Over the past few years the terminology used by financial pundits and political leaders to describe the economies are getting scarier, prompting me into adding my own non-expert and somehow cynical description, from a different point of view, not related to any fancy modern title of “financial strategist,” “financial engineer,” “financial guru,” “adviser,” “consultant,” etc. I am none of that, and since all those experts failed in their prognostications, I am taking the liberty and venture into my own opinions.
Prior to the 2008 crisis, we were frequently hearing descriptions such as: financial recovery, economic growth, light-at-the-end-of-the-tunnel, etc., of which none happened, and we started to familiarize with rescue packages, bailouts, and austerity measures ending up with downgrading of entire national economies, threats of orderly or messy bankruptcies, fiscal cliffs, as well as other economy-related psychological-terror-inducing terms, raising serious worries about the bad shape of our economies.
There are endless debates and prognostications supported with various types of barometers to analyse the catastrophic scenarios of defaulting economies, and the words “financial prosperity” look irrelevant and almost obsolete. Practically every country today is heavily indebted and we continue borrowing more to subsidize our survival, knowing very well that we cannot pay back such hefty debts and no one is raising a voice of objection to say: Stop this vicious cycle of unbridled irresponsible borrowing.
In essence, our economies can only be characterized as messy, and our political managers disturbingly ignorant, leaving all of us in the middle of nowhere, not knowing what measures we must take to safeguard our, as well as our children’s, future.
Gazing at this monstrous problem in front of us that troubles our optimism, it is imperative that we shift our debate on finding meaningful answers to engaging in asking vital questions, starting with the flawed policies we use as foundations to build and sustain our economies, of which some are:
Are we following correct and realistic calculations to measure the performance of our economy? In my view we do not. Lately we learn about the state of our economies through a handful of self established corporations who are using theoretical assumptions to measure the size or performance of our economies and issue their own reports. To our disgust, government-announced economy performance results in most cases are not trusted by the financial markets.
Are we using accurate means to estimate the exact value of our national assets in order to determine the size of loans we can afford to borrow? I think not. After abolishing the precious metals reserves yardstick, today the value of our national assets is dictated by market trends, making it hard to determine the real forced value. (Forced value: meaning the price of our assets, if we will be forced to sell today.)
Even speculative future contracts for oil, grains, metals, corporate stocks, are considered economic barometers and when a crisis occurs get devaluated rapidly contributing to further ballooning debts.
Are we borrowing within our assets parameters? Certainly not, because we are borrowing mainly against treasury bills which the real value is confused with the artificial stock market fluctuations and in most cases overinflated.
From whom are we borrowing the money from? Given the immensity of the present national debts – which sum up to dozens of trillions of dollars – capped by the fact of cash-drained underperforming first-world economies, we are perplexed with increasing questions about the sources of borrowing. Probably here we can limit the potential funding sources to the following:
A – The world’s wealthy families and individuals; B – Partly from the billionaires and partly from a few states who invested their reserves in treasury bills like China, oil-producing countries and probably some profits from private corporations; C – Printing unsecured money to be offset by future assets which will be acquired through this money (in effect a scam).
Are we paying affordable interest or do we borrow at high cost? We have a strong reason to believe that treasury bills are not only the safest harbour for investments, but very lucrative too. The insatiable appetite of about 2500 world billionaires to invest in treasury bills followed by funds of national reserves, is valid proof that we are mortgaging the future of our children to further enrich the already incredibly wealthy.
Had we made our treasury bills less attractive, money owners would have re-invested in various sectors of the economy resulting in effectively helping productivity, economic growth and creation of jobs, therefore borrowing less money to support our economies we could have ended up with multiple benefits.
Unfortunately, political leaders proved, again, bad financial managers and drove our economy up an unsustainable path, causing lenders to lose faith in governments. Now they rely more on Standard & Poor, Moody’s, Goldman Sachs and other economy appraisal entities. Even the remedies are prescribed by these entities to our governments for implementation and be served as rescue packages, economy stimulus, austerity measures etc. contrary to the will expressed through fierce protests by the citizens.
We have seen these appraisers in bold action downgrading powerful economies such as USA, UK, France, and Italy while the weaker ones of Greece, Ireland, Portugal, and Spain classified as “junk” and in the absence of optimistic assessment they succeeded in dictating to governments’ economic legislation and dictating to the world how it should live.
There is no doubt that our economies are built on very weak foundations full of faults, and have already fallen off the cliff in several areas and it is time that we start listening to the alarm bells that we must stop delivering rhetorical speeches and take real action now.
Reckless human actions brought us here and human common sense can correct these wrongs. Failure to act now, we are risking becoming the “property” of our lenders because in effect today they are providing the rescue packages to our collapsed economies.
* Ilias Sourdis is a freelance Greek expatriate and businessman. He has lived outside Greece since 1976, with most of his experience in Asia, and with short travels and stays in other parts of the world too.