naked capitalism

We’ve featured past Real News Network segments on the United Nations Conference on Trade and Development. UNCTAD has increasingly become a forum for struggles between advanced economies and developing economies over what the rules of the road should be in trade. UNCTAD was early to call the benefits of financialization into question, and has also been taking issue with the comparatively small take countries in the “south” get from extended supply chain production. This, needless to say, is a vision that is a direct challenge to how multinational like to conduct their affairs, so it should be no surprise that the big, rich countries are trying to bring UNCTAD to heel.

From the Real News Network (hat tip Aquifer):

Yves here. Even though I agree with a good bit of Hudson’s post, I take exception to part of his argument, both in general and with Krugman. Hudson fails to distinguish between private sector debt (particularly consumer debt, whose overall level is negatively correlated with economic growth) and debt issued by a government that also issues its own currency. As we have stressed, unless a country runs a trade surplus (and if some countries run surpluses, other countries must run deficits), when the private sector delevers, the government sector needs to run deficits to accommodate the private sector deleveraging (otherwise GDP and wages contract, which is the austerian result Hudson wants to avoid). And that includes debt writeoffs. Although Krugman argues for deficit spending largely from a Keynesian perspective, he sometimes invokes the sectoral balances approach we described above.

Richard Koo, who coined the expression “balance sheet recession” stresses how financial-crisis-hangover high private sector debt loads are crippling. Consumers and businesses prioritize paying down debt over investing.

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College. His new book summarizing his economic theories, “The Bubble and Beyond,” will be available in a few weeks on Amazon.

Paul Krugman is widely appreciated for his New York Times columns criticizing Republican demands for fiscal austerity. He rightly argues that cutting back public spending will worsen the economic depression into which we are sinking. And despite his partisan Democratic Party politicking, he said from the outset in 2009 that President Obama’s modest counter-cyclical spending program was not sufficiently bold to spur recovery.

These are the themes of his new book, End This Depression Now. In old-fashioned Keynesian style he believes that the solution to insufficient market demand is for the government to run larger budget deficits. It should start by giving revenue-sharing grants of $300 billion annually to states and localities whose budgets are being squeezed by the decline in property taxes and the general economic slowdown.

To focus the argument against “Austerian” advocates of fiscal balance, Mr. Krugman hopes that economists will stop distracting attention by talking about what he deems not necessary. It seems not necessary to write down debts. All that is needed is to reduce interest rates on existing debts, enabling them to be carried. He does not advocate shifting taxes off labor onto property. The implication is that California can afford its Proposition #13 that has fiscally strangled the state by freezing taxes on commercial property and homes at long-ago levels. It is not necessary to change the economy’s tax shift off real estate and finance, except to restore a bit more progressive taxation.

The effect of Mr. Krugman’s suggestions is for the government to subsidize the existing financial and tax structures, not write down debts or make the tax system more efficient. So I am afraid that his book might as well have been subtitled “How the Economy can Borrow its Way Out of Debt.” That is what budget deficits do: they add to the debt overhead.

Mr. Krugman has gotten censorial regarding the debt issue over the last month or so. In last Friday’s New York Times column he wrote: “Every time some self-important politician or pundit starts going on about how deficits are a burden on the next generation, remember that the biggest problem facing young Americans today isn’t the future burden of debt.” Failure to see today’s economic problem as one of debt deflation means a failure to recognize the need for debt writedowns, restructuring the banking and financial system, and shift taxes off labor back onto property, economic rent and asset-price (“capital”) gains. The effect is to defend the status quo – and to me, that makes Mr. Krugman a conservative. I see little in his logic that would oppose Rubinomics, which has remained the Democratic Party’s program under the Obama administration.

Many of Mr. Krugman’s readers find him the leading hope of opposing even worse Republican politics. But what can be worse than the Rubinomics that Larry Summers, Tim Geithner, Rahm Emanuel and other Wall Street holdovers from the Democratic Leadership Committee have embraced?

Perhaps I can prod Mr. Krugman into taking a stronger position on this issue. But what worries me is that he has moved sharply to the “Rubinomics” wing of his party. He insists that debt doesn’t matter. Bank fraud, junk mortgages and casino capitalism are not the problem, or at least not so serious that more deficit spending cannot cure it.

Criticizing Republicans for emphasizing structural unemployment, he writes: “authoritative-sounding figures insist that our problems are ‘structural,’ that they can’t be fixed quickly. … What does it mean to say that we have a structural unemployment problem? The usual version involves the claim that American workers are stuck in the wrong industries or with the wrong skills.”

Using neoclassical sleight-of-hand to bait and switch, he narrows the meaning of “structural reform” to refer to Chicago School economists who blame today’s unemployment as being “structural,” in the sense of workers trained for the wrong jobs. This diverts the reader’s attention away from the pressing problems that are really structural.

The word “structural” refers to the systemic imbalances that neoclassical economists dismiss as “institutional”: the debt overhead, the legal system – especially bankruptcy and foreclosure laws, regulations against financial fraud, and wealth distribution in general. In 1979, for example, I juxtaposed economic structuralism to Chicago School monetarism in my monograph on Canada in the New Monetary Order. I have elaborated that discussion my textbook on Trade, Development and Foreign Debt (new ed. 2010). The tradition is grounded in the Progressive Era’s reform program. That is what classical political economy was all about – and what the neoclassical reaction sought to exclude from the economic curriculum. From the neoclassical writers through Rubinomics deregulators, the debt problem simply disappears.

So this is getting serious. I realize that it is more difficult to criticize someone for an error of omission than for an error of commission. But the distinction was erased a month ago when Mr. Krugman got lost in the black hole of banking, finance and international trade theory that has engulfed so many neoclassical and old-style Keynesian economists. But last month Mr. Krugman insisted that banks do not create credit, except by borrowing reserves that (in his view) merely shifts lending savings from wealthy people to those with a higher propensity to consume. Criticizing Steve Keen, who has just published a second edition of his excellent Debunking Economics to explain the dynamics of endogenous money creation, he wrote:

Keen then goes on to assert that lending is, by definition (at least as I understand it), an addition to aggregate demand. I guess I don’t get that at all. If I decide to cut back on my spending and stash the funds in a bank, which lends them out to someone else, this doesn’t have to represent a net increase in demand. Yes, in some (many) cases lending is associated with higher demand, because resources are being transferred to people with a higher propensity to spend; but Keen seems to be saying something else, and I’m not sure what. I think it has something to do with the notion that creating money = creating demand, but again that isn’t right in any model I understand.

Keen says that it’s because once you include banks, lending increases the money supply. OK, but why does that matter? He seems to assume that aggregate demand can’t increase unless the money supply rises, but that’s only true if the velocity of money is fixed…

But “velocity” is just a dummy variable to “balance” any given equation – a tautology, not an analytic tool. As a neoclassical economist, Mr. Krugman is unwilling to acknowledge that banks not only create credit; in doing so, they create debt. That is the essence of balance sheet accounting.

Mr. Krugman then doubled down on his assertion that bank debt creation doesn’t matter. People decide how much income they want to save or how much to borrow to buy goods that its stagnant wage levels no longer are enabling them to afford. Everything is a matter of choice, not a necessity (“price-inelastic” is the neoclassical euphemism):

First of all, any individual bank does, in fact, have to lend out the money it receives in deposits. Bank loan officers can’t just issue checks out of thin air; like employees of any financial intermediary, they must buy assets with funds they have on hand.

So how much currency does the public choose to hold, as opposed to stashing funds in bank deposits? Well, that’s an economic decision, which responds to things like income, prices, interest rates, etc.. In other words, we’re firmly back in the domain of ordinary economics, in which decisions get made at the margin and all that. Banks are important, but they don’t take us into an alternative economic universe.

As I read various stuff on banking — comments here, but also various writings here and there — I often see the view that banks can create credit out of thin air. There are vehement denials of the proposition that banks’ lending is limited by their deposits, or that the monetary base plays any important role; banks, we’re told, hold hardly any reserves (which is true), so the Fed’s creation or destruction of reserves has no effect.

“Your money or your life” is what banks mean when they say, in effect, “Take out a mortgage or go without a home,” or “Take out a student loan or go without an education and try to get a job at McDonald’s.”

This blind spot with regard to debt derails Mr. Krugman’s trade theory as well. If Greece leaves the Eurozone and devalues its currency (the drachma), for example, debts denominated in euros or other hard currency will rise proportionally. So Greece cannot leave without repudiating its debts in today’s litigious global economy. Yet Mr. Krugman believes in the old neoclassical nonsense that all that is needed is “devaluation” to lower the cost of domestic labor. Costs can “be brought in line by adjusting exchange rates.” the problem is simply exchange rates. That will reduce labor’s cost and other domestic costs to the point where governments can export enough not only to cover their imports, but to pay their foreign-currency debts (which will soar in depreciated local-currency terms).

If this were the case, Germany could have paid its reparations debt by de
preciating the mark in 1921. But it did – a billion-fold, and even this did not suffice to pay. Neoclassical trade theorists just don’t get this.

Blindness to the debt issue results in especial nonsense when applied to analysis of why the U.S. economy has lost its export competitiveness. How on earth can American industry be expected to compete when employees must pay about 40 percent of their wages on debt-leveraged housing, about 10 percent more on student loans, credit cards and other bank debt, 15 percent on FICA, and about 10 to 15 percent more in income and sales taxes? Between 75 and 80 percent of the wage payment is absorbed by the Finance, Insurance and Real Estate (FIRE) sector even before employees can start buying goods and services! No wonder the economy is shrinking, sales are falling off, and new investment and hiring have followed suit.

How will the government running a larger deficit cope with today’s dimension of the debt problem – except to enable states and localities to spend marginally more revenue and avoid further layoffs, while the military industrial complex steps up its “Pentagon capitalism”?

This is the problem not only the United States but also in Europe. Germany balks at bailing out Greece until it will streamline its bloated government and inefficient bureaucracy, stop tax evasion by the wealthy, clean up corruption and, in a word, be more Germanic. The U.S. “Austerian” budget cutters whom Mr. Krugman criticizes likewise can point to wasteful government spending, failing to distinguish positive infrastructure investment from “roads to nowhere” promoted by Congressional earmarks to the tax loopholes inserted by politicians whose campaigns are sponsored by special financial interests, real estate and monopolies.

But I fear that Mr. Krugman is being drawn into the gravitational pull of Rubinomics, a dark Democratic Party hole from which the light of clarity dealing with the debt issue and bad financial and legal structures simply cannot escape. The only variables he admits are structure-free: The federal government can spend more, and interest rates can be lowered (especially on mortgages) so that the higher debt overhead can be afforded more easily. No need to write it down. That extreme a structural solution lies outside the scope of his neoclassical economics.

The problem is that bank debt creation plays no analytic role in Mr. Krugman’s proposals to rescue the economy. It is as if the economy operates without wealth or debt, simply on the basis of spending power flowing into the economy from the government, and being spent on consumer goods, investment goods and taxes – not on debt service, pension fund set-asides or asset price inflation. If the government will spend enough – run up a large enough deficit to pump money into the spending stream, Keynesian-style – the economy can revive by enough to earn its way out of debt.”

That is the problem with neoclassical economics. It brainwashes students to treat all activity as current spending and consumption. Debt is left out of account.
Without recognizing its role, on cannot see that what is preventing American industry from exporting more is the heavy debt overhead diverting income to pay Finance, Insurance and Real Estate (FIRE) expenditures. How can U.S. labor compete with foreign labor when employees and their employers are obliged to pay such high mortgage debt for its housing, such high student debt for its education, such high medical insurance and Social Security (FICA withholding), such high credit-card debt – all this even before spending on goods and services?

In fact, how can wage earners even afford to buy what they produce? The problem interfering with the circular flow between producers and consumers (“Say’s Law”) is not “saving” as such. It is debt payment. And without writing down debts, the U.S. economy will shrink just as will those of Greece, Spain, Portugal, Italy, Ireland, Iceland and other countries subjected to the Washington Consensus of neoliberal austerity.

The Yes Lab is a is brainstorming/training effort associated with the Yes Men to help activists subject people in positions of influence to well deserved ridicule. Aquifer highlighted their latest project, which was infiltrating an award ceremony for a trade group in Dallas and bestowing their own prize.

Unfortunately, it looks like the police intervention interfered with the best parts being captured on tape.

This part (from in the press release) describes the part not recorded (with some overlap for continuity):

The crowd of negotiators and corporate representatives applauded, and “Haversall” continued: “I’d like to personally thank the negotiators for their relentless efforts. The TPP agreement is shaping up to be a fantastic way for us to maximize profits, regardless of what the public of this nation—or any other nation—thinks is right.”

At that point, the host of the reception took the microphone back and announced that the evening’s formal programming had concluded. But Mr. Haversall confidently re-took the microphone and warmly invited Kirk to accept the award.

Kirk moved towards the stage, but federal agents blocked his path to protect him from further embarrassment. At that point, a dozen well-dressed “delegates” (local activists, some from Occupy Dallas) broke into ecstatic dance and chanted “TPP! TPP! TPP!” for several minutes until Dallas police arrived.

Fifteen minutes later, another dozen interlopers from Occupy Dallas interrupted the reception with a spirited “mic-check.” Outside, activists projected a message on the hotel, and throughout the night, delegates discovered that hundreds of rolls of custom toilet paper had been installed in the conference venue.

And this was the objective:

The activists disrupted the gala to protest the hijacking of trade negotiations by an extreme pro-corporate agenda. “The public and the media are locked out of these meetings,” said Kristi Lara from Occupy Dallas, one of the infiltrators. “We can’t let U.S. trade officials get away with secretly limiting Internet freedoms, restricting financial regulation, extending medicine patents, and giving corporations other a whole host of other powers allowing them to quash the rights of people and democracies, for example by offshoring jobs in ever new ways. Trade officials know the public won’t stand for this, which is why they try to keep their work secret—and that’s why we had to crash their party.”

Frankly, so many corporate events are boring, self-important, and in thrall to bad ideas or narrow interests that the more derision, the better. I hope we see a lot more of this sort of thing.

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010). Jointly posted with Roubini Global Economics

The half-life of solutions to Europe’s debt problem is getting ever shorter.

Recent hopes have relied on the ostensible success of the European Central Bank’s (“ECB”) LTRO – Long Term Refinancing Operation, more appropriately termed the Lourdes Treatment and Resuscitation Option. In December 2011 and February 2012, the ECB offered unlimited financing to European banks at 1% for 3 years, replacing a previous 13-month program. Banks drew over Euro 1 trillion under the facility – €489 billion in the first round and €529.5 billion in the second. Participation amongst European banks was widespread, especially in the second round where around 800 banks used the facility.

The funds borrowed were used to purchase government bonds, retire or repay existing more expensive borrowings and surplus funds were redeposited with the ECB. The first entailed banks borrowing at 1% purchasing higher yielding sovereign debt, such as Spanish and Italian bonds that paid 5-6%. This allowed banks to earn profits from an officially sanctioned carry trade – known as the Sarko trade after the French President.

The LTRO provided finance for both beleaguered sovereigns and banks, which need to raise around €1.9 trillion in 2012. It helped reduce interest rates for countries like Spain and Italy. It also helped banks covertly build-up capital, via the profits earned through the spread between the cost of ECB borrowings and the return available on sovereign bonds.

The LTRO was very clever, effectively monetising debt (printing money) without breaching European Treaties or the ECB’s charter.

The sheer weight of money – at one €500 note per second it would take 63 ½ years count €1 trillion- proved successful. Financial market sentiment was overwhelmingly positive feeding a large rally in global stock markets and other risky assets.

As subsequent events have exposed, there were always reasons to be cautious.

The LTRO facility is for 3 years. It assumes that the conditions will normalise within that period. It is not clear what happens if that is not the case.

Economist Walter Bagehot advised that in a crisis central banks should lend freely but at a penalty rate and secured by good collateral. The ECB does not appear to have quite understood Bagehot’s commandment. The rate is below market rates, amounting to a subsidy to banks. The ECB and Euro-Zone central banks have loosened standards, agreeing to lend against all manner of collateral. In effect, the ECB is now functioning as a financial institution, assuming significant credit and interest rate risks on its loans.

If the European Financial Stability Fund (“EFSF”) was a Collateralised Debt Obligation, the ECB increasingly resembles a highly leveraged bank.

The ECB balance sheet is now around €3 trillion, an increase of about 30 percent just since Mario Draghi took office in November 2012. It is supported by it own capital (scheduled to increase to €10 billion) and the capital of Euro-Zone central banks (€80 billion). This equates to a leverage of around 38 times.

Critically, the LTRO cannot address fundamental issues.

It does not reduce the level of debt in problem countries, merely finances them in the short-run. Europe is relying on its austerity program to reduce debt. As Greece demonstrated and Ireland, Portugal, Spain and Italy are demonstrating, massive fiscal tightening when combined with private sector reduction in debt merely puts the economy into recession. As public finance deteriorate rather than improve, it results in an increase not decrease in public debt.

Ultimately, it may be necessary to go Greek. Debt restructuring may be needed to achieve the required reduction in the public borrowings for many countries. Interestingly, financial markets price the risk of a Spanish debt restructuring at around 30-35%.

The LTRO does not improve the cost or availability of funding for the relevant countries beyond an immediate short term fix..

Government bond purchases financed by the LTRO artificially decreased the interest rates for countries, such as Spain and Italy. Unless additional rounds of LTRO are offered, interest rates are likely to return to market levels.

The real increase in liquidity available to support sovereign borrowings was lower than €1 trillion. Perhaps only one third of the LTRO loans and maybe as little as €115 billion were directed to this purpose. Banks used the bulk of funds to repay their own borrowings. As debt becomes due for repayment through the year, banks may need to sell sovereign bonds purchased with the funds drawn under the LTRO. Unless market conditions normalise and banks regain access to normal funding quickly, this will place increasing pressure on sovereign funding and its cost.

With European countries facing heavy refinancing programs in 2012 and beyond, the ability to raise funds at reasonable rates remains important. Existing bailout programs assume countries like Portugal and Ireland will be able to resume financing in money markets normally from 2013.

Events complicate the ongoing commercial financing of European banks and sovereigns. The need for collateral to support ECB funding makes other investors de facto subordinated lenders, reducing their willingness to lend or increasing the cost. In the Greek restructuring, European Central Banks and official institutions were exempted by retrospective legislation from loss while other investors suffered 75% writedowns. This has reduced investor willingness to finance countries considered troubled.

European banks already have large exposures to sovereign debt, which has increased since the start of the LTRO. Spanish banks are thought to have purchased around €90 billion, a jump of around 26% to €220 billion. Italian banks are thought to have purchased €50 billion, a jump of 31% to €270 billion.

Similar rise in government bond holding have occurred in Portugal and Ireland. As interest rates on these bonds have increased, buyers now have large unrealised mark-to-market losses on these holdings.

As with the sovereigns, the LTRO does not solve the longer term problems of the solvency or funding of the banks, which now remain heavily dependent on the largesse of the central banks. It is government sponsored Ponzi scheme where weak banks are supporting weak sovereigns who in turn are standing behind the banks – a process which can be best described as two drowning people clinging to each other for mutual support.

The LTRO has not materially increased the supply of credit to individual and businesses. The money is being used by banks to finance themselves as they reduce borrowings by selling off assets to reduce dependence on volatile funding markets. The LTRO does little to promote desperately needed economic growth in the Euro-Zone.

The initial euphoria faded as a number of concerns re-emerged, manifesting themselves in the form of increasing rates on Spanish and Italian debt which now hover around the key level of 6.00% per annum.

Increasingly poor economic growth figures from Europe pointed to a lack of growth and progress on debt reduction.

Attempts to reduce Spain’s deficit has proved problematic. Both Spain and Italy have deferred balancing their budget in the face of a deteriorating economic outlook. It is unclear which markets fear most -Spain and Italy not achieving its targets through savage spending cuts resulting in higher debt or achieving its target putting their economies into an even deeper recession and increasing debt.

The difficulties faced by Spanish Prime Minister Mariano Rajoy and Italian Prime Minister Mario Monti implementing labour reforms have highlighted the resistance to structural change. Increasing protests in many countries point to the political difficulty in implementing the agreed austerity measures.

The problems of the banking system have resurfaced. Spanish bank bad and doubtful debts have increased, as the Iberian property bubble deflates.

Increased reliance by Spanish and Italian banks on financing from central banks has heightened concern. Spanish bank borrowings from the ECB increased to over €300 billion in March from €170 billion in February. Lending to Spanish banks now accounts for nearly 30% of total ECB lending. Italian banks have also been heavy borrowers, a reminder of the linkage between banks and their sovereigns.

Reluctance to increase the inadequate European firewall sufficiently to deal with potential problems means policy options are limited. At around €500 billion in available funds, the bailout fund is short of the €1 trillion sought by the International Monetary Fund and G-20 or €2-3 trillion thought necessary by financial markets. German leaders have repeated their unwillingness to increase the fund to the necessary size, arguing, probably correctly, that no firewall will be adequate.

Poorly judged and ill-timed comments by ECB President Draghi about the absence of need for further LTRO funding and planning for an exit drew attention to the fragility of the position and ongoing risks. The comments were driven by Bundesbank unease at the ECB’s policy. The market reaction forced Mario Draghi to retract comments about an early exit from emergency funding. As rates continued to rise, Benoit Coeure, the French ECB board member, promoted a new round of direct purchases of Spanish bonds to reduce yields.

The failure of the LTRO to decisively solve European problems is unsurprising. Confidential analyses prepared by European Union officials and distributed to ministers meeting at the Copenhagen meeting in March 2012 concluded that the €1 trillion in loans was a “reprieve”, rather than a solution.

Rather than take the time afforded to move on other fronts, European leaders reverted to type. Spanish Finance Minister Luis de Guindos opined that: “We are convinced that Spain will no longer be a problem, especially for the Spanish, but also for the European Union”. It was eerily reminiscent of his predecessor Elena Salgado who almost exactly one year earlier on 11 April 2011 said: “I do not see any risk of contagion. We are totally out of this”. The optimism was echoed by French President Nicolas Sarkozy who was confident that the Euro-Zone had “turned the page”. Italian Prime Minster Mario Monti stated that the “financial aspect” of the crisis had ended.

The European debt crisis is not over. Fundamental problems – debt levels, trade imbalances, problems of the banking sectors, required structural reforms, employment and economic growth – remain.

Beyond the German favoured remedy of asphyxiating austerity to either cure or kill the patient, Europe is rapidly running out of ideas and time to deal with the issues. As the real economy stalls and debt problems continue, the most likely policy actions may come from the ECB – an interest rate cut to near zero and further liquidity support, perhaps even full-scale quantitative easing. Bailout funds may be channelled to recapitalise Spanish banks, as means of helping Spain without resort to a full-blown bailout package.

It is doubtful whether any of these steps will work.

European politicians and citizens want a quick return to a period Spaniards now refer to as cuando pensábamos que éramos ricos which translated into “when we thought we were rich”. Official policies and action are focused on deferring rather than dealing with the problem. Unfortunately, that means the inevitability of meeting the same problem somewhere down the road.

John Maynard Keynes observed in The Economic Consequences of the Peace that each action designed to bring closure to one crisis sows the seeds of greater economic, political and social problems. Europe is living the truth of that statement one day at a time.

The Grey Lady has an amazingly detailed, must-read account of corruption at the highest levels of Wal-Mart. In 2005, Sergio Cicero Zapata, a lawyer who had been with WalMart in Mexico for ten years and had resigned in 2004, came forward with a description of his involvement, sanctioned by top executives in Wal-Mart’s Mexican operation, of handing out bribes totaling over $24 million to accelerate the construction of new stores. This activity is a clear violation of the Foreign Corrupt Practices Act.

Even though the Bentonville giant quickly found evidence corroborating the Cicero’s charges, as well as that of a cover-up by the top brass in Mexico, and looked into hiring an outside law firm to conduct an independent investigation, it quickly converted it to a limited review by an internal unit whose main activity was handling shoplifting cases. And lead responsibility for the probe was assigned to the general counsel of Wal-Mart de Mexico, a sure-fire way to assure no tough questions would be asked. Not only was the Mexico CEO who was deeply involved in this program promoted repeatedly after the notification by Cicero, ultimately becoming vice chairman at the parent level, but the current CEO, Michael Duke, had just been installed as the head of WalMart International, was involved in the coverup. The then-current CEO, Lee Scott, criticized the internal investigators for being too aggressive.

A representative section of the account:

Mr. Cicero recounted how he had helped organize years of payoffs. He described personally dispatching two trusted outside lawyers to deliver envelopes of cash to government officials. They targeted mayors and city council members, obscure urban planners, low-level bureaucrats who issued permits — anyone with the power to thwart Wal-Mart’s growth. The bribes, he said, bought zoning approvals, reductions in environmental impact fees and the allegiance of neighborhood leaders..

The Times also reviewed thousands of government documents related to permit requests for stores across Mexico. The examination found many instances where permits were given within weeks or even days of Wal-Mart de Mexico’s payments to the two lawyers. Again and again, The Times found, legal and bureaucratic obstacles melted away after payments were made.

The Times conducted extensive interviews with participants in Wal-Mart’s investigation. They spoke on the condition that they not be identified discussing matters Wal-Mart has long shielded. These people said the investigation left little doubt Mr. Cicero’s allegations were credible. (“Not even a close call,” one person said.)

WalMart informed the Justice Department of the possible (as in probable) violations of the Foreign Corrupt Practices Act only in December 2011, after it got wind of the New York Times investigation.

This is a Murdoch-News of the World level scandal involving a company that is extraordinarily powerful in the US. The Times account is far more damning, detailed, and supported by documents and interviews than the initial releases by the Guardian on l’affaire Murdoch. It also indicates it found evidence of bribery in Mexico beyond those relating to the store expansion, namely, kickbacks from construction companies. It will reveal a great deal about the state of the rule of law in the US as to what sort of investigations and prosecutions result from these revelations.

Read it now. Or you can read the AP’s rewrite here.

Yanis Varoufakis gave an energetic, pointed, and insightful talk at the INET conference in Berlin. His message was that the efforts by European authorities were misguided, in that they were seeking to ringfence individual countries, when it was the Eurozone as a whole that needs to be shored up. And he contends this can be done now without special approvals.

This talk is the antithesis of airy-fairy. For instance, consider these observations at around 5:30:

First, we have to accept that the ECB will not be allowed to monetize the debt, whether we would like it to do so or not, that there will be no EBC guarantees of debt issues of member states. There will not be any ECB purchases of government bonds in the primary market. And there will be no leveraging of the European financial instability mechanism, ah, stability I should have said.

The second major assumption that I wish to make is that again, whether we like it or not, surplus countries will not consent to the issue of jointly and severally guaranteed Eurobonds. For good reason, in many ways. Since the yields, the interest rates that these bonds will fetch will be the weighted average of that which Germany and the Holland on the one hand and Greece and Portugal on the other will achieve, these Eurobonds will have interest rates that will be too high for the surplus countries and and not low enough for the deficit countries.

Thirdly, federation is not the solution. It may be a long-term objective for some of us, but we’re not ready yet, and it should not be an attempt to fix the Euro crisis.

It is worth noting that one of the questions after the various presentations on the Eurozone mess raised the issue of the “democratic deficit”. The various speakers endorsed the idea of getting public approval, but they implicitly or explicitly acknowledged that it would be after the fact. Erm, so since when do you approve a fait accompli?

By Richard Smith, spelunker of the Web.

We started Robert Cowley’s web bio here and this is the second installment. We will be in Mayfair, London, or on the Gold Coast of Australia, and the story involves a dead Daily Mail journalist, a great racing driver, and a bad racing driver: a very bad one, in fact positively wicked. We introduce Cowley’s two pseudobanks, Eaglebanque and Investment Suisse, and trace what we can of two of his scams.

The dead journalist is Nigel Dempster. Here is his obituary and a sample of the man:

Nigel Dempster, who died yesterday aged 65, was the hot-breathed newspaper gossip ace of his day, a punctilious, and latterly careworn, chronicler of marital discord in the moneyed set.

The doyen of his metier for some quarter of a century, Dempster was cocky and plausible, to the extent that Princess Margaret became an acquaintance and informant. Straying peers and medallioned playboys came to fear a call from the dauntless, dapper Dempster.

In county drawing rooms up and down the land his column was indignantly excoriated – yet discreetly devoured. Secretaries and suburban housewives were equally addicted to his daily dispatch from the world of “luxury” yachts, “penthouse” flats and six-figure divorce settlements.
…
At his peak in the 1970s and early 1980s Dempster commanded the largest salary on Fleet Street. His subjects, drawn chiefly from the ritzier enclosures at Ascot and Cowes, were often men and women of the slimmest achievement but Dempster made them stars of faux scandal.

Such was his success that he earned more than some of the plutocrats and noblemen whose love lives he monitored. Yet proximity to the great gamblers and bed-hoppers of the age eventually corroded his spirit, if not his liver. He lost much of his money to bookmakers and by the end of his days his capacity for enjoyment was sadly diminished.
…
His English education gave him enough self-confidence to call strangers “old boy” and to keep (and wear) a large selection of public school ties. If his shoes, like his anecdotes, sometimes seemed too polished, it was because he remained deep-down an Aussie outsider.
…
Dempster contributed for several years to Private Eye, helping to write the venomous Grovel column. Here he gave vent to a far more critical appraisal of the social elite.

For a sample of his work in his declining years, we travel back to the very dawn of time, which, as far as the modern Internet is concerned, is about 2000 A.D.

Sadly, Dempster’s journalism doesn’t appear to form part of the Daily Mail online archive, but, courtesy of a couple of flukes, we can get some idea of a piece or pieces that Dempster wrote for the Mail around the 15th August 2000. The first fluke is another, unfortunately uncommunicative, blogger  who, like me, seems to have a bit of a thing going for Robert Cowley. I can patch up one of his slightly corrupted posts on Cowley’s past to restore something close to Dempster’s original text, which I don’t have:

This morning Annie Hill and her crooner husband Vince, attended by a Bailiff of the High Court, will regain possession of their Mayfair flat on which rent of £56,000 is outstanding.

Annie let the property three years ago to Eaglebanque, which paid her with a series of dud cheques on their branch in Baton Rouge, Louisiana.

‘I don’t expect to find anyone there. The telephone was cut off last week and Eaglebanque allowed a charity called the Foundation for the Arts, Sciences and Humanities to move in. I have been corresponding with a Mr George Russell of FASH but he has moved to Glasgow. Annie says she originally dealt with an Australian calling himself Sir Robert A. Cowley of Eaglebanque Securities Limited and has been to court ‘many times’ to get an eviction order.

When I get an order I negotiate with them and that means I can’t prosecute the order. But tomorrow is the day. I hope I don’t find too much of a mess.’

Via the Sydney Morning Herald’s interest in Australians overseas, and then via the Australian “Insolvency Lawyer” web site‘s interest in dodgy dealings, a closely-related piece of Dempster’s reporting turns up, rewritten:

Making a bad name for the rest of us are the Australian pair in London from the Zurich-based Eaglebanque who have moved into the Mayfair mews residence of the late superagent Dennis Selinger the bloke who handled Peter Sellers, David Niven and Michael Caine.

Selinger’s wife Debra had been having some problems getting access to the £20,000 deposit Sir Andrew Haverford and Sir Robert Cowley were said to have put down on the residence, The Daily Mail’s columnist Nigel Dempster reports.

Sir Robert, whose card also claims he is Robert, Baron Ardwallen and a Knight of the Sovereign Order of Malta, may drive a Rolls Royce, but all efforts by Dempster to verify the knighthood have drawn blanks.

Perhaps he should ask gold bug and futures spruiker, Harry S Schultz, who had a Maltese knighthood. You don’t win them for valour.

The 50-something-year-old pair also, apparently, spend some time doing whatever it is they do in Hong Kong, while Eaglebanque has offices in the USA’s deep south Baton Rouge, Louisiana and Fort Lauderdale, Florida.

Evidently it takes one Aussie outsider (Dempster) to spot the dubiousness of two more Aussie outsiders, Robert Cowley and “Sir Andrew Haverford”. So we’re off to Queensland next, where we find out exactly why these two are hanging out in Mayfair, and why they really should have been good for all that rent money, and the deposit too. From the Queensland State Parliament’s official record of proceedings (Hansard) for 11th December 2001, page 101 in the PDF:

Mr LAWLOR (Southport—ALP) (9.42 p.m.): The matters of which I am about to speak are the result of a two-year investigation by Gold Coast journalist Murray Hubbard and will be printed in detail in tomorrow’s edition of the Gold Coast Sun newspaper. Andrew John Haberfield, who lives in a palatial waterfront mansion at Benowa on the Gold Coast, is behind a major international scam masquerading as a charity called the Hope Foundation.

The Hope Foundation was started on the promise of providing humanitarian aid to poor countries, particularly after a disaster. The foundation intended buying a Boeing 747 and having it fitted out with an on-board hospital to fly into trouble spots as a first-response unit. Although a commendable idea, the reality was quite different.

The foundation acquired a Lockheed Jetstar—a smaller jet similar to a Lear jet—which was fitted out with luxury leather seats and used to take foundation executives on trips and to impress potential victims. Investing on the basis of earning a dividend while practising philanthropy of sorts, some 30 Australian and New Zealand victims lost $6.3 million by investing in the Hope Foundation. That money has disappeared from accounts held in Switzerland and Liechtenstein.

Agents for the foundation promote returns of 10 per cent and 40 per cent per month through their scheme. They unfortunately do not show how, with whom and in what country contributors’ money will be applied. There are no financial statements, no prospectus, no investment statement and, in a short time, no money. Haberfield is said to have personally gained more than $1 million from the scheme. Documents in my possession show authorisations from his business associate Robert A. Cowley, chairman of the board of the Hope Foundation, for money transfers made to Haberfield totalling more than $800,000.

The Hope Foundation has left a trail of debts in the United States, Australia, New Zealand and the United Kingdom. On foundation letterhead he has identified himself as Dr Andrew J. Haberfield and currently purports to be Sir Andrew Haberfield, a Knight of Malta’s Sovereign Teutonic Order. Robert Cowley also represents himself as ‘Sir Robert’.

Another scam is the Millionaires of the World Club, an offshoot of the Hope Foundation. For $20,000, or $15,000 cash, investors are offered a lifetime membership of the club and a promised annual rate of return of 240 per cent. Again, no-one ever sees his or her original investment again, let alone a return.

I am aware of two previous scams by Haberfield, including one in February 1999 when he attempted to set up a V8 racing team with driver Alan Jones and aspiring young driver Darren Pate. The team and racing cars never materialised and a number of suppliers and investors lost money, including Pate, who to this day is still owed $50,000.

In late 1999, Haberfield left Australia with his family for the United Kingdom with the trip paid for by the Hope Foundation. He lived the high life, drove a Rolls Royce and lived in Mayfair. I believe the Major Fraud Squad in London is very keen to speak with both Sir Andrew and Sir Robert.

Today Andrew Haberfield is back on the Gold Coast seeking sponsors and investors for a V8 supercar racing team for the 2002 season. He is working out of premises at the rear of 6 Supply Court, Arundel, and I have it on very good authority that he is failing to pay award wages, superannuation or other entitlements to those working for him.

So we have a little copy edit for the dead Dempster, ten years too late: the name is Haberfield, not Haverford. But there are our two racing drivers: the great Alan Jones, 1980 Formula One World Champion, whose due diligence is not so great, and the crappy fraudster Andrew John Haberfield, who, unperturbed by the Parliamentary allegations, did indeed end up competing in the 2002 Super Touring Cars season, in the Alan Jones team, for that season only, and won no races at all.

If only someone had pointed Jones to the report in the Gold Coast Sun before he ever got involved with Haberfield. If only he had terminated his association with Haberfield at the end of the 2002 season.

By August 2003 at the latest, as we see from the Wayback Machine, Jones has some sort of deal going with Robert Cowley too, via Cowley’s scam vehicle Investment Suisse. The Wayback Machine is slow, but if you give it time, it will retrieve the Investment Suisse page snipped here:

and the Alan Jones Consortium page snipped here (click on it to make it bigger)

Yup: as if Haberfield is not enough, Jones has a connection with Robert Cowley too. This does not bode well for Alan Jones’s finances, at all.

In fact, it looks as if Haberfield worked very quickly: he seems to have cleaned Jones out via AJR Wheels (mentioned above in the Queensland Hansard report) before Cowley followed through on his scam, a variant of the Lockheed Jetstar wheeze also mentioned in the Queensland Hansard. Perhaps Jones was in a very tight spot even before he hooked up with Cowley, because in The Sunday Telegraph (of Australia) text archive, dated June 22, 2003 we find this:

FORMER world champion race driver Alan Jones is fighting off bankruptcy after facing debts of more than $4 million.

The 56-year-old motor sports commentator, who retired from Formula One grand prix racing in 1987, has lived in luxury on the Gold Coast, owning a waterfront home, several luxury cars and four boats, including a $3 million yacht.

It is understood Jones — who won the F1 drivers’ championship in 1980 and is rated as one of the 10 best drivers of all time — sought a Part 10 Deed of Arrangement under the Bankruptcy Act late last year.

Under the agreement, which prevents him from being declared bankrupt, Jones is paying instalments totalling $20,000 a month.

…

Jones had incurred $4.1 million in liabilities, according to a report prepared by Controlling Trustee Jeffrey Crowther, from McCowans Solicitors.

The report shows Jones had assets valued at $2.2 million…

…

In his report, Mr Crowther said: “Mr Jones attributes his present insolvency to some bad business advice and the failure of a business known as AJR Wheels, which he established with a partner.

“The nature of the business was to export aluminium to the Philippines, where it would be turned into wheels and sent back to Australia for sale. He alleges his partner did not uphold his financial responsibility and Mr Jones ended up being responsible for the debts incurred.”

The report said Jones was contracted to a car manufacturer and television network, but with Channel 9 losing the grand prix television rights, his personal income would be about $50,000 for the next 12 months.

“Based on Mr Jones’s personal income, he would not be able to make compulsory contributions, should he become bankrupt”, said Mr Crowther, who recommended creditors accept the deed of arrangement.

Jones declined to comment.

Obviously one doesn’t know, from this account, how much of the AUD4million stuck to Haberfield or Cowley. Some of it, no doubt, and enough to finally cripple Jones financially, evidently. To me “his partner did not uphold his financial responsibility” does sound like an advance payment scam of some kind.

At AUD20,000 per month, the unfortunate Mr Jones might have made some sort of a dent in the ~AUD2Million net debt ten years later, and perhaps there’s been some genius lawyering, or a big upturn in his income. But I suppose he is still out there, slogging away. It is another very sad story, I’m afraid.

Andrew Haberfield, who drops off my radar completely, must still be out there as well. Did he get prosecuted for the Hope Foundation scam? Is he the same guy as the CEO of Super Series Rodeo, a Gold Coast company incorporated only last year? I don’t know. Perhaps some locals are knowledgeable enough, or curious enough, to dig down and enlighten us all.

Robert Cowley is still out there, too. More on him in our next.

By Richard Smith, an inept narrator.

Here is the latest instalment of a shaggy dog story that has so far taken us from Oxford to Mauritius and Cape Town, with a disconnected-looking excursion to Colombia tagged on.

This time, we are heading for Australia first, then Mauritius again, then to Bristol, UK, and returning to Australia. We’ll add an extra sprinkling of the exotic to the itinerary by paying a quick visit to Macedonia, too. One day perhaps I’ll do a Google Earth thingie, with pushpins for all the places, people and scams, so that you can see the whole sprawling picture, but there’s a lot of ground to cover first, so off we go…

R.P. Emery & Associates, PO Box 5197, South Murwillumbah NSW 2484, look exactly like suppliers of cheap (ish) legal documentation to Australians:

Since 1990 RP Emery & Associates have supplied the business community and individuals with professionally drafted, ready-made contract templates.

You can save thousands of dollars by creating reliable legal documents from your home or office computer.

Simply open the document template you wish to use, insert all relevant details in the appropriate spaces, and go to print.

It’s that Easy!

There’s a vast range of different templates that people might want: business sale documents, NDAs, loan agreements, rentals, and so on and on. There’s a bunch of testimonials from happy clients. It all looks rather dull.

At the bottom of the home page it says:

Copyright © R.P.Emery & Associates 2011 All Rights Reserved No portion of this web site may be reproduced in any way or form without express permission of the publisher.

Oops, I suppose the above excerpts count as extracts. But hang it, do you know, in an attack of wanton wickedness, I am going to reproduce several more portions of this web site, in the form of screen dumps, without express permission of the publisher. Have I taken leave of my senses?

This is a snip of R.P.Emery’s home page taken on the 4^th of March 2012:

I’m going to zoom in a bit on the embedded video, which shows, as it were, the public face of R. P. Emery (we’re going to see more of this chap):

Here he is again, same horrific shirt, same tie, same room, different stuff on the shelves, holding forth on commercial property lease agreements:

So why I am interested in this dreary, unidentified Australian lawyer at this dull web shop? And why am I so unperturbed by the prospect of violating R.P. Emery’s prohibition on reproducing anything from their site?

Well, the name of the chap in the videos is Bernie O’Brien, and when he’s not boring the world, with these videos, and making the world feel queasy, with his shirt, he’s running fair-sized international scams.

I don’t think R. P. Emery should be associating themselves with Bernie in any way whatsoever. So I think those videos will simply vanish, though I hope for another, more entertaining outcome, which I will say more about, if it happens: the ball’s in “R.P. Emery”’s court.

Let’s take a look at some of the fallout from one of Bernie’s scams, Discovery Beach.

Here’s a typically furious and typically misspelled, Ripoff Report:

Now for the sake of this report I will call myself Troy. This letter is aimed fair and square at Bernard Brien (BO) of Discovery Beach Australia.

…

I can only say at this point that I am another victim of these rip off merchants, everything that I am going to dot point (and much more) is verified in all of the current rip off reports on your site

1. They ask you to fill out a first stage assessment (FSA)

2. You then get a 30 to 40 page report (looks to be fairly generic) outlining problems that they have discovered in the (FSA). Part 2 of the (FSA) are recommendations on what needs to be done to address these problems. The (FSA) includes one paragraph on how interested they are in your project blaba, blaba!!

3. Then comes the trap!!! They then send you a Strategic Review Analysis (SRA) asking you for an amount of money usually between $20,000.00 and $30,000.00 which they claim will make the relationship work because they are supplying the bulk of the money to make the project ready for investment, they also say that providing that you follow the recommendations, the Discovery Beach Guarantee is that your project will receive funding and it will take 3 to 5 weeks to get the project investment ready

4. Now the bottom line hear is that (BO) wouldn’t know the first thing about how to run a business, let alone start one, or draft a business plan.

After reading the other reports on your site everybody has been Fu*** over using the same tactic, and as the old saying goes done like a dinner how many more people are falling for this, to (DBA) its like taking candy from a baby.

So Bernie pitches business planning mumbo-jumbo, with a hook: a would-be entrepreneur pays a little bit up front to use the business planning software, or whatever it is, sinks a lot of effort into filling in a questionnaire, gets a voluminous response, and then the sunk cost, effort and visible “results” pull the victim into the bigger scam.

Also at Ripoff Report we find a long and not 100% true 2007 sob story from Steven Pitcher, one of the Oxford scammers I posted about here, who, before fleeing to Mauritius to escape his creditors, was, in a splendidly ironic turn, scammed himself, by Bernie:

Relying on their promises, and following their advice to the letter, our existing business, and the new one, MUSOTOPIA, are in ruins, my beloved family are separated (over Christmas as well) and scattered around the world, and we are practically penniless as a DIRECT result of DBA’s inability to stick to their word.

Well, I don’t think it is Bernie’s fault that Pitcher’s Rock Star Lottery (that was his “existing business”: hah!) went belly-up, at all. Nevertheless, some of what Pitcher says about the O’Brien modus operandi is consistent with the other stories.

It seems that Pitcher tries to get his revenge by putting up a site www.bastardswhodontpay.com (now defunct, alas) and taking pops at Bernie there.

Bernie retaliates, he wants us to think, by writing a letter to an Honorary Consul in Mauritius (who happens to be another O’Brien, presumably only distantly related). The letter will no doubt vanish in due course, when Bernie wants to cover his traces a bit better. In it, Bernie complains that Pitcher is hiding from the UK authorities in Mauritius (true), defaming Bernie (that must have taken some effort) and demanding money with menaces from Bernie (perfectly likely: Bernie’s pinched some of it from Pitcher, and Pitcher wants it back). Bernie also claims to have contacted the Australian police and Interpol (relatively unlikely: the last thing Bernie wants is intense police attention).

Scammerfight!

Even if Bernie really did talk to the Consul in Mauritius, or the Australian police, I doubt whether they, or Interpol for that matter, take Bernie all that seriously now, for Bernie has more respectable victims, who really went public. A number of middle-aged would-be entrepreneurs in Australia fell for Discovery Beach, and they managed to get the Australian TV program “A Current Affair” interested enough to stage one of those cheesy doorstepping stunts where the Victims Confront The Scammer. That’s five minutes of Youtube video; it goes out of synch towards the end, but it’s still quite compelling viewing.

Bernie puts in a couple of appearances, looking somewhat less poised than in his R.P. Emery videos, but at least he’s wearing a different shirt…

The gist of it, if you didn’t want to view it, is that 25 people lost AUD3Mn (one Aussie dollar is roughly one US dollar) by handing over up-front fees to Bernie, for which they got in return a two-page business questionnaire each, and a bunch of empty promises, and no refunds. The ones who dived in deeper with Bernie ended up following worthless “detailed instructions” from him, and lost a lot more money.

It didn’t quite stop there either. Bernie franchised his scam overseas. There was a UK Discovery Beach, run by a guy in Bristol, one Christopher David Barrell. It’s the same sort of thing with the same sort of outcome (sorry about the number fluffs, by the confused victim; I daren’t correct them):

After completing the (sra) a strategic review proposal (srp) was sent to us as part of the sra. within the sra there is a considerable amount of information and within this document there is written a guarantee to fund the project that alan burrell, chairman of wisetrack pty limited investments has signed.

The signed guarantee gave us the confidence to hand over £12,000 (australian) $3,2000. this was supposed to be our contribution to the £50,000 needed to start our business on the road to publishing.

thirteen months had passed and we had not received any substantial information including the promised business plan or the promised funding, business leads, backing of ‘key’ people or personnel that is stated in the srp of the dba gaurantee.

Folk seem to be mighty confused about both the Discovery Beach scams. For instance, one chap was ripped off by Chris Barrell in the UK, and finds Bernie O’Brien quite, er, helpful:

I have been dealing with Chris Barrell since the summer of 2007. He was representing Discovery Beach in Australia and professed to be the Master License holder for this company in the UK.

He also introduced me to a very convincing person called Ali Pourtahari who confirmed he was the Master Licensee for Discovery Beach International. I now find that after paying some £15,400 in total to Mr Barrell, he has neither license or ability to perform the promise he made to us which was “Guarantee” funding for our business. Both Mr Barrell & Mr Pourtahari were mentioned in conversation when I spoke with the Australian branch with a Mr O’Brien, and he was candid with his words but hinted that both of these people were misrepresenting the company and were dismissed some time ago.

It now appears that either Mr Barrell or Mr Pourtahari has stolen my money, and whilst the Chairman of the Company has suggested if a pay another £5,000 to him he will deliver where Mr Barrell left off, I am beyond broke now and have no way of finding further funding.

I spoke with Mr Barrell a week before Christmas and he assured me that it was not him who had my money, but passed it to Mr Pourtihari. My feeling is someone is lying and Mr Pourtahari is refusing to call me back despite Mr Barrell assuring me he will forward my details.

I know now I have been conned out of my life savings, who conned me I’m not quite sure. Mr Barrell is the top of my list, with Mr Pourtahari a close second. Mr O’Brien appeared genuine, but not willing to try putting things right without funds first.

Good old feline Bernie, cautiously combining candour with innuendo, and fishing for another upfront fee at the end there, from someone who just wants their money back from the last scam, executed by Bernie’s reps in the UK. I hope the mark didn’t give Bernie even more money. But scam victims do sometimes fall for a follow-up “money recovery” scam, as Bernie knows; which is why he is fishing.

Tip to these very confused victims: Barrell and O’Brien are both crooks. As for Mr Ali Pourtahari, I would ignore his resumé and give him a wide berth, too.

That isn’t quite the end of Bernie. He seems to be quite adept at making himself look respectable. Here he is at a 2009 seminar at the Converga Green Economy Hub (page 2, 14:00). Bernie’s subject is “Making Your Green Idea a Success”. A success for whom, one naturally wonders. At that seminar, he is sharing a public platform with Anne Maree Huxley, CEO of the Aussie green sustainable industry body MOSS, who need a big loud wakeup call about Bernie.

Here is the last page of Bernie’s predictably banal seminar presentation (I will spare you the rest of it), with the names of some more people who could do with a big loud wakeup call.

All of which leads us to Bernie’s next vehicle, Green Planet Management. His LinkedIn profile proclaims him to be an analyst there (and we note that he owns at least three shirts):

Oh, I should have asked the Australian Bar Association to confirm that Bernie O’Brien really is a barrister. It just seems so unlikely.

From Ripoff Report again:

This letter is aimed fair and square at Bernard Brien (BO) of Discovery Beach Australia.

Now calling them selves Green Planet Management www.greenplanetmanagement.com.au

The web site above is just simply a copy of the Discovery Beach (DBA) web site with a few names changed to suite the new name, (DBA) web site I notice is now parked. The only real difference that I can see is that instead of charging $399.00 or 400.00 pounds, (depending upon which country you live in) they are now offering the first stage assessment soft wear for free (FSA) wow!!! what a deal.

From the sound of it, when Discovery Beach was rumbled, Bernie changed the name, but not the scam. Since www.greenplanetmanagement.com.au is no longer a live site either, I imagine the outcome for his clients was the same under the new name.

But it won’t necessarily only be Australian Greens nursing burnt fingers. It may be Macedonians too, and a very embarrassed British Business Group Macedonia, who, in late 2009, put would-be Macedonian entrepreneurs in touch with…Bernie O’Brien:

BBGM launches Investment for Innovation

The British Business Group launched “Investment for Innovation”, a software platform that will help SME’s, start-ups and Entrepreneurs to analyze an idea, its capacity to succeed in a market place and also prepare it in a suitable format for industry partners and venture capital groups and other potential financial investors.

“The platform aims to provide Macedonian entrepreneurs with a unique opportunity to  take their ideas to market confidently and correctly, and by doing so turning their business into a very attractive asset for British or other International companies” said the BBG’s Chairman, Ray Power.

IFI (Investment for Innovation) consists of an assessment system for ideas and business models that will act as a filter to identify those projects with the most potential and then proceed in introducing those ideas to venture capital firms or institutional investors.

Furthermore, IFI gives companies or entrepreneurs a formal channel through which to submit business plans to a network of investors that have specifically partnered with the BBG to receive and review investment opportunities.

The benefit to investment groups and private equity firms is that when using the software or our manual filtering process, a supply of quality proposals are presented ready for review and for initial due diligence.

Investment for Innovation – is being provided in association with Green Planet Management, an Australian group which has used the software and investment process for over ten years.

For more information about IFI please contact us at via our website:  www.bbgm.co.uk

IFI is presumably pronounced “iffy”.

I can’t imagine it went terribly well. The BBGM has been silent about IFI ever since they announced it.

There are plenty of loose ends; but for me that’s almost it with Bernie. He puts in a fleeting appearance in my next, doing a favour for another con man. I’d love to know what he is up to now, two years after the most recent sightings. My thanks to NC commenter Lanny Poffo, who put me onto 4chan; I will take a proper look at it. Maybe that’s the place to find out how Bernie’s getting on.

Next time we start in Australia, and dart back to the UK again. It will be like a badly-conceived fairy tale: we will encounter a great racing driver, and a not-so-great one; a Baron who is not a Baron, an Earl who really is an Earl, a Princess from a country  that doesn’t exist any more, and a Prince, from another imperilled kingdom, who is not a giant lizard; and we will discover that Bradford isn’t necessarily a city in Yorkshire (or in Pennsylvania), or a town in Wiltshire, but can be one of two different villages in Shropshire, too.

After that, it may get more confusing.

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

In France, new vehicle registrations have been plunging. Already down 17.8% in December and 20.7% in January compared to prior year, they sank 20.2% in February. Year to date, the results were even worse than they appear. With 43 selling days in 2012, against 41 in 2011, sales per selling day were down 24.2%. French automakers suffered the most. In February, PSA Peugeot Citroën was down 29.2% and Renault 28.5%.

Last year, the prime à la casse—the cash-for-clunkers à la Française—was doping sales through March 31, 2011. The CCFA (Comité des Constructeurs Français d’Automobile) expects the nosedive to accelerate next month. It also estimates that sales for the entire year will decline by 7-10%, which may be a tad optimistic, given the headwinds France faces.

Layoffs and plant closings will be tough to undertake during the election, as they become highly politicized. Labor Minister Xavier Bertrand issued a stern warning to Philippe Varin, CEO of PSA; layoffs as part of its alliance with GM would be out of the question. Already in November, Varin was summoned by President Nicolas Sarkozy and told to reconsider laying off 6,800 workers.

And layoffs might even be tougher to undertake after the election if socialist François Hollande wins. Last quarter, the French economy lost 31,900 jobs, the first quarterly job losses in two years, and unemployment rose to 9.8%. These trends will put immense pressure on Hollande to do something visible. And for auto manufacturers, it will mean even greater difficulties.

The German auto industry, which is far larger than its French counterpart and plays a disproportionate role in the German economy, is still basking in last year’s glow. Audi, BMW, Daimler, Porsche, and VW just announced record worldwide sales and profits for 2011, and record bonuses for their beaming employees. GM’s subsidiary Opel and Ford’s subsidiary Ford-Werke, however, were struggling in 2011. And now the rest of the industry is getting hit, too. Registrations in January were down only 0.4% due to massive fleet sales. But February was a nightmare: down 30%. The Abwrackprämie, Germany’s cash-for-clunkers, which ran through the summer 2011, might explain part of it. But compared to the last February without cash-for-clunkers, February 2008, sales were still down 15%.

It’s not helping that gas prices are at an all-time record high—$8 a gallon. And for months, manufacturers have been trying to boost car sales with rebates. Even Porsche jumped into the fray. Boxsters for April delivery were offered at a discount of 14% by online dealer www.meinauto.de—possibly the deepest discount ever for a Porsche. At the other end of the spectrum, Opel Astras were offered “up to” 29.9% off retail price. Nosebleed discounts (or rebates in the US), crashing volumes, billowing inventories, and overcapacity are the bane of the car business, and if they occur at the same time, the industry gets into very serious trouble and needs to restructure to reduce capacity.

But layoffs aren’t easy in Germany. Chancellor Angela Merkel got personally involved in protecting Opel factories during the financial crisis and tried to broker the sale of Opel to keep GM from shutting it down. While the deal fell apart, the restructuring agreement survived and prevents GM from closing any plants until 2014. This is the desperate backdrop for the alliance between GM and PSA, a mind-boggling non sequitur: GM lost $15.6 billion in its European operations since 1999 and had to dump or shut down a whole slew of brands and alliances during its bankruptcy—only to now drive down that same cursed road again, but this time with US taxpayer money.

There were other signs of a kink in Germany’s growth trend: tax revenues in January declined for the first time in 17 months. Experts at the ministry of Finance consider it significant that the trend of growing tax revenues was broken and cite as primary reason the economic slowdown late last year. Among the still growing taxes: sales taxes were up a very disappointing 1.3%, after rising 5.5% on average over the last 12 months; and tobacco taxes jumped by 12.2%.

Yet, the German unemployment rate had dropped to a two-decade low and was touted by politicians in the governing coalition, from Merkel on down. And the media hyperventilated about Germany’s superior economic model. But a recreational dive into the Federal Labor Agency’s monthly report for January reveals another, much darker, story. Read….  German Unemployment Obfuscation.

On the other side of the Planet, after an endless stream of horrid reports on the tragedy of the March 11 earthquake and tsunami, and the subsequent nuclear catastrophe in Fukushima, there was something … lighter. And cynical. And in a deeper sense, truthful…. Nuclear Contamination As Seen By Japanese Humor (mostly visuals).

I’m late to the remarkable interview given by ECB president Mario Draghi to the Wall Street Journal. I find the choice of venue curious, since the Financial Times has become the venue for top European politicians and technocrats to communicate with English speaking finance professionals.

But Draghi’s drunk-on-austerity-Kool-Aid message was a perfect fit for the Wall Street Journal. While he wasn’t as colorful as Andrew Mellon’s famous “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” Draghi is still a true heir in believing that his prescription, per Melllon, will result in “High costs of living and high living will come down.” The “high living” that Draghi is particularly opposed to is Europe’s social safety nets.

The bizarre part about that is it is those very programs that kept Europe from being in even worse shape than it is now. I recall in early 2009 that American economic officials were hectoring Europeans, particularly Germans, for not doing enough in the way of economic stimulus. European readers argued that that reflected abject ignorance. Germany provides generous support to idled workers, and that spending was automatic. Germany performed far better than its US critics anticipated.

Not surprisingly, the Journal did not question the notion that democratic governments should take orders from an unelected finance official. But Draghi tried to make his views sound a tad more legitimate by blaming the planned ritual sacrifice as a demand of the market gods.

From the Wall Street Journal:

European Central Bank President Mario Draghi warned beleaguered euro-zone countries that there is no escape from tough austerity measures and that the Continent’s traditional social contract is obsolete…

He said Europe’s vaunted social model—which places a premium on job security and generous safety nets—is “already gone,” citing high youth unemployment; in Spain, it tops 50%. He urged overhauls to boost job creation for young people…

He argued instead that continuing economic shocks would force countries into structural changes in labor markets and other aspects of the economy, to return to long-term prosperity…

“There is no feasible trade-off” between economic overhauls and fiscal belt-tightening, Mr. Draghi said…

Can he really not see what happened in Ireland and Latvia, and what is taking place in Greece? Did he somehow not notice that Greece falls short of its growth targets every time the screws are turned tighter? This is like watching a medieval doctor apply more leeches to a patient that has already passed out from blood loss. There is no prosperity happy ending in this story, save for a very few at the top. And the process is not “belt tightening” but open warfare on basic social structures.

And we have the predictable threat:

“Backtracking on fiscal targets would elicit an immediate reaction by the market,” pushing interest-rate spreads higher, he said.

Um, what has led bond yields to fall is the LTRO, which has taken the concern of bank failures off the table and allows (actually, encourages) banks to take their “trash” collateral and use it to secure LTRO financing. That means banks can engage in a carry trade: buy periphery debt and use it to obtain cheaper LTRO lending. For Draghi to insinuate that the tightening of spreads has anything to do with fiscal targets is dishonest. It has everything to do with the ECB (for the moment, anyhow) supporting the banks and the markets. Investors believe they can rely on the Draghi put.

If the market reaction really were about fiscal sustainability, we’d still here nervous talk about Italy. Its bond yields are still in excess of 5%, and since its growth rate is nowhere near that level, so its debt to GDP ratio will continue to rise. But as long as the ECB stands ready to throw liquidity at any emergency, the markets will remain complacent.

The Journal did include some sane remarks, albeit well into long article:

“He’s just sugar coating the message,” said Simon Johnson, former chief economist at the International Monetary Fund.

“A lot of this structural reform talk is illusory at best in the short run…but it’s a better story than saying you’re going to have a terrible 10 years,” he said.

10? Remember, it’s been more than 20 in Japan. 10 could turn out to be a very good result indeed.

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

The Eurozone debt crisis has frayed a lot of nerves, particularly among Greek politicians, whose country is on the verge of bankruptcy, and German politicians, who no longer trust Greek politicians—they’d misrepresented deficits and debt in order to accede to the Eurozone, and had continued to do so up to insolvency. For that hair-raising debacle of Northern Europe vs. Greece, read…. Firewalls In Place, Markets Ready: Greece Can Go To Heck.

But now another confrontation, far bigger and at the very core of the Eurozone, is shaping up: France vs. Germany, or rather François Hollande vs. the German dictate.

President Nicolas Sarkozy, who’d held his nose and supported the debt-crisis remedies prescribed by German Chancellor Angela Merkel, is under siege. But his dominant opponent, socialist Hollande, has come out forcefully against every paragraph of the German dictate. He wants to push the ECB to buy sovereign bonds more aggressively. He wants to institute Eurobonds to spread risks. He rejects austerity policies and insists on stimulus. And he wants to renegotiate Merkel’s most recent oeuvre, the fiscal-union pact. But Germany is unlikely to compromise. Instead, a few northern Eurozone countries might form a bloc with Germany—a rift that might tear the Eurozone apart.

Though France squeaked by with a positive GDP in the last quarter, Sarkozy’s economic record is blemished. The number of unemployed in December rose by 29,700 from November and by 152,000 from prior year, to 2.87 million, or 4.27 million if the underemployed are included—the highest since September 1999. Youth unemployment is 23%. Job offers on the internet, which had been growing for 21 months straight, dropped in January. Auto registrations collapsed, down 21% in January year over year. Renault sold 25% fewer units and Peugeot-Citroen 15%. Layoffs and factory closures, though politically risky, might be next. France’s trade deficit of €70 billion was by far its highest ever (Germany had a record surplus). All-time high fuel prices are punishing consumers. And Sarkozy, who came to power on a law and order platform, had to watch burglaries jump by 17% in 2011.

Yet, he wasn’t even officially a candidate. Instead, he crisscrossed France as president, showed up at a nuclear power plant, chatted with gendarmes, visited a kindergarten … a mini-scandal because the kids were waving, unbeknownst to their parents. And in the middle of the night, he sought out some homeless people—however that was organized, given the media presence and security detail. His speeches spanned topics from dealing with the pressures on the healthcare system to holding a referendum on whether unemployment recipients should be allowed to turn down job offers. And always, he pointed at Germany as the model for how the French economy should be run.

But Wednesday evening, he sat in front of TF1′s cameras and declared that he would like to keep his job for another five years. It was a popular show, with 10.7 million viewers, the highest number for a TV show since DSK had tried to explain away the sordid allegations of New York.

While none of this helped him against Hollande, it helped him against number three, Marine Le Pen, president of the right-wing National Front, who’d outpolled him last summer. Her father, Jean-Marie le Pen, former president of the FN, keeps making unhelpful headlines. Today an appeals court condemned him to a three-month suspended sentence and a fine of €10,000 for “denying crimes against humanity”—he’d said that the German occupation of France hadn’t been “particularly inhumane.” Hence, Sarkozy’s elimination in the first round by Marine le Pen appears unlikely. But in the second round, as things stand now, Hollande is going to clean his clock.

Merkel’s nightmare. Her government is deeply worried that Hollande might actually try to implement his campaign platform after the election. They also fear that he will clean house at the finance ministry and other institutions and replace the people who have honed their skills during the debt crisis with people who haven’t learned the ropes yet—while the Eurozone is struggling to remain intact.

So Sarkozy and Merkel appear to have made a pact. In return for his support for all of her debt-crisis remedies, she would campaign for him to prevent Hollande from becoming the next President of France. Nothing brought that out more forcefully than their glamorous joint interview at the Elysée Palace, where both lambasted Hollande. Never before had a German chancellor campaigned so hard on French soil for a French president. Read…. Merkel’s Desperate Risky Gamble.

Former banking regulator and white collar criminologist Bill Black gives an unvarnished view of the behavior of Apple and other technology companies in dealing with suppliers in China. He does not buy the idea that the US is powerless to do anything about work condition in China and provides some concrete suggestions.

Wired’s Joel Johnson has written a stunning bit of PR for Foxconn, now-controversial supplier to the consumer electronics industry, duly wrapped in credibility-enhancing guilt over Western materialism.

The article, “1 Million Workers. 90 Million iPhones. 17 Suicides. Who’s to Blame?” pretends to be about Foxconn’s factories. But Johnson admits he’s a tech toy writer who apparently has no knowledge of manufacturing (I know I’ve had only limited contact with manufacturing, yet reading his piece, I’d bet serious money that I’ve seen more manufacturing operations than he has by dint of being a coated paper brat and doing due diligence on some oddball tech deals over the years, as well as visiting a motherboard maker back in the stone ages when motherboards were made in the US). Yet he’s remarkably uninhibited in using his fantasies and abject ignorance as a basis for making sweeping generalizations about the Taiwanese powerhouse. For instance:

In the part of our minds where Americans hold an image of what an Asian factory may be, there are two competing visions: fluorescent fields of chittering machines attended by clean-suited technicians, or barefoot laborers bent over long wooden tables in sweltering rooms hazed by a fog of soldering fumes.

When we buy a new electronic device, we imagine the former factory. Our little glass, metal, and plastic marvel is the height of modern technological progress; it must have been made by worker-robots (with hands like surgeon-robots)—or failing that, extremely competent human beings.

But when we think “Chinese factory,” we often imagine the latter. Some in the US—and here I should probably stop speaking in generalities and simply refer to myself—harbor a guilty suspicion that the products we buy from China, even those made for American companies, come to us at the expense of underpaid and oppressed laborers.

Huh? Is he serious about this? Anyone who has been following China even slightly would imagine Chinese factories aren’t like Japanese car-makers, heavy on robotics, but are mainly labor intensive (with the exception of some sparkling new capital intensive factories where China is trying to go up the value added chain), and if they are in the Pearl River Delta, makers of watches, clothing and toys (hence not much soldering). And if higher tech, the operations HAVE to be pretty to very clean. But no, everyone in the Wired readership is assumed to share his blinkered imagination.

This extract really does serve as a window onto the entire piece, because it is unduly involved in his inner process, and is remarkably ungrounded in reality-vetting. Yes, he did visit a Foxconn factory, on a guided tour organized and led by executives and PR giant Burson Marsteller. That fails the objectivity smell test. Did he try to talk to Foxconn workers outside the factory? Ex Foxconn workers? Apparently not. The only perspective he has outside his guided tour and his noisy imagination is from one Paul, a “steward for Western electronics companies seeking to procure components or goods from one of the city’s thousands of suppliers.” Do you think someone who makes his living connecting Western tech executives to Chinese manufacturers is going to say ANYTHING bad about the biggest fish in the electronics pond?

The piece goes to obvious lengths to soften the perception of the situation. He frames his account in terms of the suicides, when the recent New York Times series on Apple and Foxconn did not focus on those deaths, but the extreme hours and sometimes grinding physical toll (such as workers getting swollen feet from standing and working more than 24 hours straight). So the article skips almost completely over that issue, juxtaposing the seeming niceness of the clean factory he visited versus the deaths, and only very much later gets to the conditions that produced the suicides.

Johnson is quick to claim that the Foxconn suicides are one-fourth the level of that of college students. So even the most attention getting factoid is not so bad, right? Not so fast. The right comparison is not the number of suicides to Foxconn’s total workforce, since only the employees who killed themselves on site are probably the ones that are included in that total. If a worker killed themselves off site, you can be sure it would be attributed to something else (and it would be hard to parse out the causes). Moreover, it is the workers who live on site, who are about 1/4 of all employees, who are subject to the most extreme work hours (the New York Times recounts how they were roused at midnight to meet an Apple production demand). So this means the suicide rate at least as high as that of college students.

And to be apples to apples (pun intended), you’d need to compare suicides at Foxconn to suicides by college students on campus, which would presumably be more closely correlated with the stress of campus life, than of students who were simply enrolled in college. So it is very likely that a more accurate measurement would have Foxconn showing a markedly higher suicide rate than those of college students.

Finally, and I hate to be morbid, but a highly regimented, low privacy environment like Foxconn probably reduces the number of suicides below what you might otherwise observe. You have many fewer options for offing yourself available to you if you are living on site at Foxconn compared to a US college student (I am not making this up: gunshot is out, pills are probably too costly to procure, slitting your wrists actually takes proper technique). And Foxconn now has netting up to prevent jumping off most buildings and presumably also has its guard force on closer watch. That means the suicide rate probably understates the level of stress experienced by the workers who live on site.

He also bizarrely tries to bifurcate the work content, which he makes sound OK but boring, from what critics charge are more than occasional extreme hours, and completely ignores safety problems that add to the Foxconn death count, highlighted in a New York Times article at the end of January:

But the work itself isn’t inhumane—unless you consider a repetitive, exhausting, and alienating workplace over which you have no influence or authority to be inhumane. And that would pretty much describe every single manufacturing or burger-flipping job ever.

Huh? “Every single manufacturing job ever”? Some manufacturing jobs ARE inhumane. Start with the meatpacking industry in the US. But there is a lot of light manufacturing where the work is not highly repetitive, and that is also true in highly capital intensive factories like the paper industry. This “all manufacturing jobs are bad, therefore Foxconn is not so bad” is simply a baldfaced assertion.

Now I am not saying that there is not a case to be made in defense of Foxconn. But this article is an embarrassment. It’s an intellectually lazy way to assuage the guilt of Wired-reading gadget-owners. For instance, he resorts to “everyone in an advanced economy is guilty” as a way of diminishing the issues specific to Foxconn:

Every last trifle we touch and consume, right down to the paper on which this magazine is printed or the screen on which it’s displayed, is not only ephemeral but in a real sense irreplaceable. Every consumer good has a cost not borne out by its price but instead falsely bolstered by a vanishing resource economy. We squander millions of years’ worth of stored energy, stored life, from our planet to make not only things that are critical to our survival and comfort but also things that simply satisfy our innate primate desire to possess. It’s this guilt that we attempt to assuage with the hope that our consumerist culture is making life better—for ourselves, of course, but also in some lesser way for those who cannot afford to buy everything we purchase, consume, or own.

There is a huge, unexamined leap between “things critical to our survival” and those critical to what we have come to define as our comfort. It’s the unwillingness to examine the difference between the two, or any serious question raised by the role of Foxconn, that makes this piece so dubious. (And this is not an idle observation in my case. Your humble blogger fights planned obsolescence tooth and nail: I used a NeXT computer for 10 1/2 years, a TiBook for over 8, and am still using a Nokia that is probably from 2005. I am writing this post using an Apple monitor from 2002).

I find this little chart (hat tip Richard Smith) from ninety9 via Alea (who is the antithesis of a socialist) to be more though-provoking than the entire Wired piece:

There have been numerous articles complaining about how the Chinese don’t consume enough, and the blame is laid on the high savings rate, which is in turn attributed to the lack of social safety nets (and a second, related issue is the lack of retail infrastructure). Yet it was a sonofabitch capitalist, Henry Ford, that helped create the American middle class in 1914 by paying his workers double the prevailing rate, which partly paid for itself by reducing costly turnover and increasing productivity (well paid workers are grateful workers and want to help their company what a thought!). But the big benefit for Ford was the higher wages were in large measure met by manufacturers in other cities, and created a consumer base for Ford’s own big ticket product. It was not safety nets that created higher consumption and greater American prosperity; it was higher wages.

Ford didn’t see his pay raise as a wage increases but as profit sharing. The chart Alea highlighted shows Apple could kick start a revolution in China that would help American companies, including Apple, at comparatively little cost to itself. What stood in the way when Jobs was alive was his monumental ego and his desire to leave a legacy though his products rather than his conduct as an industrialist. And now that he is dead, Apple’s practices are likely to be guided by American short-sightedness and bad incentives for executives of public companies.

By Daniel Alpert, the founding Managing Partner of Westwood Capital. Cross posted from EconoMonitor

While we may be hours away from a partial (and certainly a stopgap) agreement in the talks among the Greek government, the troika and private sector creditors, it is doubtful that a deal will emerge in a fully constructed fashion that will survive its application in the real economy.

It is likely that the only common view amongst participants in the various talks is a desire to try to avoid a disorderly default. Beyond that there is a severe disconnect fostered by parallel realities that seem unable to intersect. Accordingly, a deal that can hold up both in the streets of Greece and in the markets is both illusive and unlikely. Here’s why I think so.

Recently I have had opportunities to meet with and question senior members of the economics establishment within the German government and the broader German intelligentsia. Our meetings were held under Chatham House rules so I can’t name names, but – after several meetings with policy delegations from Germany over the past 60 days – I am prepared to sum up what appears to be the pretty-universally-held German policy position as follows (my apologies if the below evidences some degree of frustration – but these encounters leave me quite chagrined):

• Yes, since 2004 we have been in surplus and have benefited tremendously from debt fueled over-consumption in the periphery.

• Yes, we provided the loans (together with our core partners) to irresponsible borrowers who lacked the fiscal fortitude to protect our money. Shame on us, but we still want our money back (Greece is the only exception we believe we will have to make – and even then, only the private sector will suffer losses).

• Yes, we were a little irresponsible in the early days of monetary union, when the periphery was enjoying the benefits of competitive wages and the global situation was not as unbalanced. But we quickly recognized the error of our ways, remembered that we are Germans and took steps to cut our deficit.

• What you don’t understand is that after we entered surplus and could have shrunk our debt-to-GDP ratio using growth alone, we flogged ourselves with policy aimed at limiting consumption, increasing savings and avoiding a renewed encounter with the dreaded One Hundred Trillion (gr. Billionen) Reichsmark Note inflation we fear every day of our lives (Note: I sometimes jot down how long it takes in conversations with German policy folks before Weimar inflation enters the conversation, along with the aforementioned note). We didn’t have to do this but we did it because we are…well, you know. And during the Great Recession we didn’t just lay off all our workers like you did – we are civilized, we shared jobs (kurzarbeit).

 

 

 

 

 

 

 

 

• And by the way, before you tell us how to handle our periphery, you must remember that you in the U.S. were incredibly irresponsible too and destroyed the entire world economy and now you are obsessed with deflation and are printing money like mad which will, of course, inevitably result in [the dreaded One Hundred Trillion Reichsmark Note inflation we fear every day of our lives].

• Yes, yes, we studied Brüning and the deflation of the early 30′s that you say really brought about the National Socialism that nearly destroyed us and resulted in global horror, but we nevertheless attribute the trouble to the Weimar inflation.

• Don’t blame us for being incredibly productive and economically abstemious, we can’t help it if we make the best cars and everyone wants to buy them. And it is not our fault that the countries of the periphery are unproductive anachronisms that make nothing anyone wants to buy at the prices they want to sell their goods for. OK, we should have noticed the latter before we lent them all the money (and probably should have looked more closely at their books) – but it was the euphoria of European unification that made us do it, we’re only human.

• No full fiscal union, no Eurobonds….don’t even think about it.

• It’s one thing for Bavarians to share their wealth and income with northern and eastern Germany, but you must be kidding if you think we can get our electorate to support sending their money to support slothful southerners.

• We will never permit the ECB to monetize the sovereign debts of its member countries the way you have done in the U.S., the U.K. and Japan. Not only isn’t that the deal we made with each other but it will tank the Euro and result in [the dreaded One Hundred Trillion Reichsmark Note inflation we fear every day of our lives].

• There will be no exiting of any country from the Euro System. The System was only designed as part of a continuum leading to the full unification of greater Germ…uh…Europe.

• But we are not yet in a position to support transfer of national authorities, we Germans are not prepared to surrender national sovereignty (but we really did think that the suggestion for installing an Oberführer to supervise Greece was a nifty idea and aren’t sure why it got people so upset). [Fine, no one really used the word Oberführer]

• Finally, we believe in the written word – in law and in treaty. We can make more promises to each other and – unlike the last two times – we can this time honor them. Why do you doubt that?

All of this ends with a full-throated advocacy of the concept that has become known as “expansionary austerity” which forms the bedrock of German and other core nations’ policies towards the massively over-indebted periphery: Countries that have been irresponsible borrowers need only to demonstrate their fiscal discipline and prudence, reduce their indebtedness and reform their inefficiencies and over-regulation and investment and growth will resume because markets will once again have confidence in the economies of those countries. Yes, there it is…the return of the same confidence fairy that supply-siders hold out as the magic pixie dust that allows economies to fly once more without regard to the adequacy of demand or the competitiveness of a given nation relative to others.

In other words Tinkerbell Economics.

[Tinkerbell] was saying that she thought she could get well again if children believed in fairies….’Do you believe?’ Peter cried.

— The Adventures of Peter Pan, J.M. Barrie

There are many quite practical reasons why “Austerianism” will not work, and countless others have written on the subject at length. For the purposes of this essay I will briefly list three:

1. The continuing presence of several of the GIPSI’s within the Euro System effectively blocks two of the three transmission mechanisms that would otherwise enable those countries to re-balance trade. They can neither devalue their currencies nor, given their membership in the EU, can they restrict trade and take action (which would be highly unlikely anyway) to internalize production.

2. The world in general is fighting over insufficient demand relative to a global glut in the supply of labor, productive capacity and capital. Within the Eurozone, the countries of the core have been the principal beneficiaries of whatever internal and external demand exists. Yes, this results from their superior productivity and manufacturing talents, but – relative to global demand – is substantially enhanced by the weakness of the Euro relative to the value of former or reconstituted core currencies. Even if the German view were to suddenly change relative to ECB monetization, the devaluation would be universal (throughout the zone) and would not re-balance trade amongst the 17 member countries.

3. The core-recommended re-balancing transmission mechanism – internal devaluation (falling wages and prices – to the level of depression if the pixie dust doesn’t work its magic) – is functionally impossible. It is the economic equivalent of ancient bloodletting. Not only does it it result in killing off even more internal demand, but it necessitates a level of austerity that cannot possibly be tolerated by citizens of countries that still enjoy sovereign borders and popularly elected governments, merely to repay foreign creditors. They will simply refuse, at the ballot box or through other means. To believe otherwise is very much akin to believing in fairies.

A colleague of mine, present at one of the above mentioned meetings, likened the German response, to Eurozone realities, to Act II of Richard Wagner’s ring series opera, Seigfried. As Fafner the dragon is awoken from his slumber and warned by the conniving Alberich that the hero Siegfried is on his way to kill Fafner, the fearless dragon dismisses Alberich’s warning and returns to sleep.

The world cannot afford the luxury of sleeping on this. What is at stake here is more than the issue of recovering monies lent to Greece. A very substantial amount of European capital is at stake and plans to recover it by placing the populations of the GIPSI’s under indentured servitude to their creditors are the stuff of fairies and pixie dust.

It is past time to tighten the belt at both ends, recognize the money that has been lost throughout the periphery, recapitalize core institutions and bite the bullet on the secession of the defaulting nations. Sorry Tinkerbell!

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

Recently the Irish Taoiseach Enda Kenny pandered to his base once again by saying that the Irish people are to blame for the current state of their economy due to reckless borrowing undertaken during the boom years. I refer not to his base in Ireland, of course — their opinion has hardly mattered since the election — I refer instead to his base among the international financial community. For it is these people that need Kenny’s confession because it is their economic model that has been proved false by the Irish crisis — and so a mea culpa is needed from the victims so that they can avoid the responsibility that they know they bear.

This little stunt by Kenny made most Irish people spit and a political analyst might wonder what Irish voter would Kenny appeal to after laying the blame on the ‘Irish people’ in the abstract. It was a stupid move by a politician long known for his tactlessness. But it also says something about what the international financial community require of the countries that they have destroyed.

On May 31st 2004, then President of the European Central Bank Jean-Claude Trichet heaped praise upon Ireland for its economic miracle. ““The process of transformation that Ireland began over four decades ago has become a model for the millions of new citizens of the European Union,” he said, speaking at the Irish central bank, “The new Member States of the EU have had to confront economic challenges whose magnitude and long-term importance are similar to those that faced Ireland when you began your work. Thanks to Ireland’s economic success, to which you devoted your life, we can be confident that economic reform works.”

Trichet believed in the Irish model because it conformed to how he, together with the vast majority of other economists and policymakers, understood an economy should work. While we should not go too far into the technical details of this, put simply these commentators missed the massive expansion in private sector borrowing because they did not believe it could have harmful consequences.

Although it is not often spoken about in such terms, the fact is that economies need debt to grow. If we accept as a given that the ability of an economy to produce exports (not to mention find buyers) is limited, the only way in which new money can enter an economy and facilitate growth is by some entity in a given country going into debt.

During the boom years Ireland played by the rules of the neoliberal game. From 1998 to 2004 it ran a roughly balance current account — which means it did not import too much in relation to exports. And as far as the government budget goes Ireland ran a surplus every year from 1998 to 2008 (except for 2003 it ran a tiny deficit). No wonder then that Ireland was the star pupil of the international economic consensus. This was quite literally model behavior.

But with the government not running into debt and imports and exports roughly balanced, where could the new money required for growth come from? Well, obviously the private sector is the only place left — and indeed the new money came precisely and predictably from there. Ireland’s growth, as we were soon to see, relied almost wholly on private sector borrowing and the inflating of a massive housing bubble.

After the international community encouraged Ireland on this path, believing it to be the poster child for a dubious economic ideology, it is the Irish people that are supposed to take the blame for the failure of this policy model.

This is madness, of course. But no one notices. Why? Because they do not speak the language of power and must try to understand things in simple moral terms. Since most of the Irish population do not understand the economic model that was bestowed upon us by international leaders and their representatives in Ireland they must instead seek solace in simple moral arguments.

But why don’t our own patriotic commentariat explain what has happened and absolve the Irish people of their guilt in simple logical terms? Why don’t they point out that these reforms were sanctioned and pushed by the very people that now demand our infinite apologies? Because, quite simply, almost every single person in Ireland today qualified to explain what happened was complicit in pushing this economic ideology. And so to explain to the Irish people what actually happened would be to give them the rope with which to hang the commentariat.

Tragic as this may be, there is at least one saving grace: namely, that the Irish people know something stinks when the likes of Kenny comes out and play-acts his guilt in front of an international audience. There is a general feeling amongst the populace that they have been had. They know that during the boom years they played by the rules handed down from Frankfurt, Brussels and, yes, Davos — and they sense that it is these rules and the lawmen behind them that are to blame for the current mess.