The taste of snake

“It’s impossible not to commit fraud in this job,” said a voice from across the table.

I raised my eyebrows. Others around me did not – this was not surprising to them.

Who would say such a thing?

What profession requires fraud?

The answer, sadly, might not surprise you.

The incendiary words came from a man in the banking industry.

This happened yesterday, at an informal roundtable discussion in Mayfair.

To be clear, the statement was intended to provoke laughter, and meant half-jokingly. But while this may have been meant in jest, what he said next was meant in earnest, and was just as worrying.

Since 2008, he said, ethics in banking haven’t got any better… they’ve got worse.

In the wake of the crisis, only the “low hanging fruit”, as he called them, were removed from the industry – the pawns at the bottom of the management pyramid.

But the deep rot remained in the upper ranks. In fact, those that had enabled the crisis were rewarded by the loose monetary policies of the central banks. As a result, having been paid for enabling the crisis last time, unethical behavior is plumbing fresh new depths.

Hopefully, his experience is an isolated one… but the cynic in me doubts it. What do you think?

I was keen to discuss the mayhem occurring in Italy. Earlier this week it was revealed that the newly formed political coalition intends to ask for forgiveness. Not for any crimes, but its debt. €250 billion of it, to be specific.

The debt in question isn’t owed to private investors. It’s owed to the European Central Bank (ECB). Considering it can create any amount of euros out of thin air, surely it won’t mind cancelling a few billion euros it’s owed, the thinking goes.

Such is the bizarre nature of today’s financial system. Governments borrow money from private investors, who sell that debt to central banks, who are then asked to forgive that debt by the government! Ouroboros, the alchemist’s symbol of a great snake eating itself, swallowing its own tail, comes to mind.

Her take on the Italian situation? Should the ECB begin considering forgiving the Italians’ debt, it’ll want something in return. This could be control over what the government does with the resources freed up by the lack of debt. But considering the patriotic nature of the coalition, granting yet more power over Italy to the bureaucratic overlords of the eurozone probably won’t go down well.

Prins described today’s global economy as a passenger plane that is stuck in a holding pattern. Central banks cannot sell all of the assets they’ve bought to support the financial system, and so the plane cannot land and release the passengers back into normality.

Around and around the plane circles the airport. Passengers aboard wait patiently. But as time drags on and on, a weed of worry begins to grow in the back of their minds.

When will we run out of fuel? 

Until next time,

Boaz Shoshan
Editor, Southbank Investment Research

Category: Economics

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