"Lies are like children: they're hard work, but it's worth it because the future depends on them." - Pam Davis

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After rich Frenchmen and affairs, more from the EIU's report:


"A word about morality (Please ignore this section if morality is not your thing)

In 2005-08 about 25,000 rich or very rich men (and they were mostly men) decided they wanted to get even more rich. These 25,000 senior executives in the US, European and global financial sector were earning ("earning" is hardly the appropriate word) $1-2mn a year, some were receiving $5-20mn and a few were raking in $25-100mn. But this was not enough for them; they wanted more. They dragged in their wake several other tens of thousands of their employees in the financial sector. Their greed has led to the great economic and business crash of 2008-10 which will diminish the earnings and welfare of billions of people around the globe. These senior executives ought to be arrested en masse for crimes of "criminal negligence" or "criminal greed". But none of them will stand to account. Not one senior financier has said "Sorry", not one has offered to pay any money back. Financiers will receive billions of euros bonuses for their so-called services in 2008. The fat-cat CEO and CFOs will get away with it and even continue to gain huge amounts of money as they are retained or return to high paying positions in the emasculated financial sector. Tens of millions of people in the developed world will be less well off and have less money to spend on consumption; this will in turn hurt corporate profits. Many people will see the values of their life savings in pension funds diminish by 30-80%. People who retired in the last 3- 4 months will have seen their pension value reduced by 30-40%. Their plans for the future of their golden years are destroyed. The savings they had accumulated in pension funds to pass on to children and grandchildren are no longer there. The children will have to do without. Lifelong dreams and plans are shattered. People will have to work 2-3-5-10-15 years longer. Some people in the rich countries of the world have low standards of living and they will be pushed into genuine hardship. Millions of people will lose their jobs and some will suffer health problems as a result. A few will commit suicide. In the emerging markets, hundreds of millions will see their rise into the middle class and lower middle class halted and postponed for 1-3 years. Many more people in these countries are on the bread line and those who were surviving well on $3-5-7 a day will be pushed back into hardship, penury and starvation. Thousands of people will die in 2009-10 who would not have died otherwise. The total financial cost in bail outs and guarantees is currently running at 6-8 trillion dollars but the opportunity cost to the global economy in lost output and consumption will also rank in further trillions of dollars: all this because a few thousand rich greedy men wanted to be more rich and greedy. It's all seems a bit of a shame.

The FBI is conducting investigations about malfeasance and fraud. Few investigations are underway in the UK or Europe. Why? A small handful of executives may get slapped on their wrist or told to pay fines which will be paid off by director insurance policies.

The trillions spent in bailing out the banks and the trillions of destroyed value could have been used in other ways: 20,000 new schools and 15,000 new hospitals could have been built in the USA and Europe; third world debt could have been eradicated; poverty could have been eliminated in Africa and India, but instead the money is spent cleaning up the mess of 25,000 greedy, stupid men. And the negative impact is two-fold: not only was this money not spent on health and education in 2008 but the crisis will ensure that public spending will be more rigorously assessed by cash-strapped governments in 2009-13 and cut back. The people lose out twice.

Short-selling – a cautionary tale

Adolf Merckle, Germany's fifth richest man committed suicide on Monday 5 January. This is a tragedy for the man and his family. Mr Merckle committed suicide after his business empire crumbled as a result of over-leveraging. But the culminating factor was a corporate loss of a suspected 600mn (borrowed) euros gambling on the share price of Volkswagen. It must be said that Mr Merckle was a greedy, selfish man, as are all short-sellers. He betted hundreds of millions of euros that Volkswagen shares would decline and if they did so, this could become self-fulfilling (the shares fall, they are short sold more, fall more etc), and Volkswagen could have gone bankrupt; tens of thousands of jobs in the company and its massive supply chain could have been lost. Mr Merckle and his short-selling friends didn't care about that. The more the price fell, the more they would win. If 10,000 people lost their jobs after working in companies for 5-10-20 years, then tough luck for them. In any case the stupid German government and stupid German tax payer could dole out billions of euros propping up the company and paying out social security payments for the unemployed.

But having bet against Volkswagen, against the Germany budget and the German people, what did Mr Merckle do when he had lost his hundreds of millions in his gamble? Why, he approached the German government to bail him out of course. Disturbingly the state government gave this 24 hours consideration and then thankfully declined to help. Mr Merckle was then left to the mercies of his commercial bank creditors and the game was up.

Short-sellers do not deserve our sympathy. There may well have been many suicides as result of their actions: Hans Schmidt, auto worker at VW for 25 years, loses his job in January 2009 as a result of the short-selling and then commits suicide. His death would not have made so many headlines...

Governments seem to be unaware that bankers do not rescue economies, they rescue banks. They always want to privatise profits and nationalise losses...

Franklin Delano Roosevelt saved the US economy and society from implosion in 1932-37 with Keynesian policies. But it is less well known that he changed track in 1937 when he followed the advice of more traditional economic conservatives who advocated a tighter budget, more tax increases and less social spending; as a consequence a second slump followed in 1937-39 from which the US economy was only saved by the advent of the Second World War... Perhaps the most damaging pursuit of conservative style policies was conducted by German chancellor Heinrich Bruning who sought to implement a balanced budget, tighter taxes and lower consumption just as Germany plunged into the Great Depression: policies which exacerbated economic pain and helped Hitler to power...

On 12 November 2008 [George Bush] declared, "Big government is bad for America." Then one month later, on 20 December, he said, "If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation of the US automotive industry." Indeed. "Big" government, which is no more than the taxpayers and the people, bailed out the US economy after 9/11 and once again in autumn 2008, when the economy was, on two occasions, within 36 hours of complete collapse."