Global Investing

Chocolate “solves” crisis in not-so-parallel universe

By Reuters Staff
May 2, 2012

Imagine a world where an international fund hands out cash so that indebted developed countries can stay in denial, and a European central bank prints money and urges pension funds to buy up “risk-free” government bonds, leaving starving pensioners with no money for bread.

But, hey, that’s OK, say the powers that be – let them eat cake!

This world, in which the International Nemesis Fund and the European Central Denial authority (ECD) with its Buy A Bond for European Liberty III (BABEL III) initiative call the shots, has been imagined by emerging markets asset manager Ashmore co-founder and head of research, Jerome Booth.

And his take on a “cure” for the financial crisis through the INF’s DENIAL (Debt Extension New International Arrangements to Lend) programme should strike a chord.

Booth, an emerging markets bull, imagines one market participant praising the DENIAL programme, which allows Heavily Indebted Developed Countries (HIDCs) to “suspend crisis conditions indefinitely”:

We all know that these countries are going to default or inflate their debt away but this DENIAL programme enables us to engage in double-think and achieves all the major goals that policy-makers are currently focussing on: the need to blame others for previous policy errors, the need to rob people of their savings without them noticing, and the need to avoid the stigma of actually defaulting.

And a spokesman for the European Pensions Association, Booth says, acknowledges the risk of snapping up bonds labelled risk-free that may not be all they’re cracked up to be:

Pensioners may need educating that a pension is there to provide them with a certain number of euros, not a certain amount of bread…Our members, colleagues in the consultancy industry, and academics have researched the issue in detail in recent years, and one of the significant conclusions coming out of this academic work is that pensioners can instead eat cake.

And if that isn’t enough to convince you that all is well while the ECD continues its hard work of “printing money recklessly and eroding savings”, the International Nemesis Fund’s head of strategy and economic analysis, Dr F. Gump has this nugget of wisdom, according to Booth:

Life is like a box of chocolates.  You never know what you’re gonna get … as a result we tend to eat them all at once, but then get sick.  Previously, we have been trying to convince people not to do this, but we are fighting human nature here.  The new DENIAL strategy instead is about training people to eat whole boxes of chocolates, packaging and all, without throwing up.  It requires patience and practice but the initial results are encouraging.

 

(Writing by Clare Kane @clare_kane)

 

 

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