Reality bites – at last …triple AAA? (ask Mr Micawber, he knows)

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The AAA rating, by Mr Micawber’s definition (and that of reality and your grandmother) is earned when your income just exceeds your expenditure and that future prospects are stable. Neither of these simple criteria apply to any country in Europe, including Germany, and certainly not to the USA or to Great Britain. So why all the excitement when the USA which has not met these criteria for years (as indeed, we have not) loses the AAA rating?

Politicians have been lying their heads off for years, and money, an artificial contstruct at best, has been warped far away from its original purpose (a means of exchange) – that’s why. The incredible thing, to me at least, is that everyone (journalists, financial services and economists – but not the banks!) has been believing them and the warped money definition –  but it seems that some have at last woken up to the fact that having politicians in charge is just like a company being run by the marketing department. Reality will bite – once the customer has bought the product and found it not to be as advertised.

It has been a long time coming but Mr Micawber’s lesson is slowly beginning to be understood by economists.

Of course it will be a few weeks more before politicians and banks can bring themselves to understand, but reality will bite, sooner or later. It really is so easy to understand.

The Thatcher era started off the real stupidity of modern ‘fast’ stock market madness and the Blair / Brown followed on like unthinking lap dogs. Cameron is still lapping at the bowl of Blair’s stupidity – he (Cameron) will probably be  the last to get it.

But its all OK – really, if the banks are allowed to “take their haircut” – as they must in order to start correcting the massive overvaluation of the banks and the stock markets around the world. 

It will take just one brave politician somewhere to start the process – say with RBS, or Lloyds (banks that we the people now own). Return the banking model to that of the 1960s and a lot of very rich people will lose billions but reality will slowly return to the world.

Discuss …


2 thoughts on “Reality bites – at last …triple AAA? (ask Mr Micawber, he knows)

  1. I don’t know how anyone but the very rich can lose billions. This is one problem the poor do not have.

    I am not sure how a hopeful politician who doesn’t lie can be elected, because the electorate demands that politicians promise the impossible before giving them the opportunity to fail.

    This is all a matter of conscientous and effective stewardship. Capitalism is based on the concept that those who are effective in their stewardship of a portion of society’s accumulated wealth will increase the portion they control through earnings, and ineffective stewards will lose control (go bankrupt). Over time social resources progressively concentrate in the hands of the most competant stewards.

    The countries noted have confiscated wealth, directly through taxation, and indirectly through borrowing without capacity to repay. Those who have been good enough stewards to have sizable incomes had their earnings transferred to those who are such poor stewards they are unable to meet their personal needs. This overturning of property rights is called “fairness”. These countries are bankrupt in direct proportion to how fair they are in making sure that unproductive members of society — the sick, the aged, the incapacitated — have rights to the property of those that produce it.

    Concentration of wealth is necessary to do big things. A poor man who donates the little bit he can spare to a charity who aggregates the contributions to fill a need believes this. So does a rich man who takes his stacks and combines them with more stacks by making a deposit to the bank. Conversely, disaggregation of wealth eviscerates the potential to achieve the scale necessary to solve problems.

    Kings build empires. Mobs overthow Kings. Mobs do not build empires.

    Given that members of society must work together (aggregate) to be successful, to whom should leadership be entrusted?

    We need accountability for the stewards. The rich who have made bad decisions should be relieved of their riches, and, by extension, their ability to make the decisions that control of wealth enables. Those whose claim on resources comes from the ballot box instead of productivity need to start losing elections.

    The votes of the rich man and the poor man count equally. But there are, and always will be, many more poor, because of society’s need to concentrate wealth. So the onus is on the poor to comprehend that they need the rich more than the rich need them.

    We need, most of all, humility at the ballot box.

    The rich need to recognize the responsibilty that is the handmaiden of priviledge. The poor need to recognize some degree of responsibility for their lack of success, and gratitude for what others have provided for them. Only when both rich and poor are, on balance, honest about their own responsibility in determining their lot in life, and exercize their votes humbly, will we have a good outcome.

    Class warfare is not any more helpful than any other kind of war.

    1. Your analysis is thought provoking and after some pondering has added perspective to my simple, in comparison, statement of the obvious.
      But where lie the practical steps to be taken and by whom to right the wrongs?
      I suspect some stewardship realistions along the lines of:-
      a) The acceptance of “steady state” economics – banishing ‘growth’ to the dustbin of unsustainable bad ideas…
      b) Some measure of population awareness and control…
      c) More regulation of capitalism – socialism is not the answer …

      but I’m not very hopeful 🙁


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