Monday, December 26, 2011

A Glimpse Into the Self-Destructive Psychology of Sharks

"You cannot survive without that intangible quality we call heart. The mark of a top player is not how much he wins when he is winning but how he handles his losses. If you win for thirty days in a row, that makes no difference if on the thirty-first you have a bad night, go crazy, and throw it all away."
-Bobby Baldwin

There still remains a large population of stubborn “fish” in the developed world, who are clinging on to hopes of an economic recovery like incredulous poker players cling on to hopes of winning all their money back by playing three cards to a straight or a flush. These are the people who continuously get their clocks cleaned and then reload their chips in a vicious cycle of defeat; the people who keep the game alive and profitable for the “sharks”.

At the same time, the bankrolls of fish have been diminished so severely and their egos bruised so badly that an increasing number are simply being forced out of the game for good. They can no longer ignore the fact that their lofty expectations have been flattened into silver dollar pancakes, and that they may find themselves lacking food to eat the next day if they continue gambling with what little wealth they have left.

A Glimpse Into the Stubborn Psychology of “Fish”

“It's only when the school of fish stream towards the exits in unison that the "game" becomes wholly unprofitable for solid players. Until that tipping point arrives, our bets will continue to scream "I have a monster!" at the top of their lungs, and the fish will continue to make crying calls in stubborn disbelief. The psychology of fish always leads them from a state of comfortable wealth to one of utter destitution over time, as they incessantly chase their losses, throwing bad money after even worse money.

As the total amount of money sunk into the pot exponentially increases along with net losses, the fish find it that much more difficult to simply walk away from the game. In the long-run, however, every fish goes for broke and is simply unable to purchase any more chips to play with. The solid players are then left with a minimal or non-existent edge at their tables, as the game begins to consume itself, and that's when you know it's time to get up, leave the casino and begin the long journey back home.”

In the financial investment world, anyone still speculating on rising share prices through “buy and hold” strategies, for example, would be labeled a huge “fish”. A fish could also be a country such as Croatia, who recently decided to become a member of the EU in 2013. That was a classic move of “chasing” losses, or throwing good money after bad.

After being downgraded to nearly junk status by Standards & Poor a year earlier, and struggling to achieve any economic growth whatsoever, Croatia panicked and stubbornly decided that its best play would be to shove the remainder of its chips into the middle of an imploding European Union, scurrying for the last deck chair on the Titanic.

The most striking example of fish remains the rabid consumers of the developed world, who still feel the need to trample each other during the Holiday season for some sense of short-term gratification. They draw down their savings and run up their credit cards at a time when their jobs could evaporate at any moment along with the value of their assets and retirement accounts.

So while there are still quite a few individuals, corporations and countries harboring the stubborn psychology of fish, it’s also clear that fewer and fewer people and entities can afford to remain in this category – i.e. we have most likely reached the “tipping point”. The point where there are no longer enough naive fish for the cut-throat “sharks” to feed on.

A shark is a solid, patient player who immediately assesses the playing styles of his opponents when sitting down at the game, and uses that information to pounce on every single situation in which the shark has a mathematical advantage. The shark is out to maximize value and profits like everyone else, but typically realizes many of his/her own limitations and does not hesitate to sit on the sidelines, patiently waiting for opportunities to strike.

The sharks also have a variety of tools at their disposal, including multi-layered deception and misinformation (something Bill Gross, the notorious financial shark, is familiar with) and an ability to make accurate probability assessments rather quickly with any given hand. Despite all of these advantages, even the most cunning sharks still share one fatal flaw – they are addicted to the game and refuse to quit even as the game collapses in on itself.

The #1 reason the sharks lose money in the medium to long-term is not because of bad luck or better opponents, but rather they beat themselves. They lose patience with bad players, they let their ego get the best of them against good players and they start to take unnecessary risks with their bankroll.

It could start off with small mistakes, such as getting into large pots with other players for the sole purpose of “out playing” them with weak hands, i.e. bluffing them off of the pot. These mistakes simply snowball on top of each other, as the inevitable losses pile up and the players begin to doubt their ability to remain patient and win.

Eventually, the losses and frustration build up to such a level that the good player feels compelled to move up in stakes and win some money back. So the player goes from, let’s say, a $500 max buy-in game to a game where one cannot play comfortably without a stack of at least $2000-$3000 in front. At this point, the formerly disciplined players have entered a self-destructive spiral of throwing bad money after good which they are very unlikely to escape from.

In a game of poker, the sharks can either put all of their available capital at risk on one game, or maybe leverage that capital up a few times by borrowing from a - pardon the pun - loan shark or the local bank, but that’s really about it. The desperate sharks in the world of international finance, though, can take their self-destructive attitude to a whole different level of extreme.

The highest stakes game in this world is obviously found within the shadow credit markets, where hundreds of trillions of dollars worth of derivative debt instruments are bought and sold between large institutional players. These games are established by the very largest players in smoke-filled rooms at the back of the speculative casino, and cannot be observed or regulated by any official exchanges.

ZeroHedge has been gradually piecing together what little we know about these “dark pools” to arrive at a more complete picture of how big this shark-infested game really is. It turns out that the total notional value of outstanding “over the counter” derivatives rose to a record $707 trillion in the first half of 2011, which was a $107 trillion increase in six short months. [1], [2]

$707,568,901,000,000: How (And Why) Banks Increased Total Outstanding Derivatives By A Record $107 Trillion In 6 Months

”So why did the notional increase by such an incomprehensible amount? Simple: based on some widely accepted (and very much wrong) definitions of gross market value (not to be confused with gross notional), the value of outstanding derivatives actually declined in the first half of the year from $21.3 trillion to $19.5 trillion (a number still 33% greater than US GDP).

Which means that in order to satisfy what likely threatened to become a self-feeding margin call as the (previously) $600 trillion derivatives market collapsed on itself, banks had to sell more, more, more derivatives in order to collect recurring and/or upfront premia and to pad their books with GAAP-endorsed delusions of future derivative based cash flows.

Because derivatives in addition to a core source of trading desk P&L courtesy of wide bid/ask spreads (there is a reason banks want to keep them OTC and thus off standardization and margin-destroying exchanges) are also terrific annuities for the status quo. Just ask Buffett why he sold a multi-billion index put on the US stock market. The answer is simple - if he ever has to make good on it, it is too late.

The description above almost perfectly captures the self-destructive psychology of sharks in action, as the game enters an entirely new phase of ridiculously high stakes and almost no margin for error. As the value of the shadow debt-derivative system implodes, the financial sharks are forced to throw ever-more leveraged money onto the table until they have nothing left, because the alternative is to simply quit the game and accept their current losses.

Peter Tchir provides some clues into what kind of derivative bets are being placed when he describes “The Ultimate Trade”. It was recently revealed that many European banks have been selling large amounts of CDS insurance on the bonds of their home countries, while also buying large amounts of the sovereign bonds themselves. In essence, they are going “all in” on the bet that those countries will remain solvent.

The Ultimate "All-In" Trade

"But why would BSC be so willing to sell protection [on itself]? Well, the markets were very wide because of the fear that they would default. You sell as much protection as possible. If you default what do you possibly care? Your stock is wiped out, your job is gone, and your strategy is totally explainable to future employees. If you don't default all this massive amounts of protection screams tighter and you have your best year ever. No brainer for the firm, an issue for the market.

So, why are French banks selling protection on France like it is going out of style? Why are Italian banks doubling down on Italy? Because if the bailouts work, it is free money. Huge tightening on top of the spread income until the bailout finally wins. If the sovereign defaults, is the bank really going to be around anyways?

It is the ultimate trade. If you make money, you get paid. If you lose money you were screwed anyways."

For the sharks swimming in the high seas of finance, current losses are so devastating to their balance sheets and their expectations that they cannot even conceive of a worse situation than leaving the game, so they double, triple and quadruple down using whatever capital and whatever leverage they can get their hands on through synthetic financial products. That’s the hallmark of a shark’s psychology right before he/she blows sky high:

“I’m such a clever player, yet so deep in the hole, that there’s no other choice but to let it all ride. Just give me one more game; one more hand to prove myself. If I win, I’m back even or maybe even booking a healthy profit. If I lose, then I simply end up in the dark and frightening place where I would have ended up anyway.”

The reality, though, is that this dark place ends up being much more frightening that anyone could have ever expected. After it’s all said and done, we can be sure the bruised and battered sharks will be begging the Lord Almighty to return them to the place where they were before they decided to make their final stand. But life simply doesn’t work that way, and that’s why we find our economies and societies held hostage to a self-destructive global banking system.

Reuters and Zero Hedge have recently cast some more light on the shadowy games played by the sharks of finance, as they examine the role of the “re-hypothecation” of collateral assets through a never-ending chain of large broker-dealers and banks. Boiled down to its most basic form (which is really all that matters), this process allows a single asset to be pledged as collateral for short-term loans an infinite number of times.

In the shadow banking system, many of these loans take the form of “repo” transactions, where the collateral security is “sold” for cash with the condition that it will be bought back at a specified date and rate of interest. These Escher stairs of OTC transactions, in turn, allow the financial sharks to potentially create an infinite amount of leverage behind their speculative derivative bets.

In this particular game, all of the big-name sharks gather in the City of London, where virtually no restrictions exist on how many times the same collateral can be “re-hypothecated”. The following are excerpts and graphs from an IMF report prepared by Manmohan Singh and James Aitken entitled, “The (sizable) Role of Rehypothecation in the Shadow Banking System”, courtesy of Zero Hedge.

The (sizable) Role of Rehypothecation in the Shadow Banking System

” The United Kingdom provides a platform for higher leveraging stemming from the use (and re-use) of customer collateral. Furthermore, there are no policy initiatives to remove or reduce the asymmetry between United Kingdom and the United States on the use of customer collateral. We show that such U.K. funding to large U.S. banks is sizable and augments the measure of the shadow banking system.

… Rehypothecation occurs when the collateral posted by a prime brokerage client (e.g., hedge fund) to its prime broker is used as collateral also by the prime broker for its own purposes. Every Customer Account Agreement or Prime Brokerage Agreement with a prime brokerage client will include blanket consent to this practice unless stated otherwise.

…On-balance sheet data do not “churn,” where churning means the re-use of an asset. If an item is listed as an asset or liability at one bank, then it cannot be listed as an asset or liability of another bank by definition; this is not true for pledged collateral... However, off-balance sheet item(s) like ‘pledged-collateral that is permitted to be re-used’, are shown in footnotes simultaneously by several entities, i.e., the pledged collateral is not owned by these firms, but due to rehypothecation rights, these firms are legally allowed to use the collateral in their own name.”

”Following the collapse of Lehman, hedge funds have become more cognizant of the way the client money and asset regime operates in the United Kingdom. For some, the United Kingdom provides a platform for higher leveraging (and deleveraging) that is not available in the United States. In general, post Lehman, one would expect an increasing tendency for those providing collateral to counterparties to ask for their collateral to be segregated from the counterparty’s assets and to place limits on its further use.

Our understanding is that the U.K. FSA has not yet made any changes on the use (and re-use)of collateral since their LBIE experience that would remove or reduce the asymmetry in the U.K. and the U.S.”

So, there you have it. The financial sharks are sitting down with each other in London to play one last game of incredibly high-stakes poker with infinitely leveraged capital, where absolutely none of them can afford to lose! Some of them will lose, though, and, when one or several major institutions do go down, it will become apparent that none of them really have the actual capital to back up their electronic chips.

In a sense, that is what has already happened with MF Global, and the liquidity crunch was only temporarily stalled by the coordinated action of the Fed and other central banks. To see why, we can return to the original article by Christopher Elias on rehypothecation for Thomson Reuters.

MF Global and the great Wall St re-hypothecation scandal

”MF Global's bankruptcy revelations concerning missing client money suggest that funds were not inadvertently misplaced or gobbled up in MF’s dying hours, but were instead appropriated as part of a mass Wall St manipulation of brokerage rules that allowed for the wholesale acquisition and sale of client funds through re-hypothecation. A loophole appears to have allowed MF Global, and many others, to use its own clients’ funds to finance an enormous $6.2 billion Eurozone repo bet.

The volume and level of re-hypothecation suggests a frightening alternative hypothesis for the current liquidity crisis being experienced by banks and for why regulators around the world decided to step in to prop up the markets recently. To date, reports have been focused on how Eurozone default concerns were provoking fear in the markets and causing liquidity to dry up.

Most have been focused on how a Eurozone default would result in huge losses in Eurozone bonds being felt across the world’s banks. However, re-hypothecation suggests an even greater fear. Considering that re-hypothecation may have increased the financial footprint of Eurozone bonds by at least four fold then a Eurozone sovereign default could be apocalyptic.”

As the institutional clients of brokers become increasingly fearful of having their funds effectively stolen through rehypothecation after the MF Global debacle, they will do everything in their power to make sure their cash cannot be further subjected to this process, which will only exacerbate asset sales to meet margin requirements, leading to lower valuations of toxic assets and more funding shortages at banks.

The most toxic assets right now are the sovereign bonds of peripheral Eurozone countries, up to and including Italy. If the banks turn to their governments (taxpayers) to re-capitalize them, then the countries’ own funding needs will worsen as their debt yields go up, which also exacerbates the funding needs of the banks. Yalman Onaran describes this “death spiral” in his article on Bloomberg:

European Banks Taking Cash From Governments Seen Sparking ‘Vicious Cycle’

The size of potential losses at European banks has scared away short-term creditors, squeezing the region’s lenders. The European Central Bank has stepped in to replace funds being withdrawn, providing unlimited cash and lowering requirements on the quality of collateral it will accept.

“We’re in a death spiral,” said Andy Brough, a fund manager at Schroders Plc in London. “As the yields on the peripheral bonds increase, value of the bonds decreases and the amount of capital the bank has to raise increases.”

Basically, the amount of actual capital available for the pot continues to rapidly shrink, while the sizes of the outstanding bets and raises remain the same – a theme well-known to readers of The Automatic Earth. The central banks are trying to hold back a tsunami of margin calls that will produce waves of potentially infinite height, and therefore there is no way they can hold them back for very much longer.

As llargi outlined in his post, Cash for Christmas, the funding situation for European banks remains dire despite the coordinated CB swap lines designed to lower the short-term cost of borrowing dollars, perhaps because there is a massive shortage of euro funding as well, and there is very little chance it will improve.

What is truly frightening about these financial sharks is that their predictable psychology ends up being much more destructive to the rest of society than to themselves. In a poker game, the sharks playing recklessly outside of their bankrolls will self-destruct, go home in tatters and perhaps drink themselves into a coma. In the game of high finance, though, the sharks will be bailed out and/or go home with much their personal wealth intact, after the institution’s shareholders, creditors, employees, customers and just about everyone else associated with it is wiped out.

The sad fact is that we are all currently a part of their reckless poker game, whether we like it or not. There is only one way around that - the people must force their governments to hold the bankers criminally, civilly and financially liable for their actions and losses. If that doesn’t happen very soon, through whatever means necessary, then the only other option is to insulate yourself from the fallout through whatever means you are able and willing to undertake. The long journey from the casino back home is well underway, and now we must simply make it to that home, safe and sound.

Tuesday, December 13, 2011

The Debt Walkers Strike Back

"There's a time when the operation of the machine becomes so odious—makes you so sick at heart—that you can't take part. You can't even passively take part.

And you've got to put your bodies upon the gears and upon the wheels, upon the levers, upon all the apparatus, and you've got to make it stop.

And you've got to indicate to the people who run it, to the people who own it, that unless you're free, the machine will be prevented from working at all."

-Mario Savio, UC Berkeley Speech (1964)

The dawn breaks on a cold, winter day in a major Western city. It’s Monday morning, and the air is permeated by an ominous, dry silence. Some cars remain idly parked on the street, reflecting calm, while others have their windows bashed and their steel burnt black, reflecting chaos.

The sidewalks are nearly empty and most of the storefronts are dark and devoid of activity as well. There are no buses running, the subway system is out of operation, airplanes are grounded and shipping ports lay dormant.

Interesting and unusual animals wander about in the streets and alleyways, as if they had all suddenly decided to escape from their cages in the Zoo, out into the real world. Every few city blocks there is a spattering of homeless or a roving gang of restless, frustrated, filthy-looking teenagers.

The streets are no longer fit for routine travel by casual drivers and pedestrians looking for something to do or someplace to go.

It is all a rather disquieting and terrifying scene – perhaps one from the latest Hollywood flick about a civilization collapsed by viral infection, transforming masses of human beings into flesh-eating zombies.

Or maybe it was the influenza pandemic that evolved to resist vaccinations and treatment, spread through major cities like a wildfire and wiped out 75%+ of the human population, leaving only a few survivors to rebuild society from the bottom-up. Or perhaps it's simply what the Evil Empire left behind in its war-mongering wake.

What’s more terrifying than the cannibalism, debilitating symptoms or war-torn landscapes, though, is the fact that the zombies left behind refuse to drive gas-guzzling SUVs, commute 20 miles to work or shop for Christmas presents.

No zombies flocking to cities from the suburbs, no zombies slaving away at the factory or the office, and no zombies spending their bimonthly paychecks at the mall on computerized gadgets and cheap trinkets. That, more than anything else, is what the consumerist empire fears.

In coming days and weeks, we are going to continue getting a lot of official and unofficial economic "projections", revised and re-revised, such as the economic growth and budget deficits of various countries by the end of 2012, 2013 and beyond.

In Greece, they’re already telling us the rate of economic contraction will slow down and the budget deficit will be cut in half, as long as certain painful austerity measures are adopted. Needless to say, all of these projections will be WAY OFF and much worse than expected, just as they were last year and the year before.

Most academics and pundits conduct analyses and make predictions in a Vacuum Universe, where nothing outside of a frighteningly simplistic model matters. One of many factors left out of these models is the predictable socioeconomic reactions to "structural reforms" and bankster bailouts imposed by "technocratic", unaccountable governments.

There will be riots and protests and perhaps even pockets of full-blown revolution in some developed countries. Call them the "Arab Spring" or the "European Winter" or whatever you want, but they will happen and they will render previous projections meaningless.

What will be most disruptive to the current system of mandated growth, though, are not the riots and protests, but the strikes. Direct action from the people always faces the potential of being met with violent repression from their governments, but refusal to participate in economic activity is a much more stealthy and subversive threat to our political and financial overlords.

The machine’s propaganda lever will be used to label these people "lazy bums" or "parasites", but they will continue refusing to operate any of the other levers, and instead hoist their bodies on top of its gears.

Our twisted market system has bred a whole new class of human beings who are up to their eyeballs in debt, struggling to find any remaining scraps of gainful employment and incensed with the corporate oligarchies that pass for representative governments these days.

We may as well label them an entirely new species of humans –perhaps "debt walkers" - because that’s how far apart they must feel from previous generations and from their former selves. Our label is not meant to disparage, but illustrate a general reality that has evolved.

Rioters, protestors, strikers – these are all the debt zombies who have grown in number and influence over the last few years, threatening to pounce and feast on the current neo-feudalistic economic order.

As small and sporadic groups making a "stand" here or there, they may not seem like a force to be reckoned with, but as a relatively organized bunch, with weekly or even daily events planned, it would be a huge mistake to discount their influence, as most agencies predicting future economic growth and budget deficits do.

In two previous articles, Bailouts, Austerity and Rage: Calm Like a Bomb and People of the Sun, I outlined how people across Greece, Ireland, Portugal and Spain were becoming increasingly infuriated with their banks and their governments, and, in some cases, staging violent protests and riots.

We should expect this trend to continue, but, as I mentioned above, there is another very important aspect to the rage of these zombie debt slaves – their strikes.

The strikers are the ones to keep an eye on, despite their distinct lack of publicity in the popular media. These "walkers" are plainly and simply refusing to participate in what most consider "normal" economic activity for significant stretches of time.

They will play repeated games of chicken with their employers and customers (individuals, companies and governments), discovering who really has the raw drive to hold out the longest, before one, both or the entire system breaks.

This new species of the Western world is best observed in Europe right now, both in its "periphery" and parts of its "core".

While Americans were preparing to feast on turkey, stuffing, mashed potatoes, gravy, and Egg Nog, generally warming up their hearts for future episodes of ventricular tachycardia, and to raid every Wal-Mart in the country with their little children and pepper spray in tow, the Portuguese were preparing for a general strike in their land across the Atlantic. As Andrei Khalip and Daniel Alvarenga wrote for Reuters:

Portuguese Strike Against Austerity

"Portuguese workers launched a general strike on Thursday to protest against austerity measures imposed as the price of an EU bailout designed to keep Portugal afloat and stem a deepening euro zone debt crisis.

Planes were grounded, trains halted and public services interrupted as workers across the nation of 11 million protested against job losses, tax hikes and pay cuts agreed between Portugal and the troika of lenders -- the European Commission, European Central Bank and International Monetary Fund.

The Naval Shipyards in Viana do Castelo in northern Portugal ground to a halt as all 700 workers downed tools, the local union leader, Antonio Barbosa, said.

All international flights to and from Lisbon and Porto were cancelled for the duration of the 24-hour walkout , according to the website of the airport authority ANA, and only minimum services connecting mainland Portugal with the islands of Madeira and the Azores were operating"

Perhaps these debt walkers realized that a country without functioning transportation networks is one without much exploitative economic activity. While the elite institutions continue running financial weapons of mass destruction across national borders, mounting a global attack on freedom, equality, justice and humanity, the Portuguese have decided to strike back. And here’s what they were chanting at the Lisbon airport while they did:

"The strike is general, the attack is global!"

The people of Portugal, of course, aren’t the only ones planning strikes. In Greece, millions of workers called for a general strike yesterday, a week before the Greek Parliament is set to pass a package of oppressive austerity measures mandated by the external authorities of the "Troika" (European Commission, ECB and IMF). Kathimerini (English version) reports on some of the details of this strike.

" Public services are to be paralyzed again on Thursday as thousands of workers walk off the job to protest an ongoing austerity drive in the seventh general strike this year.

As usual, tax offices, courts and schools will shut down, hospitals will operate on emergency staff and customs officials will walk off the job.

The national rail network will suspend operations all day as will the Proastiakos suburban railway service. Ferries too will remain moored in port as seamen join the 24-hour walkout.

…The metro will not shut down at all but trains will not run to Athens International Airport. They will stop at Doukissis Plakentias station.

The media held a 24-hour strike on Wednesday and will take part in work stoppage on Thursday to show their support for the protest action."

It’s unlikely this current level of popular resistance will actually force the politicians to change their votes, but it will certainly render whatever "structural reforms" they vote on next week meaningless over the next year. How does a country grow itself out of a deficit when many of its inhabitants simply refuse to accept slave wages and standards of living, and participate in “normal” economic activity, as long as the richest among them continue to live like kings?

It can’t and it won’t, not even in the short-term, and not until the politicians meaningfully respond to the resistance of their people. Their policy changes would have to be just as “radical” as the actions of the debt zombies, including a systematic cleansing of Greece’s banking sector and public debts, or else they may as well join the strike and not show up to their jobs, either.

That or the entire economy collapses in a disorderly process as the politicians dither, and then it finally gets a chance to start down a completely different path. Perhaps there are a few other options, but none that look very likely right now. What is certain is that there are plenty more strikes in the Western world that have occurred or will occur in the near future.

In Greece alone, we can take a look at the tourist website "Living, Working, Musing & Misadventure in Greece", and see a regularly updated list of ongoing and upcoming strikes and protests in the country (tourism in Greece contributes about 15% to annual GDP).

Meanwhile, the people of Britain launched their largest strike in decades two days ago. In what can only be seen as a reckless and insensitive provocation, Chancellor George Osborne shoveled on an unprecedented burden of public sector austerity on top of the already large “reforms” in his “Autumn Statement”, right before the strikes were due to start.

Mr. Osborne is probably also under the fanciful illusion that his government still has the upper hand with protestors and strikers (and voters), because the British economy will not be effected by their actions. Severin Carrell, Dan Milmo, Alan Travis and Nick Hopkins reported on this event for the Guardian:

Day of strikes as millions heed unions' call to fight pension cuts

”The UK is experiencing the worst disruption to services in decades as more than 2 million public sector workers stage a nationwide strike, closing schools and bringing councils and hospitals to a virtual standstill.

The strike by more than 30 unions over cuts to public sector pensions started at midnight, leading to the closure of most state schools; cancellation of refuse collections; rail service and tunnel closures; the postponement of thousands of non-emergency hospital operations; and possible delays at airports and ferry terminals.

Union leaders were further enraged after George Osborne announced that as well as a public sector pay freeze for most until 2013, public sector workers' pay rises would be capped at 1% for the two years after that.

In Scotland an estimated 300,000 public sector workers are expected to strike, with every school due to be affected after Scottish headteachers voted to stop work for the first time.

The UK Border Agency is braced for severe queues at major airports after learning that staffing levels at passport desks will be "severely below" 50% despite a successful appeal for security-cleared civil servants to volunteer.

"We will have the bare minimum to run a bare minimum service," said a Whitehall insider. Many major public buildings and sites, including every port, most colleges, libraries, the Scottish parliament, major accident and emergency hospitals, ports and the Metro urban light railway around Newcastle and Sunderland will be picketed.”

The TUC said it was the biggest stoppage in more than 30 years and was comparable to the last mass strike by 1.5 million workers in 1979. Hundreds of marches and rallies are due to take place in cities and towns across the country.”

It’s too bad that politicians like Osborne are not paying attention, though, because, if they were, they would see that these types of strikes are going to continue on for months and years if need be, and they are one of many factors that are screaming loud and clear that it’s all downhill for economic growth and public deficits for the UK from here on out.

Perhaps the British Lords of Debt should take a harder look at the report just recently produced by their own Office of Budget Responsibility, which took a hacksaw to its own estimates for growth that were produced a few short months ago, and mirrors forecasting trends in just about every other country in Europe.

Such huge downward revisions have become characteristic of just about every private and public institution in the business of making projections, as they desperately try and remain credible in the eyes of those people who have been living with reality for years now. They won’t be successful, though, because that credibility is long gone. Their analyses and models are just more garbage products that people will refuse to consume in the near future.

Why continue leading “normal” lives and playing by the “normal” rules when the system itself is so abnormal and unjust? Everyone, including the general public in all of Europe and America, should take a hard look at how the austerity cuts are hitting the poorest among us far worse than the richest, as illustrated by this graph from the Institute for Fiscal Studies:

All of this oppressive austerity and systemic inequality is not limited to the Western hemisphere by any means. The world’s second largest economy, China, also presents a stunning example of how fast one can go from a “booming” economy to a rock hard landing, both financially and socio-politically. The recklessly financed cheap labor, industrial export model is simply no longer working for countries like China, and their debt walkers are no happier about it than those of Europe. Ben McGrath of the Worldwide Socialist Website reports:

Strikes rock manufacturing centres in southern China

Thousands of factory workers in the manufacturing cities of Shenzhen and Dongguan in China’s southern Guangdong province have taken part in strikes over the past two weeks to protest cuts to wages and other conditions.

On November 17, 7,000 workers stopped work at a Taiwanese-owned shoe factory in Dongguan. The Yue Cheng facility had recently fired 18 middle managers and cut overtime. Many workers also faced losing their jobs as the company prepared to shift production to inland China or another country, such as Vietnam, where labour costs are lower.

…The tensions continued this week, with security guards patrolling the industrial park. Workers told Reuters that the strike continued. They were clocking in, but refusing to work at the assembly lines. “We are willing to work but you must also pay us enough to survive,” one worker said. Another declared: “Even during the financial crisis [in late 2008 and early 2009] we didn’t see pressure like this.”

Starting from November 21, two-thirds of the 800 employees at lingerie maker Top Form International Holdings’ factory in Shenzhen staged a five-day strike against a piece-rate wage system and onerous daily production quotas.

On November 22, 1,000 workers at a Taiwanese-owned computer factory in Shenzhen, went on strike over excessive overtime from 6 p.m. to midnight.

…China’s export industry is based on cheap labour and sweatshop conditions. A shift toward domestic consumption would necessitate higher wages for workers, undermine export competitiveness and therefore accelerate job losses in the export sector.

In April, in an attempt to ward off growing social discontent, the Shenzhen authorities increased the minimum wage slightly from 1,100 yuan to 1,320 yuan a month. Even this meagre increase caused companies to speed up plans to reduce their workforces and shift production to cheaper provinces and other countries. Top Form International, where one of latest strikes occurred, is reducing its sewing workforce from 1,000 to 400, by moving to Thailand where wages are even lower.”

What we see in China is just a different type of “austerity” – one in which the private sector must suppress wages before a sizeable middle class ever gets the chance to even form, or the public sector ever gets a chance to over-spend with salaries and entitlements (and wars). The Chinese zombies have been forced into a state of leveraged fury, just like everyone else.

The only questions that remain now are (A) how long before the American zombies make like their debt-walking brothers and sisters across the Atlantic and Pacific, and generally strike back against a devolving financial consumer empire of exploitation, and (B) what kind of damage they can really cause to this system when that inaction gets going.

If localized resistance movements continue to grow and others follow in the footsteps of Occupy Oakland, which is quite likely at this point, then perhaps it won’t be very long at all. This particular flick may not follow a Hollywood script or have a Hollywood ending, but you can count on it earning its place in history as something real; something that followed its own script and helped change the world.