The Ultimate Business Model

I’ve discovered what I want to be when I grow up… Wall street banker! Seriously… what a job! When things go right you give yourself a million-dollar bonus. Or 10, Or 100. If things fall apart because your worthless commercial paper is now poisoning the financial infrastructure of the world you run to the governments to tap them for a $700 billion bail-out package saddling the US-taxpayer with debt for three or four generations. All the while keeping the aforementioned bonus of course.

This is called ‘privatise-the-profits-and-socialise-the-cost’ in strategy terms. It’s a model where the profits (if any) of a certain activity become a private asset while the cost or losses (and these are not just monetary – think dead soldiers or a poisoned environment) is borne by society at large. This behaviour out of Wallstreet is extra double-plus hypocritical since the firms now asking for a handout of ginormous proportions have done everything they could over the last decades to whittle away what little oversight there was to prevent exactly the behaviours that led to these problems.

All of this would not be so bad in itself if the US government actually had $700 billion lying around but they do not. Everyone of those dollars has to be borrowed from foreign lenders increasing their control over the US state. By now a significant part of the US is de-facto property of foreign banks and other large investors such as pension funds or sovereign wealth funds who have the power to implode the US economy at any time. I don’t see a Dutch pension fund doing this but China might be interested eventually. This is a real time clock of the US national debt, just the tip of the iceberg but it gives a feel of what is going on. Injecting $700 billion into this mess is not going to solve anything structurally. The US is consuming too much and making too little. Sooner or later gravity much take hold.

With a twinge of (professional) pleasure I note that my scenario, developed in 2004, where the US becomes the fastest imploding empire in at least 2000 years. While the consequences of dollar-collapse will be bad for both the US and Europe it may just be the most effective way of preventing additional ‘pre-emptive’ wars in Asia.

An important lesson learned over the past four years when I started many of my presentations in the financial sector with the debt-clock: it’s just as dangerous to be too far ahead of the curve as it is to lag behind. Not necessarily because the analysis is faulty but because people need time to adapt to new concepts. In 2004 most of my clients were not ready for the concept of a failing US state (or not ready to discuss it openly). Despite two openly stolen elections and an illegal war the US was still perceived as the standard to aspire to by many. After Katrina it became easier to be critical of US policies in the Netherlands, the images of a drowned city touched a nerve. Now the problems with some bad mortgages have exploded into a full-scale meltdown and both wars in Iraq and Afghanistan have utterly failed to achieve any of their stated goals it has become possible to discuss these possibilities openly in polite company. The idea and the basic data are the same, the perception of the world has changed.

What will the next ‘impossible’ scenario be? Watch this space. Meanwhile ING bank can buy the rest of New York and we can call it New Amsterdam again, like before.