of the Wall Street Journal in terms of “bourgeois press”.

  7. klynn says:

    I can’t decide whether it’s pathetic or funny that our power continues to rest on such fragile narratives.

    (my bold)

    I wish we could get a majority of the populace to understand this fragile narrative. Thank you for your efforts to get people to wake up and smell the coffee.

    I agree with DDay…Right now your safe investment is the Mattress Central Bank.

  8. readerOfTeaLeaves says:

    But when a counter-narrative comes to be viewed as this dangerous, it’s usually a testament to the fragility of the narrative it threatens. In Leverett’s case, the counter-narrative threatened the stupid efforts to shore up US hegemony in the Middle East by attacking Iran; in this case, the counter-narrative threatens our continuing willingness to embrace austerity so the banksters can get richer. Of course both narratives are about the same thing: sustaining US power.

    I don’t think it is simply ‘US power’; I think that is far too limited. I’m finishing up Shaxson’s terrific book on tax havens and secrecy jurisdictions, and in view of fact that about half the money in the world seems to be flowing through secrecy jurisdictions, the US by no means is the sole culprit.

    I think the narrative is more about trying to protect ‘free market capitalism’, which worked well for a minority of the planet as long as resources were pretty easy to come by. Going forward, that economic system, which the US personifies, is not functioning and IMVHO we are seeing the early symptoms.

    Add in the population dynamics of the Middle East, with half or more of the populations < 30 years old in prime childbearing years, and the existing narrative is a whole new level of stupid.

    Tax havens are very close to the heart of the problem: whether it's Iran, or a multinational corporation running derivatives trades, it's a great formula for oligarchs of all nationalities, and it empowers an amoral system. It allows people to claim that they are 'outside' an economic ecosystem, so they're starving governments at all levels of resources. It's a shell game, and part of what is so striking about Shaxson's book are the psychological links that he points to between tax secrecy and libertarian (and conservative) political culture and ideology. The tax jurisdictions (Caymans, Jerseys) are specifically designed for tax avoidance elsewhere; 'Designer Government Entities’, so to speak. They are designed and run to support tax avoidance and concentrate wealth with zero public responsibility to anyone, anywhere.

    In other words, in my view, tax havens give power to Cheney as well as to Russian oiligarchs, to the Viktor Bouts just as much as to the Mexican drug lords. This veiled system is protected by bullshit narrative, and it becomes creakier by the day.

    It can’t withstand Wikileaks, the demographics of poor nations, the resource depletion, the problems of pollution, or the Ponzi economics of the free marketeers. So the more obviously bogus it is revealed to be, the deeper the denial gets and the more shrill the threatened parties become. (Erik Prince is no doubt all weaponed-up and waiting… in Dubai, a tax haven.)

    BTW: I clicked here from NYT reporting that the Galleon trader was found guilty on all 14 counts of insider trading (!!). Of course, he expects to appeal and get off. But I do take this as a very interesting development — 14 counts of guilty… wow!

    Because I see the Galleon group and their insider trading as symptomatic of the manipulations and bogus nature of the Ponzi economic narrative, I think it is related to this thread.

    • emptywheel says:

      I should have said American hegemony (which is more accurate), and with the Shaxson example, you could expand that to include Anglo-American hegemony.

      It’s only in the last decade or so that the interests of the oligarchs have begun to split from Anglo-American hegemony, though they’re still closely linked. Particularly in the context of oil > dollar reserve–which is what Iran is about–and the Bretton Woods system–which is what the imperative to bail the banks out is all about.

      • readerOfTeaLeaves says:

        I should have said American hegemony (which is more accurate), and with the Shaxson example, you could expand that to include Anglo-American hegemony.

        I completely agree that it’s Anglo-American hegemony, and in ‘Anglo’ I include a lot of people educated in Commonwealth nations, so ‘Anglo’ doesn’t mean white or Caucasian.

        I suspect that tax havens and economic instability and commodities speculation offer Iran a stronger hand than it would have otherwise; lots of options for deception in those systems.

        As for Bretton Woods, anyone interested really should spend some time at the INET website; I’m slowly moving through their videos from their very recent Bretton Woods conference and anyone interested in larger economic systems would probably find it quite interesting.

        But if you (EW) are saying that the Ponzi structure gives Iran (or other actors who prefer to operate in the dark, in secret, a la Wachovia or Galleon or Goldman) then I agree. The Ponzi is tailor made for fraud and predation, IMVHO.

        We need new economic structures, asap.