Thursday, January 27, 2011

Davos 2011 vs the SOTU

Now that America's  annual irrelevant recitation of platitudes and clichés in the SOTU is over in DC, I need to clue you in on where the real party  is jumping. I am referring to the World Economic Forum being held high in the Swiss Alps in a secure berg/sometime ski area by the name of Davos.  I long ago gave up on the political circus of the State of the Union(SOTU) years ago in which nothing of substance is ever said interrupted by loud applause from the dominant party de jour. I do confess I generally read a transcript of  what the president says but ESPN college basketball and the Australian Open was far more compelling boob tube fare than watching the  latest lesser of 2 evils political leader spouting cornpone shibboleths, half lies and sheer nonsense.
     Davos  is where it's happening. It is the annual by invitation only FORUM   to  the 2500 masters of the Universe, the people who actually rule the world, the  echte ruling classes to engage in deal making, kibitzing and partying and receiving the latest in financial and economic wisdom handed down from the various think tanks associated with the WEF. I will report on one of those economic reports in a bit but let's take a look at who the WEF really is. Their slick website is here:http://www.weforum.org/. The featured face that popped up when I clicked the link was the famous bankster Jamie Dimon so I knew what I was in for even before I did my due diligence research. First some background. The WEF was founded by a German businessman named Klaus Schwab in 1971. It is structured as a NGO non profit organization but it appears to be  well funded from the profits of its members. Here is a citation from Wikipedia of who pays to play:
Membership
The foundation is funded by its 1,000-member companies, the typical company being a global enterprise with more than five billion dollars in turnover, although the latter can vary by industry and region. In addition, these enterprises rank among the top companies within their industry and/or country and play a leading role in shaping the future of their industry and/or region. As of 2005, each member company pays a basic annual membership fee of CHF 42,500 and a CHF 18,000 annual-meeting fee which covers the participation of its chief executive officer at the annual meeting. Industry Partners and Strategic Partners pay CHF 250,000 and CHF 500,000, respectively, allowing them to play a greater role in the foundation's initiatives.[11][12].

Organization

Headquartered in Cologny, the foundation opened, in 2006, regional offices in Beijing, China; and New York City, New York, United States. It strives to be impartial, and is not tied to any political, partisan or national interests. The foundation is "committed to improving the State of the World",[9] and has observer status with the United Nations Economic and Social Council, and is under the supervision of the Swiss Federal Council. The foundation's highest governance body is the Foundation Board consisting of 22 members.
So we are told that it is an impartial organization funded by more than 1000 global corporations who do at least $5 Billion per annum with a nice sliding scale allowing more play to those that pay. I did look up  some of the  members of that highest governing board which consists of some curious souls like George Bush lapdog Tony Blair and Queen Rania of Jordan? Who woulda thunk it?rania  You may remember her when she was a bank executive working in Jordan for Citibank.  I enclose a passport size picture for your viewing pleasure. But I digress…..Naturally every TBTF bank on the globe is a member and the members list is thick with unindicted banksters as well as the uberwealthy oligarchs from industry and technology like Bill Gates as well as every hedge fund you can think of. Some impartiality there. I see George Soros gave a speech there the other day  castigating the world’s central banks for being asleep at the switch. His harsh remarks did hurt some feelings.  It does appear that some of the talks and seminars purport to have  lofty goals but the nature of the participants being the Kings( and queens) of Globalization does trigger a blip in my cynical BS meter. Unfortunately for the world, the members list includes an assortment of discredited Sorcerers, excuse me, I mean Economists  drawn from Ivory towers as well as the expected economic Think Tanks. And that brings me to my next topic.
Here is the headline in The Telegraph. I’d say the headline speaks for how the WEF thinks:

World needs $100 trillion more credit, says World Economic Forum

The world's expected economic growth will have to be supported by an extra $100 trillion (£63 trillion) in credit over the next decade, according to the World Economic Forum.

By Emma Rowley 8:49PM GMT 18 Jan 2011
Here is a clip from Emma Rowley’s article:
This doubling of existing credit levels could be achieved without increasing the risk of a major crisis, said the report from the WEF ahead of its high-profile annual meeting in Davos.
But researchers warned that leaders must be wary of new credit "hotspots", where too much lending takes place, as the world emerges from a financial catastrophe blamed in large part "to the failure of the financial system to detect and constrain" these areas of unsustainable debt.
"Pockets of credit grew rapidly to excess – and brought the entire financial system to the brink of collapse," said the report, written in conjunction with consulting firm McKinsey. "Yet, credit is the lifeblood of the economy, and much more of it will be needed to sustain the recovery and enable the developing world to achieve its growth potential."
The global credit stock has already doubled in recent years, from $57 trillion to $109 trillion between 2000 and 2009, according to the report.
The WEF said the continued demand for credit could be met "responsibly, sustainably – and with fewer crises". However, it cautioned that to achieve this goal, financial institutions, regulators, and policy makers need more robust indicators of unsustainable lending,
I really don’t know where to start. It is simply baffling to me that there are people who actually draw a salary to write this stuff.  By way of background, world GDP is somewhere in the vicinity of $60 Trillion. We see that debt doubled in the last decade. Most of the world banking system is now holding that debt not marked to market as we say in the economic blogosphere.  If it were held at what the market would pay, most of the banks would be bankrupt. Instead this debt is held at what the bank says it is worth, which in most cases is the amount that was lent out with interest. Much of that debt went to fund  a massive worldwide building expansion which became a bubble and is beginning to pop everywhere.  All these banks are pretending that the money they lent to belly up developers will be coming back to the banks with interest. But of course it isn’t and in most cases it wont. This is capital, credit, debt, money, or whatever you choose to call it, that is going poof. Of course the banks and central banks have had a solution: Hit the taxpayers up for the bank’s mistakes and this has been the solution not only here in the US but all over the world where this banking model of loaning money to anyone with a pulse was the modus operandi. In a few cases, namely Iceland, the people said Hell NO and told their government that they the people, were in no way responsible for their bank’s mistakes. This sort of behavior terrifies the types of Oligarchs who are partying in Davos. God forbid. What would happen to them if the serfs of the world refuse to pay for the crimes of these plutocrats. WE need austerity! More austerity!  So the solution to all this bad debt is GOOD DEBT, like maybe another $100 trillion or so. These sorcerer economists assure us the demand for credit can be met sustainably and responsibly with fewer crises.   The kind of people that could write such a paper are living in a parallel universe. a never never land in which debt doesn’t matter, jobs can arbitraged to the lowest bidder nation, economic growth can grow to the sky even as the population soars, world energy supplies are in decline and pollution fills the skies, the rivers and the oceans. I have some friends who cry out “When will  we be free of these Bozos?”, My guess is no time soon.

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