Sunday, May 12, 2013

Do Social Impact Bonds Add Up?

We cannot give a sign the wrong sense.
Ludwig Wittgenstein, Tractatus, 5.4732

You had to know it was coming. With the demise of the sub prime mortgage market in 2008, the corporate whore greed heads had to come up with something new. They had to figure out a way to get all the F9 monkeys back to work and out of retirement from their tax havens. The market for junior oil and gas, and the proverbial gold mine of junior mining stocks has all but dried up, due to consolidation. And even if they did exist, the sheer scale is no match of the size of sheer numbers that the sub prime mortgage market once had.

Old fashioned corporate bond
 It appears to the Oracle of Ottawa that the greed heads have come come up with a potential candidate, it is called a Social Impact Bond. It is a contract with the public sector in which a commitment is made to pay for improved social outcomes that result in public sector savings.(?) In other words the greatest potential Public Private Partnership (ripoff) of all time! Trebles all around. Now the problem is that it all sounds good from the top. Just like sub prime lending, the first generation social impact bond, if you like. This helps a ton with the marketing all round. It only has to look good until the sucker signs on.

A very ancient trading company bond...
 Advocates of these performance-based investments claim that they encourage innovation and tackle challenging social issues. It is just that they forget to tell you that the innovation is for their bottom line, and they have absolutely no intention of tackling challenging social issues. If this stupidity actually worked, you wouldn't be able to sell very many more "bonds" in the future would you?  The Oracle of Ottawa will now explain all the (in)efficient cost adding measures that the corporate whores will add on to ensure failure and the sale of yet more "bonds" and the eventual construction of a fascist corporate society, with out any government at all ideally.

The Oracle of Ottawa has added a little video to explain all the advanced concepts of the social impact bond. It was the least complicated one he could find at the time of this writing. The problem is that every pitch for SIB's is different in varying degrees. The main problem that the Oracle of Ottawa see's is that there are going to be several add on layers to every government program that they will finance. First, there is the investment bank that will underwrite the so called bond issue, that really is not a bond. This will no doubt add 20% on to the cost of the said program! Second, while the investors (suckers?) money is at work in the project (train wreck?) there is another mediator, or rather and ideological policeman, after all the project cannot really be allowed to succeed can it? You certainly can't sell social impact bonds, if there are no social problems! Add on another 10%. And Thirdly at the end of the project, you have to audit it of course to insure that it was all after all, a total failure. Again this is legal ground paper for the next batch of bonds, and legal conformation for the valuation of the puts on the bonds that were sold by the investment bank to the hedge fund that bet against the project! The variations are endless! Isn't the future great?

No comments:

Post a Comment