tisdag 25 oktober 2011

Who should at the end of the day pay the bill?

As a country finds itself unable to cope with a debt burden and in order then to get its house in order there are basically only these four options awailable:

- Austerity. The debt burdened country lets its citicens take the hit. Resulting in all important assets in the country e.g. electricity company, infrastructure etc transfered to private interest whilst at the same time reducing the standard of living for all taxpayer as a combination of increased taxes and reduced services gets the economy in a down ward preassing vortex of missery and negative GDP growth. By the way this is a great way to get real worth to a dead cheap price as deregulation and sell of of public assets is the main way to finance the debt.

- The debt is written off and the banks lending out the money takes the hit. As a result the banks worth might be significantely reduced and in some cases may not be able to survive without the injection of tax payers money. Then either of two options are availlable: let the bank go under or nationalise the bank thus the private owners of the baks takes the hit. Thus far no bank has had to take any losses. If fact new accounting measures has been implemented since 2008 allowing the banks to book assets in their books not at market value but at a fictisiouse "booked" value - thus hiding the real losses.

- The bond holders (primarely large banks) takes the loss

- the tax payers in the country bailing out another debt burdened country takes the hit. Resulting in hiked taxes and reduced standard of living in that country. The implementation of EFSF (by the way via un parlamentaric means) is a way to try politically manouver so that this may be possible what othervice taxpayers 100% are opposing).

In this assymetric world of risks where not only all the pain so far has been taken by a combination of austerity and financial "aid" from other counties taxpayers and where banks are allowed to not only not take the hit but are protected via manipulative and fictisiouse new accounting rules one can but wander how ANYBODY in their right mind can argue how not special economic interest rules the world and sets the agenda.

The end result so far - ALL whats worth anything is now transfered to private hands and all that the taxpayers are left with, in debt burdened as well as initially not debt burdened countries, are the losses and reduction of services and standard of living.

What instead is needed is austerity for the financial sector. Off with their heads.

Geopolitical Update - The Impact on Investments April 2011

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