Idi's opinion about credit crunch

Before I go any further telling you what happened to our fortunes, I really need to break through to you some news. I can’t help but follow the news and newspapers about the credit crunch. I can see that nobody got it right(maybe Gordon Brown did). But a simple phone call to Idi, my money launderer friend, gave me all the answers to this crisis. So here it's what he said:

"A long long time ago(and it’s not Don McLean), the cold war was ended with the Soviet Union collapse. At that very point, the US had its pledge with dozens of countries lowered to almost nothing. You see, beforehand,they would offer better deals than the opponent, while the USSR would to the same. These offers, among other requested by insane dictators all over the world, would include more equipped armies but…also megastructures to be built in their soils(megabridges, mega hydroelectric plants etc) and extractions to be done. These would open room for western companies to build/produce/extract in unstable countries , but with the strong back of American government. So, a big multinational company would borrow money from an American bank to build/produce in these countries, and the banks did lend the money because all was guaranteed by the American government.

The Clinton Era was one where American Government did only collect all the money borrowed by these countries(interest & all). These were the Bonanza years. No need to reinvest(and probably loose/win money) in dozens of countries. But, amazingly enough, banks do survive out of reinvesting. Since no American Government guarantee was offered to these unstable countries, the banks saw themselves packed with money with no place to invest. So they started self indulging themselves, by offering its own citizens money to build their own little castles. Hence the speculations on house mortgages. On the other hand, any piece of money that is still being lent to developing countries(which is much less than used to be), comes back, through corrupted government leaders, to very quiet private accounts in big banks this side of the world. Quiet in the sense that this money does not invest productively(not speculatively), and it sits still there. What do you do with this money?

Well, in Ole Country the following which had happened pretty much elucidates it all: a couple of years ago, McDonald’s sold its entire Continental Operation(Ole Country’s continent) to a few bunch of Ole Country’s politicians. More like “rotten papers” being sold to politicians/money launderers, who need a very public company to be able to “win”or “loose”money. McDonald’s main office then becomes a mere royalties' benefactor against paper/certificates they issue declaring everything is just fine, according to McDonald’s standards. And the meaning of “rotten papers” is very much obvious. Their operation has been so poorly profitable in the continent, that it was a much wiser decision to sell it all. Unfortunately, to people who know nothing about business, but only whitening and blackening money.

Now that’s a very global new thing: First World countries producing certificates rather than anything else(HACCP, organic, ISO, Rainforest Alliance)other than extracting production/products from these unstable countries, when first world governments do not guarantee the loans these banks would provide to any big investor overseas(oil and construction companies, junk food multinationals, etc).

Public opinion(the ignorant majority) in First World countries, is very much concerned with any real and effective help a 3rd world country gets(other than “donate GBP3.00 to dig a well”). Take for instance China: there was a genuine effort(from Nixon and on)towards that country. The local Chinese government accepted it and is producing. Now public opinion is scared that China will suck all the Energy from the world. Nonsense. They supposedly created a whole new middle class (100 million people) who will devour Philips and Toshiba and Panasonic Plasma Tvs, other than Louis Vuitton bags and Apple ipods. But- ay,there’s the rub- is it really a 100 million people middle class? How can it be explained that in China there are only 350 Starbucks branches then, in a Middle Class population twice as the UK,while the UK has 700 branches? And we should remember that British are not very fond of Starbucks anyway(at least Peter Mandelson isn’t…)."

So, what Idi knows for sure is that banks simply do not have where to invest, because General Motors cannot continue to produce same pace as it actually can without enough buyers. There are only 300 million Americans and they do not multiply at the same speed technology is getting more efficient. There is no need for new GM plants-either in the US, or in the 3rd World-there are simply no buyers in the 3rd World-either for their new technology, or old generation technology(they always build in these countries 02 or 03 older generations versions of their cars, a very profitable trick). You can’t even use the old trick: “spread profit”, which would mean General Motors selling older generation cars to 3rd World countries at a more expensive price than new technology ones in the US. Because there is simply no more money over there.

So now I understood it all: when an Insurance Company puts an add asking for a native Ole Country boy to work for them, it’s actually a phony: why would you need an 08th employee to work in an 08 million dollars annual turnover department on a single product? Other than the manager needing to show the chairman that they are thriving, and that actually buying this whole department portfolio from a megaworldwide insurance broker has been a wonderful decision. Hence, putting this manager forward or giving a reason for the salary he gets. So he can make a new mortgage and buy a new house, worth GBP2 Million with only GBP100K in his bank account. How? When? Where?

In my old days, to have credit was actually to have the money. In 1st World, to have credit is to have a job.

Well, that was a long distance call from Idi.The Oracle had spoken. Get back to the story, or else we will get lost.

Tell you later.