By Toby Birch Managing Director, Oppenheim & Co Limited (Guernsey)


Time Machine: MASTERING THE MORLOCKS


In 2007, I published my book called The Final Crash, Addictive Debt and the Deformation of the World Economy. As part of the preparation for writing it I spent many hours contemplating ‘what if’ scenarios. I tried to imagine the sights, sounds and surroundings after a financial meltdown and work out how the dominos would fall from that central assumption. It is therefore fitting to consider a little science fiction in the form of HG Wells’ The Time Machine. In the 1960 film version a time traveller ventures far into the future where the human race has developed into two distinct species. One is known as the Eloi; a feckless, beautiful people who want for nothing and are fed and clothed by invisible benefactors. The other strand has mutated into cave-dwelling, man-eating Morlocks whose hypnotic sirens draw the Eloi underground to be devoured. It transpires that the Morlocks were the unknown hand providing the life of luxury for the docile Eloi, who had become little more than human cattle but did not know it.


The comparison is reminiscent of the relationship between banks and the public in modernity. Like


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the Morlocks, the banking system has mutated from servant to master, feeding off the public and government alike, aided and protected by political lobbying. Years of apparent prosperity through credit creation have left us utterly indebted as individuals. On a macro scale our currencies have been devalued and diluted by a similar process of never- ending money supply, otherwise known as inflation. This is the slow-burn theft of prosperity from the next generation, forced to pay higher prices with diminished benefits that have been squandered by the baby- boomers. The very process of saving the banks that caused the chaos has left a gargantuan tax burden. Having been bailed out, these financial institutions are gorging on virtually free money and using it to buy government bonds, thereby pocketing the hefty yield difference with little risk.


We were assured that we had to save the banks to save the economy, to provide new loans for corporations and entrepreneurs. It is now abundantly clear that even healthy businesses and responsible individuals are unable to borrow for day-to-day finance.


Why would a bank go through the risk and hassle of lending money when they can speculate with it or buy up the government debt? The net result is that the bail-out money has gone into the black hole of an over-leveraged financial system, allowing obscene bonuses to be dished out among the elite of these institutions. No doubt most ordinary banking staff have had to endure euphemisms about cutting the cloth and adapting to new paradigms which equals a pay freeze or worse still, redundancy.


The billions created by


Quantitative Easing never made it into the mainstream economy and likely never will. However, the associated tax bill will remain in the public domain for decades. In a lesson from nature it is evocative of the parasitic cuckoo that preys on the warbler bird. The cunning cuckoo implants its egg in the warbler nest, thereby avoiding the need to do any work in rearing its offspring. The cuckold chick has an in-built distress call mimicking its step- siblings that drives the tormented parents to gather ever more food. Think of the cuckoo as the banks and the parents as the government. As a result the


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