On 20^th May, 2009, and as part of the Institute of Contemporary Art’s A-Frame Figures of Speech event, I gave a talk about the importance of functionality in design. I was part of a group of 8 eight individuals chosen to talk about what motivates, drives and inspires them. I thoroughly enjoyed it. I got to talk about how a pair of red shoes I saw in 1999, triggered my artistic Zeitgeist.

© Sameh El-Shahat 2009

Icelanders are a proud bunch.

A session of Iceland’s Parliament, in the good old days…(the yellow bucket is for the vote on giving every Icelander a free face mask once a day, financed by money Iceland didn’t know it didn’t have.)

They have, after all, the oldest Parliamentary tradition in Europe, with the Althing being Europe’s oldest parliament. Things were going swimmingly well for Icelanders till quite recently. It was ranked the Most Developed Nation, according to the United Nations Human Development Index, in 2007. The UN knows a thing or two about Developed Nation…NOT. The country is considered one of the greatest, if not the greatest exponent of civil society of our era, and its people some of the blondest. For centuries its economy was almost entirely based on fishing, but in recent decades it started diversifying into everything from services, to manufacturing to banking. Suddenly, it started punching way above its weight, and somehow (don’t ask me how), Iceland’s biggest 3 banks ended up with six times their nations GDP of USD19bn. The government pulled the plug, the economy went into freefall (followed by the government) and went from exemplary nation status to basket case status sometime at the end of 2008, becoming effectively bankrupt. The IMF moved in and the rest is history.

So far, so bad, if you’re a proud Icelander.

But then things are about to get worse, if you’re a proud and fiercely independent Icelander, as most Icelanders said they were, till the IMF moved in and started treating their country likes its “bitch”. The IMF has a history of abusive relationships with the countries it finances. It’s power trip “thing”. But most recipients of IMF largesse are usually of “exotic” extraction and therefore used to being treated like shit. When you’re a vibrant European nation full of blond little things, your pride takes quite a knock

In common with most potential new EU entrants, Iceland has many unpronounceable places names. This definitely gives it an advantage should it want to apply to Brussels.

The new government of the first openly gay head of state of the modern era  of Jóhanna Sigurðardóttir (I can’t claim to be able to pronounce her name well, but you can check her on http://en.wikipedia.org/wiki/Jóhanna_Sigurðardóttir) is openly pro-EU, once a position akin to anathema in the little, not to say belittled, island nation. But then beggars cannot be choosers. The EU would offer Iceland a home after its grandiose plans to conquer the world failed. The fact that the UK had to resort to anti-terrorist legislation to freeze Icelandic assets during the darkest days of the liquidity crisis, informed the Icelanders that their free-wheeling days were over. If you can’t beat’em, join’em. I mean, these measures were passed to deal with the likes of Iran, Al Qaeda and other miscreants. Iceland knew it had to join, or risk missing the boat. An if your island miles from anywhere, missing the boat is not a really clever thing to do. They might offer Iceland’s place in the EU to Afghanistan after all, the way the EU is expanding.

Afghani Taliban MEPs on their way to their inaugural address in Brussels the day Afghanistan was allowed into the EU

But just because Iceland has seen the “wisdom” of joining EU, it doesn’t mean that the EU bunch will be grateful for Iceland having made the fine choice of joining their shindig. The EU expansion thing has, mercifully, hit a few snags. Here are some:

1.      Ireland still hasn’t ratified the REFORM Treaty, which is the old European Constitution with another name that makes it sound more progressive and dynamic. Without the Leprechaun Collective saying YES, or the Gaellic equivalent thereof, there is no chance of any further expansion, ever. The Irish will have a chance to vote during a referendum this year. However, if you have seen the sorry state of the Irish economy recently, the Irish may well decide that the end of the Irish dream may be a good time to tell the EU to go to Hell. No better time to trigger another potato famine and nurse more tragic myths about the Irish Condition. There is whole sector of the cinematographic industry that’s almost gone of out of business because of happiness and prosperity of the Irish nation. “Michael Collins”, “In the Name of the Father” and “Bloody Sunday” would have never seen the light of day had Ireland not been a great place for suffering. If the Irish choose the path of self-pity, then Iceland will remain outside the EU

Just the sort of Irish referendum result the EU, and Iceland, are not hoping for…

2.      The rules of expansion are firmly based on unanimity. So everybody already in the EU must approve the new entrants, whether by parliamentary decree or referendum. We’re seeing how Croatia’s entry is being hampered by the fact that it’s in the middle of a territorial tiff with its ex-Yugoslav neighbour Slovenia, which happens to be already in the EU. You can expect, therefore, someone to have a problem with Iceland’s entry. The chances are that it will be the Spaniards. You see, Iceland has a lot of sea, and Spaniards are voracious eaters of seafood and their fleets can be found everywhere fishing legally and illegally. From Canada, to the Pacific, Spanish fishermen can be found causing havoc with other countries’ fish stocks. It has something to do with the fact that the Spaniards have decimated all fish stocks nearer to home, and their predilection of all sorts of exotic seafood from faraway places. Iceland will therefore be expected to surrender all its national waters to Spaniards and any other EU nation. Icelanders will be blockaded in their own harbours till the Spaniards have decimated their waters too. The price of joining the EU will be high for them.

The Spanish take their fish very seriously, so their fishing expeditions are given every chance of success, like military escorts, for example…

So what can Iceland do?

I have a few suggestions which I hope their new blonde and sexually emancipated PM might want to consider.

1.      Tell the EU to Pack Its Bags and Take Up the USD
A cursory glance at the map of Iceland, will tell you that its affiliation with the European continent is based on the most tenuous pretexts. It is in fact not that much further away from Canada and the US. They should take advantage of President’s Obama’s lenience with small wayward island nations within his backyard. Iceland can follow Cuba’s lead and adopt the USD as its currency and try to get into NAFTA, say. Its currency, the Krona is well and truly dead and there is no point going through the pain and hassle of a peg. Just take up the dollar and tell the EU where to get off. Sarkozy would never be able to live with the humiliation of seeing Obama beat him once again in the popularity stakes. He’ll be on the place to Reykjavik in no time offering the Icelanders to join the EU (and the Francophonie) in no time. One way or another, it will be a great way to have a bargaining chip with the EU

Iceland’s new currency, adjusted for Icelandic inflation, and taste…

2.      Take Up Piracy
The worst thing that has happened to Iceland in the last few months is that it has disappeared from the headlines. Iceland cannot afford to have the rest of the world think that they have resolved all their problems and gone back to thermal baths for a well-earned hot soak. That would be disastrous. Iceland is a totally dysfunctional country that needs all the headlines it can get to remain a contender for more help. It’s in luck, for Somalia is another dysfunctional country that’s been crying for attention since it last made the headlines in 1993 with the slaughter of 18 US Marines. Back then, the events were immortalized with Black Hawk Down, which gave the country some much needed notoriety for a while. But when the excitement kind of evaporated, they had to resort to piracy.
The Icelanders are seafarers and once famous whalers. They should go out and try to harpoon a few large supertankers, drag them back to Reykjavik and wait for international attention. The worst that will happen to them is that they will gain the reputation of Pirates, which, I am sure you will admit, is a far better title than Financial Failures. They might even make enough booty from their raids to sell the lot on Ebay and pay off their IMF debts.

If Icelanders cannot bring themselves to do some piracy, they can always advertise for Somali pirates, give them work permits, and bleach them…After all, they were good at bleaching money.

3.      Declare War on the United States and the EU
In the movie, The Mouse That Roared, a small nation in dire financial straits, the Grand Duchy of Fenwick, declares war on the US in the hope of being roundly beaten. The idea is that the Americans, known for being generous victors to a fault, would then flood the little Duchy with Marshall Aid-style funds to get its economy back in shape. Unfortunately for the Grand Duchy of Fenwick, it won the war. (http://en.wikipedia.org/wiki/The_Mouse_That_Roared) Iceland’s Prime Minister should learn from the mistakes of the Grand Duchy. Icelandair flies regularly to New York and one flight can be packed with a bunch of Icelandic commandos disguised as, errr…, as a group of Abba fans visiting the US. Once there, they can take over JFK and make a nuisance of themselves and hold out until the US bombs Reykjavik. They should then surrender and thank their lucky stars that Guantanamo is closed. Orange overalls only look good on swarthy complexions.

Luckily for Iceland, its ineffectual anti-missile measures could not prevent the US Air Force from establishing air superiority. The war ended the day it started.

© Sameh El-Shahat 2009

We are witnessing the birth of a new unstable country. The Democratic Republic of America.

he word democratic in a country’s name never bodes well. It’s like you’re trying too hard to be “democratic”, and more often than not, it just means that you’re not. Move over DRC (Congo), here comes the DRA, the world’s most powerful banana republic. And, Reverend Al Sharpton, before you even so much as start thinking about getting offended, just remember that Bananas don’t just grow in Africa, but in many other places. So this has nothing to do with Obama…

Well not directly, but it has to do with his party. The US of A will become the DR of A because it will be under the Democratic Party that everything American capitalism stood for, from confidence, to capitalism, to meritocracy is being slowly destroyed. Never has the word Democratic meant so little…

In another big screw-up, the administration has totally mishandled the AIG situation. To stop the bonuses, or not to stops the bonuses, that is the question? It seems that the person chosen by Obama to take decisions on the economy is just as indecisive as his boss. Timothy Geithner, Treasury Secretary and tax laggard, is in trouble. He’s in more trouble than the assets in his flop of a Troubled Asset Relief Programme or TARP. He’s scared. He pushed Obama’s USD787bn stimulus package, but Obama now says another USD750bn may be needed to stabilise the financial market. But the market is not really very impressed with the results of the first 700bn spent. To many it looks like throwing good money after bad.

This is because Obama and his administration are, put simply, political cowards. Spineless. Simply put, they either do not know what to do, or, worse, they know what to but are too scared to do it for fear of ending the love-in they’ve enjoyed so far. That is why Timothy Geithner has abandoned plans for a BAD BANK that gets troubled assets of the balance sheets of troubled banks so that they can start lending. He was scared of the political cost to his boss. No to BAD BANK has meant YES to BAD ECONOMY. A damaged Obama and Geithner now will have to eat humble pie and give the US the Bad Bank it deserves in the Badest way possible. The Bad Bank fiasco is a sign of a Bad President. I think we can lay off the word BAD for a bit now, don’t you think?

Meanwhile, the US economy main financial institutions are suffering more and more from the uncertainty. The market has been doing nothing but fall since Obama stepped into the White House. So much for the man touted as the Messiah. The true Messiah expelled the money changers from the temple. The Obama version (the fake one) is expelling money from the economy. GREAT!

So the big financial goliaths of America are beginning to look like the kind of behemoths that we used to call mammoths, till they went extinct. This is because of the uncertainty in the market which the Democratic Messiah and his “apostles” have failed to dispel. So recently, we have Senate Banking Committee Christopher Dodd (a Democrat, btw), talking about nationalizing the entire banking system for “a short time”. I’ve never heard of the idea of a “short nationalisation” before…I’ve heard of “The Long Kiss Good Bye”, which wasn’t bad movie, but in this case, it is exactly what he’s suggesting to the financial system as we know it. BYE BYE…. And for a long time. Yes, nationalisations are like extinctions. They are never “Short” because what is born from them is never what was put to long sleep in the first place… But that’s OK, because something will be reborn and it will be hopefully healthier, if this is the only choice available. I’m no fan of nationalisation, but if nationalisation is the way out, then so be it, but do it quick. Tough love, people, tough love is what is needed. Obama was elected on a ticket of change, and he already acts like a jaded cynical politico too scared of paying the political price of economically vital decisions. However the longer you drag your feet before doing the inevitable, the worse its impact will be. If America ends up having to nationalise entire parts of the economy late, then we will have the kind of nationalisation that is the stuff of nightmares. Messy, haphazard, piecemeal and inefficient. The value-destroying kind of nationalisation. Is there any other kind, I wonder?

This is not the only sign of cowardly leadership. Take the nomination process. Why do you think so many of Obama’s candidates failed to get Senate confirmation. Two reasons:

1. The first is because most are mediocre or just simply tax dodgers
2. The second, is because Obama is obsessed with how history will judge him, so installed the most ridiculously unrealistic vetting procedure which only permits saints to get in. Mother Theresa would have failed for account of having bad breath in her late years and I doubt even Ghandi would have passed it because of the sexual harassment lawsuits he would have triggered due to his partial nudity shocking female interns. Obama is trying to make it sound that the vetting must be tough to uphold high ethical values. Yeah, right, and the Pope is African…No, this is all about Obama. All this is because Obama cares more about his image than his country. A man so in love with rhetoric and nice words that he is willing to play the fiddle while his country burns. He so often likes to compare himself to Roosevelt and Lincoln. I suggest he compares himself with Nero, for a change.

May be it is inevitable, may be it is essential to nationalize everything after Obama and the Congress screwed up the stimulus plan. But if it does take place, I expect Obama will do it in style. He might as well also install state control of all industry (well with Obama as Car Czar, Detroit is already a mini-Soviet in the making), and land collectivisation too.

With no cars being made in the US anymore, the Amish should be put in charge of Detroit. Wagons which go clipetty-clop, clippetty-clop may be slow, but they are cheaper and American through and through (unless Toyota invests in Amish transportation too). With everything belonging to the state, Americans will have time on their hands as everybody will earn the same money and with no incentive many will just stay at home. Obesity could become a greater problem with a sedentary population so many will be forced to work the land to lose fat.

Seriously, I don’t see a nationalisation being short, so I think America would soften the blow by picking a new name for their country to reflect its new status as banana republic.

The Democratic Republic of America. The word Democratic will be just meaningful here as it is with the Congo. It is more prescriptive, than descriptive… It is an ambition and destination rather than a reality. It is also dysfunctional. The DR of A. That’s what it will be called and the Democrats can take all the credit. Obama got into office by saying “Yes We Can…”, and now you know why he never finished the sentence. “Yes We Can Screw You” doesn’t get you into office.

A word of hope though, to end this article on a positive note. Only one year ago, Kenya, that post-colonial haven for all those who would like to believe that the dark days of Africa (no pun intended) are firmly behind it, was being torn apart by tribal rivalries.

It was the sort of behaviour we would have expected from Sudan, or Somalia, or your run-of-the-mill African basket case. Kenya was a cool place, it was the playground of the rich and famous, and people like Silvio Briatore no less, had made it their home. (His clothing brand, Billionnaire, is really nothing more than a way of introducing African sartorial chic cool Mobutu-style to an essentially white Caucasian well-heeled market).

Kenya was becoming a basket case in traditional African style. And yet, one year later, it had managed to place a man at the top of the American administration. What an amazing feat indeed! I would therefore like to take this opportunity to congratulate the Kenyan and American people on their union. As a sign of the growing bonds between the two nations, their economies are fast converging! I am not sure how any of this will help the American people, but at least the Kenyans are happy.

© Sameh El-Shahat 2009

The G20 came and went and we remain none the wiser. Apparently the IMF will gets loads of money, bla bla bla. The poor BRIC (Brazil, Russia, India and China) countries were placated with platitudes about more say on how the fund is run, but that won’t be till 2011. It was business as usual.

Lots of pussy-footing was done, with more emphasis on face saving than real action. The US, in typical superpower style, tried to bully the Europeans into greater tax cuts and public spending. The Americans eventually stopped when the Europeans threatened not to take Guantanamo inmates and the French and the Brits hinted that they might just recognise Mexico’s claims to Arizona, Nevada, California and Texas. So they agreed to agree to disagree about what to do, in private, and agreed to agree on an agreeable compromise, in public. You know, what’s the hurry, after all?

The analogy that comes to my mind is a guy whose house is burning, after having been looted and he’s worrying about what to wear to meet the insurance company rep, and, worst of all, how to explain to Blockbusters that he won’t be bringing back that DVD, after all.

The communiqué was along the lines that they would ensure that “all systematically important financial institutions, markets and instruments are subject to an appropriate degree of regulation of oversight.” Very wishy-washy in my opinion, so much for the urgency of important action. But then when you realise that these finance ministers were actually politicians with mostly little or no financial training, then surprise somehow evaporates. Politicians don’t make decisions in  a hurry, not in democracies at any rate. Alastair Darling, the UK Chancellor, was Secretary for Scotland, Secretary for Transport, Secretary of State for Work and Pensions before ending up as Master of the Universe. One can hardly can him qualified. At least France’s Christine Lagarde was the first female Chairman of an international law firm and knows how to take decisions. But her boss Sarkozy is such a primadonna that he would never allow her to take a decision unless he was there. And Geithner, well, he can’t pay his taxes, so technically, he is more part of the problem than he is part of the solution. So we have to wait till April 2^nd when all the head honchos meet.

Surely it cannot be that difficult. But the leading economies of the world (except for China), are making a very good impersonation of a chronically indecisive person with a dilemma. All solutions so far have been open-ended and piecemeal. Take the idea of a Bad Bank… Nobody can agree in the major economies (except the Swiss who set one up for UBS’s toxic assets) how to make one work. Or the stimulus plan in the US, After congress had a go at rewriting it, it has been emasculated…  Tough love is the answer. We need decisive action and for that we go Finland….(see title)

Yes, compared to the Swedes, the Finns may come across as very staid and rather boring. Who’s heard of Finnish porn? Exactly my point.  Who’s heard of anything Finnish other than Nokia? But when it comes to dealing with a credit-crunch, they know how to take tough decisions. In 1991 a Scandinavian credit explosion was followed by a housing bubble which eventually burst. The result was a banking crisis that humbled the mighty Finns…In 3 years, GDP fell by 11% and unemployment went up from 3 to 18%.

Technically, Finland should have been Finnished…but no. Not the Finns. They went into decisive action. But then what do you expect from a country whose top telephone maker once used to make boots and other rubber products. Yes, Nokia made boots, analogue ones, I presume. So what did the Finns do to save their economy?

1.      They recapitalized all the banks

2.      Their government gave a solemn guarantee for all deposits and banks in peril

3.      The government took full control of any bank that went under (unlike our 30% to 75% nationalised banks, RBS, Lloyds HBOS, Citibank – Nationalisation is like pregnancy, you either are fully or you’re not at all)

4.      They injected massive capital in the form of public loans to promising businesses going through a bad patch

5.      They froze dividend payments (unlike Gordon Brown, who’s still insisting on not giving up on this vestige of old capitalism) despite having sold capitalism down the river in every other way

6.      They set up a bad bank to throw in all the toxic assets

7.      And on the 7^th day, they rested and had a Sauna

The amazing thing about us today is:

·         We are still procrastinating about setting up a Bad Bank (hoping that somehow this is all a bad nightmare that will go away), the Finns did not waste time

·         We refuse to take the worst case scenario as the most probable scenario as the most likely scenario for fear of scaring voters. “Most of Mr Obama’s targeted deficit-reduction comes not from his own actions, but from the expiry of the stimulus, a halt to bail-outs, and the natural restoration of tax revenue as the economy pulls out of recession, growing by a robust 4% on average from 2010 through to 2013. And therein lies the biggest threat to the president’s plans.” Economist, 26^th Feb 2009 http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=13185415

The Finns just plunged in and didn’t skimp on the courage. They waged total war on their recession. It makes sense.  Here’s why:

·         First, they have to make themselves a reputation. All their Scandinavian neighbours had already forged themselves reputations as mighty warriors and Vikings. Somehow the Finns never caught on and became the boring cousins. Declaring war on recession may not be as sexy as raping or pillaging, but it meant that come 2009, we would be talking about them

·         If you look at the their language, you get a hint that if anybody was going to do something 1000%, full on, and not skimp on the details, if would be the Finns. Here for example is passage in Finnish:

Yhdistyneiden kansakuntien peruskirja allekirjoitetaan San Franciscossa 26. kesäkuuta 1945. Jäsenmaiden tulee kansainvälisissä toimissaan mukautua peruskirjan periaatteisiin, jotka kieltävät mm. sekaantumisen vieraiden maiden sisäisiin asioihin. YK on pääasiallisesti vastuussa kansainvälisten kiistojen rauhanomaisesta sopimisesta

These are people who never miss an opportunity to put dots everywhere irrespective of the consequences. Throwing caution to the wind, their courage borders on foolhardiness. Also, if you see the word pääasiallisesti , you will see that they are not even scared of using not only double but also triple vowels! They don’t do things by half…hence their 1991 rescue package. Their language, one of only four non-Indo-European in the EU, is part of the URALIC family of languages and share something with Hungarian, equally unintelligible. Sadly for the Hungarians, that’s all they share with them. Hungary’s economy is screwed and lacks Finland’s resolve. These characteristics and the opaque nature of their language meant that the Finns could take rather tough action and neither worry about being understood by others nor justifying themselves to others. Only Finns needed to understand what was being done to them and they were doing to themselves. Obama is the leader of the free world, is ubiquitous, and speaks a language most understand. The slow nature of his decisions tell us that he seems to care more about being understood than actually about being effective…May be Americans should learn Finnish so they can sort out their mess.

Ironically, Nokia’s first GSM phone was launched on 1991. The Finns wanted desperately to communicate their wisdom with the world (trying to call New York using a pair of Nokia rubber boots had failed miserably). Sadly they spoke Finnish and we did not. Their many dots and triple vowels are our loss….

winmail.dat (3351 KB)

The G20 came and went and we remain none the wiser. Apparently the IMF will
gets loads of money, bla bla bla. The poor BRIC (Brazil, Russia, India and
China) countries were placated with platitudes about more say on how the
fund is run, but that won’t be till 2011. It was business as usual.
 
Lots of pussy-footing was done, with more emphasis on face saving than real
action. The US, in typical superpower style, tried to bully the Europeans
into greater tax cuts and public spending. The Americans eventually stopped
when the Europeans threatened not to take Guantanamo inmates and the French
and the Brits hinted that they might just recognise Mexico’s claims to
Arizona, Nevada, California and Texas. So they agreed to agree to disagree
about what to do, in private, and agreed to agree on an agreeable
compromise, in public. You know, what’s the hurry, after all?
 
The analogy that comes to my mind is a guy whose house is burning, after
having been looted and he’s worrying about what to wear to meet the
insurance company rep, and, worst of all, how to explain to Blockbusters
that he won’t be bringing back that DVD, after all.
 
 
The communiqué was along the lines that they would ensure that “all
systematically important financial institutions, markets and instruments are
subject to an appropriate degree of regulation of oversight.” Very
wishy-washy in my opinion, so much for the urgency of important action. But
then when you realise that these finance ministers were actually politicians
with mostly little or no financial training, then surprise somehow
evaporates. Politicians don’t make decisions in a hurry, not in democracies
at any rate. Alastair Darling, the UK Chancellor, was Secretary for
Scotland, Secretary for Transport, Secretary of State for Work and Pensions
before ending up as Master of the Universe. One can hardly can him
qualified. At least France’s Christine Lagarde was the first female Chairman
of an international law firm and knows how to take decisions. But her boss
Sarkozy is such a primadonna that he would never allow her to take a
decision unless he was there. And Geithner, well, he can’t pay his taxes, so
technically, he is more part of the problem than he is part of the solution.
So we have to wait till April 2nd when all the head honchos meet.
 
Surely it cannot be that difficult. But the leading economies of the world
(except for China), are making a very good impersonation of a chronically
indecisive person with a dilemma. All solutions so far have been open-ended
and piecemeal. Take the idea of a Bad Bank… Nobody can agree in the major
economies (except the Swiss who set one up for UBS’s toxic assets) how to
make one work. Or the stimulus plan in the US, After congress had a go at
rewriting it, it has been emasculated… Tough love is the answer. We need
decisive action and for that we go Finland….(see title)
 
 
Yes, compared to the Swedes, the Finns may come across as very staid and
rather boring. Who’s heard of Finnish porn? Exactly my point. Who’s heard
of anything Finnish other than Nokia? But when it comes to dealing with a
credit-crunch, they know how to take tough decisions. In 1991 a Scandinavian
credit explosion was followed by a housing bubble which eventually burst.
The result was a banking crisis that humbled the mighty Finns…In 3 years,
GDP fell by 11% and unemployment went up from 3 to 18%. Technically, Finland should have been Finnished…but no. Not the Finns.
They went into decisive action. But then what do you expect from a country
whose top telephone maker once used to make boots and other rubber products.
Yes, Nokia made boots, analogue ones, I presume. So what did the Finns do to
save their economy?
 
1. They recapitalized all the banks
2. Their government gave a solemn guarantee for all deposits and banks
in peril
3. The government took full control of any bank that went under (unlike
our 30% to 75% nationalised banks, RBS, Lloyds HBOS, Citibank -
Nationalisation is like pregnancy, you either are fully or you’re not at
all)
4. They injected massive capital in the form of public loans to
promising businesses going through a bad patch
5. They froze dividend payments (unlike Gordon Brown, who’s still
insisting on not giving up on this vestige of old capitalism) despite having
sold capitalism down the river in every other way
6. They set up a bad bank to throw in all the toxic assets
7. And on the 7th day, they rested and had a Sauna
     
     
The amazing thing about us today is:
 
* We are still procrastinating about setting up a Bad Bank (hoping
that somehow this is all a bad nightmare that will go away), the Finns did
not waste time
* We refuse to take the worst case scenario as the most probable
scenario as the most likely scenario for fear of scaring voters. “Most of Mr
Obama’s targeted deficit-reduction comes not from his own actions, but from
the expiry of the stimulus, a halt to bail-outs, and the natural restoration
of tax revenue as the economy pulls out of recession, growing by a robust 4%
on average from 2010 through to 2013. And therein lies the biggest threat to
the president’s plans.” Economist, 26th Feb 2009
http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=131854
15
 
The Finns just plunged in and didn’t skimp on the courage. They waged total
war on their recession. It makes sense. Here’s why:
 
* First, they have to make themselves a reputation. All their
Scandinavian neighbours had already forged themselves reputations as mighty
warriors and Vikings. Somehow the Finns never caught on and became the
boring cousins. Declaring war on recession may not be as sexy as raping or
pillaging, but it meant that come 2009, we would be talking about them
     
* If you look at the their language, you get a hint that if anybody
was going to do something 1000%, full on, and not skimp on the details, if
would be the Finns. Here for example is passage in Finnish:
     
    Yhdistyneiden kansakuntien peruskirja allekirjoitetaan San
Franciscossa 26. kesäkuuta 1945. Jäsenmaiden tulee kansainvälisissä
toimissaan mukautua peruskirjan periaatteisiin, jotka kieltävät mm.
sekaantumisen vieraiden maiden sisäisiin asioihin. YK on pääasiallisesti
vastuussa kansainvälisten kiistojen rauhanomaisesta sopimisesta
     
    These are people who never miss an opportunity to put dots
everywhere irrespective of the consequences. Throwing caution to the wind,
their courage borders on foolhardiness. Also, if you see the word
pääasiallisesti , you will see that they are not even scared of using not
only double but also triple vowels! They don’t do things by half…hence
their 1991 rescue package. Their language, one of only four
non-Indo-European in the EU, is part of the URALIC family of languages and
share something with Hungarian, equally unintelligible. Sadly for the
Hungarians, that’s all they share with them. Hungary’s economy is screwed
and lacks Finland’s resolve. These characteristics and the opaque nature of
their language meant that the Finns could take rather tough action and
neither worry about being understood by others nor justifying themselves to
others. Only Finns needed to understand what was being done to them and they
were doing to themselves. Obama is the leader of the free world, is
ubiquitous, and speaks a language most understand. The slow nature of his
decisions tell us that he seems to care more about being understood than
actually about being effective…May be Americans should learn Finnish so
they can sort out their mess.
 
     
Ironically, Nokia’s first GSM phone was launched on 1991. The Finns wanted
desperately to communicate their wisdom with the world (trying to call New
York using a pair of Nokia rubber boots had failed miserably). Sadly they
spoke Finnish and we did not. Their many dots and triple vowels are our
loss….

winmail.dat (3356 KB)

The G20 came and went and we remain none the wiser. Apparently the IMF will
gets loads of money, bla bla bla. The poor BRIC (Brazil, Russia, India and
China) countries were placated with platitudes about more say on how the
fund is run, but that won’t be till 2011. It was business as usual.
 
Lots of pussy-footing was done, with more emphasis on face saving than real
action. The US, in typical superpower style, tried to bully the Europeans
into greater tax cuts and public spending. The Americans eventually stopped
when the Europeans threatened not to take Guantanamo inmates and the French
and the Brits hinted that they might just recognise Mexico’s claims to
Arizona, Nevada, California and Texas. So they agreed to agree to disagree
about what to do, in private, and agreed to agree on an agreeable
compromise, in public. You know, what’s the hurry, after all?
 
The analogy that comes to my mind is a guy whose house is burning, after
having been looted and he’s worrying about what to wear to meet the
insurance company rep, and, worst of all, how to explain to Blockbusters
that he won’t be bringing back that DVD, after all.
 
 
The communiqué was along the lines that they would ensure that “all
systematically important financial institutions, markets and instruments are
subject to an appropriate degree of regulation of oversight.” Very
wishy-washy in my opinion, so much for the urgency of important action. But
then when you realise that these finance ministers were actually politicians
with mostly little or no financial training, then surprise somehow
evaporates. Politicians don’t make decisions in a hurry, not in democracies
at any rate. Alastair Darling, the UK Chancellor, was Secretary for
Scotland, Secretary for Transport, Secretary of State for Work and Pensions
before ending up as Master of the Universe. One can hardly can him
qualified. At least France’s Christine Lagarde was the first female Chairman
of an international law firm and knows how to take decisions. But her boss
Sarkozy is such a primadonna that he would never allow her to take a
decision unless he was there. And Geithner, well, he can’t pay his taxes, so
technically, he is more part of the problem than he is part of the solution.
So we have to wait till April 2nd when all the head honchos meet.
 
Surely it cannot be that difficult. But the leading economies of the world
(except for China), are making a very good impersonation of a chronically
indecisive person with a dilemma. All solutions so far have been open-ended
and piecemeal. Take the idea of a Bad Bank… Nobody can agree in the major
economies (except the Swiss who set one up for UBS’s toxic assets) how to
make one work. Or the stimulus plan in the US, After congress had a go at
rewriting it, it has been emasculated… Tough love is the answer. We need
decisive action and for that we go Finland….(see title)
 
 
Yes, compared to the Swedes, the Finns may come across as very staid and
rather boring. Who’s heard of Finnish porn? Exactly my point. Who’s heard
of anything Finnish other than Nokia? But when it comes to dealing with a
credit-crunch, they know how to take tough decisions. In 1991 a Scandinavian
credit explosion was followed by a housing bubble which eventually burst.
The result was a banking crisis that humbled the mighty Finns…In 3 years,
GDP fell by 11% and unemployment went up from 3 to 18%. Technically, Finland should have been Finnished…but no. Not the Finns.
They went into decisive action. But then what do you expect from a country
whose top telephone maker once used to make boots and other rubber products.
Yes, Nokia made boots, analogue ones, I presume. So what did the Finns do to
save their economy?
 
1. They recapitalized all the banks
2. Their government gave a solemn guarantee for all deposits and banks
in peril
3. The government took full control of any bank that went under (unlike
our 30% to 75% nationalised banks, RBS, Lloyds HBOS, Citibank -
Nationalisation is like pregnancy, you either are fully or you’re not at
all)
4. They injected massive capital in the form of public loans to
promising businesses going through a bad patch
5. They froze dividend payments (unlike Gordon Brown, who’s still
insisting on not giving up on this vestige of old capitalism) despite having
sold capitalism down the river in every other way
6. They set up a bad bank to throw in all the toxic assets
7. And on the 7th day, they rested and had a Sauna
     
     
The amazing thing about us today is:
 
* We are still procrastinating about setting up a Bad Bank (hoping
that somehow this is all a bad nightmare that will go away), the Finns did
not waste time
* We refuse to take the worst case scenario as the most probable
scenario as the most likely scenario for fear of scaring voters. “Most of Mr
Obama’s targeted deficit-reduction comes not from his own actions, but from
the expiry of the stimulus, a halt to bail-outs, and the natural restoration
of tax revenue as the economy pulls out of recession, growing by a robust 4%
on average from 2010 through to 2013. And therein lies the biggest threat to
the president’s plans.” Economist, 26th Feb 2009
http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=131854
15
 
The Finns just plunged in and didn’t skimp on the courage. They waged total
war on their recession. It makes sense. Here’s why:
 
* First, they have to make themselves a reputation. All their
Scandinavian neighbours had already forged themselves reputations as mighty
warriors and Vikings. Somehow the Finns never caught on and became the
boring cousins. Declaring war on recession may not be as sexy as raping or
pillaging, but it meant that come 2009, we would be talking about them
     
* If you look at the their language, you get a hint that if anybody
was going to do something 1000%, full on, and not skimp on the details, if
would be the Finns. Here for example is passage in Finnish:
     
    Yhdistyneiden kansakuntien peruskirja allekirjoitetaan San
Franciscossa 26. kesäkuuta 1945. Jäsenmaiden tulee kansainvälisissä
toimissaan mukautua peruskirjan periaatteisiin, jotka kieltävät mm.
sekaantumisen vieraiden maiden sisäisiin asioihin. YK on pääasiallisesti
vastuussa kansainvälisten kiistojen rauhanomaisesta sopimisesta
     
    These are people who never miss an opportunity to put dots
everywhere irrespective of the consequences. Throwing caution to the wind,
their courage borders on foolhardiness. Also, if you see the word
pääasiallisesti , you will see that they are not even scared of using not
only double but also triple vowels! They don’t do things by half…hence
their 1991 rescue package. Their language, one of only four
non-Indo-European in the EU, is part of the URALIC family of languages and
share something with Hungarian, equally unintelligible. Sadly for the
Hungarians, that’s all they share with them. Hungary’s economy is screwed
and lacks Finland’s resolve. These characteristics and the opaque nature of
their language meant that the Finns could take rather tough action and
neither worry about being understood by others nor justifying themselves to
others. Only Finns needed to understand what was being done to them and they
were doing to themselves. Obama is the leader of the free world, is
ubiquitous, and speaks a language most understand. The slow nature of his
decisions tell us that he seems to care more about being understood than
actually about being effective…May be Americans should learn Finnish so
they can sort out their mess.
 
     
Ironically, Nokia’s first GSM phone was launched on 1991. The Finns wanted
desperately to communicate their wisdom with the world (trying to call New
York using a pair of Nokia rubber boots had failed miserably). Sadly they
spoke Finnish and we did not. Their many dots and triple vowels are our
loss….

For those ER fans out there, imagine the following scene:

Capitalism has just been seriously injured after bingeing all night long on a heady mixture of CDOs. Not content with living sensibly, it had even borrowed to indulge its addiction. However, nothing could satisfy its appetite for In the end, when it couldn’t pay its suppliers, they stopped supplying. Faced with this terrible illiquidity, it went into shock and slipped out of consciousness. It’s been rushed into intensive care and is awaiting a transfusion of ideas and cash.

That’s really in short what the forthcoming G20 meeting is all about. But that’s also where the problem starts.

The patient will be surrounded by some 20 doctors, many of whom with different ideas of how to nurse capitalism back to life. Some are keen on more ideas, such as better regulation and others are keener on more cash in the form of stimulus packages. The doctors have chosen an odd time to have a philosophical debate.

http://online.wsj.com/article/SB123702789137730081.html

Much as I am fan of the US, it is a well know fact that patient capitalism is in the current dire straits that he’s in because of the US doctor. It was he who got capitalism used to free credit drugs with endless easy prescriptions little or no regulation. And it was also the US doctor who was always against too much intervention, preferring to let capitalism find his own balance. Now the US wants to replace the bad drugs with more good ones, and lots of them to create the necessary stimulus. It is a bit akin to heroine replacement, using methadone instead of heroine under the pretext of making the sure the patient does not go “cold turkey”. The European doctors, on the other hand preach a stricter regime. They want more regulation of the drugs, and they are not keen on pumping more cash into the patient. They want to end his addiction altogether with tight monitoring.

http://www.ft.com/indepth/g20

The irony of the situation should not be lost on us. The US was always the country of small government and big capitalism. Now, it has become the most vocal supporter of big government and stimulus packages. There was a time not so long ago, when the Americans used to make fun of the European (the French in particular) for their proclivity for government aid to their companies and state intervention.

The philosophical issue that rankles the most with the Europeans is Treasury Secretary Geithner’s call for greater stimulus spending by all major economies to the tune of at least 2% of their GDP. In Shakespeare speak, the European dilemma can be summed as “Two percent or not two percent, that is the question”. The Europeans’ point is that they have no interest in racking up the kind of government debt the US now has thanks to its big, albeit vague and potentially inconclusive, stimulus package. They want more regulation.

http://www.iht.com/articles/ap/2009/03/11/business/Obama-Geithner.php

You know something is up when Geithner (who is still taking tax-paying classes after his nomination troubles) is now suggesting that America might, in an unexpected change of heart, want to expand and reform the IMF. He wants to increase tenfold the emergency fund of the IMF to USD500bn (a figure just bigger than Citibank’s toxic debt tally) to help countries in distress. And he is also willing to give more say to the developing world over the IMF, long seen as just another organ of US global financial policy. In return, he wants the IMF to do the US’s bidding and force other countries, such as the Europeans, to increase fiscal stimulus via the backdoor. Put differently, doctor US is trying to bribe the other doctors by shipping in nurses for them to sleep with and bigger accreditations, in order to get them to deal with Capitalism America’s way.

http://www.foxnews.com/politics/first100days/2009/03/12/europeans-balk-geithner-spending/

I can only imagine that at some stage, Geithner will ask developing countries to put in more money into the IMF to have more say. But why should the poorer countries have to pay the price of the mistakes of richer ones? The bigger IMF kitty would supposedly be used to help countries like Hungary for example, which has made some rather bad bets recently. It would the equivalent of letting the Hungry bail out Hungary.

The G20 meeting should focus our mind and make us question what we have taken for granted for so long. At a time when taboos likes nationalisation have been shattered, why don’t we go a little bit further and question other instruments such as the World Bank and the IMF? Are they relevant to our world today?

The last thing patient capitalism needs is more doctors. Too many doctors are as bad as too many cooks. Yes for coordinated action, but no to opaque international organisations that force their will on others and are not fair nor representative. If not Capitalism will make an appearance as a corpse in CSI instead.

I think Nero has been given too hard a time by historians. Did he really play the fiddle while Rome burned? Do we really care? It happened so long ago and I am sure it was nothing more than an innovative way of urban regeneration. Burn and build. The rumour was spread by a contractor who didn’t get the contract to rebuild the brand new forum. No point in accusing Nero of dereliction of duty then, but the present offers us interesting parallels.

http://www.iht.com/articles/2009/03/10/business/coffee.php

The EU commission, already with enough to do with 27 mutually unintelligible members, has an even more vexing problem on its hands. The commission had installed 21 top of the range espresso machines in its famous star-shaped Berlaymont buiding. Each had cost EUR5000, which I am sure you will agree is an excellent use of an artificial currency, to say nothing of the EU budget. And then, back in December, they malfunctioned. Apparently, the coffee started tasting very strange and tests, carried by the aptly named Mr Alexander Just, an archivist in the commission with time on his hands (a predicament suffered by everybody at the Commission, but glossed over in the article) showed abnormally high levels of lead and nickel.

If you think this is about coffee, you’re a mug

Any right-minded commissioner would have read in these high levels of lead and nickel, dangerous and possibly deadly if left and unchecked, a manifestation the will of the people of Europe wanting to do away with the ineffectual commission, and its even more obsolete president Barroso, once and for all. But then “right-minded commissioner” is an oxymoron and “the will of the people” is a term that these European Über-bureaucrats do not understand. Self-obsessed as they as are and so taken in by their own spiel, they saw in these highly elevated lead levels a malfunctioning of the machine, rather than an assassination attempt. If you ever needed evidence that the commission had lost touch with the people it represents, then you have it.

Once again, hidden behind their platitudes and grand theories of enlargement, the commission missed an opportunity to see that trouble was brewing. Instead, they mistook the brew for the trouble.

The Berlaymont Building (a Belgian corruption of the word Parlement, I can only imagine, to keep with the spirit of corruption of the EU), is actually the EU headquarters of Starbucks!

And so it came to pass, because they have loads of time on their hands, that they came down hard on the La Cimbali (the Italian espresso machine maker) and asked for explanations. This is extraordinary as the commissioners themselves are chronically unable to give any explanations of their actions to the people of the 27 countries they represent. La Cimbali protested that the problem was not the machines, but the poor cleaning of the machines. Espresso machines need to be cleaned regularly, you see, and it seems that nobody on the Commission cleaned them, because everybody there is SO busy doing really important things that, well, nobody has ever managed to understand till far too late, only to discover

The EU Commissioner and the Slovenian Prime Minister in Ljubljana pretending to discuss future enlargement of the EU…coffee flavour list…

Commissioners of the EU, like their commission are people who do not yield to others. They are a doctrinaire bunch, who impose their will on others (the people) and take no for an answer. So as you can imagine La Cimbali, just a company, no more, no less, didn’t stand a chance against the commission. And so the commissioners managed to exact a deal out of La Cimbali. First, the company would program all 21 machines so that they clean themselves automatically regularly. This would afford the commissioners and their staff more time to have lunch and frustrate the ambitions of the 27 peoples they represent. And second, staff from each of the 27 commissioners would receive courses on “coffee tasting theory and sensorial techniques”, coffee “recipes and hints”, and finally “ordinary machine maintenance procedures.”

The Commission allowed the story to be released, without risking the fear of accusations of profligacy, because it knew it had scored two huge victories:

1.       It could stand tall in front of the people of Europe and announce that a bunch of Europeans with no idea of how to drink coffee could bludgeon an Italian espresso maker into submission, proving that good coffee is not the monopoly of Italy. So today an EU Slovak commissioner can tell an Italian how to make coffee. The commission believes in painting everything with the same brush and reducing all to the lowest common denominators. Tomorrow we will have the Finnish commissioner telling a Greek Feta maker how to make cheese, and a Latvian commissioner will tell the Spaniards how to make ham. Everything in Europe will look, taste and feel the same and carry the Commission’s stamp of approval

“German Coffee, Mrs Chancellor? You must be joking, I can’t sell that to the Italians!!!!!”
“You’d better, Barroso, if you still want me to buy Portuguese-standard deficits for the all the EU financed by the Germans! I’m assuming you want to keep your job.”

2.       The Commission can show that it saved money by not paying for the coffee courses, diverting attention from how they paid for the machines in the first place

3.       The Commission can make light of an assassination attempt and turn it into a crusade for manufacturing standards, in so doing once again triumphantly subverting the will of the people. They did the same thing with the European Constitution. When it failed to get its way, the Commission repackaged it as the Reform Treaty, or the Treaty of Lisbon. The Commission is a master of making light of disasters.
If you go to http://forums.ec.europa.eu/debateeurope/viewtopic.php?p=133409&sid=55f6ba3f029288ff7c999b0befd40764 , you will even find that on the EU commission page, there is a forum to discuss the coffee machine issue. The barefaced shamelessness of the EU is such that they can, with total impunity, take the caffeine out of democracy…

The newly cleaned machines come into operation on 16^th March 2009. The Commission can then claim that decent EU-approved coffee has been properly brewed. Europe, with far weightier things on its mind, can then claim that it has been properly screwed.

The European Commission before their Barista Class

© Sameh El-Shahat 2009

The Financial fallout has provided an excellent opportunity for little countries in Europe to show the big players, humbled by the global recession, who’s boss.

This is a salutary tale of how and why you should think carefully before badly treating a small country, however harmless it may seem. Not so long ago, 65million years to be exact, the dinosaurs thought they had the Earth to themselves and  thought nothing of riding roughshod over little creatures called mammals that were all to intents and purposes insignificant. Then came the Asteroid (the precursor to the sub-prime crisis) and wiped out the big dinosaurs leaving the meek to inherit the earth. History could be repeating itself.

Here are two sobering tales from our times:

How Switzerland Turned on Germany To Teach The Americans A Lesson

This is a truly bad time for Germany. In classical Götterdämmerung style, it is being assailed by its friends and allies for money.

Only yesterday, I wrote about how its Euro-area partners are trying to fleece it, so that they may carrying on living way beyond their means. To fill up its rainy day chest, beleaguered Germany is being forced to turn on small tax haven Liechtenstein to claw back some of the money stashed away there by its rich barons.

Don't Mess With UBS!

And now, in a typical kick’em-while-they’re-down fashion, Switzerland has entered the fray as the latest country asking Germany to bail it out, and it is doing so in a very imaginative fashion. We’ve been dumping on the Swiss for a while now about their banking secrecy laws, so it seems that they are fighting back to secure a future in a rather bleak financial future.

The Swiss are neither in the Euro nor in the EU. They also have no natural resources to speak of, aside Milka cows, fresh air and great scenery. For their fabled chocolate, they have to depend on some pretty dodgy African countries for supply, and for their legendary timepieces, they need a constant supply of people with at least two free wrists to wear them, if the business is to remain sustainable.  So they had to be resourceful. First, they invented secret numbered bank accounts where, behind the façade of respectable cute family-owned banks that looked like something out of Legoland, anyone could hide their money and have access to it with no questions asked. But then the Americans and the Germans turned on them to try to get them to divulge the assets of their nationals. And so, in an attempt to show they are still in control, the Swiss have unveiled their new and deadly weapon.

Swiss Chocolate may be innocent for children,but the Swiss secret service has been using it as their weapon of choice for seduction and espionage for centuries. Ever wondered how a country could live off chocolate?

The Swiss Gigolo.

The Swiss Treasury, together with their fabled Nestle-fed Secret Services have sent their best agent first to seduce and then blackmail Germany’s richest woman who is heiress to the BMW fortune. The Swiss Secret services must have planned this operation very carefully, and they counted on certain German national proclivities. For example, they Swiss are obsessive about time-keeping, and so are the Germans. And so it was most natural that Ms Susanne Klatten, a member of the reclusive Quandt dynasty, and a major shareholder of BMW, would fall for suitor whose charm lay, largely, in being punctual and arriving on time for their secretive trysts. If there is one thing the Germans love, it is punctuality. A punctual yet unimaginative lover from the clock making Germanic  races could easily trump a constanly late but more ardent latin lover. If there are two things the Germans and the Swiss adore in a partner, they would be constancy and punctuality. The Swiss then asked their chocolatiers to produce to the most aphrodisiacal confectionaries for their man to ensure that his prey would offer no resistance.

He is considered "good-looking" by German matrons, and she's a good catch if you're a nerdy looking Swiss spy on the make. But he always "came on time", and that's what really made her fall for him. She became his "Swiss Made"

Having sold her some cockamamie story about running over some US mafia kid and the mafia dad asking for EURO10 million to care for his daughter. He would put up EUR3m and she the remaining EUR7m, which she did. Then he asked for her to leave her husband and place EUR290m into a trust fund for their future lives together. When she refused, he threatened to show intimate videos of them making love (punctually, of course). She reported him to the police, he was arrested and just sentenced to six years imprisonment by a Munich court.

It turned out that Ms Klatten was nothing more than the fourth wealthy woman he had seduced then conned and duped into coughing up the cash. He had been practicing for his big hit. While this may seem like a failed mission by the Swiss secret service, it is in fact a very successful mission. The Swiss wanted the Germans to know that they can strike at the heart of the industrio-financial complex. BMW had been penetrated (excuse the pun). What of Mercedes?

Unbeknownst to a German car manufacturer with a similar logo, this the coat of arms of the Swiss secret service. It stands for Blackmailing Married Women

This was also a shot across the American bow. UBS, the Swiss bank has been forced to hand over a few hundred client account details under duress by the US with the threat of criminal action. The Americans want details of 52,000 more clients who, they say, are flouting America’s stringent tax laws. For the Swiss, banking is their means of survival and they will defend it at any cost. Is it any coincidence that the Sgarbi case has been made public now? No, they Swiss are simply warning the Americans. Every American leader of industry, major banker, or politician, must now be wondering if his wife is currently being seduced by a suave, charming, and very punctual Swiss agent masquerading as an “attentive” lover, as Ms Klatten touchingly described Mr Sgarbi. Every package of Swiss chocolate entering the US can now justifiably be considered a tool of industrial espionage, aimed at giving the Swiss an unassailable advantage over the Americans.

How The Central Europeans Finally Got To Screw Austria

Up until less than a century ago, Austria had reigned supreme for over a thousand years over large swathes of Central Europe. The Holy Roman Empire, in the hands of the Hapsburg dynasty, kept a tight rein over the whole area. From 962 to 1806 (when it was dissolved by Napoleon). Then it was revived again briefly and managed to keep going till WWI when it was finally laid to rest.

So it was quite big, as you can imagine.

The Holy Roman Empire would eventually become a Wholly Austrian Mess

The Austrians, in typical Imperial fashion, lorded it over the Central Europeans and treated them like they were some oafish backward louts. They did have a favourite in Hungary, but generally treated the whole area with the disdain reserved for exotic diseases. They waited and bided their time, these Central Europeans, and they knew that eventually, they would have the last laugh.

The WWII came and went, and they all fell under the Soviet Yoke and got even more abused. Then the Iron Curtain fell and they were free again for a while, and then they saw their opportunity. Austria was so near, and yet so far.

In 2004, a whole bunch of them joined the EU where Austria had found refuge. A rump state and a far smaller one, but still a haughty one, all the same. Their revenge would be sweet.

http://www.eurointelligence.com/Article3.1018+M545e0be824a.0.html

They all then secretly agreed to start building shakiest and most advanced banking system that money could buy, and they made sure that they didn’t use their own money. In effect, the Central Europeans got Western Europeans, with Austrians at their forefront, to buy them a banking system from scratch. Then, in a concerted action that History will remember as the true end of the Hapsburgs, they encouraged their citizens to borrow their mortgages in Euros and Swiss francs, where the rates were lower than local currency banana republic rates. The Central Europeans then went on the kind of profligate shopping spree that one only does with other people’s credit cards! When the financial downturn came, all the local currencies collapsed, and all the mortgage repayments became huge as the local currency value of the foreign currency loans shot up sky high.

When people talk of the banking system of Hungary being screwed, they are in effect saying that Austria’s banking system is screwed. That is because Austria, in a last fit of imperial grandeur, thought it its god given right to recreate a financial Holy Roman Empire all over again. They fell into the Central Europeans’ trap. Austria got burned badly and the Central Europeans know that the Austrians, much as they would love nothing better than see them go to hell, must now bail them out as that’s the only way to save the Austrian banking system.

“After leading the way in providing credit to the eight former communist nations that joined the European Union in 2004, Austria’s banks are now on the hook for 201 billion euros ($254 billion) in loans, equal to about 71 percent of the nation’s gross domestic product. International investors rank Austria’s bonds as less safe than those of Italy, Spain or even Slovakia”. ©Bloomberg 2009

http://www.bloomberg.com/apps/news?pid=20601085&sid=aSskJbEPpc4A&refer=europe

Who’s having the last laugh now??

© Sameh El-Shahat 2009