That flapping you hear is the sound of chickens coming home to roost, both in European economies and around the US’s Middle East policy.
Those damn chickens are everywhere. And we realists, so often mocked as doomsayers and pessimists, are trying not to do the “I told you so” thing when we hear all the anguish and panicky guesswork coming from the capitalist world’s financial and political leaders.
Take first the world’s financial mess. What is it that makes some leaders determined to press on until the bitter end, hoping that some magic solution will soon emerge to enable us to avoid the inevitable consequences of two decades of borrowing to fund our expanding sense of self-worth and entitlement? We thought we deserved it, but in fact we deserve the consequences.
Most of us will know of certain high-flying business people who battle against the inevitable, seemingly certain that a solution to their financial problems will be found. I worked as an employee with/for two of them, one after the other, back 20-odd years ago. They were interesting (though also tragic) to watch as they told anyone who cared to listen that black was white, that a spoon was in fact a spade, and they actually seemed to believe their own lies. I remember spending hours trying to work out if they were simply deluded or exceptionally talented in telling blatent lies to suit their goals.
New Zealanders will be aware of two characters of recent or current times who have battled on for months trying to avert the inevitable – Wellington’s Terry Serepisos and Christchurch’s Dave Henderson. Their media presentations are totally plausible, just like those of the two employers I mentioned in my previous paragraph. “Problem? What problem? The solution is just around the corner! Just leave it to me.” Do you see a flicker in their eyes? A frown of self-doubt? No way! They actually believe what they’re saying, against odds that would be overwhelming to us mere mortals.
And in Henderson’s well documented case (and probably with many recently failed finance companies such as South Canterbury Finance), the answer when things get tough is to create new business entities, holding companies etc, which can lend money to each other when needed to give the appearance of business liquidity.
This seems to work as follows: Company A is struggling to pay its debts, so you create Company B, borrow money to start it up, then lend that money to Company A, just enough to get its creditors off its back for a few months. Company B won’t need to address its debt for a while yet, and when it does, a new Company C will lend it money. When creditors of Company B chase their debts, the directors say that they’re owed money by A so the creditors have to try somewhere else.
This goes on (as it appeared to do for a few years in Henderson’s case) until finally the major creditors have had enough and start working their way through the strands to wind up the core of the failing empire.
This leads to the next common feature of these debt situations – the owner of Company A, B, C etc says that if the receivers are called in or he is bankrupted, the creditors will get back very little if anything at all, so they should hang in there. In other words, his empire is too large to fail, and the best way (he says) of creditors getting anything significant out of the mess is to lend more or wait longer while the business gets on its feet. And round the circle we go yet again – everyone further in debt but too scared to call it quits. Next time around, it’s worse still.
To me, this is what is happening now in the capitalist world. We’ve lived beyond our means for a while (and got used to the lifestyle this has brought), and now the creditors are knocking on the door. So what do we do? In America you simply borrow more money (from Asia) in the hope that eventually the US will get back into the black. You’re way too big to fail.
In Europe you fluff around restructuring money and loans and bonds, shifting obligations from one entity or country or bank to another. Countries bale out other countries by borrowing from each other or from outside Europe, making it look like movement back toward financial solidity but in fact only making things worse and even more intractable.
I have no idea what it would take to remedy this, apart from winding everything back several pegs and hoping not too many people are hurt in the process. Stop borrowing for anything other than what is really needed. Buy what you need using money that you actually have. Step back to a simpler, less ambitious and less material style of life.
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And those other chickens coming home to roost? Here I’m referring to America’s Middle East policy. I’ve long been convinced that The US’s foreign policy is riddled with double standards.
This is because it is based not on intrinsic relationships with other (equal) sovereign states, but on how best to use alliances and conflicts at that time to advance American interests. There are numerous examples of US allies becoming US enemies, and vice versa, because it suited the current strategy. Think Sadam Hussein and Osama bin Laden as allies who became demons, or Libya’s heroic revolutionary leaders who were only recently America’s enemies.
The double standards occur not only when an enemy becomes an ally, but also when two parallel situations exist and the US supports one but not the other. And this is what’s happening now in Palestine. America encourages freedom and democracy in Egypt, Libya, Tunisia and Syria but turns a blind eye in Bahrain and Saudi Arabia and is positively antagonistic to the thought of Palestinians getting a fair deal for their democratically elected leadership.
And finally Palestine has had enough. Buoyed by the events in Egypt etc, its leaders now have the confidence to give the US and Israel the fingers and seek international acceptance at the United Nations without having to forever grovel to the demands of the US and its proxy state Israel.
I say, good on you Palestine. Go for it. I know that there will still be conflict ahead, but the call to continue negotiations with Israel while Israel continues to make more settlements on Palestine land is simply a waste of time, and has been for many years. Israel can drag negotiations on for another 10 years if it wishes, all the time taking more land and making it harder for Palestine to ever get a viable homeland.
In fact, I see the action of hard-right Jewish settlers taking more land, supported or not by their political leaders, as little different from random rockets being fired into Israel by left-wing Palestinians, with or without the support of their political leaders. Both sides are acting in ways that seek to bully the other side.
The US and Israel are becoming increasingly isolated in a region where the bullying old ruling elites are being replaced. Largely I believe they brought it upon themselves. Those chickens are starting to roost.
Posted by David Armstrong 
