Tuesday, June 29, 2010

Your future crisis

With the United States about to pass some week kneed financial reform full of loopholes, the rest of the world has come together at the G-20 Summit to tell the world they are prepared to do little else, that everyone agrees that it's time to focus on imaginary problems, and that they are fully committed to not making the financial system less dangerous in any way. Bully for them. 10% unemployment in the US and larger unemployment figures in Europe is just something people should learn to get used to.

But as we see what the world's elites has learned from this crisis (nothing) and their plans going forward (do nothing), one wonders what our financial betters have learned. Other than they can do whatever they want with no consequences, that after they set everyone's money on fire they still have immense credibility and influence with lawmakers, and that no matter what they do and how reckless it is governments will line up to bail out their failures. But we knew that already. They knew that already. I'm talking about what they've learned from this recent crisis to help them make more money creating the next crisis. And just what will that next crisis be?

Simon Johnson thinks he's figured it out: Debt-to-GDP ratios in the developed world. He cites a quote from a high up Goldman Sachs muckity muck. How will they leverage Debt-to-GDP in the emerging world? Through lending to emerging markets and leveraging the fact that debt-to-GDP in the developing world is about half what it is in the developed world. Johnson goes to the trouble of listing why this new plan is dangerous, the problems in their thinking, and the way it will inevitably fail, this time taking down emerging countries with it, but he ties it around the question: What is Goldman Sachs thinking?

I think I have it figured out:

I think that's pretty much the extent of their thinking, even down to the pirate costumes. Maybe there's a variation on this where Goldman CEO Lloyd Blankfein imagines himself as a cartoon cow with wobbly legs, playing a ukulele in a grass skirt, but I think I pegged it pretty close.

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