All Pain, No Gain

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08/09/2012 by Don Quijones

Spain is descending into a whole new world of pain. Unemployment in the country, already at 25 percent, refuses to halt its dizzying rise; inflation is rearing its ugly head – thanks in no small part to the recent V.A.T. hike to 21 percent – and most of the nation’s banks are bust, but seem determined to take the rest of the country (if not the world) down with them.

As if that wasn’t enough, the country depends on the political skills of Mariano Rajoy – arguably the least competent national leader in Europe (and let’s face it, that’s saying something) – and his trusty sidekick, Luis de Guindos, the country’s Economy Minister and former Lehman Brothers “advisor”, to lift its economy out of purgatory.

And all the while, the Troika vultures are circling the country, just waiting for Mariano to give the nod. Once he signs on the dotted line of the bailout application form, Spain will belong to the IMF and the European Central Bank (and, by default, the international finance and rentier class they represent).

To understand what will likely happen after that, one need only look a few thousand kilometres eastward, to Greece, a country that pretty much bypassed purgatory on its way to economic hell.

Like the Greeks before them, the Spaniards face the grim prospect of being squeezed from three separate directions: rising taxes, resurgent inflation and lower salaries. And Spain, like Greece, will see unemployment surge, more houses repossessed and many of its remaining small and medium-size enterprises collapse.

The final stage of the process will be the wholesale privatisation – for cents on the euro, of course – of all the nation’s vital and strategic industries, land and resources (a process which John Perkins, author of Confessions of An Economic Hitman, lays bare in the fascinating interview posted below).

Like many of the Latin American, African and Asian countries that suffered so dearly at the hands of the IMF’s “economic hitmen” during the eighties and nineties, Spain will become little more than a client state of the international financiers, forced to beg on its hands and knees for each new injection of unpayable debt.

And what little remains of the country’s democracy will be snuffed out like a candle in the wind, as authority over the nation’s economy is handed over to faceless, unelected bureaucrats in Brussels and Frankfurt.

Meanwhile in the shadows, the national and international financial elite responsible for most of the country’s woes will quietly nod its approval. After all, if there’s no pain, how could there possibly be gain?

When in Doubt, Blame the Victim

As the Spanish economy totters, threatening to bring the whole euro zone down with it, attention is naturally shifting to the question of “who’s to blame?” And the most convenient answer -though far from the correct one – is the Spanish worker.

Just as the Greek middle class were painted as lazy tax dodgers living in the lap of luxury, Spanish workers have been cast as overpaid, work-shy and uncompetitive – a narrative that fits snugly with widely-held prejudices on both sides of the Atlantic.

Indeed, many Spaniards themselves are unsure as to at whom to direct their wrath as the roll call of potential culprits trotted out by the nation’s press (central and local government, unions, civil servants, immigrants, benefits scammers, financial speculators…) continues to swell.

For their part, policy and opinion makers, both in and outside Spain, have laid most of the blame for the country’s travails on its lack of competitiveness and growing public debt. While these problems admittedly represent a genuine obstacle to progress, much less mention is made of the solvency issues of the banks whose actions triggered and are now exacerbating the crisis.

As for the widespread financial fraud and crimes that continue to be perpetrated by the world’s largest financial institutions and central banks, hush hush, mum’s the word!

Unforgivable Debt

That’s not to say that the Spanish people don’t bear any of the responsibility for their current predicament. After all, a sizeable chunk of the population did take out mortgages for scandalously over-priced properties they never had a hope of paying back.

But many of those same people have already paid their “pound of flesh” for their financial illiteracy and recklessness. Not only have many lost their homes and had other valuable assets seized by their lender, but they still remain on the hook for all remaining outstanding debt. Here in Spain, debt, unlike sin, is never forgiven!

Meanwhile, the role of the financial sector, which was and remains front and center in the crisis, is played down as guilt is dispersed across the broader economy and society.

All the while, the sector’s dominance over the productive economy continues to grow. Smaller banks have been gobbled up by their bigger competitors, and the banks’ creditors and bond buyers are always made whole – with the exception, that is, of the million or so unsuspecting savers and pensioners conned by the staff of their local bank into “investing” their life savings in the preferentes bonds, which have since lost much of their value and offer little to no hope of redemption.

Like a tapeworm feeding off its host, the financial sector, despite its enormous solvency issues, gains in strength as the productive economy continues to wither.

All of which is no accident. In Europe and the United States, a very quiet coup d’état is taking place. But instead of fighting back, many of the citizens passively blame the victims (that is, themselves) while falling hook, line and sinker for the arguments deployed to defend the hijackers (that is, the banks and hedge funds).

To paraphrase the financial commentator and RT host Max Keiser, many people are in the grip of an acute form of Stockholm Syndrome.

Another Bad Bank? But Where are the Good Ones?

While Spain awaits a second bailout, its banks are now parking much of their worthless, marked to-model trash in a “bad bank”, receiving in return billions of fresh euros (most, if not all, of which will be backstopped by the ever-generous but increasingly impoverished Spanish taxpayers).

Will the newly-minted banks lend these new funds to cash-strapped small and medium-sized businesses, thereby helping to create new jobs and opportunities?

Well, given the experience of the last few years, you wouldn’t bet your house on it – that’s assuming it hasn’t already been repossessed!

No, what they will probably do with their new windfall is plug a few of the gaping holes in their hemorrhaging balance sheets, buy up more Spanish bonds – further cementing the dysfunctional symbiotic relationship that now exists between banks and the government – and splash out on some of those credit derivative WMDs that are so en vogue these days.

Oh, and lest we forget, they will no doubt also pay back their “priority” bond holders – i.e. other European and U.S. banks and hedge funds, many of whom would themselves be on the chopping board if such a thing as honest, mark-to-market reporting were once again required of them.

So, just as with the Greek, Irish and Portuguese bailouts, much of the new money lent to Spain will probably spend less than a week in the country before it is rerouted to other financial destinations in countries such as France, Germany, the U.K. and the U.S. Much of that money will, in turn, probably be rerouted to an offshore account in one of the world’s countless tax havens.

And so the tired old game continues to play out. The criminals at the very top of the socio-economic heap get richer and the middle class grows thinner – all a direct consequence of the choices made and policies adopted by our elected governments.

To cite an example, in the latest installment of Spanish labour reforms, Rajoy’s staunchly right-wing government raised the level of income tax for self-employed professionals from 15 percent to 22 percent, equating to a roughly 50 percent hike. As a result, many of the country’s struggling self-employed workers now face total deductions (including V.A.T. and social security) of up to 50 percent, regardless of their level of income.

At the same time, the government has announced a tax amnesty for rich nationals and ex-pats, which effectively allows “high-worth” individuals who have evaded taxes to declare the money and avoid prosecution in return for paying a penalty of just 10 percent.

As the late, great George Carlin said, “the table is tilted, the game is rigged”. And if workers in Spain – or for that matter, anywhere else – are to have any hope of turning the tables back in their favour, they must first challenge and reject the dominant mainstream narrative which regards the banks’ and general public interest as one and the same thing.

So, the next time you hear about another round of bank bailouts or quantitative easing in your neck of the woods, just remember that it will likely be you (and for that matter, your children and grandchildren) who will have to foot the bill, whether in the form of higher taxes, lower wages, rapidly rising inflation, fewer employment opportunities or reduced public services.

The banks, meanwhile, will continue to suckle on the teet of central bank monetary largesse, gorging themselves in one last act of plunder and pillage. Henry Ford once said “it is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”.

One can only hope that the people of Spain and other nations finally come to the senses and see the men behind the curtain for what they are: a parasitic class of rent-seeking sociopaths hellbent on global economic domination.

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