Three men spoke out this last week, between then they paint a picture of our crisis: John Lipsky, Acting Head of the IMF, Greek Deputy Prime Minister, Theodorus Pangalos and Mervyn King Governor of The Bank of England.
According to the Greek Deputy Prime minister, Theodoros Pangalos, Greece “may have trouble” passing some of the reforms which the IMF and the EU have said are non-negotiable pre-requisites for any further bail out money. According to the Guardian today Mr Pangalos believes the Parliament may reject certain of the key measures the IMF and EU insist upon.
And insist they do. At a crisis meeting of European Finance Ministers in Luxembourg a week ago, the Acting Head of the IMF, Mr John Lipsky, made the IMF’s position very clear,
“…Europe is at a “crossroads. The euro area needs to strengthen economic governance and may need to be more intrusive in terms of national structures.”
The IMF has, for some time been in favour of relieving citizens within nations of their democratic right to determine their own economic path and instead to centralize economic decisions in to a Europe level Financial and economic authority.
In Mr Lipsk’s whole speech he never once uses the word ‘People’, nor citizen, nor democracy. (Full text here) Not once. What he did say was,
“…in Greece, a mission is currently in the field, working closely with the authorities to identify the policies needed to underpin the adjustment program going forward.”
Helping “the authorities” with their “adjustment program….” I think it is worth noting that Mr Lipsky was the IMF’s man dispatched to Chile in 1978 once Allende had been violently overthrown and Pinochet took control. In the aftermath of that coup 2700 political opponents of Pinochet were murdered and 27 000 or so were incarcerated many of whom were tortured.
Mr Lipsky did not return home in protest at what the Pinochet regime was doing. He worked, ‘helping the authorities’ with their ‘adjustment program’. A job he did for two years before returning to New York. Mr Lipsky, when not at the IMF, is a JP Morgan man. He was their Chief economist and then the head of their Investment Bank. Mr Lipsky believes that,
“…global problems require global solutions. In our increasingly interconnected world, we need policies that are right for the national interest and right for the global interest.”
Whose interest do you think Mr Lipsky has in mind when he says ‘national’ interests? The people, whom he never mentions or the financial class and their banks? What do you think Mr Lipsky sees as being ‘right’ for the ‘global interest’? What is a global interest? I feel certain it’s not mine or yours. But it could quite possibly match nicely with the interests of the banks he has worked for and the class who own and profit from those banks.
Mr Lipsky feels Europe, his Europe of banks and financial interests, are at a cross roads. One road leads to a free market utopia where we don’t talk of ‘citizens’ or ‘people’ or ‘democracy’, but focus instead on what is ‘right’ for the ‘global economic interest’. And of course only those who live in that global world of global banks, global finance and global agreements can possibly know what is best. And therefore they must be left alone, unquestioned by the ignorant mob, to decide what is best for the global economy and the 10 percent of Europe and America who own upwards of 80% of it.
Down the other path lies what? I would call it democracy, the rule of law and policies designed to build a better and fairer economy which serves its people rather than forcing the people to serve it. But the financial class and our intellectually challenged politicians won’t have us believing that sort of thing. They see the democratic path, the path of making the banks pay their own debts, of making the Bond holders, take their own losses quite differently. they want us to be afraid of it.
The most recent IMF report into the European crisis published last week, concluded,
“It will be essential to bring the unproductive debate about debt reprofiling or restructuring to closure quickly.”
Why is it essential? ‘Unproductive’ for whom? Funny that it is so ‘essential’, that your debate and mine, the Democratic debate, must be closed down and quickly.
And such sentiments are not restricted to the IMF. Our own political class are betraying us and our democracy as well. Greece’s Deputy Prime Minister, Mr Pangalos, in an interview with the Spanish paper El Mundo, said if the IMF imposed austerity measures are not accepted and implemented NOW,
“the next day the banks will be surrounded by terrified people who would try to withdraw their money, while the army would turn out tanks in the streets …. There would be riots everywhere, the shops will be empty, some people jumped from windows … And all this would be disastrous for the eurozone as a whole.”
This is a re-run of the threats made by Hank Paulson when he bullied the US Congress in to passing the 700 billion dollar TARP bail out of America’s banks in 2008. Same threats. Tanks and anarchy, but with the added frisson of mass suicide. What kind of dark, lurid fantasies is this man fed and who by?
That Pangalos is making such open threats is sad. He is a scion of one of the powerful ruling families of Greece. As is the Prime Minister of Greece. A small number of families rule and own Greece.
Pangalos’s grandfather was military dictator of Greece in 1926. In his youth Pangalos rebelled against his family and became a Left wing firebrand. I listen to him now, as an old man, and I see him as an emblem of the failure of the old political order and class of Post War Europe. Left and Right they are captured by the Free Market Ideology and afraid of anything that questions or threatens it.
His message is simple, ‘Do what the bankers and the financial class want or it will be tanks on the streets.’
And then there is Mervyn King, Governor of the Bank of England. This week he said something far more important than anyone else. As quoted in the FT, he said,
“Right through this crisis from the very beginning … an awful lot of people wanted to believe that it was a crisis of liquidity,” Sir Mervyn said. “It wasn’t, it isn’t. And until we accept that, we will never find an answer to it. It was a crisis based on solvency … initially financial institutions and now sovereigns.”
He continued,
“Providing liquidity can only be used to buy time,” Sir Mervyn said. “Simply the belief, ‘oh we can just lend a bit more’, will never be an answer to a problem which is essentially one about solvency.”
In short – the bail outs WILL NOT WORK. What is more they were never going to work. They were only ever about buying time. But not for us. Not for you and me.
On the one hand I want to kiss Mr King for standing up and speaking the truth. On the other I want to ask him why he waited? Why so long Mr King? What kept you?
I’ll also make one small prediction. If Mr King keeps saying this, the global financial class will start a smear campaign against him. Rumours will start about his health and his judgement. People will start to suggest that he has perhaps become a bit senile and soft in the head.
Now let’s put these three things together. What Mr King has told us is that the financial class has known and does know, that the bail outs are not about recovery. They are about saving a system that has made 1% of the Western World unimaginably rich and powerful. Beyond all measure and perhaps beyond reasonable restraint.
What Mr Lipsky says, tells us the Global Financial class doesn’t care. They are out to protect the system which makes them what they are and gives them what they have. Mr Lipsky does not even see people like you and me. We are not part of his concern.
And those who we elected, Mr Pangalos and his like are spent, decrepit afraid and morally rancid.
We must look to each other now, or go down to ruin each of us alone.
Golem — another good one. I'm surprised more people haven't picked up on Mervyn King's use of language …. liquidity probs get temporary funds, insolvencies go into liquidation…
Very good coverage of the media treatment of Greece , first ten minutes of this Al Jazeerah programme.
Thanks to 13th Duke of Wybourne for that.
Reminder of the OECD figures for Greek hours worked etc at sturdyblog.(Link from someone here.)
frog2
"Left and Right they are captured by the Free Market Ideology and afraid of anything that questions or threatens it."
???
If that were ever possible, Greek politicians aspire to an even stronger state than the most hardened German Social Democrat. Europe as a general rule abhors the free market and politicians of all stripes and colors continuously fall over each other as they jostle to demonstrate who can get the state to dish out more political protection for favored entities (euphemistically called regulation rather than protection which is what it is).
Free markets? Nope. Not in the "civilized" West.
You must remember that a politician's wet dream is the concentration of power. The more absolute the wetter the dream.
In this optic, politicians need banks much more than banks need politicians. A bank could make a very good living even in the absence of DBFM.
Not so politics and politicians. Electoral politics needs DBFM thus it needs banks. Banks are vital to the electoral politics construct.
Thus if you are a politician with any hope of getting your grubby hands on some sliver of power, you must absolutely and vitally prop up the game of the banks and do so obstinately and aggressively if you are to have any hope to get more than just a sliver of power.
Disable DBFM and you disable the political game. Some banks will survive and prosper, but the political order would be forever altered.
guidoromero said…
"Left and Right they are captured by the Free Market Ideology and afraid of anything that questions or threatens it."
Golem wrote Free Market Ideology – not free market. Whether the free market ever existed in the real world is another debate. I would take the "no" side.
However, Free Market Ideology is a thinly veiled construct for the fascist takeover of countries through the merging of corporations, banks, and government. Mussolini, the father of fascism, preferred the term Corporatacracy for his beloved economic political model.
Guido and el gallinazo,
Guido, how are you mate? How are things in your corner of the world? As ever I find myself not disagreeing with you. I think it's nearly always our terminology which divides us.
I suggest el gallinazo has it right. I do tend to use "FreeMarket Ideology" to describe what our present rules describe as the Free Market – which as you point out is rarely Free Market.
I do think. however, my position is coloured by being in the UK which might well mean that I often describe a state of affairs which is truer of the UK than of Continental Europe.
I think your point is quite a deep one and would like time to think it over.
You have to jump between websites & blogs to keep up (or abandon all efforts) -so fro some reason I thought I was reading Robert Peston's blog, and thought he had finally grown a pair. I nearly fell of me chair. He must use similar sentence construction or something.
Then I realised.
Mervyn King has always understood what this is about, but in the typically understated English way, doesn't want to offend. I hope he grows more confidence to become a flag-bearer.
The French offer to Greece is of course a joke, but it will be used as a stepping stone towards some other lousy deal for Europe's citizens, just the standard game of plying the media with the script.
Free market/free market ideology,
Its much of a muchness to me. I don't think if markets were 'free' in terms of being free from any government interference at all that would lead to a better world. Alot of the free market ideology hinges on the idea of the 'perfect conditions' existing, and one of those, if I'm not mistaken if full information. This is what would be necessary for human morality to keep a timely check on the excesses that result from the drive for profit at all costs, and I don' t think full information is possible in practice
States can be corrupted by greed but they also function to reign in greed. John Stewart did a good riff on this theme, outlining all the things from cleaner water to safer food that the big bad wolf of government regulations provide. I for one don't want to live in the wild west, I don't want to live in a world where 'labour' is treated as just another 'input' to be squeezed and squeezed, whenever profit margins demand it; outsourced and expected to move constantly around the whole world following whatever slave waged jobs are available at the time, where parents have to work so hard they can't raise their children, or even live in the same place as them. Where desperation and hope are exploited in a savage and hearltess that would make even Simon Cowell blush. So you won't see your children but never mind because 'the market' will provide you with the dubious pleasure of watching assorted smug elites raise their children in idyllic settings, which also just happens to be essential for keeping you chasing that carrot, that you might the one in a million to get to that place to, if only you're ruthless enough.
I personally don't care if the absolute perfect free market has ever existed. I think we can see a close enough approximation in many places.
I find the idea that the major concentrations of wealth which exist today would suddenly disperse if we got rid of government intervention absurd. It is possible that the free market might work if we wiped the board clean and all started again with an equal portion of monopoly money, but that's never what the free market proponents opt for. The base their theories on a more simplitic notion of human society than your average two yr old had. Corporations have become the monsters they are because governments didn't have the guts to govern them, not because they governed too much.
LOL… eh! watchagonna do… I'm Italian… I jump to conclusions… it's a survival skill… 🙂
"I for one don't want to live in the wild west, I don't want to live in a world where 'labour' is treated as just another 'input' to be squeezed and squeezed, whenever profit margins demand it; outsourced and expected to move constantly around the whole world following whatever slave waged jobs are available at the time, where parents have to work so hard they can't raise their children, or even live in the same place as them."
Is that not a faithful description of life today in the West?
The free market ideology is, in my opinion, flawed by the very same logic which did for communism in the end – it worships 'efficiency' over human life and dignity – in communism (in the early stages at least) you are asked to sacrifice the major portion of your life for the 'mother state' and the false promise of a coming utopia for future generations. in the capitalistic free market you are asked to sacrifice the major protion of your life to profit and the false promise of somehow coming through the eye of the needle to the idyllic consumerist utopia that is dangled before you. It is no more possible for even half the people on this earth to enjoy this consumerist idyll than it is for half the people who audition for X-factor to become the next Beyonce. So where exactly is all this wonderful ‘efficiency’ leading to? Where is it getting us and when?
Both systems are utterly hypocritical – dangling disney style utopias of love and family and togetherness in front of the worker while the systems works to ensure that these most valuable of things can never be enjoyed by the average citizen – what they get to replace them are an over abundance of very cheap things – brought to you courtesy of 'efficiency', and the chance to peer through the media at those lucky few who do get to enjoy this kind of real wealth.
If someone is working 10 hours a day do they have the energy to go out and find enough information on the ethics of the products they buy, do you have any idea of how much time and effort goes into finding out the ethics of the average shopping list- and that even when at least some of the work is done for you by the HSE and others (at least it is here in Europe).
The free market seems to suppose that as consumers we can be Immanuel Kant with a laptop even while we are worked like dogs as ‘labour’. But that I think is because free market ideology has done such an amazing job at completely dehumanising ‘labour’. They are ‘key staff’ but the grunts on the floor (labour) rank somewhere less than their dogs. Their humanity is only half acknowledged when it is affecting efficiency and even then it should only be considered when there is no fresher work force/robotics available to do the job. Pick up any free market text you like and see if there’s anything different in how they talk about ‘labour’ and how they talk about other inanimate inputs.
'Europe as a general rule abhors the free market' You have obviously never read the Lisbon Treaty- it could have been written by the IMF. Europe as a people might abhor the free market but our dear leaders have been thoroughly audited of all those nasty non-free market ideas.
Personally I think all states should employ whatever protectionist policies and whatever regulations they like to ensure a food sovereignty and energy security, and a sustainable ecology, what I would object to is the hypocrisy of preventing less developed nations from doing just that while we do it ourselves. To me this is where the freedom should come in, and it would do a better job of allocating world resources in an efficient humane manner than anything the IMF is currently spouting.
To me what Europe has represented is a best case middle ground between the care for the weak and vulnerable and future generations that was part of communism and the ability to take some risks and have self determination that is inherent in capitalism. I don't think that people in Europe abhor the free market because the love State Power, I think we have a higher and more refined idea of what constitutes the baseline in morality against which the market must operate. If that means we regulate health and chemicals and agriculture and labour standards more then good for us I say. I believe that it is for these very things that we are currently under a kind of financial attack, although clearly some of that is our own fault for not participating enough in our own regulatory systems.
But we should have the guts to stand our ground, and fight for what is great in Europe even if that means overcoming a general distaste for the idea of saying anything nice about ourselves at all. Faced with the levels of hubris in the IMF and the financial elites we could do with being a little less hidebound and self critical and a little prouder of what we have here.
And if Greece has the capacity to feed itself, then it should under no circumstances feel threatened by anyone, just because Americans have apocalyptic visions of societal collapse doesn’t mean that the whole world should fear the same thing. That one of things about not having a society based soley on individualism or rigid hierarchies or the profit motive – when the shit hits the fan, the social fabric doesn’t get instantly blown away.
I do not think that regulations, such as minimum wages prevent the market from allocating other resources efficiently, except where other countries don't have them. To simply say, ok we must get rid of ours just starts the race to the bottom.
Instead of saying oh look government was corrupt so lets get rid of government we could do as the Indignants of Spain are doing and get off our arses and take a more active part in government. I don't want to be part of a world where its every man for himself in the market because I beleive that communities and nations need something more to bind them and stabilise them than just geography and an army and 'the market'. Like the song goes I hope we can wise up to what we have over here before it gone. That was one of the greatest achievements of the Spanish Indignants – they demonstrated what we are capable of – how ‘efficient’ and organised we can be even when the profit motive doesn’t exist. Our media , (which grows more heavily influenced by America by the day) and very often our historians, insist on haunting us with a paranoid and overly negative view of humanity because it suits their ideology, because they think only fear sells., and because I believe it is a kind of intellectual dick swinging to be as negative and cynical as you can be. We should not fall for their schtick.
WIth you around, Rebecca, we won't.
Hurrah for you!
el gallinazo 17.22 " Free Market Ideology is a thinly veiled construct for the fascist takeover of countries through the merging of corporations, banks, and government"
Yes,the 'Washington Consensus' etc. I thought very early on that the WTO was an org with concealed evil aims,and equal consequences for the rest of us.
Making the planet safe for the most unscrupulous transnationals (well, ALL of 'em! ) is the order of the day.
The indefatigable Susan George even came a few years back to my little corner of Provincial Normandy, warning about the General Agreement of Trade in Services (AGCS in French). And so it came to pass that an Australian company won a bid for a juicy pilot sub-contract from central government 'getting people into work' in Upper Normandy.
The idea of a legitimate 'National Interest' disappears in all(or at least all I've seen) so-called FreeTrade Agreements.
Being half-Kiwi, I looked at the small print of the Trans Pacific Partnership deal as applying to NZ, and there again the government of a small country is giving everything away to the TNC's.
Another fine article.
Do we have a free market? Well only for a select few. For the rest of us we have to pay the tax that these corporation avoid.
If the offshore/onshore loophole it would force these banks and corporation to cover the the TOTAL cost of the cuts immediately.
Though the comments of Mervyn King are welcomed we have to remember that the BoE is one of the main player in this toxic market.
The Economist did a piece on King this week – how his power will increase considerably in bank regulation and how he might find it hard to work with bankers.. 😉
Rebecca,
In order to establish a viable debate, we must first agree on some definitions. In a first instance, we should agree that the monetary system is the prime and ultimate driver of all social/economic dynamics; Mises would say of all human action.
That established, a free market does not mean anarchy. It means first and foremost honest money. It means small government that upholds the law. By upholding the law impartially, government levels the playing field for all; ergo, no protection of special interest groups for profit. This means for example that we would put a stop to aberrations such as paying farmers not to plant land or paying subsidies to inefficient entities so as to shield them from competition because they are "national champions" such as Alitalia for example. National champions invariably become bloated cesspools of corruption and waste.
Greece today is handicapped because even if it rejected the bailout, unless the Greek government scrapped reams of regulation that piled up over the years, Greek society does not have the opportunity to allow their own entrepreneurial wit to dig themselves out of the hole.
Is a free market an all encompassing solution to the ills of society? Absolutely not. We still have to contend with a set of human attitudes that will ensure some will try to rig the game. But in an environment of honest money and free markets, these attempts would be far more visible than in an expedient "democratic" system that allows a dog and pony show to be visible but where the driver of social/economic policies is tinkered with behind closed doors and by decree.
I find it fascinating how opinions shift with the zeitgeist, but become modified by personal circumstances of wealth and philosophy. It seems that you can nod along with your "peer group" yet make interesting observations, perhaps be a little eccentric, a bit of a quiz.
Mervyn King has stated in plain language, not for the first time, that the global financial meltdown has absolutely nothing to do with liquidity – to paraphrase outrageously: "the banks have defaulted on their loans, but with great ingenuity, in a manner most worthy of the financial class". In other words, a debt is not a debt if it can become a bigger debt for somebody else. The discordant concerto of the financial instrument strikes up again!
Now that we are enjoying Mervyn King's wisdom, one wonders what his latest opinion of Alan Greenspan might be. In 2005 he was licking his boots with champagne infused spittle – to quote: "Alan’s departure from the central banking scene will deprive us of a source of wisdom, inspiration and leadership." – see HERE the full sicko frantic address to the Central Bank Governors' Panel at Jackson Hole in 2005.
My comments are too harsh. I should celebrate the fact that Mr King is spouting common sense; though, my cynical alter ego still whispers that there is a "bad cop, good cop" scenario being acted out here. The dastardly felon is, of course, the "TBTF" bank. I'll leave it to your educated selves to determine the rest of the cast.
Guido 21.09– do you work for the WTO ?
Joking of course; but your idea of inefficient entities forbids governments from subsidising small farmers, who are inefficient in some narrow respects but not overall economically and socially in others…
depending on who does the calculations …
Sorry
But I have to disagree, Mr king has been saying what the problem is for a long time, but he does it carefully As for the extra powers for the bank of England my understanding is that they won't be implemented until 2013 after Mr king has left the building. I read somewhere that master osborne doesn't like king's tough stance on banks
I came to this blog with the question: where has all the money gone? and thanks to Golem and the crew, (Guido, Hawkeye, Fungus, 24K, Shingu, MacP, Stevie, Princess, Rebecca and one and all) I have been deeply educated. I give thanks to you all.
The next question is: why is it happening as it is? and it is now clear that, as Guido says, it is intentional. As noted by several here, Michael Hudson outlines one of the effects of this intention: http://neweconomicperspectives.blogspot.com/2011/06/financial-road-to-serfdom-how-bankers.html.
These effects are not limited to our financial institutions: political, corporate and judicial functions are also compromised.
To paraphrase James West (http://www.midasletter.com/index.php/dizzying-new-heights-of-global-criminal-enterprise-gold-silver-110620/) , ‘we are being raped repeatedly by our financial institutions while our arms are pinned by the governments we elect.’ In these circumstances, clamouring for a change in policy is like asking the rapist to wear deodorant because his odour offends you.
A global criminal enterprise is now being played out before us (the revolution is being televised:http://solari.com/archive/missing_money/) and belief in democracy is revealed as a vehicle for the triumph of usury. Indeed, as Michael Hudson notes, the rise of Western democracy is coeval with the rise of DBFM and Central Banks.
As consumers we are now as disposable as the consumables which have consoled us; and like the culture for the pathogen, we can now be discarded.
I am a prisoner in the cave, scrying shadows,
the shadowcasters hiding in the light they work:
my own light dims in tending to their shades.
And the light they dazzle is but caustic lime
while the light within is feared:
remember Kennedy, King and Rabin.
Bullets are hard awakenings:
The powers that be have no sympathy
for aims other than their own.
So the final question is, what can we do about it? Our belief in democracy has disabled us: who here voted for war in Iraq, the bailouts, fluoride in water? Despite the blatant lies and feeble reasons, we still invest our power in the machinery of those who rob, rape and kill us. As if the fading of priests has left us like limpets to cling to any hope that passes our way.
We've invested in the externals of what we've been presented with and quibbled about details. Time is short but it seems to me that the one power we have left is the one that draws us all together here. Now, what can we create?
… eh! watchagonna do…
I thought Guido was singing my song then.
@ Mohenko.
I think something special has already been created here, a place where you & I & others have been educated for starters. I consider my contribution to the cause to be as a spreader of links. I know like seeds on a desert the vast majority fall on barren earth, but one might make a difference. I like you, I suspect, are at a loss as to what else to do. I am limited by my circumstances & geography, I feel also it's as though we are in some kind of phoney war, waiting on the real thing to start.
If you, or anybody else, come up with an idea for something you want to create that would be useful, I am a pretty good draughtsman, photoshopper, graphic designer, photographer, cook & bottlewasher. I would be only too happy to help.
@ guido(although I don't really mean to rant just at you personally),
'It means small government that upholds the law. By upholding the law impartially, government levels the playing field for all; ergo, no protection of special interest groups for profit'
On the one hand I totally agree, a level playing field should be created, and I don't believe in protecting special interest groups because they've been backhanding politicians – of course not
( but as dave pointed out above sometimes it not so simple – eg. there are environmental and other social gains to be had from set aside – and I for one don't mind paying to ensure that the EU doesn't become the land of mega farms – although interestingly if you read the Lisbon treaty that is the direction they want us to head in. What is wrong is dumping excess on developing markets and thereby imperilling their food sovereignty while shoring up our own, or swaying scientists to promote not very healthy ways of eating to protect their product group)
Then the next problem is which laws are to be upheld? The free market ideology is only concerned with upholding the laws relating to property (unless you're some kind of indigenous non clothes wearing person) and loans and all that but they don't want laws protecting the vulnerable or the worker or the environment or even the consumer if they could really have their way. The latter always get put in the 'big' government category. The argument is trotted out that market mechanisms will solve these issues in the long run and my point is
a) that well probably be too late for too many in a lot of cases and
b) that alot of industries/markets the cost of entry is too high to allow true competitiveness or there are other geographic or social constraints on competition/consumer information which in effect allow mega-corps to be every bit and worse as the most power hungry politico ever was.
At its essence the problem is that the free market wants to treat labour and the environment just like any other inputs, they're there to be 'utilised' for the maximum profit and nothing else. Only those at the top of the capitalist tree get to win free of being 'labour' and can assume the mantle of being sensitive human beings in need of self actualisation and love and togetherness and a hundred and one other 'needs' created by advertising and what have you. For flips sake the IMF scolded Ireland for having too many mothers at home looking after their children! I mean how awful! The inefficiency! Where's the immediate economic value of having happy well adjusted children?? That's not even going to help the ten year growth forecast. And if it can’t be measured in money then it can’t be worth something huh?
Why not farm them out to privatised childcare, I mean that's worked out so well with the nursing homes hasn't it??
I am not for one minute in favour of corruption and I think lobby groups from all industries and their interaction with government need careful monitoring, but that surely implies more governance not less.
I do think we need more debate on regulations and some health & safety has clearly gone too far, for example with nursing homes they now require you to have elevators in a two storey building – this creates a barrier to entry for small homes – which usually provide much better care and dignity than the huge farms as I call them. And this seems mad to me because shouldn't you be allowed to decide whether you're willing to risk possible death by fire for the benefits of dignity and homeliness in the year s you have left?
Yes, many of the regulations that are put out are lazy and one size fits all because they couldn't be bothered/didn't want to spend money putting more thought in – which is a total false economy. But they are lazy because we allow them to be – we can’t sidestep that issue
We need to be more active citizens, more active parts of our regulatory system, instead of treating it like our home heating, where you just flick the setting once a season, top up the fuel and expect the whole thing to run itself without your input.
We should solve the problems of government corruption and the sway of special interest groups with more active citizenship and more active consumerism. But this to me is the ultimate fear of the IMF et al that we will become both of these things. That we might actually wake up.
But we must wake up and quickly, I know its hard and I’d much rather be reading D-listed really but in some ways we are all totally guilty of some freemarket excesses – we have outsourced our citizenship and we don’t give a flying f what’s happening behind the sciences until something affects us personally our bottom line.
There was a good idea floating round Ireland before the election and that was for the current senate (our House of Lords equivalent – except there's no Lords obv) to be disbanded and replaced with a citizenry senate – i.e that voters would be randomly selected from each constituency and that you would have to serve – for one year at a reasonable wage. (proper reasonable not Bertie ‘reasonable’) But this would of course imply crediting your fellow citizens with intelligence and also it would mean that civic knowledge would become widespread and we must of course never allow that to happen.
Oh and in honour of it being two in the morning (I will regret this tmrw) and therefore carzy time did any of you ever see all the stuff about Obama's Step-dad and mum being all up in the Suharto faction in Indo! One of the original experiments in free market capital flow or some such.
Its hard to know though because the haters hate him with such passion and its too late for perspective. Call me a paranoid loony in the morning!
@ Rebecca,
We agree on all the issues. We might potentially disagree on how to fix them.
The issue of scolding stay-at-home mums, would probably even not come up in a free market. Conversely, in a society where politicians have imposed DBFM by decree, all members of a household must progressively seek gainful employment and, when that is not enough to make ends meet, must gradually go deeper in debt. Hence the reason that families could make a nice living on one salary till the 40s and then gradually debt has become a defining characteristic of life in the West as if we were a dinky little developing primitive society.
Small farmers should not be subsidized. But small farmers must have access to the markets in their immediate vicinity so that the produce that reaches the consumer is at the peak of its nourishment/flavor capacity. The West dumping produce and goods on developing society is no different than a national government subsidizing "national champion" so that said champion can run a fleet of trucks at a loss and distribute produce (that is picked green) to the far corners of a nation overwhelming local farmers. There is something inherently wrong when a government subsidizes a company or an individual because of special circumstances. I personally know small farmers in France and in Italy that buy land to plant olive trees for example not because they want to make oil but simply to collect EU subsidies.
Adjacent to my uncle's farm house north of Torino in Italy, farmers are giving up farming to install photovoltaic farms. this is not born of need or a desire to save the earth but simply because of the subsidies that are dished out by the government and that, in this case, will result in higher food prices and/or lower quality food for all.
Subsidies, props and supports are the road to perdition because one subsidy will justify the next in a situation that, at first blush, presents the same characteristics that justified the first one. If a farmer cannot stay in business either because there is no market or because he is incompetent or because the land is not suitable then, yes, said farmer should seek alternative means to make a living. And this is where a free market can make a difference. In a free market, the farmer that can't make a living on his piece of land, could go out and aspire to do anything else he feels he can put his head to. Not so in a regulated market of unions, professional licenses, and political influence. Once again, I refer to Italy as an extreme case that typifies a market that is as far from free as is statistically possible in any given universe which creates a society that is beholden to the munificence of the state that, in turn, renders it sclerotic and frozen in the headlights.
Anyway. The key is the monetary system I am afraid. Our salvation hinges on successfully repudiating DBFM. Once we have honest money, all these arguments will by and large take care of themselves. DBFM is what we must reject and it is surprisingly easy to do. That should be our number one task.
This is typical Wizard of Oz stuff. They are in a minority. If they damage enough of the middle class, other interests will intervene and stabilize the situation. Trust me!
Chile was disgraceful. It will not be repeated in Europe.
Paranoia helps those who oversee us. They are there to help!
This is simply a banking problem. They have blackmailed all the politicians, but that hold can be broken. Hyperbole is entertaining but all is in hand and according to plan. This was laid down years ago, think depressions were abolished?
I am at a loss as to why you take this approach given that you know this? Nothing paper is worth holding as the deflation in credit necessary to rectify the situation has yet to take place! You know that This will take decades or years if certain steps are taken.
Perhaps you can set out those steps? Think banks!
We all know what happens in depressions. More efficient and effective ways of protecting the weak will ensure a stronger economy.
The illness was and is excessive credit!
It is now being resolved. Badly, where bankers are allowed to have any say! Reduce their power and the solutions become obvious. Separate them from their toxic credit creation!!!!
Now!!!
OK Guido, 'DBFM is what we must reject and it is surprisingly easy to do': How?
And Fungus: 'Reduce [the bankers'] power ..and…Separate them from their toxic credit creation' : How?
Do Credit Unions fit into this?
I have a "how and why" on my blog. Briefly, DBFM is predicated on inflation; in other words, DBFM is predicated on leverage.
Inflation is predicated on spending thus the circulation of the currency. Savings is anathema to leverage thus it is lethal for DBFM.
Leverage works both ways.
As individuals, we can lower the velocity of the currency by increasing saving or closing lines of credit or buying bullion or a mix of any of the above. This means material sacrifice today rather than sacrificing your life tomorrow.
When leverage runs at ratios of 40:1, 50:1 or as is the case for some of the Primary Dealers, 70:1, a decrease in capital of a few percentage points will bring about the demise of the major banks thus of DBFM.
Once the major banks are immobilized, the political process runs out of fuel and freezes.
There isn't much time left till the final denouement of this iteration of DBFM.
Warning. Paralyzing the banks and the political process is easy and, for the time being, still legal. What is required is mere material sacrifice. BUT… once you force the demise of the major banks and the monetary system, you also precipitate dislocations in services and systems that you usually take for granted: i.e. refuse collection, sewer maintenance, water distribution, electricity generation and more.
The choice is material sacrifice today or global conflict, death and devastation tomorrow.
Watchagonna do?
Rebecca – 20.03 last night to Guido ( I think)- "You have obviously never read the Lisbon Treaty- it could have been written by the IMF."
Well, I did read the proposed Constitution that we refused 53 to 47%, and its hundred-odd repetitions of 'Free and Fair Competition', and you're right!
Another bit I hated was Tony Blair's lobbying to have NATO included…
I'm fairly sure that there was something about mutual military and policing assistance to cope with civil disorder too. When the EU Commission threatens that if the Greek government can't do the job, others will have to take over direction of the Greek economy, one has to wonder exactly how they think they can go about that.
The Lisbon Treaty is the single most fascist piece of legislation since the 30s. Not only that, but it gave us layers of politicians whom despite not being elected have significant executive power. There is nothing about free markets in the LT other than expedient rhetoric.
But now for some good news:
In Denmark they let their banks go bust without more bail-outs. Amagerbanken, Denmark, revisited:
Add Fjordbank Mors in liquidation from this weeekend. More are expected to follow. There is talk about a new full-blown bank crisis in Denmark, and the wisdom of the first bail-out is questioned.
http://politiken.dk/erhverv/ECE1318139/ekspert-der-kan-godt-ryge-en-haandfuld-banker-mere/
The Danish are surprisingly principled still. The National Bank stands by the depositor guarantee to its limit, above that and for other creditors it's loss realization time.
But up until now only comparatievely small banks have gone belly-up. Will be interesting to see what happens when a big one is about to go.
Or maybe it's just a ploy to get rid of the small banks in order to secure their business for the TBTF?
Now whining can be heard all over for the public purse to be opened up. It is unheard of that share-holders and investors in banks faces billions in losses when the bank goes bust. It hurts the image and credit ratings of Danish banks. It's like Iceland II.
http://www.bt.dk/danmark/banker-slaar-alarm-vi-ender-som-island
I wonder for how long Danish authorities withstand pressures to absorb these poor investors' losses – in the common interest of course
You have any Danish readers that can enlighten about the siuation?
@ Guido,
agree wholeheartedly about the Lisbon Treaty – reading that thing felt like swallowing a large ice cube – it gave me indigestion and chills at the same time.
I also agree with you about the kind of regulations you're talking above – a balance should be found between regulations that protect and those that strangle. I think you're right that common sense too often gets strangled by sectional lobbyists. We need to stop accepting a slapdash approach to solving problems, and give greater scrutiny to the laws they pass in our names. I think you're right that common sense too often gets strangled by sectional lobbyists
Also if you don't call the ideology of the Lipsky and the IMF and Lisbon free-market what do you call it?
@ Dave,
Yep there are definitely articles in there that lay the ground work for dealing with protest in a very Napoleonic (sp?) way. What chilled me most about the whole thing was the slyness of it – nothing untoward was expressed clearly, aside from usual neo-liberal dogma but – lots of clauses were laying the groundwork for things that would cause riots if they were spelt out clearly for the public, the majority of whom were never going to be asked to vote on it and therefore were unlikely to go to the bother of trawling their way through it.
Rebecca
You've just made me think a bit about the concept of efficiency and how it has been used and just what it has come to mean. It is a term that is just as well applied to botanical processes yet it has been generally railed off and limited in general discourse to economic or narrow concepts of work. Itself a kind of reuse of the notion of mechanical efficiency.
And the strange thing is how little the idea of a biological or human vision of what efficient might mean enters any debate…let alone a psychological interpretation. Maybe its time "Efficiency" was reclaimed from the reductionists and blind economists and brought back as a useable term for how life as a whole can be lived.
We can imagine a concept of planetary efficiency say that would be very different from the way efficient is used now …
@ Wirplit,
Exactly! Efficieny is presented to us as this kind of Saxon God to which we must all pay homage. The assumption is always that we must produce more faster with less.
I got to thinking about it when everyone was disparaging the Greeks for not sacrificing every last minute of their day to Mammon. For daring to have a slower pace of life. When the system into which we have all been conned state that you can only enjoy life when you have scrambled your way to the 'top'.
It just seems like not enough people stop to ask where we are going with al this efficiency – where's it getting us?
In the current economic model its considered good to produce cheap magazines for kids that come with the flimsiest plastic toys, that last maybe two days before they are added to the growing rubbish heaps, unrecycleable (word?) in any way. They represent to me everything thats wrong with our system – they use up so much resources to give some Western child a half hours amusement max.(that they will also get if you just read them a story from the library/play games with them on the internet or just tell them to bloody stop whinging and that occasional boredom's a fact of life).
But based on the fact that one in ten parents will be so hassled and harried at the shops that they will give in rather than take part in a scene worthy of Supernanny, they are obviously 'profitable'.
And when someone does stop and question our constant rushing – like the slow food movement – they are immediately packaged up and presented by the media as the new luxury fad for the privileged yummy mummies or the occassional crusty freak/retired hedge funder – and teh message get drowned in consumerism – you’ll always need to do alot of expensive new shopping or a book about what you're doing to pay for it.
We need to seize this crisis as an opportunity to take a look at what we are producing, how necessary is it, what exactly is the rush on it, and where are we all collectively rushing off to? Death? We need to start owning, in our real lives, the kind of wisdom and ideals about what really matter that we like to feed our children – instead of letting the TPTB always brainwashing us that happiness must be bought and real life has to be hard-hearted and hard-headed – where is that battering ram heading to?
Immortality as a computer – I'll pass thanks.
Stripping our planet of everything on the offchance that we find another planet a gazilion light years way – get real.
I don't want to be some WASPY drone I don't want to live to work, I want to work to live, and I want my whole community to have the same balance or I won't be able to truly enjoy my own good fortune,
Rebecca, you are asking to put a stop to inflation. AT least, you are asking to put a stop to artificial inflation.
Here is my opinion on efficiency.
Efficiency is desirable always and everywhere. Efficiency is the ability to achieve something using the least amount of resources, in the least amount of time for a desired level of quality.
Efficiency has nothing to do with a frenetic pace of life which instead is a direct result of inflation.
I'd like to take a page out of the philosophy of Tao to illustrate that efficiency is a desirable characteristic of life. Efficiency relates to things like elegance, ingenuity, dedication, study, aesthetics and morality all things that are precluded by the need to induce ever greater degrees of inflation into a system.
Efficiency is always good and desirable and it is not a prerequisite for a quickening pace of life.
@ Guido,
'Efficiency is desirable always and everywhere. Efficiency is the ability to achieve something using the least amount of resources, in the least amount of time for a desired level of quality.'
But what happens when labour is just another one of those resources – doesn't that mean that labour should be squeezed to the max- doesn't the concept also lead to extreme specialisation of labour and the negative psychological effects that can bring. I think that this means that rather than do jobs collectively, gaining from both social interaction and common purpose, as well as having a more balanced life, it has tended to mean that if one guy can just about manage it, then the other should be left to 'specialise' in something else – but what if there is call for that something else?
I am not against things like ingenuity, elegance and dedication, but I think the idea of 'efficiency' as it relates to labour (and non-replenishable environmental resources also)is a little more complicated than mainstream economics normally allows for
PS. Sorry if I am not understanding the effects of inflation properly – but its a long time since I took your basic economics 101 course – so my knowledge of macroeconomics is pretty basic, if not a little muddled.
@ Guidoromero
How do you judge the desired level of efficiency ? Is it desirable at any cost ? From the definition it seems to imply that the more efficient the better, but surely nearly everything must be only relatively efficient.
My little production line I feel is quite efficient, but myself who operates it, being a middle aged spoilt Western male who is often distracted, am not as efficient as say a 16 year old slave girl.
So if I was able to smuggle my slave girl into my lttle factory, my factory would be more efficient, but would this outcome be desirable.
The very definition of efficiency means it can be forever & ever squeezed to get more out of something. Therefore to produce something with the tiniest effort possible is it's goal. A good thing in energy terms but perhaps not in Human ones.
If due to austerity measures in a country a boss needed to increase his factories productivity by forcing his workforce to work faster, with longer hours & by lowering their wages, he would have succeeded in making these people more efficient, but I am sure their pace of life would have quickened.
I agree efficiency is a very good thing, but once you add the Human element it can be used for both good & bad ends.
You guys are confusing efficiency with exploitation and expedience.
But hold on. Let me go over inflation because it is important and is the basis of all the oppression you refer to.
Inflation conforms to the law of diminishing marginal utility. This means you always need more inflation to achieve the same result. This is borne out by empirical evidence such as US Federal debt increasing by over 1000% but GDP increasing only by 100% since 1980. That's the plainest illustration of inflation.
One of the results of inflation is that it compresses in time the demand and production cycles. This is exactly one of the intended aims of inflation. By debasing the currency, government induces spending in order to induce circulation of the currency. In this construct economic actors consume today what they would otherwise consume over a much longer period of time. For example. In the absence of credit, you would have to save your excess income before you could buy a car or a house. But when credit is made available cheaply and pervasively, you can buy today both your house and your car.
Now. When you induce inflation aggressively over decades, you are inducing excess consumption. Thus, for example, you also instigate the depletion of natural resources because you don't allow the natural cycle to replenish those resources. Think of fish stocks today that are thoroughly depleted in the coastal waters of the West. Think of aquifers. Think also of oil wells where extraction rates are directly related to the productive life span of each well.
So, inflation is directly related to dynamics that are aberrant, immoral, expedient thus inherently wasteful.
Less intuitively, inflation is also directly responsible for the off-shoring of jobs. Here's why.
Because of its mathematical characteristics, inflation is limited; it is finite within a given system. In other words, in any given monetary system, government cannot push inflation ad infinitum.
Hence, an inflationary monetary system as DBFM is, must necessarily assimilate other monetary systems and markets for its survival. This is what the concept of "Floating Exchange Rates" does. It Dollarizes the sovereign currencies of the participating countries. This is the reason why when bankruptcy stokes banks in Europe, the Federal Reserve opens swap lines.
Inflation initially crops up fairly evenly across the economy inducing a general rise in prices and wages (i.e. 70s). Eventually, as new members to the monetary system are assimilated, corporations will seek to outsource jobs to those markets where inflation has not yet had the same degree of incidence that it has had at home. In turn, this wage arbitrage serves to simultaneously limit wage growth and expand credit markets at home. This is the monetary authority's wet dream.
From there, you have all sorts of exploitation going on including the use of illegal labor at home.
Steviefinn and Rebecca refer to exploitation and expediency not efficiency.
Efficiency as a universal concept, has nothing to do with making someone work 20 hours and paying them a pittance. Or, at the very least, that is a very selective application of the concept of efficiency.
As upheld in the philosophy of Tao, efficiency applies to everything, everywhere at any given time, universally. Dignity is a direct function of efficiency. The freedom to work as much or as little as one desires in order to achieve their own stated goals is a function of efficiency. But government coming to tell me how much I should work goes against freedom and efficiency. Similarly, government saying what someone should be paid for a given task goes against efficiency.
But, I hear you retort, the minimum wage guarantees dignity for anyone taking a job.
When you think of the minimum wage, you cannot think of it in isolation to the entirety of the economic framework government has put in place due to the requirements of the monetary authority that requires instituting ever more layers of mandated spending in order to induce circulation of the currency. Like social security, the minimum wage has the veneer of decency and humanity but in fact, it does not stand up to rational inquiry because anyone that can perform basic arithmetic has been warning that social security as it was set up could never work. More precisely, just like in a pyramid scheme, social security as it was instituted would work for the people that first got into the scheme but for those getting into the scheme at later stages.
In the absence of an interventionist, inflationist state, a minimum wage has no reason of being. In the absence of the need for inflation, government would be left to deal with issues pertaining to decency and the impartial application of the law.
It is the need for inflation that leads to aberrant, exploitative, wasteful policies.
There is little we can do about human nature other than set rules and enforce them. But there is a whole lot we can do about the nature of money.
Make money honest and a swathe of problems relating to decency and exploitation will take care of themselves.
DBFM must inherently, inevitably and necessarily corrupt government. It mathematically cannot be otherwise.
@ Guido, thanks for the fascinating lesson on inflation – you have made me want to dig out my old school books and relearn MU.
But while I can see the harm caused by DBFM, I'm not so clear about its absence being enough to protect against exploitation.
Was there ever a time when the economy operated with a non-debt based currency and industry has neither slavery nor its successor indentured servitude to rely on?
My worry with cancelling DBFM, is that, in the absence of wiping the slate clean and starting again (although global financial collapse might partly achieve that I suppose), we would return to an era where the landed 'gentry' would control economic activity. Because while agree that personal debt is not a good thing – doesn't bank credit facilitate entrepeneurship and upward mobility? I mean I know that there cold still be banks and loans but they'd be vastly reduced, and wouldn't that concentrate the economic control in the hands of the wealthy/the banks who would favour safe (large) corporate investments over the new little guy on the block? And in the absence of inflation wouldn't there be little incentive to take any investment risks at all – why wouldn't those with an abundance of cash just sit on their money, or invest it in those things which suit their narrow interests?
If the main players remain largely the same and you also got rid of labour standards and the minimum wage then wouldn't they be free to exploit those without land or resources to their hearts content. And couldn't we still be left in the same position where we are today – where a disproportionate amount of the world's resources go towards a kaleidescope of amusement for the world's rich, at the expense of even basic goods for many people in the world?
I could be missing some very obvious point here but it seems to me that DBFM has allowed TBTP to put off a basic confrontation between an evolving public morality (which renounced, aristocracy, slavery, indentured servitude, and then the idea of a subservient and pliable working class) and the hierarchical status quo of inherited wealth and privilege (won a the point of a gun/sword, whether recently on some new frontier or in the old world many moons ago) and the newer rentier class (whose wealth might have been wiped out if the GFC was allowed to correct itself.
I agree, that to get back to honest money as you call it would definitely be a start, but I thing that avoided confrontation remains to be had. Or you could say that's where we're at right now, DBFM or no.
Sorry that's probably a bit muddled and if someone helpful and more literate! wants to make any of it a bit clearer please do so.
Much like a slap in the face during a panic fit, your post has brought me back to reality.
In actual fact, there is not perfect system. Any system can be gamed. The demise of the Romans was heralded by a "need" to debase their gold based currency because state expenditure eventually overtook fiscal income as empire building guarantees will happen.
That does not detract from the fact that DBFM is a deliberate tool for the impoverishment of society from the word go. Not only that, but DBFM allows degrees of leverage that are significantly higher and, crucially, stealthy till the moment the whole house of cards comes crashing to earth.
A value based monetary system or a fiat monetary system based on a fixed quantity of money can be gamed. All it takes is poliical will. But either of these two systems make it much harder and evident that the system is being gamed.
Just like Democracy is the worse system of government except all the others that have been tried, honest money too is the worst monetary system except all the others that have been tried.
Are we fighting wind mills? It certainly looks and feels like it. It comes down to cycles I suppose. Most people have been happy to run in their hamster wheels till today. But suddenly, all the wealth that has been subtly stolen over the decades now seems to matter. The problem is that the math behind the system has not changed. It has always been there for all to see. Why did it not matter then but it does now? Heck if I know. But the piper is aknocking and someone is expected to pay.
@ Rebecca & guido
I can see where you're both coming from, fascinating stuff thank you.
@ Guido,
definitely agree that honest money would be an important first step, as the current system seems like bread & circuses – I would love to see a more centrist public figure than those currently doing it, expose these ideas to a wider audience, but in the mean time, thank you so much for your taking the time to educate the economically illiterate life myself.
Quote of the day from Jim Rogers, co-founder with George Soros of the Quantum fund, arguing on Today's World at One that Greece should default:
"Capitalism without bankruptcy is like Christianity without God or Jesus".
Listen to the full interview here:
http://www.bbc.co.uk/iplayer/console/b0124qtk (NB: just before 27mins in).
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