Massive Currency and Debt Devaluations Lie Ahead

The run-up in the stock market from March 2009 until last month was sharp and rewarding … for some. But there was one problem, it came with disproportional risk. You see, the stock market rose to an extent that it was pricing in perfection … a V-shaped recovery … a return to normal.

That overly optimistic view on the world can make for an ugly ending …

Because if there’s one thing we can assume after enduring a global meltdown of historical proportions, it’s this: A sharp return to normal is highly unlikely.

That common sense approach to risk aversion should be clear. And it’s why I find it troubling that stock market professionals have been scrambling to explain the recent decline in global stocks and other high risk investments.

They tell themselves, “This is just a healthy correction … earnings momentum is strong … the fear weighing on stocks is unwarranted.”

Then they quietly ask, “Is there something bigger going on?”

The answer: Of course there’s something big going on! And it’s sitting right under their nose, plain as day.

It’s a sovereign debt crisis, which is putting the world’s largest collective economy, the euro zone, in jeopardy.

And It’s Not Just Europe …

People around the globe should have gotten the wake-up call from the crisis in Europe. But denial is a strong emotion to overcome, especially for the stock market bulls that make a living from rising stocks.

Greece’s problems are spreading around the world.

As I’ve warned in several Money and Markets columns, the problems in Greece aren’t just a European problem. Greece’s troubles have not only exposed the structural flaws of the European Monetary Union, but have also exposed the structural problems in the global economy.

Government officials around the world have attempted to put problems on hold for the time being, with the hope that they can deal with them later under better circumstances, when economies are stronger. They’ve responded to the debt problem by adding more debt. And that “crisis response” has only exacerbated a dynamic that created the crisis to begin with: Easy credit … i.e. debt.

We have benchmarks on how this likely turns out …

Historically, financial crises typically lead to sovereign debt crises. And sovereign debt crises typically lead to currency crises. All this is a recipe for tough economic times ahead.

Sovereign Debt Crisis Paving the Road for the Currency Crisis

The sovereign debt crisis is still unfolding. And a currency crisis is now upon us. When Europe chose to go all-in by pledging backstops for the downward spiraling weak countries within the euro zone, they made a conscious decision to devalue the euro and to inflate away the debt.

For those like the euro zone, which are backed into a corner, a currency and debt devaluation become the only option.

And with economies around the globe burdened with debt, addressing problems through currency devaluation becomes highly competitive.

You see, currencies are only valued on a relative basis, that means someone’s currency has to win the least ugly contest, and as a result appreciate against world currencies … in this case, it’s the U.S. dollar.

Meanwhile, three out of four of the most liquid currencies in the world — the euro, the pound and the yen — will likely be dramatically devalued before it’s all said and done.

As for the euro, many have been throwing around the possibility of the euro going to parity against the dollar.

Let’s take a look at my chart below to see just how low it can go …

The euro broke an eight-year trendline two weeks ago. It then retested that line last week following the announcement of the Emu stabilization plan, and it promptly failed.

This week, the recent downtrend in the euro breached the 2008 lows of 1.2330, a significant technical development.

Now we have the guidance of technical support levels that plot retracement points from the euro’s move off of the all-time highs of 2009 (1.60) to the all-time lows of 2000 (82 cents) …

• Support #1, the 50 percent retracement level, tested this week … and held, so far.

• The next support level comes in at 1.1205 (Support #2).

• And then parity to the dollar comes into the picture (Support #3).

Don’t expect the euro to decline in a straight line. The European Central Bank wants the decline to be orderly, and will likely be intervening at levels along the way to slow the pace.

The Organisation For Economic Co-Operation And Development (OECD) puts a fair value on the euro at about $1.16 based on purchasing price parity. But in times of stress, financial markets and currencies are known to overshoot.

The Big Picture …

To get an idea of where financial markets are headed, it’s important to have a good grasp of the big picture, perhaps never more important than today.

For that analysis, I’d like to revisit an IMF study on 122 historical recessions. This study found that recessions that are global and synchronized with financial crisis tend to have slower recoveries than average recessions, typically running about five years before long-term trend economic growth resumes.

Considering the structural problems surrounding the global economy, we could be in another storm.

As an investor, that should give you a perspective on where we stand in the current downturn …

If you mark December 2007 as the beginning of the U.S. recession, we’re just half way through it.

Although economies are growing again, it’s highly probable that what we’re seeing now is just the calm before another storm. Or it’s a stimulus-induced surge off of low levels of economic activity that quickly deflates back into economic malaise.

Given the structural problems the global economy is facing, the “storm” scenario is most likely … in fact, I would argue it’s already well underway.

Regards,

Bryan

P.S. For more in depth analysis on the currency markets and specific recommendations on how to both profit and protect yourself from the unfolding currency crisis, I’d love for you to join me in my monthly newsletter, World Currency Alert. For more details please click here.

Whatever Germany does, the euro as we know it is dead

Angela Merkel's ban on short-selling is just a distraction from the horror to come

Angela Merkel's response to the euro crisis is 'doomed to fail' Photo: Bloomberg

"Money can't buy you friends, but it does get you a better class of enemy" – Spike Milligan

For Angela Merkel, leader of the eurozone's richest country, a queue is forming of high-quality adversaries. As she tips German Geld und Gut into the furnace of a rescue package for the euro, while going it alone in a misguided ban on market "manipulators", the brass-neck Chancellor has infuriated domestic voters, angered her EU partners (in particular the French) and invited the so-called wolf pack of global traders to do its worst.

In one respect, Mrs Merkel is right: "The euro is in danger… if the euro fails, then Europe fails." What she has not yet admitted publicly is that the main cause of the single currency's peril appears beyond her control and therefore her impetuous response to its crisis of confidence is doomed to fail.

The euro has many flaws, but its weakest link is Greece, whose fundamental problem is that for years it spent too much, earned too little and plugged the gap by borrowing in order to enjoy a rich man's lifestyle. It flouted EU rules on the limits to budget deficits; its national accounts were a moussaka of minced statistics, topped with a cheesy sauce of jiggery-pokery.

By any legitimate measure, Greece was unworthy of eurozone membership. That it achieved card-carrying status was down to the sleight-of-hand skills of its Brussels fixers and the acquiescence of central bank bean-counters. Now we know the truth, jet-hosing it with yet more debt makes no sense. Another dose of funny money will delay but not extinguish the need for austerity.

This is why the euro, in its current form, is finished. The game is up for a monetary union that was meant to bolt together work-and-save citizens in northern Europe with the party animals of Club Med. No amount of pit props from Berlin can save the euro Mk I from collapsing under the weight of its structural dysfunctionality. You cannot run indefinitely a single currency with one interest rate for 16 economies, when there are such huge fiscal disparities.

What was once deemed unthinkable is now, I believe, inevitable: withdrawal from the eurozone of one or more of its member countries. At the bottom end, Greece and Portugal are favourites to be forced out through weakness. At the top end, proposals are already being floated in the Frankfurt press for a new "hard currency" zone, led by Germany, Austria and the Benelux countries. Either way, rich and poor are heading in opposite directions.

When asked on Sky if, in five years' time, the euro will have the same make-up as it does today, Jeremy Stretch, a currency analyst at Rabobank, the Dutch financial services giant, told me: "I think it's pretty unlikely." The euro was a boom-time construct. In the biggest bust for 80 years, it is falling apart.

Telegraph loyalists with long memories will be shocked by none of this. In 1996, Sir Martin Jacomb, then chairman of the Prudential, set out with great prescience in two pieces for The Sunday Telegraph why a European single currency, without full political integration, would end in disaster. His prognosis of the ailments that might afflict the eurozone's sickliest constituents reads as if it was penned to sum up today's turmoil.

"A country which does not handle its public finances prudently will find its long-term borrowing costs adjusted accordingly," Sir Martin predicted. "Although theory says that default is unlikely, nevertheless, a country that spends too much public money, and allows its wage costs to become uncompetitive, will experience rising unemployment and falling economic activity. The social costs may become impossible to bear."

Welcome to the headaches of George Papandreou. The bond markets called his country's bluff. Greece is skint, but its unions don't want to admit it. There is insufficient political will to tackle incompetence and corruption, never mind unaffordable state spending. But, locked into the euro, Greece cannot devalue its way out of trouble, so it relies on the kindness of strangers.

Dishing out German largesse to profligate Athens, with little expectation of a reasonable return, is a sure way for Mrs Merkel to join Gordon Brown as a political has-been. Fully aware of the revulsion felt by Mercedes and BMW employees at the prospect of their taxes being used to pay for a Hellenic car crash, she has resorted to creating a bogeyman – The Speculator.

By announcing a ban on the activities of short-sellers (those who bet to profit from falling prices in financial markets), she is hoping her decoy will avert German attention from the small print of Berlin's support for Greece, which talks of developing processes for "an orderly state insolvency". This sounds ominously like a softening-up process for a form of default.

Greece's severe difficulties were home-made. The euro has come under pressure not from dark forces of speculation but respectable investors, many of them traditional pension funds, which, quite correctly, worked out that when the crunch came, the Brussels elite would sanction an abandonment of its no bail-out rule and cough up for a messy fudge.

In 1990, the late Lord Ridley, when still a government minister, caused a storm by telling The Spectator that Europe's planned monetary union was "a German racket designed to take over the whole of Europe". One knew what he was getting at, but it has not turned out that way.

Protecting the euro has become a project via which profligate states dip their fingers in Berlin's till. Germany is taking on nasty obligations without gaining ownership of the assets. Germany's version of The Sun, Bild Zeitung, feeds its readers a regular diet of stories about the way ordinary Germans are being taken for mugs. Trust has turned to suspicion. Next stop is divorce.

As for the United Kingdom, we must be grateful that those frightfully clever Europhiles, such as Lord Mandelson and Kenneth Clarke, did not get their way. Had they been able to scrap the pound and embrace the euro this country would be even closer to ruin. Without a flexible currency, the colossal deficit clocked up by Mr Brown would have crushed us completely. We have little to thank him for, but it would be churlish to deny that his decision to reject Tony Blair's blandishments in favour of the euro was a life-saver.

Sterling's devaluation has not been pretty, but it is helping to keep our exports competitive while the coalition Government begins rebuilding the nation's finances. Siren voices from across the Channel, calling for closer integration between Britain and the rest of the EU, can be confidently rejected. As for joining the euro, I find it impossible to imagine any circumstances under which it would be in the UK's interest to do so.

GERMANY'S PARLIAMENT VOTES TO GIVE 66% OF COUNTRY'S ANNUAL INCOME TAX REVENUE TO BANKS

Germany’s parliament today passed a bill that will mean that about 66 per cent of the country’s income tax revenue each year will go to banks in the form of interest payments on souvereign dent bonds held by Greece, Portugal and other eurozone nations.

Chancellor Angela Merkel’s centre-right coalition government voted to give 123 billion as Germany’s portion of a 750-billion euro loan guarantee package prepared by the European Union and the International Monetary Fund to enable governments to keep up interest payments to banks on souvereign debt.

The bill was passed by the Bundestag with with 319 "yes" votes, 73 "no" votes and 195 abstentions.

The abstentions came from the center-left opposition Greens and Social Democrats (SPD) and a handful of CDU/CSU and FDP backbenchers.

The 123 billion euro bank package comes on top of the 22.4 billon that Germany’s parliament voted to give Greece two weeks ago.

German taxpayers will, therefore, have to give 145 billion euros or 77% of the country’s annual income tax revenue to the banks in the highly likely event of Greece, Portugal and other countries not being able to meet their souvereign debt interest payments.

A German accountancy website allowing people to calculate what portion of their income tax will go to fund the banks reveals that a man earning 30,000 euros a year, and paying income tax of 5,625 euros, will be giving 3,709 euros to banks as part of the 123 billion eurozone “rescue” package.

He will be giving another 675 euros as part of the 22 billion euro Greek “rescue” package.

Germany spends another 40 billion a year paying interest on its national debts, which were created by the bank bailout and stimulus in the first place.

This means that another 1,200 euros of the 5,625 euros collected in income tax from a man earning 30,000 euros a years goes on interest payments on the national debt.

In this case, a total of 5584 euros or 99% in income tax is being paid directly to banks such as Deutsche Bank and Goldman Sachs by the German government in the form of interest payments on national and international eurozone debts.

As a result of this bill, only 41 euros of the total annual income tax of 5,625 could soon be available for the government to spend on education, pensions, hospitals and welfare and such like.

41 euros is 0.72% of the total income tax paid by a man earning 30,000 euros each year.

The Merkel government has just announced a raft of deep cuts and tax hikes, which will increase the proportion of the country’s income flowing to the banks and accelerate an economic collapse that could be much more severe than the Great Depression of the 1930s.

The transfer of almost the country’s entire tax revenues to the banks shows that the politicians in Germany are working hand in glove with banks to loot the people on an unprecedented scale under the smokescreen created by the mainstream media.

Though sold by the controlled media as “aid for Greece”, none of the money will go to the people of Greece.

The 123 billion euros and 22 billion euro packages will go straight to the banks who hold souvereign debt bonds issued by the Greek and other eurozone debtor governments if these cannot raise enough money.

These same banks have been artificially pushing up the interest rate using credit default swaps to maximize their profits, and Germany’s recent bank on naked short selling will do little to stop this practise.

The way governments and regulators acted together to help banks create paper debt and then transfer gigantic sums to those banks under the guise of having to rescue them and pay interest payments on the rescue loan is the subject of a parliamentary investigation and criminal probes in Iceland. Several bankers have already been arrested.

In the USA, the SEC has launched a criminal probe into Goldman Sachs and Deutsche Bank, among others, for their role in creating property debts, which were then used as a pretext to get tax payer funds.

The credit rating agencies are also under investigation in the USA for fraud.

German prosecutors have asked the boss of Deutsche Bank, Josef Ackermann, to testify on the bank’s role in the bankrupting of IKB, triggering the bank bailout and stimulus packages that vastly increased the national debt.

But Germany is just the latest country to push through its part of the 750 billion eurozone package.

Austria's parliament on Wednesday voted to provide up to euro15 billion in loan guarantees as its share.

In France, the package is set to go parliament on May 31 and is expected to be passed.

Never in recent European history have governments so blatantly looted taxpayers.

If nothing is done to reverse these bills, the economic and social collapse of Germany, Greece and EU nations is inevitable.

‘Nervous’ Wall Street Waits for Congress to Kill Swaps Limit

May 21 (Bloomberg) -- Wall Street banks, surprised that the Senate’s financial overhaul passed with language that could curtail their derivatives trading, are now hoping the rule can be killed in Congressional negotiations.

Lawmakers have been telling Wall Street the Senate provision would fail, “but it passed, so people are nervous,” said Paul Miller, analyst at FBR Capital Markets in Arlington, Virginia. “The problem is that everybody in Congress wants it out, but nobody wants the responsibility of taking it out.”

The Senate bill demands that companies like Bank of America Corp., JPMorgan Chase & Co., and Goldman Sachs Group Inc. conduct derivatives trading outside of their commercial banking units that benefit from federal support. They could still escape the impact if the rule is stripped out during a conference committee to resolve differences between the Senate bill and one passed by the House of Representatives in December.

“There’s a reasonable chance it will remain only because anti-bank sentiment has increased since the House bill was passed,” said Robert Litan, vice president of research and policy at the Kansas City-based Kauffman Foundation, which promotes entrepreneurial economic growth. While the likelihood is hard to handicap, he said, “it’s certainly not zero.”

Raj Date, a former Deutsche Bank managing director and now executive director of New York-based research group Cambridge Winter Center for Financial Institutions Policy, said he expects the rule to get watered down in conference.

‘Unmitigated Negative’

“I think that gets eliminated and we end up closer to where the House is,” Date said. Otherwise, “It’s a sort of unmitigated negative for the biggest swaps dealers.”

The most likely compromise is that House and Senate members agree to conduct a study of the swaps provision, which may result in killing it eventually, said Brian Gardner, a former congressional staffer who is now senior vice president for Washington research at KBW Inc.

Derivatives are contracts whose value is derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in interest rates or weather. They include credit-default swaps, which act like insurance for investors in case a debt issuer can’t repay.

Swaps sold by American International Group Inc. that later went sour helped push the insurer to the brink of bankruptcy and triggered a $182 billion federal bailout of the New York-based company during the near-collapse of the financial system in 2008.

The new swaps rule was drafted by two-term Arkansas Democrat Blanche Lincoln, head of the Senate Agriculture Committee. Earlier this week Lincoln failed to win the Democratic primary and faces a June 8 runoff against Lieutenant Governor Bill Halter for her party’s nomination.

Regulators Opposed

“The conventional wisdom has been that if she gets the nomination, she has the political room to drop the provision, but as long as she’s running for re-election she’s going to want to continue to take a tough-on-banks stance,” Litan said.

Regulators including Federal Reserve Chairman Ben S. Bernanke, Federal Deposit Insurance Corp. Chairman Sheila Bair, and former Fed Chairman Paul Volcker, now an adviser to President Barack Obama, oppose the provision because it could drive derivatives into unregulated parts of the market and to foreign competitors.

Moving Trades

Customers will move their most complex derivatives trades to European banks such as Deutsche Bank AG, Credit Suisse Group AG or Barclays Capital if the legislation passes, say analysts including Brad Hintz at Sanford C. Bernstein & Co. in New York. Clients who want to buy protection will see a European bank as a stronger, better-backed credit than a U.S. derivatives subsidiary, Hintz said.

U.S. commercial banks held derivatives with a notional value of $212.8 trillion in the fourth quarter, according to the Office of the Comptroller of the Currency. The five banks with the biggest holdings of derivatives -- JPMorgan, Goldman Sachs, Bank of America, Citigroup Inc., and Wells Fargo & Co. -- hold $206.2 trillion, or 97 percent, of that total, the OCC said.

JPMorgan, the second-biggest U.S. bank by assets and the biggest dealer in the over-the-counter derivatives market, would be the most affected by the new rule, Barclays Capital analyst Jason Goldberg wrote in a note to investors today.

On April 14, JPMorgan Chief Executive Officer Jamie Dimon estimated the legislation’s new trading and capital requirements for derivatives could affect revenue by anywhere from “several hundred million to a couple billion dollars.”

Capital Impact

The Securities Industry and Financial Markets Association, which represents JPMorgan and other large derivatives dealers, estimated the provision would require banks to find as much as $250 billion in new capital for the subsidiaries.

“It’s hard for me to come up with what’s a worse argument than that,” Date said. “That’s tantamount to saying, ‘Well, we’re undercapitalized today and we prefer to remain undercapitalized, thank you.”

Instead, he said, the industry’s argument should focus on the role that banks play in society.

“The whole reason for having a banking system is you want banks to be the primary intermediaries for credit risk and interest-rate risk,” he said.

L.A. Loses Deep-Fryer, 45 Percent of Items Purchased With Taxpayer Funds

In budget-crunched L.A., a new report finds that 45 percent of items purchased with taxpayer dollars have gone missing [PDF].

(Los Angeles) – City Controller Wendy Greuel released an audit today showing that
various City departments could not locate hundreds of items purchased with taxpayer
funds, and that hundreds of other items had been sitting unopened or unused for up to 7
years....

* Of 254 items that we attempted to locate, 115 were not where they should have been. While 56 items were ultimately found in the wrong location, 59 were unable to be located at a cost of $938,000.
—Some of the items that were never found included a video recorder purchased by ITA for almost $60,000.
* Departments are supposed to conduct a physical inventory of items every two years to maintain accurate physical inventories of equipment. ITA and Sanitation have not conducted a review in at least 5 years and Recreation and Parks has not conducted a review of all items in at least 7 years.
* ITA and Recreation and Parks have 138 items that were purchased at least 1 year ago, still in warehouses or staging areas. These items are worth $237,000, and some were purchased over 7 years ago.
—Some of the items not placed into service included 9 microwaves, 1 deep fryer and 2 television sets by the Recreation and Parks Department and various computer equipment by ITA.

32 States Have Borrowed from the Federal Government to Make Unemployment Payments; California Has Borrowed $7 Billion

EconomicPolicyJournal.com has learned that 32 states have run out funds to make unemployment benefit payments and that the federal government has been supplying these states with funds so that they can make their payments to the unemployed. In some cases, states have borrowed billions. As of May 20, the total balance outstanding by 32 states (and the Virgin Islands) is $37.8 billion.

The state of California has borrowed $6.9 billion. Michigan has borrowed $3.9 billion, Illinois $2.2 billion.

Below is the full list of the 32 states (and the Virgin Islands) that have borrowed from the federal government to make unemployment payments, and the amounts that remain borrowed as of May 20 . (Numbers in red are billions)

Alabama $ 283 million

Arkansas 330 million

California 6.9 billion

Colorado 253 million

Connecticut 498 million

Delaware 12 million

Florida 1.6 billion

Georgia 416 million

Idaho 202 million

Illinois 2.2 billion

Indiana 1.7 billion

Kansas 88 million

Kentucky 795 million

Maryland 133 million

Mass. 387 million

Michigan 3.9 billion

Minnesota 477 million

Missouri 722 million

Nevada 397 million

New Jersey 1.7 billion

New York 3.2 billion

N.C. 2.1 billion

Ohio 2.3 billion

Penn. 3.0 billion

R.I. 225 million

S.C. 886 million

S.D. 24 million

Tennessee 21 million

Texas 1.0 billion

Vermont 33 million

Virginia 346 million

Virgin Islands 13 million

Wisconsin 1.4 billion

Total $37.8 billion

The Heresy Of The Greeks Offers Hope

As Britain’s political class pretends that its arranged marriage of Tweedledee to Tweedledum is democracy, the inspiration for the rest of us is Greece. It is hardly surprising that Greece is presented not as a beacon but as a “junk country” getting its comeuppance for its “bloated public sector” and “culture of cutting corners” (the Observer). The heresy of Greece is that the uprising of its ordinary people provides an authentic hope unlike that lavished upon the warlord in the White House.

The crisis that has led to the “rescue” of Greece by the European banks and the International Monetary Fund is the product of a grotesque financial system which itself is in crisis. Greece is a microcosm of a modern class war that is rarely reported as such and is waged with all the urgency of panic among the imperial rich.

What makes Greece different is that within its living memory is invasion, foreign occupation, betrayal by the West, military dictatorship and popular resistance. Ordinary people are not cowed by the corrupt corporatism that dominates the European Union. The right-wing government of Kostas Karamanlis, which preceded the present Pasok (Labour) government of George Papandreou, was described by the French sociologist Jean Ziegler as “a machine for systematic pillaging the country’s resources”.

The machine had infamous friends. The US Federal reserve Board is investigating the role of Goldman Sachs and other American hedge fund operators which gambled on the bankruptcy of Greece as public assets were sold off and its tax-evading rich deposited 360 billion euros in Swiss banks. The largest Greek ship-owners transferred their companies abroad. This hemorrhage of capital continues with the approval of the European central banks and governments.

At 11 per cent, Greece’s deficit is no higher than America’s. However, when the Papandreou government tried to borrow on the international capital market, it was effectively blocked by the American corporate ratings agencies, which “downgraded” Greece to “junk”. These same agencies gave triple-A ratings to billions of dollars in so-called sub-prime mortgage securities and so precipitated the economic collapse in 2008.

What has happened in Greece is theft on an epic, though not unfamiliar scale. In Britain, the “rescue” of banks like Northern Rock and the Royal Bank of Scotland has cost billions of pounds. Thanks to the former prime minister, Gordon Brown, and his passion for the avaricious instincts of the City of London, these gifts of public money were unconditional, and the bankers have continued to pay each other the booty they call bonuses. Under Britain’s political monoculture, they can do as they wish. In the United States, the situation is even more remarkable, reports investigative journalist David DeGraw, “[as the principal Wall Street banks] that destroyed the economy pay zero in taxes and get $33 billion in refunds”.

In Greece, as in America and Britain, the ordinary people have been told they must repay the debts of the rich and powerful who incurred the debts. Jobs, pensions and public services are to be slashed and burned, with privateers in charge. For the European Union and the IMF, the opportunity presents to “change the culture” and dismantle the social welfare of Greece, just as the IMF and the World Bank have “structurally adjusted” (impoverished and controlled) countries across the developing world.

Greece is hated for the same reason Yugoslavia had to be physically destroyed behind a pretence of protecting the people of Kosovo. Most Greeks are employed by the state, and the young and the unions comprise a popular alliance that has not been pacified; the colonels’ tanks on the campus of Athens University remain a political spectre. Such resistance is anathema to Europe’s central bankers and regarded as an obstruction to German capital’s need to capture markets in the aftermath of Germany’s troubled reunification.

In Britain, such has been the 30-year propaganda of an extreme economic theory known first as monetarism then as neo-liberalism, that the new prime minister can, like his predecessor, describe his demands that ordinary people pay the debts of crooks as “fiscally responsible”. The unmentionables are poverty and class. Almost a third of British children remain below the breadline. In working class Kentish Town in London, male life expectancy is 70. Two miles away, in Hampstead, it is 80. When Russia was subjected to similar “shock therapy” in the 1990s, life expectancy nosedived. A record 40 million impoverished Americans are currently receiving food stamps: that is, they cannot afford to feed themselves.

In the developing world, a system of triage imposed by the World Bank and the IMF has long determined whether people live or die. Whenever tariffs and food and fuel subsidies are eliminated by IMF diktat, small farmers know they have been declared expendable. The World Resources Institute estimates that the toll reaches 13-18 million child deaths every year. “This,” wrote the economist Lester C. Thurow, “is neither metaphor nor simile of war, but war itself.”

The same imperial forces have used horrific military weapons against stricken countries whose majorities are children, and approved torture as an instrument of foreign policy. It is a phenomenon of denial that none of these assaults on humanity, in which Britain is actively engaged, was allowed to intrude on the British election.

The people on the streets of Athens do not suffer this malaise. They are clear who the enemy is and they regard themselves as once again under foreign occupation. And once again, they are rising up, with courage. When David Cameron begins to cleave £6 billion from public services in Britain, he will be bargaining that Greece will not happen in Britain. We should prove him wrong.