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A lesson on economics

Ok guys, this blog is usually all fun and lulz, but let’s take a look at a serious matter for once.

I’m going to speak about economics, and explain to you why we are truly and royally fucked.

Someone asked me on a status “serious question here – in your own personal opinion – what’s the worse that can happen should Greece finally declares bankruptcy?”

My answer was off the cuff, and it was this:

Considering that everyone has Credit Default Swap against everyone else, it is very possible that bankruptcy activates those CDS. That would mean the complete and total destruction of the financial system.

To put it into perspective: A CDS is an insurance against your creditor defaulting on some debt he had with someone else, a third party. That third party might be, say, a sawmill in Malawi, another loans, another bunch of loans… in an extremely convoluted system, where everyone endless chains of debt and CDS to each other. Everyone has millions of those. If you are the only one activating a CDS, you get your money, from a small credit or something. But if everyone activates the CDS at the same time (and everyone would want to be the theoretical first who gets his money) then all the banks are suddenly engaged to pay CDS meaning, all financial banks in the world. implode at the same time. It’s just impossible that everyone has enough money to pay the multypling debt with everyone else.

That would mean we’d be truly and royally fucked, because we depend on the entire production industry (which is another kind of mess of its own, for environmental issues), which in turn depends of the financial industry that dissapeared a moment ago.

But it could well be that maybe that is a better alternative than getting completely screwed by those same banks to avoid this financial nuclear war. Also, all this austerity measures slow economic growth. Which means, more risk of bankruptcy. All “aid” “bailouts” etc just kicks the can down the line.

We are in quite a dire situation my friends. It’s either we are screwed now, we are screwed later when we find ourselves facing the same risk of bankruptcy, or screwed forever, if we keep worsening work conditions, salaries, purchasing power, and completely disrupting the environment. And that’s the other problem, environmental problems aren’t just some far away swamps being poisoned. It’s about the capacity of earth to sustain how many we are, and how well we’ll live. There’s an economical question at the heart of it. As the Stern review proved, even in purely capitalistic terms we would stand to lose from a 5% to a 20% of global GDP if we continue polluting like we do now. Even when you use the same frame of reference as them (growth, GDP, not taking externalities into account) we stand to lose greatly.

And for that, I call for Real Austerity. Maybe they are right in defending austerity. Let’s be serious about it and start by acknowledging the complete bankcruptcy and extreme brokenness of our current international financial system. It will mean hard times, but at least we will be able to do something with it. Anything else is kicking the can down a road with less natural ressources and more pressure factors.

I invite and demand the populations of the world to declare the complete bankcrupty of the international financial system of the present time.

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