The Farce - Act I, Scene (God only knows)

A report has highlighted how respectable and solid investment funds from the pension and insurance industries are planning to take the Irish government to court, to seek a reversal on, or even damages for, the governments decision to deeply discount the payments to these funds on sub-ordinated bonds in Irish banks.

We all know by now the crazy situation where our government had agreed to honour all senior bondholders in the Irish banks, but thankfully they have at least decided to not honour 100% of the monies invested by junior debt holders, or those sub-ordinated bondholders from above. Usually these bondholders would slink off into the night licking their wounds, recouping their energies, to proceed onto newer markets. But, considering the ineptitude and naivety of our ruling class in Ireland, they figure in this instance they may negotiate higher remittances, especially with the threat of court cases against the government.

All of this again beautifully highlights our dysfunctional modern relationship with money. If these guys had slinked off, we would never think about them and what they represent in our lives. By speaking up and demanding more they have shone a light on themselves.

We are told they are from trusted and respectable industries like the insurance and pension funds. Obviously commentators think that means we are to treat them better than rich private investors or vulture funds. However they only have money because we, the individuals who make up society, give them money. By investing in our future security, as the pensions and insurance industries promise us, we allow these companies amass massive funds that are then often invested in the bond market to generate vast profits for these companies. Our future security is drawn down when we need an insurance claim or when we retire, monies that are only a fraction of that generated by these companies on their investments in the long term.

As we all know by now the bond market is the main funding vehicle for our countries. Any revenue that is needed over and above taxation from the people is raised in the bond markets. So on one side we have investors needing somewhere to invest, i.e. pension and insurance companies seeking reliable, yet profitable investment opportunities. On the other side we have governments, mainly inefficient and inept, who repeatedly run their economies in deficit and so constantly need extra funding. So as well as paying individual taxation to run a country, our invested monies are also feeding back into our countries to meet the spending shortfalls.

Try explaining that to a six year old. I’m sure they would tell you it is madness. A circulation of money, your money, that is feeding two addictions. The addictions of the investors for fat returns and the addictions of our governance for access to easy credit. Now we can waste vast amounts of energy bemoaning morally bankrupt financial types or we can spew our venom at Muppet politicians but, and here is the crux of it, NOTHING will change. Nothing will change. Let it sink in. Nothing will change. Why? Because whatever legislation is passed to curb the tendencies of those trading in bonds and markets will always be bypassed and superseded eventually. Also no matter how much governance bleats on about change and root and branch reforms, the old inefficient ways will always kick back in.

Surely then we should despair. Throw our hands in the air. Well no we shouldn't, because there is an answer. I am sure too that the six year old would tell us how. STOP giving away our money to these industries. The promise of your future security is being used to trap you into committing your hard earned money. There is another way. Retain your money in your life today, use it to build real security and then you will not need to draw down cash at a later stage of your life. Form local community insurance models that create jobs and build real life enhancing infrastructure to provide services like ongoing free energy. These projects have the added benefit of building strong local communities.

Only when we stop priming these companies with our cash will they start to shrink in size and subsequently start to have less cash available to loan out to governments. Only then will huge profits and bonuses that attract risk takers, stop being paid. More importantly if the cash source is gone only then will our governance learn to balance their budgets and live within their means. You guessed it, only then do they become efficient. That is real effective change.

I’m sure our six year old would also question why it is considered totally acceptable for any Euro zone state to post a budget deficit year on year of 3%, and receive kudos for this. 3% of the Euro zone GDP equals the economy of Austria or Greece for one whole year. So every year the Euro zone is building up debts equal to one of the large countries above. I’m sure he/she would say, "But how do you spend money all the time that you don’t have". Exactly how do you?
It’s not like a huge population spike is coming down the tracks to pay it off. It's accepted and endorsed because it is feeding the two addictions. The only problem then is we, the bill payers, have to run faster and faster on the treadmill to meet these voracious addictions; longer working weeks, longer working lives, more taxes, higher premiums to offset risky losses etc.. etc..
p.s. If they are so respectable what are they doing investing in higher risk sub-ordinated debt? Higher returns in good times, thats why.