Tag Archives: loan

Off topic: economics, fear and loathing.

22 Jun

Just so you know: I’m creating a new category with this post because there’s only so many times I can repeat the same, very simple, message without boring you to death. Yeah I know there’s a lot of different ways to tell it, but in the end it’s the same point.

Besides; I’d like to write about larger things in the world that are indicative of the smaller problems we face without having to, badly and awkwardly, tie it back in to the main point of this page. The point is always there, you just have to look for it.

Like a hawk…a sexy, sexy hawk.

Anyway, banks. I was watching a programme about the rise of the drug trade a few days ago, when I heard something interesting. I had heard it before, and knew the process well- seeing as I’m pretty sure I smoked a mix of rubber tyres and plastic a fair bit in my day- but this was the first time I realised it applied to something else.

The banking collapse around the world, and particularly in America, happened because mortgage companies packaged the bad debts with a bunch of good ones, then sold them off to investment companies. To break it down, here’s how it went:

– family on low income want a house but can’t get a mortgage. Because of good markets around the world, loan companies and banks start giving credit free and easy based on the assumption that, well, shit’s never been so good!

-Banks then, in an effort to create some easy money, package one bad loan with a chunk of good loans and sell it off for instant cashmoneymoney. This is appealing to investment companies, many of them pension funds and the like, who figure  if things go wrong then their loss from the bad loans will be covered by all the good ones.


-Banks, investment funds and economic institutions realise that, rather than some of the loans being good and foolproof, they’re all bad when packaged together seeing as they all rely on each other for their value.

Simple enough? sure is (…I’m no economist though, so don’t quote me on that). What does this have to do with drugs? Everything.

– Man buys kilo of heroin,then cuts said kilo of heroin with chalk because he wants to capitalise on his investment, and double his money.

-customers figure its doing them good, because pure heroin has a reputation for being very dangerous when taken on it’s own.


-people realise that, wait a minute, it’s all bad! Even when something that’s seemingly good, in a certain contex: chalk, is cut with the bad it gets spoiled, resulting in people getting allsorts of health problems because of it.

Business models are notoriously easy to transfer from one discipline to another, and the ancient art of cutting the product is no different. Of course no one would ever admit that it was the same thing, god no.¬† This might also be one of the reasons things went to hell in the first place: If you think of a mixture of Heroin and chalk, you only think of that bad- the Heroin. Doesn’t matter how good the chalk is, it’s mixed with Heroin! Apply that same logic to an investor shitting his pants: Good loans mixed with a few bad? Doesn’t matter, I don’t want the bad!

There’s been a lot of hoo-ha about Greece in the past few days, because they need another bailout to keep the country running. Me? I’ve got absolutely no problem with Greece needing a bailout, none at all. What I do take offense to, is the word ‘bailout’.

A bailout is something you do for your friend who’s penniless and needs to feed his children. He needs to keep them alive and healthy? give him money, just give it to him. You don’t however, attach all sorts of terms and conditions to this bailout, because then it becomes a loan. A loan, plain and simple. Not a bailout, a loan.

If those terms and conditions dictate that your friend must…

A: tax his children on everything from food and board to education, denying them a good chance to grow into mature adults who can help alleviate their father’s plight.

B: tear down a few supporting walls of his house, only so that they can then be rebuilt by a private company at twice the cost (and he must be happy about this, naturally. No complaining allowed when it’s a bailout: You’re doing him a favour after all)

C: pay you back at the equivalent of his total yearly salary (providing he finds a way to make a decent living, somehow) plus the same in interest over the next seven to ten years

or D: accept the debt created by his, non rent-paying food-eating beer-drinking, friends as his and his alone.

Well then… I smell a shark.

…and a blind hobo. Who took fourth place in the national chalkshark finals.

One of the main reasons all this contributes to a mad mad world, is that we here in the west have fallen so in love with privatisation, cost cutting and outsourcing (to the East, mainly) that we have nothing to trade anymore, leaving us to rely on devious banking methods to create our wealth.

It’s a lot harder to predict what will happen to your money when you ring up Vegas and drunkenly shout down the line “Put it all on a fat man wearing a fur coat walking through your hotel lobby at exactly 10:15 during the summer solstice”, and a hell of a lot harder to control when someone else then says “NO! I wager he’ll be wearing high heels!” and you then have to reasess and revalue your original bet and compensate for it. (this is starting to sound like nonsense: sorry, but it’s hard to boil down the worlds financial system into a single sentence…I think that’s pretty close anyway)

Actually, the Vegas thing rings true. If you want to get a decent idea of the mindset of a financial employee, either watch or read ‘Fear and Loathing in Las Vegas’.

We can’t stop here, this is VAT country.

My point? we’ve got nothing to trade anymore. Privatisation, and the ‘magnificent’ economic system we have today destroyed the coal mines (and the unions) in England during the 80’s, leaving england without any exportable natural resources to make money money make money money. The car industry in America was shipped off to Asia because of cheaper labour, leaving the country without a decent industry to call its own.

Of course America has full access to a host of oilfields…but they’re in the hands of private companies. Here in Ireland, we could use our oilfields to wipe out our national debt within ten years and get out country back on track…but it doesn’t belong to us. It belongs to shell (another long story, I’m sorry about this I really am).

What does that mean? well, when you’ve got nothing to trade and no proper industry to create wealth from, you tend to make money by betting on other people’s money and invisible products, then hang on to it for dear life when you get it. Sadly.

If you’d like to actually understand what’s going on with the European Union, the International Monetary Fund, our current economic model and the countries involved, I highly suggest you read ‘The shock doctrine’, by Naomi Klein. It’s an invaluable tool for understanding the world.