Travels With A Bike (ePub)

Five years ago Jonas Cleary asked me to write a foreword for "Brothers,

sisters.. with a focus on the socio-economic aspects of the book. As

"Brothers, sisters.. is now republished as a trilogy, he has asked me for a

new, revised foreword to the book or better, an updated one mirroring the

prevailing socio-economic environment relative to what he has written.

In that original foreword I had not only outlined how the then economic

factors determining the world's financial system would inevitably lead to its

collapse, but could do so in a frighteningly short space of time.

I mentioned that seemingly bedrock behemoths from General Motors to

the House of Saud would be swept away in the wake of such a breakdown.

That the only beneficiaries of the AAA rated bonds, then flooding the

financial markets, were bankers skimming fat fees from peddling them, but

otherwise, they were worthless 'paper' puffed up with 'air money'.

These years later, the world's financial system has narrowly escaped - yet

again - from implosion. Those supposedly secure bonds have indeed been

found to be worthless, and General Motors swept into insolvency, as have

many financial institutions, whose gluttony for ever higher profits were

largely responsible for bringing about this latest financial crisis. However, the

prediction I made, and has not - as yet - materialised is fall of the House of

Saud (although it too, is now being buffeted by the storms, unleashed by

jobless graduates, sweeping through the Middle East).

Finance ministers across the world believe that their immediate

intervention in, and assistance to, the financial markets staved off this

impending breakdown. In this they are deluded. It was money, more than

$13 trillion of it - equal to the US's GDP - high-handedly taken from

ordinary peoples' tax payments by those ministers' governments, and

rushed to the outstretched hands of the then desperate, near as destitute

banks, which prevented a worldwide economic collapse.

None of these ministers have acknowledged that their administrations' -

individually and collectively - lax monetary policies and laissez faire attitudes

towards the financial markets were largely responsible for precipitating the

crisis. Nor has there been admission from a single financial institution that

their irresponsible wagering and employees' greed for ever higher

remuneration were also responsible for the near collapse of financial markets.

Since the near breakdown in 2008, and despite politicians' and bankers'

pronouncements to the contrary, nothing of substance has changed. The

sole product of the much vaunted inter-government regulatory oversight of

the banks is the 'Basel III Accord'.

This Accord called on banks to increase their capital reserves and clean

up accounting procedures. Basel III is a beefed-up successor to Basel II,

which banks cheerfully ignored and was itself created in an attempt to stop

banks avoiding the similar tenets of Basel I.

Gallingly for governments, most major banks neglected to comply with

Basel III. Moreover, many of them, or so it appears, also quickly found ways

of circumventing it.

Having handed over so much of their taxpayers' money too bail out the

banks, many governments' treasury cupboards are bare. In increasingly

desperate bids to stave off the consequences of their own wastrel ways, they

have been forced to borrow from the money (bond) markets.

While much of the finance provided by these markets is usually puffedup

leveraged 'air money', interest on the bonds is paid with [taxpayers'] real

money. However, increasing amounts of the sums governments borrow is

not for the benefit of their countries' economies but is spent on paying back

their earlier bond borrowings.

Because most governments are for all intents insolvent, bond markets,

led by banks and rating agencies, exact ever harsher terms on the money

lent. In so doing these markets exercise ever greater power over countries'

economies than do their governments.

Also unchanged by