Monday, 20 December 2010

It's just not fair (a Ben Hur tale)

Homo economicus: It's just not fair. We have been at sea for two years and have faced almighty storms and attacks from raiding speculator vessels. We have spread the pain on board by flogging the slaves who do the rowing. Just as the other ships draw close we flog them harder and harder indicating that the beats of the hammer will be front loaded in velocity up to the limits of debt slave endurance (on board we like to say that things are manageable). All the time we enchant pari passu pari passu - we are all in this together depositors and bondholders. We would never harm a bondholder in a 1,000 years unless our overlords told us to. And what do our overlords in the markets say? We don't trust you and we don't think that you can bring the ship in.

It's just rotten - having rowed, flogged and done everything to appease the market overlords they treat us with contempt never dropping below 8 beats per minute as shown by these bond spreads. The curve rises every time we inflict more austerity flogging. Data here. What more do you want us to do? We can cut wages even more and stop buying your exports to us? We can export our most talented and best educated? We can offer you smart golf courses in place of ghost estates?

I'll tell you what we will do - we will send more ships and more debt slaves to shock the market further. Instead of a €15bn adjustment, lets go for €30bn. Shock them I say. And we can:
Fire 30,000 public servants
Cut public sector wages to align with those in Singapore
Simply abolish the minimum wage
Contract out hospitals and provide private health insurance to everyone
Raise class size to 40
Sell of the state silver - especially the profitable bits

Reduce welfare to the levels prevailing in the wastelands of inner city Britain - that will incentivise them.

Bet you that is what you are thinking right now o godly markets. And we will never default, never default, pari passu, we will do whatever you order.

(Slí Eile)


Anonymous said...

And you forgot to say we'll wear sack cloth and tar and feather ourselves. But seriously the reason people cannot get motivated to storm the bastille is because they have been worn down over past 3 years and are all too depressed to get the energy to do anything. Chomsky and Bordieu predicted that state of affairs. People so psychologically downtrodden that it seems unsurmountable. Just getting by is a stressor.

Paul Hunt said...

Things must be getting really bad when this site is venturing towards the wilder shores of polemic. Still I expect a rant at the perceived perfidy and omnipotence of markets will warm many progressive-left hearts.

Sovereign bond investors (many of whom invest the savings of millions of ordinary citizens) want to have a solid assurance that the sovereign will be able to pay the coupon on the bond for its term and repay the full face value on redemption. Anything that impairs that assurance increases risk and is reflected immediately in secondary market yields.

In fact, sovereign bond investors and Irish citizens are on the same side in this instance. They believe the burden of bank debt will impair the ability of the sovereign to service sovereign debt. They want the burden of bank debt on Irish citizens to be reduced as much as Irish citizens do.

And they will keep pressing until the EU closes the gap between the fantasy that almost all EZ banks have sufficient equity capital to deal with losses and the reality that quite a few (and particularly those exposed to peripheral bank and sovereign investments) are a long way short of this and will require public funds to recap them adequately.

There is nothing we can expect cheer on the sovereign bond vigilantes.