Fungibility .. The Demise of the Labour Party

March 29, 2013

English: Dependency Network of financial data,...

English: Dependency Network of financial data, for 300 of the S&P500 stocks, traded between 2001-2003. Stocks are grouped by economic sectors, and the arrow points in the direction of influence. The hub of the network, the most influencing sector, is the Financial sector. Reproduction from Kenett et al., PLoS ONE 5(12), e15032 (2010) (Photo credit: Wikipedia)

Part 1

One is reminded of the Trojan Horse of the Trojan Wars:

“The Greeks pretended to sail away, and the Trojans pulled the horse into their city as a victory trophy. That night the Greek force crept out of the horse and opened the gates for the rest of the Greek army, which had sailed back under cover of night. The Greeks entered and destroyed the city of Troy, decisively ending the war”(1)

Following Ireland’s meltdown, the EU, the IMF and the ECB were presented with a unique problem: There was a danger to bondholders in European banks. It would be unseemly to close a bank such as Anglo, the world’s worst bank. Senior bondholders would be protected. Instead of loan write-down vast unpayable loans would be levied on Ireland, its economy and democracy would be reduced to serfdom.

It would be necessary to sell a deal to the Irish to protect European interests. It was decided to do so at the expense of Irish taxpayers. This ‘bailout’ would be Ireland’s Trojan Horse. Ireland’s politicians were weak both in terms of their knowledge of economics and they had no wish to stand up to the ECB.

In Ireland there were many compliant politicians enamoured with ECB and membership of EMU whose vanity would be susceptible to getting a Trojan bailout protecting the financial sector, banking interests, bondholders. All the better if you can persuade Irish politicians the deal on offer is a method of bailout that will save Ireland and return it to prosperity…fools rush in where angels fear to thread. Enter the Labour Party.

The scene was set for a propaganda war that continues to now with Labour still in the wake of the Meath by-election result still extolling its own virtue in stepping in for Ireland to gain a successful bailout that will return this economy to stability and viability.

In spite of propaganda black white to the contrary, voters see in their take-home pay, their austerity taxes, what Labour cannot see, financial ruin lies ahead for many while services in education/health and security deteriorate rapidly. The financial sector is protected at expense of leading taxpayers to destruction.

Into this Trojan Horse jumped many politicians including Eamon Gilmore, Brendan Howlin, Michael Noonan, Enda Kenny. In the shadows others such as Peter Sutherland, John Bruton, Professor Honahan of the Irish Central Bank none of home suit the role of Odysseus in this tale.  Few warned  the Irish people to beware of Greeks bearing gifts. Fools rush in…..

As austerity is currently devastating and ruining the Irish economy, the crew of the Irish Trojan Horse are still blindly trying to sell to us the notion the bailout for Ireland along with negotiations subsequent to it, is evidence of the Labour party’s efforts to save Ireland from ruin.

Others believe, if the evidence of Cyprus is anything to go by, with senior bondholders in Cypriot banks burning, closure of banks in Cyprus on the cards, that compared to Cyprus and/or Greece, Ireland was sold a pup of a deal…

The result of the Meath by-election has been a  devastating result for Labour  with Labour suffering a humiliating result,  the party’s candidate Eoin Holmes running in fifth with just 1,245 votes, 5% of the valid poll.

The result was a success for Fine Gael capitalising on a large sympathy vote for their candidate Helen McEntee.

I would like to draw your attention to some interesting parallels beyond the obvious question over the better deals dealt to Cyprus and to Greece compared to the penal laws exacted by our erstwhile bendable, adaptable, easily led, intellectually challenged in economic matters, economic saviours in The Labour Party.

Part 11

Financial sector should have a one to one relationship with the real economy. When confidence is lost in the financial sector(2) eg the possibility and probability of sudden and sometimes unpredictable events rises. For example, Wall Street Crash on Black Monday followed by Black Tuesday, see changes in the DOW here:

Date Change % Change Close
October 28, 1929 −38.33 −12.82 260.64
October 29, 1929 −30.57 −11.73 230.07

We have entered the territory of sudden and unpredictable financial events in the EMU. The crisis is not ending, its beginning; Spain, Italy, Greece, Portugal, Ireland, Cyprus are huge icebergs breaking away from the euro.

It’s due to global warming, toxic gasses in the financial sector that have been bubbling away unimpeded since 1970 with the creation of derivatives, toxic instruments of mass destruction, currencies running on confidence alone, free lending to the outer core by the inner core economies of the EMU.

Instead of a real European Union built on a strong economic foundation the EU is foundering on the euro which is destroying the EU and its member states. The outer core countries such as Cyprus were in fact financial hot air balloons bloated by the financial sector whose economies instead of being based on real economic foundations, instead became based on toxic lending and  toxic financial instruments of mass destruction.

Now that such economies are beginning to founder, the response is to dismantle the real economies in these countries and to sacrifice their economies to the same tenets and ideologies of the financial sector that led to their demise in the first place.

Austerity will not recover the ‘success’ of the financial sector’. Instead it will spearhead its demise and bring us closer to Black Mondays. Anyone who believes current European bailouts accompanied by policies of austerity will return Europe or Ireland to prosperity, is clearly misguided and foolish.

But among European politicians there are as many misguided politicians as those in the Irish Labour Party, perhaps it needs a new name, the IOrush Labour Party.

“Definition of ‘Fungibility’

A good or asset’s interchangeability with other individual goods/assets of the same type. Assets possessing this property simplify the exchange/trade process, as interchangeability assumes that everyone values all goods of that class as the same.”

Stocks, shares, bonds, derivatives, complex over the counter derivatives because of deregulation since 1970 plus unregulated lending/speculation has seen a course mapped in global economics a pattern last seen in the years 1925 to 1929 previous to The Wall Street Crash. This time its global.

Complex over the counter derivatives in the trillions have been traded across a world increasingly without economic borders. Little is being done in spite of Dodd Franck or Volcker or financial transaction tax (ludicrously opposed from an Irish standpoint) to patch the burst holes in the world’s economic balloon.

Crisis in Europe and its current meltdown is as a result of the export of this financial economic model with many of the toxic instruments of financial mass destruction hidden away in European bank vaults having been exported to Europe by US banks.

It would appear the repatriation of gold reserves to Germany and to Switzerland at the current levels would be an indication that even those countries are preparing for the worst.

We are now entering in Europe the phase of the European Hot Air Balloon economies.

They are Zeppelins filled with many surprises ahead, the least of which is the non too surprising result of the Meath By-Election.

The dangerous financial sector threatens the destruction of world democracy at the hands of private banks. The financial sector is desperately trying to reconnect with some semblance of real economics as its own virtual bubble bursts in Cyprus, Spain. Portugal, Italy, Greece and Ireland.

Financial sector contagion is spreading. It cannot connect to the real economy. Neither can the Labour Party.

The fungible mapping of traded goods  priced in the financial services sector through the means of complex derivatives and similar vehicles is being tested with weakening confidence in the euro, weakening confidence confidence in banks in the EMU; the question is how long the center will hold before a pin pricks this balloon.

And I didn’t even use the term Irish Debt once!





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