We’re all Argentinians now!
Investors are betting on the Fed… they’re betting on the ‘central bank put’, the idea that central banks have their backs, and will make sure the downside is protected. How? With as much cash as it takes.
They’re probably right. At least in the short run. There are only three weeks between today and the US presidential election. If there is one thing the Bernanke Fed does not want to see during those three weeks, it’s a falling stock market. That’s why we got QE3 when we did. Bernanke knows that if the Republicans win, his job is in jeopardy.
Eventually, of course, stocks will fall… and this whole episode will end in the worst possible way. We’ll go broke… just like the Argentinians. It happens slowly at first. Then, suddenly.
Now, we’re going broke slowly… and no one seems to mind.
And we’re not the only ones. We’re all Argentinians now…spending more than we can afford…taking advantage of the system…printing money… and pretending we have things under control.
‘Things here have changed a lot… even in the last six months,’ said a friend at last night’s dinner party. ‘I mean, everyone knew that there was a black market in France. But it was really dark… beneath the surface. You didn’t come into contact with it very often.
‘But now, every time you do business, someone will suggest that you can cut the price if you pay in cash. The woman who cleans our house. She used to get a cheque. Now she wants cash. And if you bring in a plumber or a roofer… you’ll end up paying at least a part of the cost in cash. It’s the only way to get a decent price.
‘The other thing is that small merchants are so fed up with the system that they want to help you cheat. They will put a phoney price on an invoice. Or phoney-up an invoice all together. They’ll ask for cash. They’ll even tell you how you can avoid paying the TVA [French VAT].’
‘Yes,’ continued another diner, ‘I get the impression that France is going down fast. It wasn’t a shock to me that Bernard Arnault [France’s richest man] is leaving the country… I’ve heard of lots of people who are leaving… but it was a shock when I read in the Le Figaro [one of France’s biggest newspapers] about all the advantages of leaving the country. You don’t expect a leading newspaper to actually be encouraging people to get out.’
‘The problem is that the ruling class – Hollande and all his friends – has no idea of what really makes a country work,’ explained another of our group, the mayor of a small town. ‘They have never had jobs in the private sector. They’ve never had to balance a budget or pay an employee. It’s all theory and ideology to them.
‘They have spent their whole lives cushioned from the real world, getting their money from either the government or a political organisation. No wonder they have no idea how an economy functions…
‘But they’re ruining the country. They’re creating an entire generation that will never work. I’m exaggerating to make my point. But it is not far from the truth. Young people are getting used to living in this unreal world.
‘They expect to stay in school with their studies paid for. And then they expect the government to provide a job. And since this is France, they expect to do nothing and take plenty of vacations.’
‘It’s not just the young people and the blue collar workers either,’ said another man. ‘It’s the managers. They have the money to be able to take advantage of their time off. They look forward to their vacations. They believe they have a right to work only 35 hours a week. And if they work more… they accumulate more vacation time. That 35-hour work week wrecked this country.
‘Do you know that the people in Paris who give out parking tickets have the right to 12 weeks of vacation per year? Plus they take another week or two, on average, for sick leave. So they are off the job at least three months of the year. It’s unbelievable. How can we afford that? Of course, we can’t. But you can’t reduce their salaries or their pay. So, the whole system just keeps going until… until… until what?’
‘Until you go broke,’ we offered cheerfully.
‘Thanks,’ the mayor went on. ‘There are already millions of young people who have effectively dropped out of the system. They pretend to be looking for work. They get money because they are unemployed. Or, they get money because they are training for a new profession. Or, they just get money… I don’t know for what.
‘And they come to my town. I don’t know why they come to my town. They’ll never find work in my town. They come with their dreadlocks and their dogs. They hang out. Sometimes they get together and have children.
‘You know, we’re required by law to provide a clean, decent place for migrants… for people who don’t have a place to live. But these people turn it into a dump. They just don’t care about anything. So, they’re outside the whole system of law and order.
‘They just lay around all day. They take drugs. They lie to you. You have to laugh, because you know they are lying… and they know you know… But what else are you going to do? There are more and more of these people. And how long can this continue?’
‘Until you go broke,’ we repeated.
‘I don’t know. Maybe. But what I see is that more and more of the hardworking people who really make this economy work are fed up. The shopkeepers. The small business people. They’re ready to attack these shiftless layabouts. I mean, attack them physically…
‘And I recently saw what looked like a manifesto from a group of young people. They’re fed up too. It gets more complicated, because there is also a subculture in France of people from Africa.
‘They don’t have the same work ethic as the rest of the French. They don’t have the same culture. They’re perceived as coming to France to take advantage of our social welfare system. They take, but they don’t give. The middle and lower classes in France resent it.
‘Well, this group of young people has realised that the bill for all these fantasies we’ve allowed ourselves – that we take three months of vacation… that we could pay for everyone’s health care… and give everyone who doesn’t work an income… and retire at 55 or 60… and invite millions of people from Africa to come to take part in our welfare system…
‘… these young people have realised that the cost of all this falls on them. They can’t find jobs. They can’t get married and support a family in the old-fashioned way. They can’t expect to get richer as they get older. They are stuck. And they’re fed up.
‘I’m afraid a lot of resentment is building up.’
for The Daily Reckoning Australia
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