The New Economic Order – G20 is the De Facto World Bank

The G20 summit at Pittsburgh will likely be the meeting where the 20 leaders of the “advanced” nations cement their commitment to maintain their financial hold on their respective economies.

This will be done to ensure there is not a double dip recession which would be catastrophic for world economies but more importantly, their re-election.

It’s all about timing the stimulus money to ensure their economies maintain those “green shoots” everyone has been talking about for the last few months.

The credit crisis may be over, and the recession may be coming to an end, but governments now control most of the major banks around the world.

They may not overtly tell the bankers what to do, but there can be no doubt bankers will be pressured into supporting incumbent government agendas.

What a fabulous opportunity for your government. Nationalisation without nationalising.

It is not in their interest to tighten the regulations on banks right now, because the governments control them anyway. Why would they hamstring themselves when they can virtually direct banks to do their bidding?

Didn’t President Obama sack the head of GM, a publicly listed company? How can that happen?

Even socialist leaning governments realise they need business to make profits. Only they prefer to deal with the big ones as it makes it easier to control and it’s nice to be seen with all these powerful financiers too.

Everyone can see we are in a new bubble phase on the stock markets. This may be mainly driven by large institutions gambling tax payers money and driving up stock prices.

They are making profits from the stock market and paying their governments a handsome return for your money. Governments are even bragging about how much money they are being paid in dividends. In return these financiers have been allowed to keep their bonuses.

By the way I am not in favour of capping bonuses but am in favour of controlling the leverage financial institutions can use. The two are directly linked. Bear Stearns leveraged up to 35 to 1 every dollar they owned.

“Just prior to its collapse, Bear Stearns was leveraged 35 to 1. At that insane level, it’s pretty obvious how even some small losses could have wiped out everything. (Motley Fool)
They “borrowed” against a single dollar thirty-five times and when the market crashed, they owed $35 dollars for every dollar “invested.” Let’s do the math, then. If an “investor”, “investment bank”, “hedge fund”, or financially irresponsible moron leveraged $100 million in risky investments, when the investment crashed, he would owe 35 x $100 million, which equals $3,500,000,000. All based on getting concurrent loans on the same “dollar” thirty-five times.”

That means a trader could use that same leverage to earn commissions. Also the executives were able to share in that bonus based on 35:1 leverage. That was the real problem here over bonuses.

Governments need to ensure the banks they control have the best financial wizards working for them – er, I mean the financial institutions if they are to benefit financially.

So we are seeing a new economic model emerge where governments who control their financial industry underwrite that financial industry and encourage them to risk tax payer money to make huge profits from which governments get “huge bonuses” called dividends, if not taxes – just yet.

That allows governments to use these windfall profits for their social programs, and keep the public happy. Now if they can just allow those financial institutions to leverage – just a little – just think how much money they can make in “bonuses” to governments from banks and how they can implement their agendas without more taxes.

I’m not sure what governments do with windfall dividend profits as opposed to tax receipts. They probably don’t have to even account for them.

The trick is to give financial institutions enough opportunity for risk without reaching the tipping point and bringing on another financial crises.

But when you can just print money if it looks like a crisis might happen why worry. Just tell the public those pesky banks are at it again and you have to control them to save the country. It can take years for wrong-headed economics to destroy an economy with printing money.

I read that governments around the world seem to believe that they need to invest in education, health and green jobs. This they say is how they will grow their economies.

“We will not rebuild our economy on the old model of bubbles and busts. We’ll only climb out of the current crisis by creating a new, sustainable foundation for our economy’s future — and make the tough choices to put our economy back on the road to long-term prosperity.”

As far as I am concerned education and health are actually financial costs to you the tax payer. If they were investments you would see a financial profit or loss on them wouldn’t you? No, they are an expense on the taxpayer.

The only way they can be investments is if they generate wealth by being run as businesses and apart from overseas students paying high fees for their education, they are an expense to the nation. Unless a medical center can create some new procedure and sell it to others for a profit, it is an expense to taxpayers.

The government is not talking about drug companies and medical equipment companies that do make profits. To the contrary they want to control these companies and limit their profits.

Green jobs are a pipe dream for most high wage advanced countries. Once they did develop technologies and then would set up factories to produce products. But China and many Asian countries have some of the smartest people in the world now and can compete at the technical level and their manufacturing costs are much lower than advanced economies. Spain has found this out to their cost with 17% unemployment and green jobs costing about 5 times the cost of a “normal” job.

“Europe’s current policy and strategy for supporting the so-called “green jobs” or renewable energy dates back to 1997, and has become one of the principal justifications for U.S. “green jobs” proposals. Yet an examination of Europe’s experience reveals these policies to be terribly economically counterproductive.”

Read the full report, “Study of the effects on employment of public aid to renewable energy sources by Gabriel Calzada Álvarez PhD“.

“The study’s results demonstrate how such “green jobs” policy clearly hinders Spain’s way out of the current economic crisis, even while U.S. politicians insist that rushing into such a scheme will ease their own emergence from the turmoil.”

Governments cannot grow an economy. Private business is the only one that can do that job by building “real” wealth. It takes millions of businesses with motivated workers working for their own success to generate the wealth that grows economies.

Education and health matter, but they are satisfiers and not motivators to people to create wealth.

If you are worried about your health or you cannot read then starting a business is going to be hard and may not be your highest priority.

But if the taxes to provide these services to everyone are so high that starting a business makes no economic sense the government snookers itself anyway.

For Baby Boomers who can educate themselves and stay on the “right side” of all this government manipulation of the financial system it may well be very rewarding. But remember governments operate by whim and what they think is a good idea today may be a bad idea tomorrow. Think “Cash for Clunkers”,  which was supposed to run until November and was suddenly stopped.

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