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Exactly 220 years
ago (the French Revolution), on the night of August 4th, 1789, the question
certainly was not about systemic risk. Yet, on that very night, an event of
systemic magnitude occurred: the French assembly ended the feudal system and
its privileges.
Keeping this
historic event in mind, we have to reflect on the fact that we have not yet
fully grasped that when systemic risk became an issue in 2007, capitalism
wasn’t just going through a rough patch. Rather, it had been mortally
wounded. Our politically correct attempts to see green
shoots in the economy and marvel at them epitomizes wishful thinking.
The old fashion
way to save capitalism, the socialization of losses, proved insufficient,
this time to absorb the sheer size of the systemic shock, only matched by the
enormity of the debt binge that caused it over the past 35 years. Tax havens
had allowed the wealthy to evade the IRS, leaving the middle class to pay for
the bailouts. This time, however, the price tag is simply unaffordable.
Without a viable
solution, we look the other way and comfort ourselves with the illusion that
things will heal over time; a propaganda, that is generously fed by the
establishment. Isolated havens of prosperity have emerged, the pitiful
benefits of the purported trickle down economics
behind the massive bailouts.
The less
fortunate were left to face dire prospects on their own, while at the same
time the available resources were given in priority to the few banks still
standing, thereby confirming the oligarchy theory. Looking back, they seem to
have been pulling the strings all along. Lehman Brothers, declared bankrupt
on Sep 15 of last year, was a rival of “Government Sachs”.
Wasn’t it meant to happen, then?
In the heydays of
finance, competition was rife between banks, yet markets were deemed
resilient. The high-jacking of capitalism by banks, however, eventually
brought it to its knees. With the benefit of hindsight, we’d like to
think that everything would get back to normal if only we got rid of the bad
guys. Alas, our awakening comes after the fact. The goose that lay golden
eggs is gone.
In spite of
occasional rallies, under IV therapy by the government, Wall Street’s
attempts to resurrect its glory are eventually deemed to failure and will
only reflect the desperate attempts of its kings to stick to power.
When the new
system takes over, we will not see it for what it is: the replacement of a
broken system by a new one. Rather, we will clamor that reason won over a
corrupt elite, that drowned in its own excesses.
Paul Jorion
Paul Jorion.com
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by Paul Jorion
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