Buckle up – Credit Crunch 2

I am sorry this is such a lengthy article. But I offer it as an explanation and understanding of what is going on that the bankers DO NOT want you to have.

 

I think it may now be time to buckle up and read that little card that tells you how to assume the crash position.

In a nut shell we are already in the midst of another  credit and bank funding crunch. Of course all the talk from the bankers, such as Buiter at Citi  and the tin hat brigade at Deutsche Bank is all about how it is all the fault of nations. But it’s not quite so wonderfully simple as that.

Already one multi billion dollar brokerage, MF Global, has collapsed. One Trillion dollar bank, UniCredit, is teetering on the edge of collapse, and two European nations, Italy and Spain, each with enough debt to bring down Europe are desperately trying to borrow euros from the ECB and dollars from the Fed. Just this morning Spanish bond yields are shooting up well in to unsustainable territory. And French yields are also in motion. Like a train sliding backwards over a precipice, as each carriage goes over so the weight pulling down grows and the weight resisting decreases. And the engine at the front, the ECB/Germany has to think can I still pull all this back up or should I cut the coupling and save myself at least.

There is a crisis and it is in Europe , but the ‘contagion’ is not at all what our cretinous media and brain rotted politicians are telling us it is. The contagion the markets are worried about is bank contagion. Nations’ borrowing woes are the radioactive material, but the banks built the bomb.

Here’s what I mean. What I want to show is that what is happening is almost a carbon copy of what the banks did in the lead up to Credit Crunch 1. They have done the same again only this time with sovereign bonds instead of American mortgages. This is another sub prime and once again it has been engineered by the banks.

To understand why the rise in borrowing costs in Italy and Spain, as well as worries about Greece, have suddenly become a ‘contagion’ that the bankers speak of in apocalyptic terms we have to understand why and how MF Global imploded. This might seem like a sideways diversion but it’s not. The collapse of MF Global is our window in to what is actually frightening the bankers.

MF Global was not only a huge brokerage it was one of the gilded Primary Dealers. That is, the largest and most trusted banks or brokerages chosen to for their size and stability, to deal everyday with the Fed to help it sell America’s trillions of debt. MF Global was run by Jon Corzine former head of Investment Banking at Goldman Sachs and one time governor of New Jersey. But please don’t get any ideas that there is a revolving door between finance and government.

And yet MF Global collapsed. According to The Guardian it did so because of lax oversight which had not noticed or been bothered by the fact that at the time of its demise,

…MF Global had liabilities at the end of June of $44.4bn against only $1.4bn in equity.

The familiar trope of ‘lax oversight’ goes along with ‘rogue trader’ as the explanation the  bankers can live with and are happy for you to accept. ‘Lax oversight’ like ‘rogue trader’ scape-goats one or two people and deflects any questions of whether what happened was a direct consequence of what the banks do and how they chose to do it as a group and profession.

What is undeniable is the massive leverage. Now we need to ask what underpinned this leverage. For that we turn to a report from AP which I picked up at The Business Insider With the Headline, “MF Global Is The First Big US Victim Of The Europe Crisis”. This article began the – It’s a crisis of European nations’ story-line. It begins with the statement,

“The European debt crisis has claimed its first big casualty on Wall Street…”

But how exactly? Much later in the article comes this,

MF had amassed net exposure of $6.29 billion in debt issued by Italy, Spain, Belgium, Portugal and Ireland. Of that, $1.37 billion was from Portugal and Ireland, which already were bailed out by European authorities. More than half was from Italy, whose borrowing costs increased in recent days as investors grew concerned about its finances. (My emphasis)

Now no one had forced MF Global to buy these bonds. MF Global could just as easily have bought German bonds. Only they would have given far less of a return. What MF Global had been doing was buying up dodgy bonds on the secondary market that other people were selling. Picking them up cheap and expecting them to be bailed out.

So now we have massive leverage resting on sub-prime assets, this time bonds not mortgages,  which the company had specifically sought out. And it sought them out for the same reasons sub prime mortgages had been sought after – their high risk made them more lucrative than safe ones. Same greed, same idiocy. Same people.

But Corzine wasn’t done yet. Oh no, not by a long way.

MF Global was also following the exact same finding model as Bear Stearns did, as Lehman’s did, as Northern Rock did and as countless others did. They relied for a huge part of their day to day funding on short term borrowing. Why go for short term borrowing which in retrospect seems so unstable – in that as soon as you have a problem you have so little time to sort it before you run out of money? Why, because it’s cheap. Of course. So you buy risky because it’s cheap to buy and offers high return (until it explodes that is) and then you borrow short also because its cheap but unstable. Banking genius at work having ‘learned those lessons’ from 08!

But wait there’s more as explained here by professional accountants in forensic detail. I will give you the short version.

MF Global was borrowing to finance itself but with what collateral? Remember Lehman bothers and their infamous repo 105? For those who don’t, repo is where you ‘sell’ as asset but with a fixed agreement to buy it back at an agreed slightly higher price at a set time. So although it is ‘sold’ it is actually a loan because the asset comes back and the money is returned with interest. All banks use repo for overnight and short term funding.

Lehman’s was using repo but exaggerating the worth of its assets to ‘borrow’ more than they were worth. They came unstuck when creditors would no longer accept their valuations of their assets or, in fact, accept them at all. MF Global was using its dodgy European bonds as collateral. It was marking them to mythic – sorry – model valuations and repo-ing them. But it gets better. The particular type of repo it was using was ‘repo to maturity’. Which simply means the agreement was that the short term repo was to be rolled over and renewed all the way until the bond matured. This is legal. But I should  point out the the law was written by the financial firms themselves. The key fact is that repo to maturity is supposed to be done ONLY with absolutely AAA rated bonds like American bonds. MF Global was using it with Italian, Greek and Spanish bonds. Pretending they were AAA even as it was buying them up at prices which recognized they were very far from AAA. And the international accounting standards boards and regulators either didn’t ‘notice’ or did and sanctioned it.

Now what this meant was that MF Global was showing the repo’s as actual sales. Naughty, yes, but terrible? Well, yes. Terrible enough that much of it was hidden off balance sheet. You see by booking them as a sale the company was claiming that the risk associated with them (remember they are dodgy bonds from struggling countries) was also gone. Sold to the ‘buyer’. But there was no buyer. They were only repo’d.

I say  ’only’ but in fact MF Global was happy they were only repo’d. It was more lucrative than selling them. And in fact this is in may ways the point of the deal MF was doing. You see the ‘interest’ MF was getting on the bonds, because they were dodgy, was quite high. This was the whole reason for buying them. Whereas the interest charged on short term repo is quite low. So MF Global was buying dodgy bonds which gave high interest and using them to borrow at a lower rate. Not only did this borrowing enable it to leverage itself more and more, but it was even making money on the deal; from the fact that the interest it was getting on the bond was higher than it was paying to borrow, using them as collateral. It seems convoluted and it is. But this is what the bankers call arbitrage and is why they think they are so clever. Understand it and you too could be a proper banker.

However, they ignored one thing. The same thing as Lehman’s ignored. No matter what accounting trickery they got up to, the bonds were not sold they were repo’s which meant that the risk (of the bonds declining in value) remained with MF Global. In fact the risk was now much greater. Not only was there the original risk of the dodgy bonds losing value, they now had an additional, greater risk because they had taken out further loans using the dodgy bonds as collateral. And from the leverage we looked at earlier know just how much MF Global had multiplied the risk.

So when the value of Italy’s and Spain’s bonds began to decline, their value as collateral declined and MF Global was asked to provide additional capital/cash to make up the difference. This is what is called a ‘margin call’. And these margin calls killed MF Global. They couldn’t come up with any more cash because they had none (they’d spent it all buying dodgy bonds) and couldn’t borrow any more because all they had were those bonds whose value was going down not up and a simply insane leverage which geared those losses up till they had the power to crush.

So now we have almost every aspect of the original sub-prime credit crunch reproduced by the same people who did it the first time and were never punished or even rebuked but instead were allowed to reward themselves with millions in bonuses.

So to summarize, MF Global invested in sub prime. Only this time sub prime bonds not mortgages. It leveraged them hideously, pretended it had off-loaded the risk when it hadn’t and then got caught when the value of the bonds went down and counldn’t pay the debts it had taken on using the bonds as collateral. Sorry to belabour the point but I want you to see how this really is subrpime all over again.

And like the original sub prime it means when one bank goes down it leaves all those to whom it owes money, with their own losses.

So now let’s move on from MF Global, because as some wag commented, you never find just one cockroach in a dirty kitchen. Which logic nearly killed a second brokerage, Jeffries. Its stock collapsed on the rumour that it too had bought up lots of European bonds. Jeffries had to take the amazing step of publishing every single position in bonds that it had. Only then did its stock recover.

Since then other banks have been less forthcoming about their exposure, namely Goldman Sachs and JP Morgan. Only they are not so much suspected of having lots of European bonds themselves as having perhaps provided the one part of the whole sub prime crisis we have not so far mentioned, CDS insurance. Goldman and JP Morgan are among the world’s largest derivatives traders. And they revealed that between them they have sold ‘protection’ on over $5 trillion globally. No one knows how much of this is on dodgy European debt and neither Goldman nor JP Morgan is saying.

In sub prime credit crunch 1 it was AIG that provided much of the short term funding and much of the CDS protection. This time who knows who are the main providers. But one thing you can be sure of, there will have been a great deal of it sold. Because it would have been sold using the same logic which inspired MF Global to buy the debt. The logic which said, these are countries too big to fail so in the end they will be bailed out even if democracy has to be  suspended to ensure it.  If you believed that logic then you wold have sold CDS protection and pocketed the premium.

So that, I believe is all aspects of sub prime accounted for. You can now see that while sovereign bonds and debts may be the fissile material the bomb itself and its explosive potential was constructed by the banks just as they did last time following the same blue-print and same greed.

And how soon might it go off. For that we end with UniCredit. Last quarter the trillion euro bank suddenly posted a ‘surprise’ 10.6 billion euro loss in just this last quarter! It’s bonds are now trading as junk while it faces having to raise another 51 billion euros to re-finance its debt in just the next year. That, to me spells BOOOOM! It is only the first. It certainly won’t be the last.  There will be others and they may be along fairly soon.

Why did UniCredit suddenly make such a loss? What was happening during the last quarter? Well Spanish and Italian bonds have lost a lot of value. what do you think, might UniCredit have been holding a lot of them? Surely not I hear you cry. Who would be so stupid. UniCredit blames the loss on its Kazakhstan and Ukraine units. What would those units have been doing to wrack up such monumental losses? UniCredit is now trying desperately to sell bits of itself.

The banks know what is going on. They each know the risks and losses they are hiding and know if they have them then so do the others. Exactly as in Credit crunch1 interbank lending is frozen with both libor  and repo markets in disarray.

I suggest these are the real reasons the banks are in an absolute panic and are shrieking about how the ECB MUST print and print now and why elections and  voting of any kind at all must NOT be allowed to upset the smooth imposition of the bank’s required plan. There is contagion but it is bank contagion, its sub prime greed and failure all over again.

Subscribe

Subscribe to posts by email

194 Responses to Buckle up – Credit Crunch 2

  1. Hawkeye November 17, 2011 at 5:55 pm #

    The slow motion train wreck is certainly picking up pace again. Thanks for an excellent summary, Golem, and for joining the dots so lucidly.

    There is one part of the MF story that would help expose the sheer corruption that is seemingly endemic in high finance:

    “They couldn’t come up with any more cash because they had none (they’d spent it all buying dodgy bonds) and couldn’t borrow any more because all they had were those bonds whose value was going down not up and a simply insane leverage which geared those losses up till they had the power to crush.”

    Well, it also appears that MF Global seems to have staved off some of the margin calls for a while by pledging its customers money in place of its own account funds (which presumably had run dry by this point!).Therefore a clear case of co-mingling accounts which is ILLEGAL at the best of times, let alone when their balance sheet is getting ripped apart:

    http://www.zerohedge.com/news/someone-going-jail-mf-global-caught-stealing-hundreds-millions-customers

    Gerald Celente for one is a bit miffed about this (scroll down for video):

    http://www.zerohedge.com/news/euro-gold-outperforming-bunds-and-euro-assets-celente%E2%80%99s-mf-global-gold-account-%E2%80%98looted%E2%80%99

    MF Global should forever be known as More-Fraud Global.

  2. mvsjcl November 17, 2011 at 6:14 pm #

    I think the aforementioned Mr. Celente had a different “MF” in mind.

  3. Neil (the original one) November 17, 2011 at 6:42 pm #

    Re Jeffries brokerage, there’s this from Zerohedge on their CEO, who sold 2 million shares in his company in September for $25 million dollars:

    http://www.zerohedge.com/news/it-time-jefferies-ceo-dick-handler-put-his-money-where-his-mouth-and-buy-jefferies-stock

    Dick Handler – you couldn’t make it up…

    • Golem XIV November 17, 2011 at 7:11 pm #

      Dick Handler!? You are kidding me.

      No wonder he turned into a banker if that’s what his parents gave him as a name.

  4. liberatetutame November 17, 2011 at 6:56 pm #

    Spot on Golem.

    The pain is currently being felt on the banks balance sheets. The ESFS/ECB could support the new issuance market for PIIGS debt for some time even with current limited resources. The only reason for any of the PIIGS to default will be if they do not comply with bail out terms and are refused access to ESFS/ECB funds. However the ESFS/ECB would need huge additional resources to support PIIGS sovereign debt prices across the secondary market. Until it can do so, PIIGS sovereign debt prices are likely to continue falling and the banks capital ratios will be eroded until one or more of them fails/is bailed out.

    If the ECB monetizes the debt it is the bankers who will benefit. The savers of the EZ will pay by having their euros devalued. The citizens of the PIIGS will have to suffer austerity anyway. The bankers are not the root cause of this crisis, but they have turned a problem into a crisis.

    Is it any wonder that Merkel/Schauble want to recoup what they can with a Tobin tax? Perhaps they have a point.

    • el gallinazo November 19, 2011 at 9:26 pm #

      “The bankers are not the root cause of this crisis, but they have turned a problem into a crisis.”

      Hmmm. Exactly who was willing to buy up all this sovereign debt at ridiculously low interest rates enticing the corrupt politicians to impoverish and indebt their citizens? Maybe it was Paul Krugman’s aliens. It’s just another version of the subprime mortgage / MBS heist by the bankers. In the case of Ireland, its had no problem with sovereign debt until its corrupt politician bought up all the bankers’ toxic waste.

  5. backwardsevolution November 17, 2011 at 7:54 pm #

    Golem – well said! Thank you for pinning it up on a wall so we may clearly see. Excellent explanation. These bankers are hustlers, skimmers, circus barkers. The whole FIRE industry needs to be put out.

    Charles Hugh Smith:

    http://www­.oftwomind­s.com/blog­nov11/coll­apse-of-co­rrupt11-11­.html

    “The Collapse of Our Corrupt, Predatory, Pathologic­al Financial System Is Necessary and Positive

    We are being throttled by the Big Lie: we’re told that if the predatory financial system implodes, we’ll all be ruined. The opposite is true: the only way to save our economy is to let the corrupt, pathologic­al and flawed financial system implode.

    I was recently challenged by a contributo­r to write something positive, and so I decided to write about the single most positive outcome of the current financial crisis in Europe: the complete collapse of the corrupt, predatory, pathologic­al global banking sector and its dealers, the central banks. Exploring why this is so reveals the insurmount­able internal conflicts in our current financial system, and also illuminate­s the systemic political propaganda which is deployed daily to prop up a parasitic, corrupting­, pathologic­ally destructiv­e financial system.

    Our first stop is modern finance itself. Modern financial “products” and “instrumen­ts” are often highly complex and abstract, but the entire edifice can be distilled down to this: the system is based on the assumption that all risk can be hedged, and the difference between the initial position’s yield/gain (i..e. placement of capital at risk for a gain) and the cost of hedging the risk of the wager to zero can be skimmed from the system risk-free.”

    • Patrick Donnelly November 18, 2011 at 7:03 am #

      YES!

      The disease is over, but the doctors can still kill the patient if they try to keep the FIRE going!

      Deflate and repudiate! Bankers do not exist in a vacuum. They need funds and bonds. Those who have made so much that they invest in risky bank lending deserve to lose what they put in!

  6. The Dork of Cork November 17, 2011 at 8:11 pm #

    Maybe The Guild has Lost Control.
    Maybe.

    The Spice Must Flow

    http://www.youtube.com/watch?v=dcgft-iiZ_s

  7. steviefinn November 17, 2011 at 8:40 pm #

    Someone who agrees with Mr. G, voting with his feet, powerful stuff.

    http://www.zerohedge.com/news/entire-system-has-been-utterly-destroyed-mf-global-collapse-presenting-first-mf-global-casualty

    • Neil (the original one) November 17, 2011 at 9:22 pm #

      Actually it’s *her* feet.

      That’s the delightful Ann Barnhardt, who thinks Obama is a Marxist, has burnt the Koran on YouTube and refers to Muslims as “Musloids”. She’s also stopped paying federal taxes: “I cannot give money to this government in good conscience any more than I could give money to the Third Reich in 1941. It is now to the point where supporting this government is very, very likely a mortal sin. God is first. God is first. God is first.” (November 4 blog entry).

      Although her comments about MF Global may be on the ball, she’s either lost it completely or may be facing arrest.

      You should have a look at her blog at http://barnhardt.biz/ , eg her entry for November 1. Most edifying.

      • richard in norway November 17, 2011 at 9:55 pm #

        Omg thanks for the link, we should really take any thing she says with a pinch of salt

        Psyko lady!!!

      • steviefinn November 17, 2011 at 10:12 pm #

        I’ll pass on that, surprised she isn’t a GOP candidate. Over the last couple of years I have found the truth coming from unexpected places & have had to throw a lot of my old certainties away. This present situation seems to make for strange bedfellows, but I am glad I can still learn & admit to f&*^ing up. One of the biggest problems it seems to me, is the people who have no doubts & wont change course no matter what the consequences, especially if they think they are bullet proof.

        • richard in norway November 17, 2011 at 11:07 pm #

          Well she doesn’t think she is bullet proof, just that she’s got more guns and ammo then her enemies.

        • Patrick Donnelly November 18, 2011 at 7:06 am #

          Right!

      • Charles Wheeler November 17, 2011 at 10:52 pm #

        Why are these person’s ravings of interest to ZeroHedge? She just seems to be firing off in all directions. In any case, don’t these fundamentalists look forward to End Times?

        • Neil (the original one) November 17, 2011 at 11:10 pm #

          Steviefinn: don’t worry, the post as it appeared on Zerohedge seemed quite rational and unexceptional – until you get to the very end, perhaps: “As for me, I can only echo the words of David: “This is the Lord’s doing; and it is wonderful in our eyes.”

          ZH did preface it by saying: “Presented without comment, merely to confirm that the market as we know it, no longer exists.”

          And near the end, Ms Barnhardt writes: “I will continue to blog at Barnhardt.biz, which will be subtly re-skinned soon, and will continue my cattle marketing consultation business.” ;-)

          As for strange bedfellows, how about the red-blooded capitalists who thought from the start that the banks should be allowed to fail like any other business? (Mind you, some of them probably wouldn’t back compensation for ordinary account-holders and think people who can’t afford to buy private healthcare should be allowed to die.)

          • Charles Wheeler November 18, 2011 at 1:37 pm #

            ” the post as it appeared on Zerohedge seemed quite rational and unexceptional “

            Well, to those who view Obama as a Marxist!

        • Patrick Donnelly November 18, 2011 at 7:14 am #

          AB is a new one on me, but she is calling it correctly, albeit 12 years too late! I presume she has made a fair bit in the meantime, so ignorance is bliss. Her analysis is spot on.

          All this was predicted by Bob Chapman and many others years ago. Being a psyko is no bar to earthly success, it seems! Those who just chug along, not realising they are part of an insane pretence, may find dealing with reality somewhat difficult, hence suicide rate increases.

          • neilcaff November 18, 2011 at 5:15 pm #

            That’s the problem with Zero Hedge. The raw data is top notch but the comment sections are full of absolute dickheads (I believe that’s the technical term) who seem to glory in the pain and suffering complete financial collapse brings about because it proves how much smarter they are than the common herd.

            It’s one of the reasons to be wary of those who make correct criticisms of the financial system from the right. Their criticisms may be empirically correct but their agenda is to replace the status quo with some thing even worse, i.e. even less regulation since it was “socialism” that caused the financial crisis!

          • Wirplit November 18, 2011 at 5:40 pm #

            In fact as Primo Levi pointed out about those peculiar individuals who actually thrived in the insane world of the concentration camps – it is a necessary condition to be insane to do well in an insane environment….

            …likewise in the semi criminal world of the bankers…

      • nominou November 22, 2011 at 6:12 pm #

        Jebus she’s a scary freak

  8. steviefinn November 17, 2011 at 8:42 pm #

    On the other hand, more of ” Nothing to see here folks”

    http://www.businessinsider.com/bullard-mf-global-krasting-2011-11

  9. Sean November 17, 2011 at 9:23 pm #

    I think you can see from the of the french banks exposure to Italian debt that the french state has been using the banks as a tool of foreign/EU policy. Its pretty well known that the passage from the French state buildings to a good job in a bank.

    In fact the Euro crisis proves that the whole things is a crisis of the political economy.

    So where were you all in 2004? No tents up then!

    http://www.independent.co.uk/news/business/bank-of-england-and-imf-on-a-collision-course-over-house-prices-6160936.html

    • Patrick Donnelly November 18, 2011 at 7:10 am #

      Planned for many years. Postponed and deepened by the 9/11 theatre and ZIRP!

  10. Chris L November 17, 2011 at 9:59 pm #

    Another excellent article David. It deserves a larger audience.

    While this is not the time to be smiling please have a look at this clip from Nigel Farage in the European parliament today it is priceless:

    http://www.zerohedge.com/news/watch-nigel-farage-dance-euros-grave

  11. Charles Wheeler November 17, 2011 at 10:43 pm #

    It’s always worth reiterating that Credit Crunch II is the natural consequence of Credit Crunch I.

    The revisionists like to pretend that there was something called the ‘banking crisis’ which was somehow resolved, then along came a ‘sovereign debt’ crisis caused by profligate governments and lazy, unionised public sector workers who began sucking the economic system dry causing Credit Crunch II as banks bailed out governments!

    Of course, the ‘sovereign debt’ crisis, which mysteriously hit all the governments of Europe and the US simultaneously because, as the story goes, they were all spending too much on pensions and healthcare, was simply the inevitable result of taking on the debt and toxic waste of the private sector. We’ve now found that nationalising the debt doesn’t seem to remove the problem – hence Credit Crunch II.

    But the crowning absurdity is that the idealogues (aka ‘technocrats’) that caused the crisis are now being appointed to govern the system.

    As Simon Johnson wrote back in 2009: “the finance industry has effectively captured our government . . . recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.” http://goo.gl/jKATn

    Since that article, the grip of the financiers on the global windpipe has tightened, while the populace (aside from a few tent dwellers) seems largely unconcerned about the incipient demise of democracy – as long as they can still vote for their X-Factor favourites.

    • nominou November 22, 2011 at 6:24 pm #

      “while the populace (aside from a few tent dwellers) seems largely unconcerned about the incipient demise of democracy – as long as they can still vote for their X-Factor favourites.” Well said

  12. Golem XIV November 17, 2011 at 11:11 pm #

    Spain goes to the polls tomorrow. If the markets get any feeling that the result calls into question the enforcement in austerity in Spain then there will be ructions.

    I really think the financial technocrats and bankers are loosing control and will do something amazing and terrible to regain control.

    MFGlobal feels to me like those PNB Paribas funds which collapsed in 07 and which everyone ignored. But they were the visible tip of a deeper shift and the wave that shift created, although unnoticed, was already travelling and when it reached another shore it rose up and knocked the shit out of a system which was unprepared.

    The bankers think they’re better prepared. I don’t think they are.

    • Patrick Donnelly November 18, 2011 at 7:40 am #

      Disagree. Even if they were to repudiate debt and I think they should, it was foist upon these countries, they still have to deal with the aftermath of the bubble collapse. More taxes and less spending is going to be imposed regardless of who imposes it. The problem is that the technocrats may corruptly borrow more than is needed and waste it ala NAMA, by interfering in a natural resolution of the bubble collapse.

  13. Hawkeye November 17, 2011 at 11:14 pm #

    Charles

    If any ignoramus still harps on about how the Gvt debt was caused by socialist profligacy just show them this chart:

    http://www.spectator.co.uk/article_images/articledir_10752/5376401/1_fullsize.jpg

    All G7 countries show a substantial uptick in Gvt debt to GDP in 2008-2009. For instance the UK went from a trend of under 30% in 2007 up to 60%+ in 2010.

    This was the Gvt sector “absorbing” the banking sector profligacy!

    According to Reinhart & Rogoff it’s how all financial crises work:

    Financial liberalisation > Asset speculation > Banking crisis > Currency crash > Rising inflation > Sovereign Default > High inflation / currency collapse

    • Hawkeye November 18, 2011 at 12:13 am #

      I’ve just had this mis-fortune to watch a pompous ignoramus peddle this line on Newsnight.

      If anyone can dig up a contact email address for Richard Sharp (ex Goldman Sachs) then please let me know.

      The man is a coward and a lying snivelling snake and he deserves the wrath of my typing!

  14. shiningrain November 17, 2011 at 11:34 pm #

    Thanks again for a superb article. Readers may find this post insightful and related -

    http://barnhardt.biz/

    • Neil (the original one) November 17, 2011 at 11:55 pm #

      Erm…. See above…

  15. steviefinn November 18, 2011 at 1:12 am #

    This is interesting, a scientific study which shows the capitalist network that rules the world. I have checked, this time the link doesn’t contain anything written by a fundamentalist looney toon. It’s not from Newscientologist it’s from Newscientist. It states that there are a core of 147 very inter connected companies who control 40% of the wealth. They give a list of the top 50, the usual suspects are included & coming in at No.1 is Barclays.

    http://www.newscientist.com/article/mg21228354.500-revealed–the-capitalist-network-that-runs-the-world.html

  16. Mike Hall November 18, 2011 at 1:27 am #

    Golem,

    Another great article!

    I haven’t seen the kind of stark tone in this piece from Prof Randall Wray much, if at all in his writings before. Things are looking very bleak.

    http://www.economonitor.com/lrwray/2011/11/16/euro-crisis-is-spreading-from-periphery-to-center-the-system-designed-to-fail-will-fail/

    I stiil believe an 11hr 59min intervention from the ECB is possible but I may yet be underestimating the ability of of Eurocrats’ stupidity & arrogance to overcome their avarice.

    Time to keep the food stocks up….be safe all.

    For a little good news, it seems there’s far more support for the basis of MMT & Functional Finance, lurking in all sorts of places beyond the main blogs.

    Found an excellent paper contextualising MMT among the post-Keynesian school strands. (Essentially, near universal agreement, with a few minor quibbles.)

    http://www.boeckler.de/pdf/v_2011_10_27_lavoie.pdf

    Also, a brilliant comment on the FT, reproduced here:

    http://neweconomicperspectives.blogspot.com/2011/11/what-eurozone-needs-is-functional.html

  17. allcoppedout November 18, 2011 at 2:05 am #

    Quite brilliantly written. I’m reminded of some of the computerised business games we use to show the consequences of various actions and how costs escalate. The old value chain stuff of needing to make money faster than you spend it, and cashflow before it went into hyperbolic ‘discounted’ mode. The idea was to always have as little inventory as possible and as little capital as possible attributed to the value chain (etc.) Stuff was being marked as sold as soon as it arrived on docks, not as it left actual shelves and so on. Thus the products (say trainers) would be in the accounts as sold at $120 a pair but actually worth only the $1 dollar paid to the sweat shop, less fire-sale discount. LA Gear went bust along these lines and I found colleagues using it as a ‘case of excellence’. The list would include Enron to Wickes (in the past).
    I can no longer read accounts – only teach what should be in them and how this is likely to be there to confuse.

    • Patrick Donnelly November 18, 2011 at 7:18 am #

      The pretence is of course necessary for the FIRE to survive and the actual borrowers all must be complicit else get off the roundabout!

      A lot of the capital that must be written off has been used to transfer much wealth to many people. These are the clever ones and they will try to keep it!

  18. Toby November 18, 2011 at 9:23 am #

    Excellent detective work, David.

    What I take from this is how similar the pattern is, as Hawkeye pointed out (citing Reinhart and Rogoff): “Financial liberalisation > Asset speculation > Banking crisis > Currency crash > Rising inflation > Sovereign Default > High inflation / currency collapse”. For me the question is why this essentially capitalist, free market process is leading only to worsening crises. Is this period of history an anomaly because people are greedier than ever before? Is our generation of bankers and financiers unusually risk prone? I doubt it very much. Crisis characterises this system. The difference today is that growth is not coming back.

    The world is changing fast beneath the financiers (by now well-known) shenanigans. There are many aspects to this change, but they all add up to No More Growth. Our money (and hence financial) system is backed by economic growth. Because of oil no longer being cheap and easy to extract; because of computerised automation; because, slowly, more and more people are no longer bewitched by the supposed Dream Life of endlessly growing consumption of Junk, of higher and higher salaries in an ever-accelerating rat race, the economy will no longer grow as it once did. Our system cannot deal with that challenge.

    As I understand it, our entire economic system is ‘designed’ to promote and profit from roughly 5% GDP growth annually. That rate of growth doubles the size of the economy every 14 years. As a comparison, imagine the planet’s population doubling every 14 years; that would be 14 billion humans by 2026. Obviously, this is not possible. We added a billion humans to the planet over the last twelve years; from 6 to 7 billion in 12 years is no where near 5% growth. I make that around 1.4% growth, and most of them are poor and staying that way. Without more people getting good jobs and buying more stuff, powered by cheap and easy energy, the growth we have been used to can’t happen.

    All the complexity of CDS, CDOs, repos, repos to maturity, whether what’s traded, borrowed, insured or leveraged is bonds or mortgages, in the end comes down to one simple process; making money from money, i.e., usury. Usury is, put crudely, money growing. If goods and services (not money) are not expanding to give ‘meaning’ to the expanding money supply, we have a problem. No complexity can mask this, hide from it, escape it. The money system, which is like a fire heating a vast pot of soup, is evaporating the soup because not enough water and other ingredients can be added. And we’re eating the soup too. And we ourselves are cooking in that same heat as those most deeply enmeshed in finance and banking scrabble to save themselves at all costs by doing the only thing they know. Ruthlessly ensuring their money grows, and grows, and grows.

  19. Hawkeye November 18, 2011 at 10:35 am #

    Toby

    “The difference today is that growth is not coming back.”

    Thank you for such a succinct and clear explanation. In studying this crisis for the last 3 years or so, the only credible explanation I have come across to answer “why are things so bad this time?” is that articulated by those who embrace the principles best exemplified by the school of Ecological Economics.

    In a way the 1972 “Limits to Growth” model is congruent with this approach, and their key chart is frighteningly accurate, so far:

    http://forensicstatistician.wordpress.com/2011/05/27/is-economics-a-real-science/

    “From a practical view, the model predicts world food per capita peaking in about 2010. Real world events are bearing this out. The model also predicts peak resource extraction (steepest decline of the blue line) between 2010 and 2020. Many in the “Peak Oil” community share this synopsis. Peak Industrial Output per capita, and Peak Services per Capita [i.e. real word economic production & welfare] are also predicted to be on the cusp of steep declines.”

    The divergence between ever expanding monetary claims and a real economic engine under stress is only likely to get wider and wider.

    The financial crisis is certainly our acute predicament and will in itself cause much injustice and suffering, but a chronic malaise of far greater impact awaits us in the longer term if we fail to confront nature’s “limits to growth”.

    • richard in norway November 18, 2011 at 2:08 pm #

      Peak oil arrived in 2004, I knew it had arrived when the politicos started to sound serious about global warming. But the production graphs show that 2004 was the peak year of course the iraq oil going offline had some say in that.

      • princesschipchops November 18, 2011 at 7:15 pm #

        It amazes me how little time the MSM gives to peak oil. I remember that in 2005/6 or so the IEA were still saying that conventional oil production wouldn’t peak until 2035 and that non conventional oil and other energy sources would easily make up the shortfall by then.

        Then last year the IEA releases a statement whereby they (the biggest peak oil deniers of them all) said conventional oil had peaked by 2006. That is huge news. But there wasn’t a murmur in the MSM. Some sites we are familiar with like Zero Hedge that talk about the financial crisis mentioned it in relation to the crisis and the worsening of it but that was it.

        The IEA also admitted that non conventional oil sources weren’t as abundant as previously thought. All of this, rising food and energy costs, slow admittance of peak oil by the PTB and increasing wars in the Middle East, as well as the way the financial crisis has played out so far, is scarily close to the scenario laid out in The Last Oil Shock.

        • richard in norway November 19, 2011 at 12:04 am #

          I was talking to someone in the states about this, he was making the point that peak oil has been known about for a long time and this crisis is being used to start shifting the population to a post oil standard of living without letting them become aware of the stupidity of our leaders in not making adequate preparations. I would add that the last thing TPTB want to admit is that the market really sucks and I mean really really sucks at providing solutions to long term problems

  20. Nell November 18, 2011 at 10:43 am #

    Thank you David for a very cogent summary of the current situation in the financial sector. Do you (or other commentors) think that the ECB will cave in and start up their program of ‘printing money’ which is being pressured from the US and the markets? If they do, will it stave off a second credit crunch?

    • Hawkeye November 18, 2011 at 11:27 am #

      Nell

      Given there is so much pressure being exerted on the ECB to print, by the financial mouthpiece then one should ascertain why.

      The Reinhart & Rogoff model of financial crises (referenced in a previous comment of mine & in Toby’s reply) can actually be distilled into three levels:

      - Banking crisis
      - Sovereign crisis
      - Currency crisis

      Each of these represents a repayment problem in a debtor / creditor relationship (usually when excess lending has taken place). The first layer (banking) is actually a private credit relationship between borrower and bank. The second layer is more socially dispersed and relates to a Gvt’s ability to repay debt through tribute extraction from all productive elements of an economy.

      When both of these “credit firewalls” are breached, then the only outlet for dispersing the cost of excessive credit extension is through the currency itself – known as monetising the debt.

      In other words, it is complete and utter socialisation of the debt (as money is just an IOU from the whole of society to the holder).

      The alternative, default, actually punishes the creditor class (uber wealthy). We have just been seduced into thinking that our interests are aligned with the creditor class, i.e. “default as financial armageddon”, and so monetising the debt is couched as being the safest outcome. It’s effects are more subtle to start with, but it is nothing less than financial repression (a non means-tested repression at that!).

      By refusing to support the monetisation, Germany actually seems willing to call their bluff.

      Perhaps Cameron has been sent to Berlin to test the water, and perhaps to ward them off (a la Chamberlain?).

      • Nell November 18, 2011 at 12:48 pm #

        Thanks Charles. Does monetizing the debt mean that the currency is devalued? And is monetizing debt the same as central banks increasing base money supply and/or pursuing a policy of quantitative easing? I have been reading, but as a novice I worry that I might understand the ‘dots’ but not the connections between the ‘dots’ and end up with an incorrect interpretation.

        • Nell November 18, 2011 at 12:54 pm #

          sorry – thanks Hawkeye!

        • Hawkeye November 18, 2011 at 1:13 pm #

          Nell

          No worries! I’ve tried looking for a nice chart, but can’t dig one up at the moment.

          If we take UK, then we have two main forms of money:

          M0 – Narrow money, or basically currency / tangible money (this has slowly been trending upwards for decades, but slowly) – this the true “socially underwritten” aspect of money
          M4 – Broad money, so this would include private credit creation by banks. This has rapidly been increasing in the last few decades, such that the ratio of M4 to M0 was up to 40 times the amount I believe

          Now, since the credit crunch, M4 growth has slowed down (maybe even declined at some points), and I suspect that through QE and other “monetisation” efforts M0 has picked up. Such that the ratio is probably closer to 20:1 and maybe even narrower now in 2011.

          At some point I will grapple with the ONS quagmire and dig up some stats to test whether this is happening. If the ratio is indeed reducing then the financial sector is de-leveraging, but by essentially “socialising” the losses by converting their excessive credit creation into narrow money.

          The large growth in M4 over the last few decades didn’t create consumer price inflation (just asset bubbles in stocks, house prices and Gvt bonds etc.), but if it gets converted to M0 it may well create real rising inflation for consumer essentials (food / fuel etc.).

          • Nell November 18, 2011 at 2:58 pm #

            thanks

          • Nell November 18, 2011 at 3:43 pm #

            Thanks also. I have read critiques of the quantity theory of money and the arguments make sense.
            Your link argues that increasing M0 is not leading to inflation, and that one of the reasons may be because M0 increases are not being transferred into the public circulation. And that the current increases are circulating around the financial sector or sitting in reserves. Another reason might be that the velocity of money has slowed down and there is evidence to support this viewpoint. And finally, our economy has spare capacity (millions of unemployed people). However, this picture may be reassuring as regards the argument that monetizing debt may not necessarily lead to hyperinflation – but it is not reassuring to small businesses who cannot get credit because banks aren’t moving money into the real economy, nor is reassuring to people who need work to provide for their families. A policy of monetizing debt provides continuing support to what I consider to be a corrupt financial sector.

            Basically, as a citizen I am more concerned about how ordinary people will fare, what kind of economy would protect their interests, and what do I need to understand to make informed decisions about economic matters. I am already an academic in one discipline so am very wary of the kind of mistaken assumptions that can arise when a person is standing outside a discipline. Although having said that economics as a discipline seems to be in deep trouble at the moment.
            http://www.nakedcapitalism.com/2011/11/philip-pilkington-debunking-economics-%E2%80%93-an-interview-with-steve-keen-%E2%80%93-part.html

  21. steviefinn November 18, 2011 at 10:44 am #

    Time bomb – 17.5 billion in Irish domestic mortgages at risk of default & it’s only likely to get worse.

    http://trueeconomics.blogspot.com/2011/11/16112011-irish-mortgages-crisis.html

  22. pilibi November 18, 2011 at 11:20 am #

    Mike Hall,

    are you advocating that the ECB should buy up all countries debts/bonds and that this action will solve the financial crisis? Is it already doing this – buying Greek, Portugese, Irish and Italian Bonds or is it prevented from doing so by various treaties?

    Can someone explain to me how that could possibly work?

    • richard in norway November 18, 2011 at 2:14 pm #

      I think that the point is not if monitising the debt will solve the problem, but what will the soulution look like. I not keen on this mmt stuff cos it seems to me it let’s the mother fcukers off the hook

      • Mike Hall November 18, 2011 at 2:54 pm #

        I’m not keen on letting the MFs off the hook either, but as regards the eurozone, they have us by the nuts already.

        MMT is a monetary/fiscal framework that puts citizens’ wellbeing first – ‘functional finance’ not lie of ‘sound finance’ (sound for the few, fcuk the rest).

        If we can get some democracy – which we need to do anyway, in whatever system, we need to revert banking to a ‘utility’. We could then also tax the sh1t out of the b@stards – really a redistribution of claims on real resources – & direct it toward creating the ecologically sustainable future we need.

    • Mike Hall November 18, 2011 at 2:45 pm #

      The problem is not really the levels of gov. debt (ratio to GDP) – many other countries, with similar or much higher ratios of debt (& similar recession conditions) are not facing even a hint of the imminent crisis of the eurozone states.

      The problem is interest rates on the debt – getting toward 3 times or more than those other countries. That’s enough, at this level of debt, to make it economically unsustainable – makes the downward spiral of ‘austerity’, in due course, terminal (like Greece).

      The difference is that eurozone countries are not +issuers+ of their own currency. The others are – & markets all know that their central banks can always cover (‘print’) any debt denominated in that currency. cf. the whole ‘debt ceiling’ farce in the US. US gov. borrowing rates actually +went down+ after S&P’s nonsensical (pure ‘politica’ – even S&P aren’t stupid) ‘downgrade’. Throughout the whole debacle, rates barely moved. (UK, Japan etc. – similar)

      The ECB has, very reluctantly, been buying countries’ bonds (Itlay, Spain, Portugal etc.), but only in ‘extremis’ & on the ‘secondary’ market & as a stop gap measure to prevent a ‘crazy’ (rather than plain unsustainable) level of interest rate, default & system ‘implosion’.

      The ECB was explicitly set up without this key ‘backstop’ function of other central banks. ‘Fiscal rectitude’ – or anally stupid in other words. In legal terms, the ECB has just one catch-all clause under which it has been buying bonds – ‘maintaining financial stability’, but the attitude of the ECB board members is very ‘German’. Any hint of the ‘big bazooka’ of a permanent & unlimited ECB ‘backstop’ & there’s real threat of legal challenge. (Note that the ECB would not likely have to actually ‘buy’ much – just the threat that it would, without limit, at a certain max interest rate would be sufficient to keep markets in check.)

      The bond buyers (‘markets’) are loving it. Making big returns and quite happy to take their ‘gambling’ to the brink. Pushing interest rates (for them) as high as possible to the point of ECB intervention, on the basis that, ultimately, the ECB will have only two choices. Implode the entire eurozone, or keep coming back as lender of last resort on the secondary markets.

      Let’s be clear, the financial sector remains every bit as wreckless, feral & greedy as it was 4 years in kicking off the whole crisis. I think they see it as win-win for themselves. Massive ongoing yields…. or if the whole thing crashes, it’s ‘firesale’ time – they’ll have plenty left to buy up every last bargain asset.

      Anyhow, in saying the ECB +could+ ‘monetize’ and buy every gov. debt, I’m making a point about the monetary system. Doing some, with a threat to do the lot would resolve the immediate crisis.

      But I think the ECB should debt-free finance a euro-wide minimum wage job guarantee to stimulate aggregate demand & restore growth & at least some short/medium term stability. This would give time to properly reconfigure the euro system, democratically – or decide to break it up in an orderly fashion.

      • Nell November 18, 2011 at 3:49 pm #

        This pretty much answers my question above. Thanks

      • Debra November 20, 2011 at 12:03 am #

        I agree with your analysis of ECB ideology, and its implications for Europe. The euro is a symptom of European political crisis : The ideal of Europe is no longer federating the countries that belong to the EU. The most recent European politics involve creating a union which economically apes the federated united states which are rather.. DISUNITED at this time, if I may say so.
        Perhaps this is the place to remind people that the Reformation (a revolution…) started out as a rather standard inquiry about FINANCES, and essentially what money could buy, and what it couldn’t.
        To me, OUR WESTERN CIVILIZATION is once again in crisis (in the midst of a revolution…), and over 500 years of thinking about science, politics, the relationship between money and work, are being challenged.
        This thinking needs to be challenged, indeed. It has brought us to the brink.

  23. Neil (the original one) November 18, 2011 at 11:42 am #

    Telegraph:

    “”Hungary is likely to be central Europe’s first casualty of the eurozone crisis,” says Reuters Breakingviews. “Growth is poor, debt is high, and a credit ratings downgrade to junk is likely. The risks of deleveraging by Western banks are large. Hungary needs IMF funds.”

    -and

    “German finance minister Schäuble predicts the end of the British pound

    That’s the top story from German newspaper Die Welt today. Wolfgang Schäuble tells the paper that the more successful the stabilisation of the eurozone is, the faster it will be that “others that are still outside the eurozone will see the benefits of this common currency.

    “It will still take a bit. But one day the whole of Europe will have a currency. It’s probably faster than many people believe today in the British Isles.”

    - and:

    “Germany has drawn up secret plans to prevent a British referendum on the overhaul of the European Union amid concerns it could derail the eurozone rescue package, leaked documents obtained by The Daily Telegraph disclose.

    The leaked memo, written by the German foreign office, discloses radical plans for an intrusive new European body that will be able to take over the economies of beleaguered eurozone countries.

    It discloses that the EU’s largest economy is also preparing for other European countries, which are too large to be bailed out, to default on their debts — effectively going bankrupt. It will prompt fears that German plans to deal with the eurozone crisis involve an erosion of national sovereignty that could pave the way for a European “super state” with its own tax and spending plans set in Brussels.”

    For an English translation of the leaked document, see: http://www.documentcloud.org/documents/267781-brusselsembed.html#document/p1 .

    See esp. p. 3, which talks about a European Stability Mechanism (ESM) developing into a European Monetary Fund (EMF) with “rights of intervention in the households [sic] of ESM programme countries.” (These Eurocrats do love their acronyms.)

    More votes for UKIP there…

    • Hawkeye November 18, 2011 at 12:25 pm #

      Neil,

      “It discloses that the EU’s largest economy is also preparing for other European countries, which are too large to be bailed out, to default on their debts — effectively going bankrupt. It will prompt fears that German plans to deal with the eurozone crisis involve an erosion of national sovereignty that could pave the way for a European super state”.

      Eh? I’m confused. Is the Telegraph saying that Sovereigns who default effectively LOSE their sovereignty? I was always presuming that (external) default helps to REGAIN sovereignty, as it is bailout & reforms implemented by external agencies such as the IMF that undermines national control of one’s sovereign finances.

      Or does it mean that the periphery countries can only be allowed to default (essentially stuffing US banks & the dollar paper tribute mechanism) if they then agree to come into the fold of a German protectorate? In other words, the US is playing the “divide and conquer” game with Europe, picking off weaker countries one at a time with it’s Hedge Fund & Rating Agency tag team assualts. Therefore Germany’s push for more European centralisation (e.g. fiscal unity & the “super state”) is actually their best hope for being able to stave off these assualts and untimately to square up to US dollar hegemony.

      Therefore, the PIIGS are actually just pawns stuck in the middle between a US v. Germany scrap for who leads the European economic protectorate zone. It’s just that Germany’s (Governmental) Fiscal Unity play is so much more overt & obvious than the US’s covert (Free Market) financial tag team play.

      • Neil (the original one) November 18, 2011 at 12:46 pm #

        It looks like the second option you outline.

        Financially virtuous Germany (the German for debt, Schuld, also means “sin”) wants to punish the PIIGS by forcing them to default AND lose their sovereignty, by submitting them, like naughty children, to Brussels/Berlin-style financial Gauleitership. Those sinful PIIGS must be made to pay for the error of their ways: no moral hazard will be tolerated.

        PS Telegraph latest:

        “Leading German newsmagazine Der Spiegel is cranking up the pressure, publishing a story on its website branding Britain a “diseased empire”, battling with high levels of youth unemployment.

        Der Spiegel says many problems in the UK are “home made”, with a situation that “is now even more dramatic than on parts of the continent” with bad news published daily by the Government. Chancellor George Osborne’s plan to cut the deficit to zero by 2015 is “utopian”, the magazine says, and therefore “obsolete”. “

  24. Neil (the original one) November 18, 2011 at 1:16 pm #

    “the German for debt, Schuld, also means “sin””

    Mind you, this can be traced back to the Aramaic of the Bible: the word translated as “trespasses” in the Lord’s Prayer could also be rendered as “debts”.

    And isn’t Jesus the “Redeemer” of our sins/debts? Think too of the parable of the talents (coins), Matthew 25:

    “24Then he which had received the one talent came and said, Lord, I knew thee that thou art an hard man, reaping where thou hast not sown, and gathering where thou hast not strawed:

    25And I was afraid, and went and hid thy talent in the earth: lo, there thou hast that is thine.

    26His lord answered and said unto him, Thou wicked and slothful servant, thou knewest that I reap where I sowed not, and gather where I have not strawed:

    27Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury.

    28Take therefore the talent from him, and give it unto him which hath ten talents.

    29For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath.

    30And cast ye the unprofitable servant into outer darkness: there shall be weeping and gnashing of teeth.”

    PS No, I’m not doing an Ann Barnhardt…

    • richard in norway November 18, 2011 at 2:20 pm #

      Only because you ain’t got her weapons systems. With enough guns and ammo…………

  25. steviefinn November 18, 2011 at 2:24 pm #

    Billionaire mayor Bloomberg enforces health & safety legislation to presumably, protect the people in Zucotti sq. Sends in NYPD who use pepper spray & thuggery to apply the aforementioned legislation, I suppose it’s all part of ” to serve & protect ” the 1% obviously. It’s great to see that it seems to have failed miserably.

    http://occupywallst.org/article/november-17-historic-day-action-99/

    Meanwhile the userers in St. Pauls have issued eviction notices & protesters are squatting in UBS.

  26. Syzygy November 18, 2011 at 2:27 pm #

    Bill Mitchell quote from a few days ago:

    ‘I had a very interesting lunch yesterday at the Monash University European Centre. I am soon to join the centre as a member. More details later. The discussion included the demise of democracy in Europe.

    One strand was how the Germans “lost the War” but then worked out how to “win” it back by using economic rather than military weapons. The EMU is their “economic” war on the rest of Europe.’

    http://bilbo.economicoutlook.net/blog/?p=16935

    Something similar was said by a Goldman Sach’s man on the radio. He ‘joked’ that it was almost as if there was an underground secret German department orchestrating the EU crisis in order to achieve the desired outcome of fiscal and political integration …

    Thank you David Malone for making sense of the system and why Michael Hudson said in the beginning of September:

    Treasury Secretary Geithner is reported to be pressuring the Europeans to bail out the banks because Goldman Sachs and others American banks have gambled that Greece and other countries can pay, and written default insurance. It seems that if these U.S. banks lose the bets that they’ve made, they’ll go under and Washington will have to bail them out. So Mr. Geithner is telling Europeans to sacrifice their economies so that U.S. financial casino gamblers won’t take a loss. This did not go over very well in Europe.

    http://www.nakedcapitalism.com/2011/09/michael-hudson-debt-deflation-in-america.html

  27. Syzygy November 18, 2011 at 2:44 pm #

    Hawkeye Re Limits to growth. I totally agree with you.

    Banker’s cynical gambling, and governments using ‘disasters’ to push through their agendas are relatively easy to deal with given the political will, but the environmental carrying capacity in terms of water, food and temperature control are not so amenable to solve. For me, the most frightening aspect of neoliberal capitalism (really it is plutonomy or neo-feudalism) is the complete absence of understanding of science or the natural world. It is not only workers who are exploited. The contradictions of capitalism apply as much to the unsustainable depletion of resources and unregulated pollution …

    Exxons 8 billion assault on climate science seems to have been very effective and persuasive .. but it won’t stop the devastating impacts of climate change and overwhelming oil dependency, anymore than King Canute’s commands.

    • richard in norway November 18, 2011 at 6:49 pm #

      Hi sue

      Nice to see you, where are you hanging out these days

      • Syzygy November 19, 2011 at 2:53 am #

        Lovely to see you too .. one of those smiley things!

        I’m with Pam, Mr K and Julian at think-left.org … there’s a facebook link on the site ‘about’ page … know they’d be delighted to ‘see’ you. Have you ‘seen’ Hooded anywhere? He has disappeared as well.

        BTW I still agree with you … and interesting your informed gossip re: peak oil. Hope all’s well with you and your little ones.

  28. Charles Wheeler November 18, 2011 at 2:45 pm #

    Those that can’t appease ‘the market’ will be ‘technocratised’ (new word):
    http://goo.gl/7LUEB

    Essentially, the finance sector has effectively bought up the political system and now intends to cut out the middle man.

    As David has argued: if, at a time of military insecurity, the generals take over government, this is labelled a military ‘coup d’etat’.

    Similarly, if, at a time of economic insecurity, elected politicians are replaced by ‘technocrats’ – i.e. bankers – this represents an economic ‘coup d’etat’.

    In effect, all the nations of Europe are on notice that they retain their democracy at the discretion of high finance. Should ‘the markets’ take aim and destabilise their economy, the ‘technocrats’ step in. Of course, ‘the markets’ – led by Goldman/JPM/Citi/etc., are the technocrats!

  29. Charles Wheeler November 18, 2011 at 2:46 pm #

    In The Great Transformation Karl Polanyi describes how the desperate desire to cling to an outdated economic orthodoxy set the scene for economic collapse in the 1930s:

    ”Vienna became the Mecca of liberal economists on account of a brilliantly successful operation on Austria’s krone which the patient, unfortunately, did not survive.”

    ”Nations found themselves separated from their neighbours, as by a chasm, while at the same time the various strata of the population were affected in entirely different and often opposite ways. The intellectual middle class was literally pauperized; financial sharks heaped up revolting fortunes. A factor of incalculable integrating and disintegrating force had entered the scene. ‘Flight of capital’ was a novum . . . currency had become the pivot of national politics . . . recognition [grew] that the foundations of currency might depend on political factors outside the national boundaries . . . the naïve concept of financial sovereignty in an interdependent economy [was shattered] . . .

    Belief in the gold standard was the faith of the age . . . the essentiality of the gold standard to the functioning of the international economic system was the one and only tenet common to men of all nations and all classes . . . it was the invisible reality to which the will to live could cling, when mankind braced itself to the task of restoring its crumbling existence.

    The effort, which failed, was the most comprehensive the world had ever seen.

    For over a decade the restoration of the gold standard had been the symbol of world solidarity . . . the frantic efforts to protect the external value of the currency as a medium of foreign trade drove the peoples, against their will, into an autarchized economy.”

    The snapping of the gold thread was the signal for a world revolution.”

    This leads up to our thesis . . .: that, the origins of the cataclysm lay in the Utopian endeavour of economic liberalism to set up a self-regulating market system.

  30. Neil (the original one) November 18, 2011 at 3:02 pm #

    Torygraph:

    “We have more on the overnight occupation of an empty UBS office in London, which has been labelled a “public repossession” by anti-fiscal consolidation protesters.

    The office block becomes their third location in London, after St Paul’s Cathedral and Finsbury Square. But unlike the first two this is apparently not a residential occupation and protesters are planning to use it instead as a “Bank of Ideas” which will be open to the public from tomorrow.

    Occupy London supporter Jack Holburn said:

    “Whilst over 9,000 families were kicked out of their homes in the last three months for failing to keep up mortgage payments – mostly due to the recession caused by the banks – UBS and others financial giants are sitting on massive abandoned properties.

    “As banks repossess families’ homes, empty bank property needs to be repossessed by the public. Yesterday we learned that the Government has failed to create public value out of banking failure. We can do better. We hope this is the first in a wave of ‘public repossessions’ of property belonging to the companies that crashed the global economy.”

    The protesters have arranged a series of events in the office tomorrow, including talks from Palestinian activists, comedy from Josie Long and a session led by “trader” Alessio Rastani.”

    Anti-fiscal-consolidation? Surely not the term used by the protesters.

    • Hawkeye November 18, 2011 at 3:22 pm #

      “A bank of ideas”

      The protesters are showing themselves as learning and adapting, constantly one step ahead of the lumbering Corporatocracy.

      In fact, the ultimate irony is that the Occupy movement is a sort of “free market” of ideas, forms and methods that is showing itself as far more nimble than the Statist operations of Government, the Police, and the Banks themselves!

      :-)

      • Neil (the original one) November 18, 2011 at 4:29 pm #

        Telegraph:

        “The occupation of the UBS office in London already has a website: http://www.bankofideas.org.uk. Looking at the registration details we can see that it was purchased yesterday – just ahead of the overnight occupation – by a Daisy Golding.”

  31. James November 18, 2011 at 3:15 pm #

    Brilliant article, the madness of this situation reminds me a little of catch 22. We’re all part
    of this insane monetary system, predicated on lies. Although its had so little press coverage the #ows occupywallst movement had a large protest last night. Will an Arab spring, end with an American winter?

  32. keekster November 18, 2011 at 3:57 pm #

    Hawkeye November 18, 2011 at 10:35 am
    Great to see a reference to Limits of Growth. I recommend Richard Heinberg’s recent book The End of Growth, which updates this to reflect the latest position. I am utterly convinced that we are reaching that point. The banking system needs debt to grow exponentially to avoid collapse, which of course ignores the finite nature of earth’s resources. This is why I think collapse is inevitable. Capitalism itself (and conventional economic thinking), always assumes the world is limitless. I cannot see how businesses can continue to improve productivity (and therefore increase income inequality), and continue to make a profit as key resources, particularly oil, begin to peak and reduce: in terms of reducing supplies forcing up prices. A crunch between these contradictions will happen. The future will mean we have to get by on less overall. We will have to rely on less efficient energy sources, so products will have to be closer to markets. It will represent the end of globalisation and a move to localism and self sufficiency. I don’t believe there will be a new magic energy source in time to prevent a radical shift or transition to a no growth future. Corporate business will not be able to make such big profits in a world of less energy. Division of labour will regress back to the way it was in the past when energy was more expensive. Could it be that labour becomes cheaper than energy once again? Its possible. I don’t believe that trends over the last 100 years should necessarily determine the next 100. Hopefully, this change may force us to become more sustainable, in an environmental sense.

  33. Ken November 18, 2011 at 4:54 pm #

    Another great post. Could the US be pulling strings here to see the Euro break up? Did attempts by oil producers to trade oil in Euros freaked them out that much? Is it payback for France not accepting US GM modified corn?

    (Wikileaks – In a leaked cable from 2007, Craig Stapleton, who was the U.S. ambassador to France at the time, comments on France’s decision to ban cultivation of genetically modified (GM) corn:

    “Europe is moving backwards not forwards on this issue with France playing a leading role, along with Austria, Italy and even the [European] Commission… Moving to retaliation will make clear that the current path has real costs to EU interests and could help strengthen European pro-biotech voice.

    … Country team Paris recommends that we calibrate a target retaliation list that causes some pain across the EU since this is a collective responsibility, but that also focuses in part on the worst culprits.

    The list should be measured rather than vicious and must be sustainable over the long term, since we should not expect an early victory.”).

    • Neil (the original one) November 18, 2011 at 5:18 pm #

      To rephrase Clausewitz, geopolitics is the continuation of war by other means.

      • Neil (the original one) November 18, 2011 at 6:00 pm #

        And politics is (or has become) the continuation of class war by other means.

        To shift topic (or perhaps not): In the United States last year, 40 percent of corporate profits were made by the banking sector.

        From the Michael Hudson interview quoted above, which is long but well worth reading. http://www.nakedcapitalism.com/2011/09/michael-hudson-debt-deflation-in-america.html

        • Wirplit November 18, 2011 at 6:15 pm #

          and apparently the US banks made more profit in the two and a half years of Obama than in the eight years under Bush!

          • richard in norway November 18, 2011 at 6:47 pm #

            But most of that was accounting tricks, I was going to say fraud but its legal. The banks themselves are being hollowed out

    • Charles Wheeler November 18, 2011 at 8:48 pm #

      “Could the US be pulling strings here to see the Euro break up?”

      Given that Goldman Sachs now seem to be calling the shots in Europe (http://goo.gl/7LUEB) the survival of the Euro might not be such a priority?

  34. Neil (the original one) November 18, 2011 at 6:06 pm #

    Telegraph again (though I heard about this last night – Channel 4 News?):

    “The fact that details of the Irish budget – notably a planned VAT hike from 21pc to 23pc – were given to the Bundestag before being revealed in Ireland is “regrettable”, says an EC spokesman:

    “We understand that the Irish authorities are upset, any leak of confidential information is regrettable. We share the relevant, necessary information with ministries of finance, what happens next is the sole responsibility of the ministries.”

  35. Wirplit November 18, 2011 at 6:13 pm #

    Thanks Golem for brilliantly making clear what Repo to maturity actually meant. I brought it up back in a comment in mid November from a guest post on ZH about the MF scam

    …but its often so obscurely explained by the insiders who understand it all one easily gets befuddled, It takes someone with your explanatory skill to make it more comprehensible. I could not quite grasp why it could count as a sale when it was actually a form of loan… so thanks

    As the original poster said from inside of the industry

    ” Somewhere in that mathematical pursuit of maximum fractions, the very goal of finance changed, as if traditional banking was no longer sufficient to support the pursuit’s ever-growing ambitions. So the financial economy has broken away from the real economy…”

    and they are using financial complexity as the smoke and mirrors to hide the essential fraud…

    So lets keep on winkling it out. Its like daylight on a vampire!
    .

    • Charles Wheeler November 18, 2011 at 10:08 pm #

      I suppose the analogy would be a pawn shop. Put up the gold-plated watch for surety, claiming it’s 24 carat (AAA). The question is why this was routinely taken at face value?

      In the case of Lehman, we’re told:
      ————————————————–
      “The report claims that senior executives in Lehman, along with the firm’s accountants at Ernst & Young, were aware of the moves. It also claims former CEO Richard S. Fulds certified the accounts, characterizing his involvement as “at least grossly negligent.”

      Fulds’ attorney, Patricia Hynes, told the New York Times via e-mail that the former chief executive “did not know what those transactions were — he didn’t structure or negotiate them, nor was he aware of their accounting treatment.”

      A spokesman for Ernst & Young told the Times that the firm’s last audit of Lehman came at in November 2007 and the financial statements “were fairly presented in accordance with Generally Accepted Accounting Principles (GAAP).”

      The report indicates that some executives in Lehman either had misgivings about the aggressive use of repurchases or acknowledged them as misleading.

      One e-mail exchange between Lehman executives sheds light on the practice:

      Executive A: “It’s basically window-dressing.”

      Executive B: “I see … so it’s legally do-able but doesn’t look good when we actually do it? Does the rest of the street do it? Also is that why we have so much BS [balance sheet] to Rates Europe?”

      Executive C: “Yes, No and yes. :)”

      Though it offers no opinion on whether Lehman’s actions were criminal, the report does say there is evidence for possible civil lawsuits.”
      http://www.cbsnews.com/8301-503983_162-20000341-503983.html
      —————————————————————–
      !

  36. Wirplit November 18, 2011 at 6:23 pm #

    sorry 3rd November I meant

  37. havantacluOTMP November 18, 2011 at 6:30 pm #

    I think this is probably correct – remember ‘Atlantic Bridge’.

    All facilitated by the present British Government – but HMOpposition would probably do the same

  38. pilibi November 18, 2011 at 7:25 pm #

    Thank you Mike,

    “The ECB has, very reluctantly, been buying countries’ bonds (Itlay, Spain, Portugal etc.), but only in ‘extremis’ & on the ‘secondary’ market & as a stop gap measure to prevent a ‘crazy’ (rather than plain unsustainable) level of interest rate, default & system ‘implosion’.

    The ECB was explicitly set up without this key ‘backstop’ function of other central banks. ‘Fiscal rectitude’ – or anally stupid in other words. In legal terms, the ECB has just one catch-all clause under which it has been buying bonds – ‘maintaining financial stability’, but the attitude of the ECB board members is very ‘German’. Any hint of the ‘big bazooka’ of a permanent & unlimited ECB ‘backstop’ & there’s real threat of legal challenge. (Note that the ECB would not likely have to actually ‘buy’ much – just the threat that it would, without limit, at a certain max interest rate would be sufficient to keep markets in check.)”

    If the ECB is acting as lender of last resort on the secondary markets by buying up all sovereign bonds? Are banks buying sovereign bonds on the ‘primary’ markets and selling them to the ECB. If so, this does not appear to have calmed the bond market.

    How would making this more explicit cause interest rates on bonds to moderate and make the sovereign debt levels sustainable? Will such an action not encourage bond speculators/banks to demand even higher yields knowing the ECB is ‘backstopping’ all transactions. Is the ECB allowed to buy bonds in the primary markets at the lower sustainable rate of 3% you mention?

    Sorry if this is hopelessly confused or is there something fundamental that I have missed.

  39. Mike Hall November 18, 2011 at 9:41 pm #

    ECB 2ndry market buying hasn’t really calmed things because there’s great uncertainty how far they will go. Italy has ~ €300B to roll ober in next 12mths alone…then there’s Spain, & others are creeping up, Belgium, France etc.

    It’s brinkmanship & a love of gambling. Pretty obvious there’s an ECB trigger point around 7% at the moment. It’s a basic gamble against the EMU authorities letting the whole plot go, if not they’re making 3x plus the yield vs German bonds. Are these buyers doing the repo leverage shuffle? Quite possibly….if you’re betting against collapse, why not go all out & ensure nothing can survive an EMU break up eh? You can be sure the sociopaths doing this are shifting their own bonus cash out of harms way.

    You are correct to say that the ECB ‘dithering’ is actually encouraging higher rates gamblers.

    Can’t recall who it was, Charles Hugh Smith mbe? Said that the bond market is a nicely liquid holding account for high rollers playing other markets – somewhere to park money, make a few bob in between equity/options/commodities etc trades. The rich have piled up so much money over the last 30yrs there’s a shortage of places to invest it. Plenty of willing buyers at even low rates for a quick (or slow) dip in & out. All stacks up to me.

    If the ECB made it known they would always buy at x%, they would effectively set a ceiling at that rate. Private buyers would snap up all the bonds at x- 0.1%.

  40. John Souter November 18, 2011 at 9:48 pm #

    We can huff and puff all we like – facts are the markets are winning by pushing up the costs (usury) attached to borrowing.

    Austerity Osborne must be desperately practising bowel control exercises in preparation for when the financial carousel comes round re-evaluating the UK credit rating.

    Perhaps this is the reasoning behind the moves to entice UK pension and insurance funds to invest more in -off the books – UK capital investment projects.

    • richard in norway November 18, 2011 at 11:54 pm #

      No it is preparations for bailing out the pension funds without the public becoming aware that private pensions are risky, at least that’s what I think

  41. Roger Glyndwr Lewis November 18, 2011 at 10:09 pm #

    A great Article and such informative comments as usual. I keep checking the BBC to see if Poland has been invaded yet? Cameron Returning from Berlin brandishing a piece of paper
    claiming peace in our time. Fascism returns home to Italy The world has gone completely Balmy. What could possibly go wrong?
    Iḿ going to take Mikes advice and stock up with Food, could be a long winter ahead.

  42. YesMaybe November 19, 2011 at 3:48 am #

    Excellent article! I consider myself reasonably informed about the general topic, but I learned a lot from it and it was so well-written. Thank you!

  43. Neil (the original one) November 19, 2011 at 9:57 am #

    Back to MF Global and Jefferies, as mentioned by Golem in his original post:

    The Final Straw? Jefferies And Six Other Banks Sued For “Fraudulent” MF Global Bond Issuance

    http://www.zerohedge.com/news/final-straw-jefferies-and-six-other-banks-sued-fraudulent-mf-global-bond-issuance

  44. richard in norway November 19, 2011 at 2:52 pm #

    The MF global story gets weirder, below is a quote from an investment offering from them, I wonder what folk here think about it, the quote is lifted from Zhedge

    ” In addition, the interest rate applicable to the notes will be subject to an increase of 1.00% upon the departure of Mr. Corzine as our full time chief executive officer due to his appointment to a federal position by the President of the United States and confirmation of that appointment by the United States Senate prior to July 1, 2013, as described further under the heading “Description of Notes—Interest Rate Adjustments—Key Man Event.””

    That this man was possibly being considered for treasury secretary is disturbing but this seems to suggest that the firm would benefit from his position in govt and that investors were being invited to participate in ……….fraud? Insider dealing? Embezzlement? This just seems so blatant to me but perhaps I don’t understand right

  45. steviefinn November 19, 2011 at 2:52 pm #

    Zapatero might well be glad he’s out of it.

    http://globaleconomicanalysis.blogspot.com/2011/11/spanish-banks-stuck-with-unsellable.html

    For those of you who are losing their democracy & control of their countries fiscal policies, never mind, Brussels has only got your best interests at heart. Here’s one good example – The EU is willing to spend time & millions in order to protect you from dastardly people who make ridiculous claims that drinking water prevents dehydration.

    http://www.telegraph.co.uk/news/worldnews/europe/eu/8897662/EU-bans-claim-that-water-can-prevent-dehydration.html

    Surely even if ” Der Frankfurter Gruppe ” gets what it wants it will only result in the building of huge resentment in what would effectively be vassal or 2nd class states, which will eventually gain an outlet in extreme politics fuelled by nationalism. The club med countries all have the history & the potential. Somebody with the necessary charisma is bound to eventually take advantage of the situation by manipulating the mob in time honoured fashion, in an effort to sieze power.

    My paronoia ?:- Eugendfor being the seeds of what would be needed to maintain control.

    • Neil (the original one) November 19, 2011 at 3:35 pm #

      Re the Brussels ban on claims that water prevents dehydration.

      The bottled-water companies who make such claims are out to sell as much of their product as possible, which is why they try and link it to health. But implying that dehydration is a significant health problem (especially in this country), and that their product will help keep you healthy is complete b*ll*cks.

      What is certain is that bottled water has very significant environmental costs: the energy required to make the plastic or glass bottle (which itself requires far more water than goes into the bottle), transport it and then (if you’re lucky) recycle the container. It comes to as much as 2000 times the energy cost of tap water, according to a scientific report:

      “Given an annual consumption of 33 billion liters of bottled water in the US, we
      estimate that the annual consumption of bottled water in the
      US in 2007 required an energy input equivalent to between 32
      and 54 million barrels of oil or a third of a per cent of total US
      primary energy consumption. We estimate that roughly three
      times this amount was required to satisfy global bottled water
      demand. (http://iopscience.iop.org/1748-9326/4/1/014009/pdf/erl9_1_014009.pdf). See also http://www.commondreams.org/views07/0218-05.htm .

      Bottled water is one of the biggest consumer cons ever.

      • steviefinn November 19, 2011 at 4:05 pm #

        Unlike fluoride ?

        • steviefinn November 19, 2011 at 7:58 pm #

          Lot’s of research into bottled water I see, I wonder if the same effort has been put into sports drinks, these drinks claim to re-hydrate. GlaxoSmithKline must be very pleased with the announcement that water doesn’t rehydrate, perhaps looking forward to improved sales of aspartame filled lucozade.

          As for the bottles, if there was no bottled water, wouldn’t people just buy other bottled drinks instead.

          My point is the EU wastes money & time on bottled water & then issues a ridiculous statement which could only benefit the sales of a giant corporation spewing out chemical filled crap.

          • Neil (the original one) November 19, 2011 at 8:32 pm #

            Interestingly, there’s a whole article on the media treatment of the EU ruling: http://www.guardian.co.uk/science/the-lay-scientist/2011/nov/18/1?newsfeed=true .

          • steviefinn November 20, 2011 at 1:14 pm #

            The article doesn’t discuss the alternatives to water, all the crap that contains aspartame therefore methanol. It’s kind of like picking on marijuana but ignoring the risks of heroin. The FDA in the US refused for 8 yrs to approve the chemical, Reagan a friend of G D Searle who developed nutrasweet sacked the then FDA commissioner, appointed AH Hayes who because of strong opposition was forced to set up a board of enquiry which he then overuled. Shortly after he went to work for G D Searle. ( Kind of like rating agencies in the banking world ) Shortly after Monsanto took over the company which at the time employed Donald Rumsfeld

            http://www.relfe.com/aspartame_92.html

            http://en.wikipedia.org/wiki/G._D._Searle_%26_Company

            I will shut up about it now, but why should we trust the EU, they have proved that they will put the big boys 1st in banking, so I would assume the same goes for giant corporations in food production.

          • Neil (the original one) November 20, 2011 at 2:01 pm #

            Steviefinn:

            The claim on which the EU ruled was made by “German professors Dr Andreas Hahn and Dr Moritz Hagenmeyer, who advise food manufacturers on how to advertise their products” (Telegraph).

            Who do you think produces the bottled water, if not the same companies who produce junk soft drinks with chemicals and water, or add water and sugar or sweeteners to fruit juice and then sell it at a premium?

            The EU is re-examining aspartame, btw: http://www.euractiv.com/cap/eu-food-safety-agency-test-aspartame-news-505236

            Important as this is as another case of corporate misdeeds, however, it’s a distraction from the main issues.

          • steviefinn November 20, 2011 at 3:28 pm #

            http://www.britishbottledwater.org/whoweare.html

            http://www.beveragecouncilofireland.ie/page.php?a=7&b=12

            Don’t see many major corporations listed here.

            I thought the main issue was how the few were subjugating the many, you decided to comment on my post, I responded. If I have upset any blog policemen, I apologise.

      • Neil (the original one) November 20, 2011 at 5:07 pm #

        You want major corporations?

        An article in the Ecologist refers to “The Natural Hydration [sic] Council, founded in 2008 to defend the interests of leading names in the UK bottled water industry – Danone, Nestlé and Highland Spring*”

        http://www.theecologist.org/how_to_make_a_difference/schools/361720/banning_bottled_water_in_universities.html

        Highland Spring, which is the UK’s leading brand and bottles for Tesco, Sainsbury’s and the Co-op, is owned by billionaire UAE businessman Mahdi Al Tajir (http://en.wikipedia.org/wiki/Highland_Spring ).

        PR blurb from the NHC site:

        “The Natural Hydration Council is an industry organisation dedicated to researching the science and communicating the facts about natural bottled water.

        The objectives of the Council are to research and promote the health, environmental and other sustainable benefits of natural bottled water in order to help consumers make informed choices about natural bottled water and hydration in their diet.

        The Council is a not for profit company, governed by a Council and guided by a scientific advisory panel to authorise and validate academic research and studies.”
        http://www.naturalhydrationcouncil.org.uk/

        Yeah, right…

        “The eight NHC member companies have united to help people make more healthy choices about what they drink. Between them, they own the following 21 brands (listed alphabetically below) and together constitute approximately 56.3% of the total UK package water market (exc coolers)”

        http://www.naturalhydrationcouncil.org.uk/Page/MemberBrands1

        But Stevie, there’s no need to apologise and you mustn’t take my comments on your posts on this issue personally. Can we move on?

  46. richard in norway November 19, 2011 at 3:51 pm #

    This is an interesting interview with prof black, nothing we don’t already know but well presented

    http://www.mmnews.de/index.php/english-news/5378-the-great-global-bank-robbery-part-1

    Can’t wait for part 2

  47. Neil (the original one) November 19, 2011 at 5:28 pm #

    On the Obama/Corzine connection, see: http://www.huffingtonpost.com/2011/11/02/barack-obamas-top-wall-st-fundraiser-under-investigation_n_1072199.html .

    Apparently Corzine was close to becoming Treasury Secretary.

    And on the Obama/Wall Street connection:

    “The CEO of commercial bank JP Morgan Chase is Jamie Dimon, a huge Democratic donor and fundraiser. Investment bank Goldman Sachs CEO Lloyd Blankfein, another active Democrat, led his firm’s employees as they contributed almost $1,000,000 to President Obama’s 2008 campaign. More than 70 percent of the 2008 presidential contributions of Wall Street employees went to Barack Obama.”

  48. Roger Glyndwr Lewis November 19, 2011 at 5:33 pm #

    HAd a problem making this post don’t know if its linux or something else when I started Reading Golem the site used to cause all sorts of problems with my mac freezes and all sorts of un mac like happenings? anyone else had a problem?

    http://letthemconfectsweeterlies.blogspot.com/2011/11/secrets-of-oz-history-repeating-itself.html

  49. Wirplit November 20, 2011 at 11:41 am #

    Went on down to the newly occupied Bank of Ideas in Sun Street in the City close by the Finsbury Square occupation on Saturday. Its quite impressive and they are getting it up and running really fast. Police vans parked outside and a ferment of activity within.
    Its not that the Tent City University was not good but this space is better suited to active debate.
    A whole building! Might end up like the Sorbonne in ’68!
    I really hope you are there soon David.
    Nicholas Shaxon writer of “Treasure Islands” on offshore tax havens arrived in the evening and talked on tax as a commodity and the race to the bottom. A young Jersey MP( Deputy) Monty (Monfort) Tadier was with him giving an idea of what it is like to live in a tax haven for the ordinary( non financial) people themselves and how hard it is to speak out against the system when so many vested interests are profiting.
    Meanwhile a cinema was up and running showing “Inside Job”.

    Its right opposite the gleaming new UBS bank HQ so should be hilarious on Monday when the workers arrive staring out their windows at this hive of resistance.
    I hope as many of you as possible can get down there. Who knows what plans are being hatched even now to quickly close it down…

    http://www.bankofideas.org.uk/welcome/

  50. Charles Wheeler November 20, 2011 at 3:19 pm #

    Another excellent piece by Shane/In Case You Missed It:
    —————————————————————————–
    “By setting interest rates artificially low, the ECB helped German and French exporters but it also inflated real-estate bubbles in Spain and Ireland. The resulting decade of eurozone-aided German current account surpluses and the corresponding accumulation of debt willingly doled out to the PIIGS has given rise to contagion fears of another kind, debt default. It’s no coincidence that the combined $183 billion current account deficit of Italy, Spain, Portugal and Greece are almost perfectly offset by Germany’s current account surplus of $182 billion. The only solution we are told is for the PIIGS to implement austerity in exchange for more debt. Yet the only entities being helped by this are the banks while ensuring long term pain for everyone else in the countries receiving the ‘help’. We’ve mentioned it here many times but it bears repeating, almost all of the bailout money winds up being siphoned out of the country by the banks and the payments only grow with each ‘rescue’ package. Meanwhile, the austerity measures demanded in return only serve to slow economic growth meaning further bailouts will be needed.
    . . .
    Yes, newly appointed (last week) Greek PM Lucas Papademos and Super Mario Brothers, as in the new president (as of November 1st) of the ECB Mario Draghi and new Italian PM Mario Monti (last week) are all Goldman Sachs alumni. Greece gets a former ECB official who worked at Goldman Sachs, Italy gets an EU near-lifer with a bit of Goldman advising thrown in all because the current Italian head of the ECB, another Goldman Sachs alumni won’t bend the ECB directives to bail out his countrymen and print euros. While the Germans try to hold the line on turning on the printing press for fear of a 1930s style inflation disaster, the vampire squid has maneuvered its tentacles around the economic lifeline of Europe much as it has done in America. No wonder we can’t talk about how we got here otherwise we might notice that the same folks who wrote the opening scenes of this farce are being placed in charge of fixing it.
    . . .
    Greece’s PM Papademos oversaw his country’s entry to the euro running the Central Bank of Greece from 1994 to 2002 before he became vice-president of the ECB in between stints advising Goldman and indoctrinating the next generation of neoliberals from Colombia University; Italian PM Mario Monti had to quit his role as adviser to Goldman Sachs before taking his new job while Mario Draghi was head of the Italian Treasury from 1991-2001 before heading to Goldman until 2005 until he took over at the Italian Central Bank. By using complex derivatives supplied by Goldman Sachs, Italy and Greece were able to slim down the apparent size of their government debt, which euro rules mandated shouldn’t be above 60% of the size of the economy and thus created the problem the technocratic rulers are now tasked with fixing.
    . . .
    Monti’s cabinet is technocratic not democratic, consisting of bankers, soldiers and diplomats without a single elected member. It’s worse in Greece where Papademos has named a motley crew with multiple links to the pre-1974 military junta. Full blown former fascists are being transformed into non-ideological technocrats to administer the neoliberal medicine to solve the problem, modern day quacks applying leeches to cure their patients. Terms of surrender are accepted not for fear of bullets and bombs but of losing our pensions and iPads, the former getting more elusive and the latter more addictive as it becomes harder to qualify for benefits and gadgets get ever more distracting. Few even noticed that while most Greek government bonds were issued under Greek law where the bonds could be redenominated in new drachma should they ever have to leave the euro, the deal stuck October 26th changes the jurisdiction governing the bonds to English law, making redenomination impossible, resistance is indeed futile, we’re being assimilated.
    . . .
    The entire euro zone is already in severe recession, yet the ECB, the Germans, the French and virtually every single policy maker in the core continue to advocate the economic equivalent of medieval blood-letting via ongoing fiscal austerity in order to keep the interest payments flowing
    . . .
    The technocrats are nothing but another ploy played by the bankers to keep skimming off as much as possible for as long as possible, repeating over and over that there is no alternative. As long as we keep believing their myths we’ll stay pinned to the mat as our rights are slowly stripped away along with our wealth. We just need to turn our heads away from the screen to see the choices we really have instead of what they’re offering us.”
    http://goo.gl/2p0wt

    • richard in norway November 20, 2011 at 5:19 pm #

      Charles

      One thing that people miss is that no central bank can set rates in isolation. When the US had very low rates most other countries had to follow suit or suffer a dramatic appreciation of their currency. We have that problem in Norway at the moment, we have low rates, not zirp, but far too low, these are fueling an asset price bubble but the central bank while warning of higher rates to come, can only move carefully because of the impact on our currency which has already appreciated by about 30%, This is of course killing our non oil exporters

      • Charles Wheeler November 20, 2011 at 5:52 pm #

        The complication is that ‘sovereign’ nations within the Euro have no control of the exchange rate, while retaining fiscal authority – at, least, up until the imposition of the ‘technocrats’. When the UK tried to ‘track’ the Mark to remain in the ERM, the strain was too much and they had to ‘suspend’ membership – Chancellor Norman Lamont was reported to have been singing in the bath on Black Wednesday.

  51. Phil November 20, 2011 at 4:31 pm #

    http://www.guardian.co.uk/commentisfree/2011/nov/20/peter-beaumont-democracy-in-crisis

    ”Concerned more with mechanics of electoral choices offered from a narrow menu of options, with most of its drama concocted by the media, democracy under the aegis of the markets has become, as both political theorists and those protesting on the streets have attested, ever more distant from notions such as social justice and equality, with less participation, not more.

    Over recent decades, the mania for deregulation, particularly of the financial markets, has diminished scope for action in the sphere of international politics and economics, transforming politicians from leaders to a species of tornado-chasers who have, since 2008, dashed from crisis to crisis.”

    • John Souter November 20, 2011 at 5:53 pm #

      Phil – If Establishments of any hue thought voting could change anything to their detriment; they would ban it.

    • Charles Wheeler November 20, 2011 at 5:53 pm #

      To add insult to injury, the bankers that called for deregulation are now in charge because it didn’t work.

  52. John Souter November 20, 2011 at 5:46 pm #

    Okay, it’s pretty clear the lunatics of finance and politics are running the asylum.

    They’ve cooked the books, liquidised the rules, regulations and records and revelled in the chaos they’ve created.

    But more importantly, by force of their imbecility they have induced a feeling of fear in both the staff who were supposedly in charge of this asylum and the general public who understand the term but not the functions and methods generally used to keep it under control and non threatening.

    While the imbeciles are perfectly happy to remain in charge -probably until such time as the drugs cabinet runs out – the deposed staff and public are reduced to swotting up on the inmates form and trying to draw some analysis as to what, as a group, they are likely to do next. The problem with that is, it is applying the rational to the irrational which by definition is an oxymoron, so what we’re really hoping for is either they will set fire to the place or blow themselves up by leaving the gas on while they celebrate with a candlelit dinner party.

    Question is, for whatever time this siege of sanity continues, will the costs associated with its relief be lessened or increased? And can these costs be restricted only to price or do they involve far greater intrinsic values?

    Seems to me the costs associated with both questions can only increase the longer this absurd situation is allowed to continue.

    Unless of course you want to give the lunatics free rein to control you and your community.

    • Charles Wheeler November 20, 2011 at 5:55 pm #

      by Greg Palast for In These Times

      “Here’s what we’re told:

      Greece’s economy blew apart because a bunch of olive-spitting, ouzo-guzzling, lazy-ass Greeks refuse to put in a full day’s work, retire while they’re still teenagers, pocket pensions fit for a pasha; and they’ve gone on a social-services spending spree using borrowed money. Now that the bill has come due and the Greeks have to pay with higher taxes and cuts in their big fat welfare state, they run riot, screaming in the streets, busting windows and burning banks.

      I don’t buy it. I don’t buy it because of the document in my hand marked, “RESTRICTED DISTRIBUTION.”

      I’ll cut to the indictment: Greece is a crime scene. The people are victims of a fraud, a scam, a hustle and a flim-flam. And––cover the children’s ears when I say this––a bank named Goldman Sachs is holding the smoking gun.
      http://goo.gl/BhWwz

    • Patrick Donnelly November 21, 2011 at 7:36 am #

      Agreed!

      Look at Japan! They are so paralysed that they cannot deal with a death threat to them! Chrenobyl was less and surrounded by open country. Japan is the densest large country. If this was an attack by China, then what comes next?

      Investigation of the frauds must come next and that means taking control of computer records of banks supposedly non-resident, washing funds for gun and drug smugglers!

  53. 24K November 20, 2011 at 9:04 pm #

    I went to the Bank of Ideas yesterday and filmed that trader dude. He was pretty cool.

    Spent the afternoon on the roof, very strange.

    Super bonus of watching Max Keiser in the night aswell. He was pretty cool too and Stacey’s great.

    You should get down there if you can and give a talk. The more people like you that give talks down there the better. They require as many thought deposits as possible. The more they get the more they can loan out ;)

    I may go down again next week as reclaiming a bank is very ZBDS :)

    • Roger Glyndwr Lewis November 20, 2011 at 11:07 pm #

      I’m hoping to come over to the UK for the 30th November March and I will definitely pop along to the Bank of Ideas to witness and share in such a fantastic initiative. Thanks for the heads up ZBDS.

      • 24K November 21, 2011 at 6:34 pm #

        No problem dude.

        It’s well worth it and it’s one thing if people made the effort to check it out could be very interesting.

  54. Synopticist November 20, 2011 at 9:59 pm #

    Can anyone tell me whats the latest news on Jim Corzine?
    Has he been charged with anything yet?

    • Neil (the original one) November 20, 2011 at 10:26 pm #

      Don’t think so, but you could search Google News for Jon Corzine and if you want, set up an alert to keep abreast of reports.

  55. Roger Glyndwr Lewis November 20, 2011 at 10:57 pm #

    I downloaded this FIlm today it is very good . Same director as the Secret of Oz well worth a watch I am surprised I have not come across it before. I remarked to my Partner this evening its strange how relatively easy Zeitgest is to find but this and the Oz film is much harder to find. Anyway if anyone hasn’t seen the film I can’t recommend it highly enough much better than Zeitgeist which I found kind of disingenuous in some ways although with some great points ultimately it left me feeling suspicious of its motives no such problem with these films, maybe its a result of being 9 months further down the line with reading into all of this stuff I’d be interested to hear how much others here have found initial incredulity receding
    It is so apparent to me now how much conditioning I have had to reject it is really like shaking off the denial accompanying having been abused and told by ones abuser that it was ones own fault. I must say I see the Banks and Government very much in that role now.Another analogy might be to the desentisising from violence through exposure to graphic violence over a period of time. I do feel so many of what I see as breakthroughs for me have come from discovering material hidden in plain sight.

    http://www.youtube.com/watch?v=jz5UWrp7BLg

    • backwardsevolution November 21, 2011 at 5:14 am #

      Roger – the fellow who made the film is Bill Still. He’s running for President of the United States under the Libertarian Party. He appears to be a very genuine man, and I wish him good luck.

    • Patrick Donnelly November 21, 2011 at 7:32 am #

      Welcome to reality!

      • Roger Glyndwr Lewis November 21, 2011 at 8:40 am #

        Hi Patrick thanks, I feel like I have emerged into some sort of parralel universe increasingly I started reading a lot into alternatives to main stream narratives as I was offended by a remark Made by one of the Miilibands back in 2009 he chastised some one asking questions about data related to Global Warming as a Denier and it triggered in me a similar reaction as a teenage when I read Arthur Millers The Crucible. I had also read later Studs Terkels Biography and was moved to see what others were saying on Global Warming here another main stream orthodoxy had stifled genuine scientific inquiry and it made me suspicious of the Political Class.( I think I realised we had one of thiose When Jack Straw became Home secretary having been pres of the Student union in his early 20′s.
        The Narratives of Corporate Government turned out to be everywhere and the Hijaking of the psyche of the broad mass of society seemed a constant process becoming ever more farcical the comment above about History repeating itself first as Tragedy and Then Farce from Marx is very apt.
        The other thing that promted me to start reading into this is found in the first post I ever blogged, the comments regarding Mortgagees in possesion in the
        Money Masters documentary really hit home to me again yesterday.

        My favourite passage apart from the Dr analogy to the panacea for all ills in Ruskin is this short passage from Ruskin it is echoed also in the Carnegie course notes which I downloaded and read from Wiki leaks a comment regarding water tight compartments echoed by George Soros in Inside Job.

        Pardon me. Men of business do indeed know how they themselves
        made their money, or how, on occasion, they lost it. Playing a
        long-practised game, they are familiar with the chances of its
        cards, and can rightly explain their losses and gains. But they
        neither know who keeps the bank of the gambling-house, nor what
        other games may be played with the same cards, nor what other
        losses and gains, far away among the dark streets, are
        essentially, though invisibly, dependent on theirs in the lighted
        rooms. They have learned a few, and only a few, of the laws of
        mercantile economy; but not one of those of political economy.

        John Ruskin Unto this Last PT11 The Veins of Wealth.

        I have now had a notion to look into the constitutional crisis in Australia when Walt Whitman was PM, there was an excellent docudrama ‘on the BBC I have iun the msits of my mind seeing Cananadas long battle with the central bank Cabal and that of the United States of America I wonder whether there is some background in the history of Australian republicanism against this Tyrannny of Course Murdoch a Republican is one of yours even though he has US citizen ship theres also Wolfson at the World Bank originally from Sydney too. I’m a huge fan of Steve Keen not of the former two Gentlemen.

        It strikes me as odd that the Irish are being so meak the Potatoe famine I see as a particularly cynical example of the central banks indiffereence to Human Suffering I did this piece after re viewing one of James Burkes excellent conncetions episodes there are a few which are very good in these areas and I feel might explain why James’s Knowledge Web educational project is still struggling to get off the ground.

        http://www.youtube.com/user/stampingdragon#p/u/92/54f0np2Jcvc

  56. Southern Cross November 21, 2011 at 3:52 am #

    De-lurking – pertinently.
    Greetings and thanks to David and all contributors to this excellent weblog.

    Buried away in the fine print of today’s SMH (Sydney Morning Herald) a nastly little surprise for Australian bank depositors – Covered Bonds:
    ————————————————————————————-

    http://www.smh.com.au/business/refinancing-may-push-rates-higher-20111120-1npac.html

    Refinancing may push rates higher
    Clancy Yeates
    November 21, 2011

    THE nation’s biggest banks are expected to draw heavily on covered bonds as they face the challenge of raising more than $80 billion in long-term funds from jittery credit markets next year.

    With the euro zone crisis showing few signs of abating, banks are grappling with how to refinance tens of billions in debt secured under the since-lapsed federal government guarantee of bank borrowing.

    At least $26 billion of the bank debt maturing next year was raised with the help of Canberra’s top-notch AAA rating, extended to banks at the height of the global financial crisis.
    But, with the government guarantee closed to new debt raisings, banks are expected to refinance much of their debt by issuing covered bonds – which also attract the highest credit rating.

    Covered bonds, allowed by legislation passed last month, attract lower interest rates by giving investors a claim to savings deposits in the event of a default. ANZ Bank last week made the first Australian covered bond issue, and Westpac is said to be planning a raising. The Commonwealth Bank and NAB are expected to soon follow suit.

    Philip Bayley, a credit market specialist with ADCM Services, said banks would try to use covered bonds to replace government-guaranteed debt, because recent pricing showed the cost of unsecured debt had blown out.
    Even with the help of covered bonds, banks would have to pass on any sustained rise in funding costs to their customers, in the form of higher interest rates or smaller rate cuts, Mr Bayley said.

    ”If this continues, and all indications are that it’s going to, because the situation in Europe is going from bad to worse, these increases are going to have to be passed on,” he said.
    According to figures from NAB credit analysts and Bloomberg, more than three-quarters of the long-term debt maturing next year is held overseas, where borrowing costs are under most pressure.
    Of the major banks, Westpac faces the biggest refinancing task, with more than $30 billion in long-term debt maturing next year.
    Commonwealth is next in line with 2012 debt maturities of at least $17 billion, while ANZ and NAB each have about $15 billion falling due.

    The race to issue covered bonds comes as Europe’s leaders struggle to resolve the region’s debt crisis, with France and Germany at odds over the role of the European Central Bank.

    A senior credit analyst at the National Australia Bank, Ken Hanton, said this disagreement was dragging on market confidence, and this could push up the cost of debt for local banks tapping overseas markets.
    But global market demand for debt from Australia’s biggest corporate borrowers was strong, he said.
    ———————————————————————————
    So – a sneaky bill aimed at reducing bank’s costs while exposing ordinary depositors to risks they had no hand in incurring. I would never have spotted this nor understood the ramifications were it not for the tireless work committed internet activists like yourselves.
    Please excuse any cack formatting – I just had to share this gem.

    • Patrick Donnelly November 21, 2011 at 7:31 am #

      Good one!

      Puts the lie to the, still present, BS that the cause of the crisis was an excess of savings!

      Could be the death knell to excessive leverage as depositors slowly move like the sheep they are to less levered banks, building societies?

      • Southern Cross November 21, 2011 at 3:26 pm #

        Patrick – I do hope people start voting with their feet. If I ran a Credit Union I’d be howling to the high heavens about the advantages of saving and spending locally in the current climate, and publicising the money market exposure of the banks at every opportunity. However even many of the CUs seem dazzled by the bank sector ‘glamour’ and I half suspect would like to emulate it. They are also signficantly ‘bullied’ as institutions by banking interests.

        This little article, buried away under a nondescript heading is very revealing of facts that should be on the front page…

        Another angle to the above story – bank and CU deposits in Australia are (for the time being) government guaranteed up to $250,000. So, it could be that this is a back door subsidy to the bottom lines of the ‘Big Four’ on the part of government – ie they get to borrow more cheaply on the depositors collateral which is actually backstopped by government. Why? Perhaps in the vain hope that savings would be passed on in the form of steady or lower interest rates – a political hot potato with our ridiculous housing bubble. No doubt it would also be alleged that bank failure is unlikely.

        Nonetheless, the whole thing stinks.

  57. Nell November 21, 2011 at 11:31 am #

    Just read about the governments new housing policy (preview details aren’t out yet). A key element is a program of goverment underwriting a portion of the mortgages on ‘new homes’. http://www.guardian.co.uk/politics/2011/nov/21/cameron-clegg-homes-plan
    Another subsidy for banks?

    • John Souter November 21, 2011 at 12:39 pm #

      There you have it Nell -imbeciles trying to inflate a burst bubble!

  58. Neil (the original one) November 21, 2011 at 1:12 pm #

    Light relief: http://www.thedailymash.co.uk/news/society/housing-market-is-pretty-much-all-we-have-left%252c-admits-cameron-201111214570/

    Meanwhile the Telegraph reports that Hungary has asked the IMF and EU for financial assistance, and recalls that EU economic affairs commissioner Olli Rehn warned Belgium and four other EU states earlier this month that they could face fines if they failed to get their public finances back in order. That would really help…

    How about fining banks who fail to get their finances in order?

    Oh, and Moody’s have issued a credit downgrade warning for France.

    • Neil (the original one) November 21, 2011 at 2:01 pm #

      Ambrose Evans-Pritchard on Spain:

      “As union leader Javier Dos put it, the EU-imposed austerity plans of the incoming Partido Popular are “nothing more than the continuation of policies leading Europe toward disaster”.

      The new government of Mariano Rajoy has precious few policy levers at its disposal and cannot alone do anything at this late stage to prevent a death spiral within the strait-jacket of EMU.

      The immediate destiny of his country lies entirely in the hands of Germany, the AAA creditor core, the EU authorities, and the European Central Bank, the nexus of policy-making power that together dictates whether Spain will be thrown a lifeline or be pushed further into depression and social catastrophe.”

      More at: http://www.telegraph.co.uk/finance/financialcrisis/8903036/Spain-the-fifth-victim-to-fall-in-Europes-arc-of-depression.html

      Funny, he didn’t mention the markets…

      And who are the big fish in the markets anyway? Banks, hedge funds, pension funds, unit and investment trusts… (anyone else?).

      • Neil (the original one) November 21, 2011 at 2:14 pm #

        More from the Telegraph:

        “Poland’s finance minister has aligned himself with Cameron and against Merkel by calling for the European Central Bank to become the eurozone’s lender of last resort, warning of a “catastrophe” without a policy change. Jacek Rostowski, whose country plans to enter the eurozone in 2015, said:

        “We have a hideous choice… either a massive intervention from the ECB or a catastrophe. There is a danger of a historic economic disaster – like the Great Depression in the 1930s – that would lead to war in Europe.”

        “A European financial transactions levy is “justified” in view of the help banks have been given by government, Algirdas Semeta, the EU Commissioner for Taxation has said today in Latvia.

        “We have to take into account the support which our governments provided to the financial sector via bailouts and it’s time for the financial sector to repay at least part of the amounts back to our governments,” he said.

        Semeta also [...] identified fighting against tax havens as a top priority for the next 12 months.”

        Amen to that, but a bit late in the day, to put it mildly.

  59. Charles Wheeler November 21, 2011 at 3:54 pm #

    MFGlobal, the murky world of ‘internal repos’ and ‘rule 1.25′.

    http://youtu.be/R3L32RIkqNk?t=52s

  60. Neil (the original one) November 21, 2011 at 4:14 pm #

    Zerohedge:

    Credit Suisse Goes For Broke: Predicts End Of Euro, Escalating Bank Runs On “Strongest European Banks”

    http://www.zerohedge.com/news/credit-suisse-goes-broke-predicts-end-euro-escalating-bank-runs-strongest-european-banks

    ZH comments: “the explicit message is: help us ECB-Wan Kenobi, you are our only hope. The implicit one is: do it, or we pull the trigger and blow it all up to hell.”

    • Hawkeye November 21, 2011 at 4:56 pm #

      Neil

      The covert threat is actually being aimed at Germany. Either they acquiesce to the Goldmanisation of Northern Europe (the vampire squid having got its sticky tentacles into Club Med over a decade ago), or their intransigence will be blamed for causing banking catastrophe.

      The dollar strategy since the 1980s has been to pump in liquidity and prevent debt destruction (despite the covert devaluation of the currency being pimped around the globe!). Goldman is just the local enforcer – the friendly-faced debt pusher who claims to come in peace and help you out. But their track record of back-stabbing is second to none.

      Goldman has Germany and the Northern European block surrounded at the moment.

      My guess is that Germany won’t like being cornered in such a manner and will call Goldman’s bluff.

      Germany will pull out of the Euro leaving the US holding the can for the wasted crack-addicts. Germany will be painted as the Bad Guy, but they were just defending themselves from the Squid.

      • Neil (the original one) November 21, 2011 at 5:13 pm #

        Indeed – the covert threat has to be aimed at Germany because Germany is the only EU country that has enough money to pay into the ECB for it to pay out again to Club Med countries to pay most of it back into foreign banks…

        • Hawkeye November 21, 2011 at 6:11 pm #

          Neil

          Have you read any Peter Warburton? This article “The debasement of world currency” from 10 years ago, describes the Modus Operandi quite succinctly:

          “What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value.”

          http://www.gata.org/node/8303

  61. Charles Wheeler November 21, 2011 at 4:41 pm #

    The Big Lie: http://youtu.be/R3L32RIkqNk?t=12m57s

  62. Charles Wheeler November 21, 2011 at 6:22 pm #

    The rise of the ‘technocrats’ – i.e. bankers’ agents:

    “The idea of a technocrat is meant to re-assure. These individuals, we are led to believe, have mastery over the economic matters that are beyond the skills and intelligence of victims of the private financial crisis – ordinary people and their democratic representatives. By accepting government by ‘technocrats’ we are assured that policies will be applied to stabilise debt markets, avoid further unemployment, bank failures or lost savings. Yet these are the very officials and authorities responsible for the financial liberalization course that triggered the 2007 bank failures, rises in unemployment, and lost savings. These are the blind-sided technocrats that failed to predict the global collapse; that have acted only in the interests of the financial master at the expense of the victim, and that are now installing themselves in the highest political offices of Europe without a mandate from the people.

    In reality these technocrats have operated inside the machinery of Haute Finance at every level, both within the private financial sector and the associated governance structures. Now at the highest level they represent the interests of bankers, including Goldman Sachs, the bank notorious for its “Vampire Squid” greed and grip on the minds of senior policy-makers.

    Mario Monti, hurriedly appointed a senator for life in the Italian senate so that he could take up his post as Italian Prime Minister in November, 2011, has been European Chairman of the Trilateral Commission, a think-tank founded in 1973 by David Rockefeller. He is also a leading member of the exclusive Bilderberg Group of economists ; and an international adviser to Goldman Sachs and The Coca Cola Company. Mr Monti chaired the Italian Treasury’s committee on the banking and financial system, which set the country’s current disastrous financial policies.

    Another powerful ‘technocrat’ is Mario Draghi, head of the European Central Bank (ECB) and a former Goldman Sachs executive. Lucas Papademos, Greek PM is a former vice-president of the ECB and also ran the Central Bank of Greece at a time when the Greek government worked with Goldman Sachs to devise complex derivatives that would disguise the apparent size of its government debt and enable it to qualify to join the euro.”

    The idea that these people will serve the greater good of society is a deception of the most dangerous and invidious kind. Dangerous because of the public reaction and backlash likely to result from their flawed diagnosis of the crisis, and their determination to force the wrong austerity ‘medicine’ on innocent victims of the crisis.
    http://goo.gl/awZ7V

    • John Souter November 21, 2011 at 7:59 pm #

      Simple question -who are they trying to save?

      The people

      The Government

      Or the financial system.

      They will tell you “All three” but it’s only possible for one to come out ahead.

      • Roger Glyndwr Lewis November 21, 2011 at 9:06 pm #

        Decided to look for a Money Debt time line this one came up at top of google search I wanted to do one for the chronology of events described in the Money Masters and Secret of OZ along with the quotes that appear through that film that will take a few hours work tomoorw but for now this looks pretty good.

        http://nationaleconomy.net/a-money-timeline/

        • Neil (the original one) November 21, 2011 at 9:23 pm #

          Indeed, Roger. This is how it starts:

          “590 [BC] Solon writes new laws for Attica, cancels debts and removes stone markers (controversial).
          336 There are two sorts of wealth-getting,…one is a part of household management, the other is retail trade: the former necessary and honourable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men gain from one another. The most hated sort, and with the greatest reason, is usury, which makes a gain of money itself, and not from the natural object of it. Aristotle, Politics, Bk I, Ch. 10.
          303 Laws of the Twelve Tables appeared in Rome, defaulting debtors’ families could be seized and sold into slavery.
          221 Qin Shihuangdi unifies China.
          56 “…But meanwhile, before the empire of Rome became coextensive with Alexander’s, the most immediate and decisive effect of the universal
          enthusiasm was to impel men to incur the most impossible obligations.
          Nearly every one was at once both creditor and debtor; men lent one
          another any little money they possessed, and borrowed again whenever
          they were in difficulties. Italian society had become an inextricable
          labyrinth of debit and credit, through the system of Syngraphaeor letters of credit, which were negotiated in the same way as securities and bills of exchange today, because the scarcity of capital and the frequent oscillations in prices would have made it ruinous for
          them to be redeemed too frequently. Those who were in need of money
          attempted to sell to some financier the claims they had on other
          persons, and the financier would give cash payment, of course with a
          proportionate discount according to the prospects of the debt, the
          needs of the creditor and the condition of the money market… The Greatness and Decline of Rome, Guglielmo Ferrero, Vol. II, pg. 57.”

          And that’s all before Caesar’s assassination. Truly, there is nothing new under the sun.

    • Por Wurding November 22, 2011 at 10:03 am #

      Technocracy – 1934… Hope it amuses.

      http://ia600400.us.archive.org/4/items/TechnocracyStudyCourseUnabridged/TechnocracyStudyCourse-NewOpened.pdf

  63. Pedronicus November 21, 2011 at 10:56 pm #

    I hope anyone who is reading this far down likes what I did at the weekend. I write graffiti. I painted this.

    http://www.flickr.com/photos/pedronicus/6370934123/in/photostream

    Enjoy!

    • Neil (the original one) November 22, 2011 at 12:06 am #

      Pedronicus: I did (enjoy).

      Peston on UK debt:

      “According to the consulting firm [McKinsey], by the end of March this year, the aggregate indebtedness of the UK – that’s the sum of household debts, company debts, government debts and bank debts – had risen to 492% of GDP, or almost five times the value of everything we produce in a single year.

      That compares with 481% at the end of 2008.

      So the UK’s total indebtedness has increased, and is still the biggest relative to GDP of any of the big economies.

      [...] the debt of financial institutions has risen, from 205% of GDP to 210% of GDP.

      In McKinsey’s definition, this financial institution debt excludes bank lending to households and non-financial businesses, to avoid double counting. Its substantial size is a reflection of the size of the UK’s financial services industry, the City of London.”

      http://www.bbc.co.uk/news/business-15820601

    • Patrick Donnelly November 22, 2011 at 5:43 am #

      Y!

      • Roger Glyndwr Lewis November 22, 2011 at 8:15 am #

        I woke up this morning thinking about the fable of the Scorpion and the Frog. I was also thinking about some previous analogies I had been playing with
        Casino Chips in a casino, Footballs being taken away from the game, ( the banks have taken their Ball home) that sort of thing. I’m trying to think of ways to popularise the concepts that it helps to grasp to see that we are all the subject of a vast scam. Wading through the detail takes such a long time most folk simply have neither the time or the energy to get to the bottom of it all hence the ranks of willing and able snake ioil salesman at the fringes of this whole debate, many sponsored by the forces of disinformation no doubt.
        ZBDS is fantastic and I’d love to see lots more from the Rockers and Rappers and other artists, poets, childrens Writers ( Hans Christian Anderson emperors new clothes ) wizard of Oz, Baum)Dr Zuess ( The Sneetches )and so forth. Anyway I just wanted to throw into the discussion
        that reaching a wider audience with this information in an accesible format is quite a challenge without access to the mass Media conduits. I’m going to do some thinking about it and have a word with a few friends in the entertainment field to get some ideas.

        http://letthemconfectsweeterlies.blogspot.com/2011/11/scorpion-and-frog-on-banking-bail-outs.html

        Synchronicity just found this in my inbox.

        http://www.digitalmusicnews.com/permalink/2011/111121occupy?utm_source=twitterfeed&utm_medium=twitter

  64. Neil (the original one) November 22, 2011 at 9:51 am #

    Telegraph (yes, the Telegraph):

    “From Tottenham to Tennessee, capitalism is destroying politics
    Democracy is at stake unless the huge and growing pay gulf between the very rich and ordinary workers can be narrowed.

    “[...] the independent High Pay Commission [...] reports that, in the past three decades, top executives have awarded themselves increases of more than 4,000 per cent, with the chief executive of Barclays earning £4,365,636, or 169 times more than the average worker. The chief executive of Lloyds, one of the banks bailed out by the taxpayer, gets £2,572,000, which represents a 3,141 per cent hike over the same period.”

    (That Lloyds CEO, the Portuguese Antonio Horta-Osorio, has of course taken leave of absence after 8 months in the job, for health reasons. Wonder what his sick pay is.)

    More at: http://www.telegraph.co.uk/finance/financialcrisis/8905307/From-Tottenham-to-Tennessee-capitalism-is-destroying-politics.html

    • Charles Wheeler November 22, 2011 at 1:34 pm #

      Bill Mitchell: http://bilbo.economicoutlook.net/blog/?p=16992
      “With growth being maintained by increasing credit the balance sheets of private households and firms became increasingly precarious and it was only a matter of time before households and firms realised they had to restore some semblance of security by resuming saving. At the margin, small changes in interest rates and/or labour market status (for example, the loss of a job) pushed debtors into insolvency. Once defaults started then the triggers for global recession fired and the malaise spread quickly throughout the world.

      In our paper we argue that aggregate consumption demand is sensitive to the distribution of national income (factor shares) and that the US economy was able to continue growing in the period leading up to the financial crisis despite a major erosion of the wage share because of the expansion of credit. We also argue that these dynamics were directly responsible for the financial and then real crisis that emerged in 2007.
      . . .

      Conclusion

      The neo-liberal redistribution of national income instigated by the financial market lobbying of the US Congress has served to undermine US entrepreneurship . . . The gambling elites have arranged things so that the losses are all borne by the masses while the gains have been increasingly privatised. More US economic activity is now described in this way rather than the “glory” days of classic US entrepreneurship in the 1950s and 1960s.

    • Neil (the original one) November 22, 2011 at 2:06 pm #

      Forgot to mention that the pay of the average worker went up by just three times over the same period.

      That’s 300% vs 3,141% (Lloyds CEO), 4899% (Barclays CEO).

      I suppose they’d say because they’re worth it…

      High pay commission report here: http://action.compassonline.org.uk/page/m/424485b3/6f85ac1/58ff7f1a/83e14f9/1235874494/VEsE/

  65. fenku November 22, 2011 at 10:49 am #

    long term reader and lurker, and many thanks to everyone for beginning to clear the fog from my brain. Just wondering.
    if ECB monetizes the debt, will that make the Euro weaker? Then any debt owed to US banks in Dollars will therfore become more expensive to repay and bigger profits for the Wall St.?
    Makes me wonder who is driving all this volatility and turmoil?

    • Hawkeye November 22, 2011 at 11:15 am #

      fenku

      Interesting perspective. We are constantly told that “devalution” is good for countries as it helps to improve their export prospects. Quite clearly that is a ruse / smokescreen for the real rationale.

      Your explanation is concise and most probably correct.

      Nomi Prins also pins this whole Euro fiasco on Wall St:

      http://www.zerohedge.com/news/guest-post-world-crumbles-ecb-spins-fed-smirks-and-us-banks-pillage

      As the US trashes the dollar, all other currencies must be trashed even harder!

    • Mike Hall November 22, 2011 at 11:33 am #

      “If the ECB monetizes the debt, will that make the Euro weaker?”

      Not in itself, no. But it would not need to be done all at once. Marshal Auerback has proposed a multi year program of monetized debt reduction.

      Exchange rates, for free floating currencies, are really to do with trade balances, tho’ it must be noted that there is so much global capital concentrated in the hands of the ’1%’ that speculative capital flows can easily distort the effects of trade in the real economies. Whilst there are significant contagion effects beyond the euro, they are mainly to do with leverage or derivative bets. Most of the debt mountain in Europe is denominated in euros, so the situation is not like third world countries IMF’d into massive borrowing in foreign currencies, then having their currencies trashed..

      IMO, the eurozone should also print money for the purpose of financing an ‘employer of last resort scheme’ (at or near minimum wage) to stimulate economies & restore growth

      Overall, any currency effects would be minor imo (& could go either way) & certainly minor for most ordinary citizens facing devastation for a decade and longer with the present mess.

      • Hawkeye November 22, 2011 at 3:19 pm #

        Mike

        At the risk of opening up Pandora’s box………

        What is the viewpoint of MMT on the monetary means of international trade. I’m still not fully familiar with the principles but am not uncomfortable in terms of sovereign financing, I just don’t understand how or what acts as the means of international trade settlement? What is the international anchor in MMT?

        Currently the dollar is the world reserve currency, so all fiat currencies are “Dollarised”.

        Richard – Japan may have watered its currency, but perhaps the US has watered theirs even more (i.e. derivatives explosion since the early 1990s).

        • Mike Hall November 22, 2011 at 5:34 pm #

          I’m not 100% sure I’ve understood the question & I can’t claim to be expert on this but I’ll offer what I do understand of MMT’s perspective.

          First off, MMT focuses on the use of fundamental resources – labour & materials & allows the ‘money’ to sort itself out. This is a key concept & has the inherent implication that currencies are not ‘pegged’ to anything. Which is of course the case for all major (& most minor) currencies bar the Yuan which has a loose-ish peg to USD.

          This seems appropriate to me, particularly for ordinary citizens. Our standard of living is fundamentally concerned with optimising resources for our use.

          So let’s look at the import side. So long as another country (with it’s own currency) is willing to accept the importing country’s currency for trade there’s never a problem for importers. MMT says the importers are getting real resources in exchange for paper/credit which the exporter can only use at some future time to buy ‘real resources’ in return from the importing country. But note that they have little choice but to accept the future +price+ asked for those real resources. So, contrary to all the guff about, say, the notion of China having the upper hand accepting those USDs as payment, the reverse is actually true.

          This is also the basis of the US’s ‘free lunch’ for (historically at least) most oil – a fundamental commodity – getting sold in USDs. The US ‘printing’ currency actually represents a real gain for them in all the real resources they get in return for just bits of paper/credit & some future claim on US real resources at an +indeterminate+ price.

          But for all that apparent dollar ‘reserve’ advantage, the acceptability of UKP or Euro seems to have remained quite strong. As it has for most other developed country’s currencies.

          It strikes me that global trade has become such an important & interlinking phenomenon that’s it’s in no-one’s interests to monkey too much with currency wars that would create fall out for all. The exception being what the FIRE sector get up to.

          In the eurozone most trade is internal, so I wouldn’t expect much, if any, currency fluctuation from printing euros to bring its own idle resources back into use. Energy prices will likely continue to rise, but that affects all countries.

          • Hawkeye November 22, 2011 at 6:41 pm #

            Hi Mike

            Thanks for the reply. That seems to explain it. But something is still nagging me at the back of my mind, though.

            The description you portray is of international trade as the sort of stylised bilateral transaction involving real goods, services or assets. I don’t doubt that this is what we would all like the system to operate as, but currently international trade is both highly financialised and facilitated (pimped up?) through an excessive credit mechanism (perhaps many derivatives such as futures & options are just glorified Vendor Credit mechanisms?).

            I guess I’m still digesting various things that I am reading at the moment. The importance of Credit (and perhaps Cross Border / Internationalised Credit) seems fundamental in Kindleberger’s “Mania, Panics and Crashes”. Michael Hudson talks a lot about the financialisation of trade theory here:

            http://michael-hudson.com/2011/10/trade-theory-financialized/

            And finally I am eargerly awaiting Jim Rickards “Currency Wars” which should arrive any day now.

            It seems that whenever the world has embarked on major international trade initiatives * there has always had to be some form of global “policeman”, to supervise the players in the game. For undertaking this role the policeman gets the labour & resources from other countries at a discount! 100 years ago it was Britain and the Pound Sterling / Gold Standard, now it is the US and the PetroDollar. So where next for the world, SDRs?

            The international dimension of money is perhaps the most crucial and perplexing part of this whole story, as this shapes wealth, poverty, wars and famine.

            * This has happened more often than one would assume. See another book that is awaiting my full attention “Power and Plenty”:
            http://www.amazon.co.uk/review/R1X6FK4PM9DYLI/ref=cm_cr_rdp_perm?ie=UTF8&ASIN=069111854X&nodeID=&tag=&linkCode=

    • richard in norway November 22, 2011 at 2:24 pm #

      the Japanese have printed loads and their currency just gets stronger. Which proves the MMT folk correct.

  66. Roger Lewis November 22, 2011 at 11:23 am #

    This is priceless from the RSA. David Harvey is one of my academic heroes.
    David I wish they would do one on The Debt Generation, Perhaps they already have.

    http://www.youtube.com/watch?v=DsEUs0xK5KY&feature=related

    • Neil (the original one) November 22, 2011 at 12:52 pm #

      The original post of Harvey’s talk (there are others) has now notched up over 1.4 million views, which is good to see.

    • Charles Wheeler November 22, 2011 at 1:39 pm #

      Harvey’s Neoliberalism is well worth a read for anyone interested in what they are up against.

  67. steviefinn November 22, 2011 at 3:17 pm #

    No surprise as big 3 say no to donations reform, because of austerity, apparently.

    http://www.guardian.co.uk/politics/2011/nov/22/party-funding-reforms-kelly-report

    • Charles Wheeler November 22, 2011 at 6:18 pm #

      It all seems to be fire fighting to save a condemned building. At what point do you decide to demolish the current structure and rebuild with fire-safe materials? The problem we have is that the fire-fighters are pyromaniacs being well paid to keep the hoses flowing. They also happen to have insured the building by paying premiums to each other!

      OK . . . I’ll stop there . . .

      • BHomes November 22, 2011 at 8:35 pm #

        Think this is excellent, people i.e labour will take back its proportion of wealth

        http://ftalphaville.ft.com/blog/2011/11/22/758211/central-bankers-pursued-by-a-bear/

        • Charles Wheeler November 22, 2011 at 9:21 pm #

          “Edwards lays blame for the housing bust squarely at the feet of the central banks and he has done for some time . . . [he] is not happy that most commentators spend too much time blaming banks and not nearly enough time blaming central banks.”

          There’s some sleight-of-hand there though, given that the central banks were doing the bidding of ‘the markets’ – i.e. the private banks, having been co-opted by Wall St./K-Street. Where did all those evil central bankers come from? Who was running economic policy through the Reagan/Bush/Clinton/Bush/Obama years. Greenspan/Bernanke/Rubin/Summers/Paulson/Geithner et al are all there to run things for Wall St. (if not Goldman Sachs).

          So it’s bit rich to isolate ‘government’ policy that enriches Wall St. without putting private banks in the frame.

          But it’s part of the narrative: capture government, bend it to your will, deregulate, then pass the buck when the whole thing collapses – and blame it on ‘too much government’!

      • Roger Glyndwr Lewis November 23, 2011 at 9:34 am #

        Larry Silverman anyone?

  68. Charles Wheeler November 22, 2011 at 9:33 pm #

    Libertarian hypocrites given a kicking: http://goo.gl/3iZr4 !

  69. Mike Hall November 22, 2011 at 11:01 pm #

    Anyone in a euro ‘periphery’ country (but if you think you’re not, please check back in a week ;) ) should be aware of this:

    Warren Mosler/Philip Pilkington

    ‘A Credible Eurozone Exit Plan’

    http://www.nakedcapitalism.com/2011/11/moslerpilkington-a-credible-eurozone-exit-plan.html

    Looks workable to me. Mosler has considerable credentials & experience as a finance practitioner & MMT advocate.

  70. Joe R November 23, 2011 at 12:17 am #

    Great article Golem.

    The following linked article is off the above topic but it is on the prior general blog topic on the loss of democracy inside the Eurozone, the country being Ireland in this case. Its by Fintan O’Toole of the Irish Times and it lays out the basic illegality of the orignial bank bailout decision taken in Ireland in 2008 in very simple clear constitutional terms;

    http://www.irishtimes.com/newspaper/opinion/2011/1122/1224307948012.html

    As a further example of the selling short of Ireland by its political class I would add the current Tanaistes ( vce prime minister ) wiki-leaked comments to the American embassy in the aftermath of the Lisbon referendum ‘no’ vote . I posted this link in a comment a few articles ago, but here it is again;

    http://www.independent.ie/national-news/wikileaks/gilmore-took-opposing-views-in-public-and-in-private-2662663.html

    • steviefinn November 23, 2011 at 11:38 am #

      Thanks Joe, Gilmore another one of the Wests paper socialists, Fianna Fail winning the next election ? does it really matter? when they all behave the same. The Spanish have punished Zapatero & installed a right wing government who I would imagine will be more likely to clamp down on the Indignados, & ruthlessly implement austerity measures, although Zapatero if pushed hard enough would probably have done the same. I shouldn’t be surprised by the craven behaviour of politicians selling out their electorates, they are truly a special breed of vermin.

      http://www.irishexaminer.com/opinion/columnists/colette-browne/coalition-let-down-by-broken-promises-and-campaign-lies-174699.html

  71. Neil (the original one) November 23, 2011 at 11:41 am #

    @ StevieFinn “No surprise as big 3 say no to donations reform, because of austerity, apparently. http://www.guardian.co.uk/politics/2011/nov/22/party-funding-reforms-kelly-report

    Quote from the above article:

    “The committee also proposed that from 2015 there should be a £3-per-vote state funding for the parties, representing £23m a year over five years. This amounts to 50p per elector a year, little more than the cost of a first-class stamp. [...]

    All three parties rejected the proposals as politically untenable amid the current austerity.”

    From http://robinhoodtax.org/why-we-need-robin/economic-crisis-uk : “The banking bailout in the UK cost around £1.5 trillion in total or £31250 per person (94.4% of GDP).”

    So, the parties reckon we can each afford £31250 to bail out the banks, but can’t afford 50p each a year to make politics more democratic by reducing the link between big money and politics. Says it all really.

    • steviefinn November 23, 2011 at 12:00 pm #

      As I said, vermin, but there are exceptions, like a few good apples in a rotten barrel.

      Some great graphics :-

      http://www.payplan.com/debt-news/2011/11/22/the-eurozone-debt-crisis-explained/

      • Neil (the original one) November 23, 2011 at 12:40 pm #

        Telegraph:
        “even German bonds, Europe’s belt and braces gold standard, are under pressure today. Germany failed to get bids for 35pc of the 10-year bonds it sold in an auction today… The country was only able to get away €3.89bn of a sale with a maximum target of €6bn.

        Neil Hume of the Financial Times says its a disaster. Via Twitter:

        Twitter @humenm I cannot recall a worse auction, only EUR 3.889 Bln of bids in total fora EUR 6.0 Bln auction, and this is the new 10yr benchmark, and that is a cover of 0.65x. IF Germany can only manage this sort of participation, what hope for the rest. YIELDS are at completely the wrong level.”

  72. Hawkeye November 23, 2011 at 12:42 pm #

    Left and Right can unite.

    There is common cause. This (slightly rambling) post nets out at about 3 clear policies which should unite the 99%:

    http://www.zerohedge.com/contributed/majority-americans-including-both-ows-and-tea-party-agree-most-important-issues-%E2%80%A6-we-jus

    1) Stop bailing out banks (we have too much Irresponsible LENDING, not just Irresponsible borrowing, so we must remove the Moral Hazard)
    2) Prosecute the Fraud (where is our Eliott Spitzer?)
    3) Restore Democracy to the people (rather than subject to lobbying & special interest groups)

    • Neil (the original one) November 23, 2011 at 12:54 pm #

      I like it: three clear demands that, with a bit of rephrasing to make them punchier, should be repeated again and again and spread as widely as possible until ‘they’ get it – and if they don’t, could form the main planks of a new broad-based political movement.

  73. Mike Hall November 23, 2011 at 1:41 pm #

    A piece for Ireland (& other ‘perphery’ states). I just posted this comment at journal.ie here:

    http://www.thejournal.ie/readme/column-ireland-we-need-to-talk-about-europe/

    “The problem with the Lisbon Treaty and the entire attitude of the majority political classes throughout the Eurozone is summed up in that slogan “Yes to jobs”.

    The problem being that it was a monstrous LIE. There were & are absolutely NO policies or commitment to anywhere near full employment. What we have instead is a race to the bottom, ‘winner take all’ structure. A structure designed into the fabric of the monetary union. And there seems not the slightest interest in addressing this, even whilst, as it inevitably would, threaten to blow apart the whole project.

    A properly functioning monetary union (which we demonstrably do not have) cannot work without significant elements of fiscal & political union. Nor can it work without a clear recognition that there are inherent & largely immutable economic & productivity imbalances between countries, just as there are now such imbalances between regions within those countries.

    This means, just as, say, the wellbeing of citizens of Co. Kerry matters as much as those of Dublin, the wellbeing of citizens of ‘peripheral’ or smaller states must matter just as much as those of far more industrialised Germany. On the agreed basis that the ‘whole’ is far more prosperous than the sum of otherwise separate parts. Different activities, whilst equally important to the whole, have different economic value in pure monetary terms. Is it sensible, feasible or even desireable that each region in Ireland or each state with the Eurozone become carbon copies of each other down the last detail & cent of economic activity? No, it isn’t, it’s insane.

    Yet that is the underlying assumption of how the Eurozone was intended to ‘converge’. We see the results. The inherent imbalances became amplified. Those states least able to ‘fit’ – become, essentially economic activity copies of dominant states like Germany – are being punished & left behind to rot with the debilitating disease of high unemployment & austerity.

    This would not be acceptable behaviour toward regions within our own country. And it should not be within Eurozone states. Yet, such mathematically inconsistent nonsense as even more stringent ‘Stability & Growth Pact’ convergence is all that’s being – highly undemocratically – discussed in the ‘core’ states.

    For a monetary union to work it must have harmonisation in public services spending, and at least aggregate elements of tax . But it must also have a clear commitment to fiscal transfers wherever they are needed. It must also have a clear strategy and commitment to (near) full employment in all states. This latter is our key guarantee that no one gets left behind.

    It’s perfectly doable, albeit not remotely within the idiotic, ideologically disguised charter for the rich (only), that passes for mainstream macro economics ‘thinking’ today. Specifically, a (near minimum wage) Job Guarantee scheme, available to every eurozone citizen that becomes unemployed. It can be funded, debt-free, by a properly functioning central bank – +issuer+ of currency (ECB) – at no cost to citizens. When there are available idle resources, unemployed, to be hired, money ‘creation’ for this purpose does +not+ cause excess inflation. When the business cycle picks up again, Job Guarantee workers will be drawn back into private sector jobs by the new vancies & higher wages offered & net money creation is reduced.

    The bottom line is, that if a monetary union cannot underpin it’s social purpose with robust guarantees of a reasonable wage for all, it will fail, sooner or later.

    Ireland should be putting forward such proposals urgently to the ‘core’. And if the ‘core’ are not interested, as now, Ireland shoulkd leave the Euro & pursue its own transformation of past failed economics thinking toward fulfilling a proper social purpose. And yes, a euro exit is pefectly possible, defaulting on the ‘odious’ debts that it should never have been forced to bear alone for the EMU’s collective failure:

    http://www.nakedcapitalism.com/2011/11/moslerpilkington-a-credible-eurozone-exit-plan.html

  74. http://tinyurl.com/socison08328 February 3, 2013 at 4:22 am #

    Just what genuinely motivated u to write “Buckle up – Credit
    Crunch 2

  75. tlivyhty April 10, 2013 at 4:43 am #

    qvlj [url=http://www.eregansubaggunosekai.com/]トリーバーチ[/url] [url=http://www.osharebaggekiyasu.com/]chanel バッグ[/url] [url=http://www.annkabagryuukou.com/]トリーバーチ[/url] [url=http://www.tokukakubagnesage.com/]トリーバーチ 財布[/url] [url=http://www.uresujibagmabushii.com/]tory burch バッグ[/url] noxd
    [url=http://www.eregansubaggunosekai.com/]トリーバーチ バッグ [/url] [url=http://www.osharebaggekiyasu.com/]chanel バッグ[/url] [url=http://www.annkabagryuukou.com/]トリーバーチ 財布[/url] [url=http://www.tokukakubagnesage.com/]トリーバーチ[/url] [url=http://www.uresujibagmabushii.com/]tory burch バッグ[/url] vusc
    [url=http://www.eregansubaggunosekai.com/]トリーバーチ[/url] [url=http://www.osharebaggekiyasu.com/]chanel バッグ[/url] [url=http://www.annkabagryuukou.com/]トリーバーチ 財布[/url] [url=http://www.tokukakubagnesage.com/]tory burch 財布[/url] [url=http://www.uresujibagmabushii.com/]tory burch バッグ[/url] bvqo
    [url=http://www.eregansubaggunosekai.com/]トリーバーチ バッグ [/url] [url=http://www.osharebaggekiyasu.com/]chanel[/url] [url=http://www.annkabagryuukou.com/]tory burch 財布[/url] [url=http://www.tokukakubagnesage.com/]トリーバーチ[/url] [url=http://www.uresujibagmabushii.com/]tory burch バッグ[/url] wryf
    [url=http://www.eregansubaggunosekai.com/]トリーバーチ バッグ [/url] [url=http://www.osharebaggekiyasu.com/]chanel[/url] [url=http://www.annkabagryuukou.com/]tory burch 財布[/url] [url=http://www.tokukakubagnesage.com/]tory burch 財布[/url] [url=http://www.uresujibagmabushii.com/]トリーバーチ[/url] daxb

    mgwg
    ypsx [url=http://www.eregansubaggunosekai.com/]トリーバーチ 財布 店舗[/url] [url=http://www.osharebaggekiyasu.com/]シャネル 財布 アウトレット[/url] [url=http://www.annkabagryuukou.com/]トリーバーチ 2013[/url] [url=http://www.tokukakubagnesage.com/]トリーバーチ バッグ トート[/url] [url=http://www.uresujibagmabushii.com/]トリーバーチ バッグ 激安[/url] grpr
    [url=http://www.eregansubaggunosekai.com/]トリーバーチ バッグ 新作[/url] [url=http://www.osharebaggekiyasu.com/]シャネル 財布 店舗[/url] [url=http://www.annkabagryuukou.com/]トリーバーチ 2013[/url] [url=http://www.tokukakubagnesage.com/]トリーバーチ バッグ トート[/url] [url=http://www.uresujibagmabushii.com/]トリーバーチ バッグ 格安[/url] nozz
    [url=http://www.eregansubaggunosekai.com/]トリーバーチ 財布 2013[/url] [url=http://www.osharebaggekiyasu.com/]シャネル 財布 店舗[/url] [url=http://www.annkabagryuukou.com/]tory burch 靴 新作[/url] [url=http://www.tokukakubagnesage.com/]トリーバーチ バッグ 2013[/url] [url=http://www.uresujibagmabushii.com/]トリーバーチ バッグ 格安[/url] knlu
    [url=http://www.eregansubaggunosekai.com/]トリーバーチ 財布 アウトレット[/url] [url=http://www.osharebaggekiyasu.com/]シャネル 財布 アウトレット[/url] [url=http://www.annkabagryuukou.com/]tory burch 靴 激安[/url] [url=http://www.tokukakubagnesage.com/]トリーバーチ バッグ アウトレット[/url] [url=http://www.uresujibagmabushii.com/]トリーバーチ バッグ 格安[/url] xtul

    qike [url=http://www.eregansubaggunosekai.com/][/url] [url=http://www.osharebaggekiyasu.com/][/url] [url=http://www.annkabagryuukou.com/][/url] [url=http://www.tokukakubagnesage.com/][/url] [url=http://www.uresujibagmabushii.com/][/url]

  76. xrnjwxny April 10, 2013 at 4:59 am #

    eiya [url=http://www.ryuukoushoesnesage.org/]new balance[/url] [url=http://www.nedannoyasuishattsukakuyasu.biz/]ラルフローレン ラグビー[/url] [url=http://www.ralphlaurenrejaryuukou.biz/]ラルフローレン 通販[/url] [url=http://www.kireiishoehonmono.com/]ニューバランス 996[/url] [url=http://www.teirenshoeskan.net/]ニューバランス 574[/url] hext
    [url=http://www.ryuukoushoesnesage.org/]new balance 996[/url] [url=http://www.nedannoyasuishattsukakuyasu.biz/]ラルフローレン 通販[/url] [url=http://www.ralphlaurenrejaryuukou.biz/]ラルフローレン 通販[/url] [url=http://www.kireiishoehonmono.com/]ニューバランス 996[/url] [url=http://www.teirenshoeskan.net/]ニューバランス 996[/url] keuq
    [url=http://www.ryuukoushoesnesage.org/]new balance 574[/url] [url=http://www.nedannoyasuishattsukakuyasu.biz/]ラルフローレン 店舗[/url] [url=http://www.ralphlaurenrejaryuukou.biz/]ラルフローレン 通販[/url] [url=http://www.kireiishoehonmono.com/]ニューバランス 574[/url] [url=http://www.teirenshoeskan.net/]ニューバランス 1300[/url] cihm
    [url=http://www.ryuukoushoesnesage.org/]new balance 1300[/url] [url=http://www.nedannoyasuishattsukakuyasu.biz/]ラルフローレン 店舗[/url] [url=http://www.ralphlaurenrejaryuukou.biz/]ラルフローレン 店舗[/url] [url=http://www.kireiishoehonmono.com/]ニューバランス[/url] [url=http://www.teirenshoeskan.net/]ニューバランス 996[/url] cllb
    [url=http://www.ryuukoushoesnesage.org/]new balance 574[/url] [url=http://www.nedannoyasuishattsukakuyasu.biz/]ラルフローレン ラグビー[/url] [url=http://www.ralphlaurenrejaryuukou.biz/]ラルフローレン[/url] [url=http://www.kireiishoehonmono.com/]ニューバランス 996[/url] [url=http://www.teirenshoeskan.net/]ニューバランス 574[/url] wgmz

    vvqy
    fbni
    bzsu [url=http://www.ryuukoushoesnesage.org/]21
    [/url] [url=http://www.nedannoyasuishattsukakuyasu.biz/]ハンドバック
    [/url] [url=http://www.ralphlaurenrejaryuukou.biz/]アメリカ
    [/url] [url=http://www.kireiishoehonmono.com/]アウトレット 店舗
    [/url] [url=http://www.teirenshoeskan.net/]傘
    [/url]

  77. jdaklppx April 10, 2013 at 5:11 am #

    ktbn [url=http://www.annkabagkurashikku.com/]mcm 店舗[/url] [url=http://www.mcmchiipubagkireii.com/]mcm 店舗[/url] [url=http://www.mcmosharebagguseru.com/]mcm リュック[/url] [url=http://www.kakuyasubagnosekai.com/]mcm[/url] [url=http://www.mcmchoubibagguyasui.com/]mcm リュック[/url] hair
    [url=http://www.annkabagkurashikku.com/]mcm 店舗[/url] [url=http://www.mcmchiipubagkireii.com/]mcm 店舗[/url] [url=http://www.mcmosharebagguseru.com/]mcm[/url] [url=http://www.kakuyasubagnosekai.com/]mcm リュック[/url] [url=http://www.mcmchoubibagguyasui.com/]mcm リュック[/url] psci
    [url=http://www.annkabagkurashikku.com/]mcm 店舗[/url] [url=http://www.mcmchiipubagkireii.com/]mcm[/url] [url=http://www.mcmosharebagguseru.com/]mcm リュック[/url] [url=http://www.kakuyasubagnosekai.com/]mcm リュック[/url] [url=http://www.mcmchoubibagguyasui.com/]mcm リュック[/url] bcih
    [url=http://www.annkabagkurashikku.com/]mcm 店舗[/url] [url=http://www.mcmchiipubagkireii.com/]mcm 店舗[/url] [url=http://www.mcmosharebagguseru.com/]mcm リュック[/url] [url=http://www.kakuyasubagnosekai.com/]mcm バッグ[/url] [url=http://www.mcmchoubibagguyasui.com/]mcm バッグ[/url] bmva
    [url=http://www.annkabagkurashikku.com/]mcm 店舗[/url] [url=http://www.mcmchiipubagkireii.com/]mcm 財布[/url] [url=http://www.mcmosharebagguseru.com/]mcm リュック[/url] [url=http://www.kakuyasubagnosekai.com/]mcm[/url] [url=http://www.mcmchoubibagguyasui.com/]mcm リュック[/url] efmi

    bxka
    ogac [url=http://www.annkabagkurashikku.com/]mcm 店舗[/url] [url=http://www.mcmchiipubagkireii.com/]mcm 店舗 激安[/url] [url=http://www.mcmosharebagguseru.com/]mcm 2013[/url] [url=http://www.kakuyasubagnosekai.com/]mcm バッグ 新作[/url] [url=http://www.mcmchoubibagguyasui.com/]mcm リュック 激安[/url] iclj
    [url=http://www.annkabagkurashikku.com/]mcm 店舗[/url] [url=http://www.mcmchiipubagkireii.com/]mcm 店舗 格安[/url] [url=http://www.mcmosharebagguseru.com/]mcm アウトレット[/url] [url=http://www.kakuyasubagnosekai.com/]mcm リュック 2013[/url] [url=http://www.mcmchoubibagguyasui.com/]mcm リュック 通販[/url] otmt
    [url=http://www.annkabagkurashikku.com/]mcm 店舗 店舗[/url] [url=http://www.mcmchiipubagkireii.com/]mcm 店舗 通販[/url] [url=http://www.mcmosharebagguseru.com/]mcm 2013[/url] [url=http://www.kakuyasubagnosekai.com/]mcm リュック アウトレット[/url] [url=http://www.mcmchoubibagguyasui.com/]mcm リュック 通販[/url] zynr
    [url=http://www.annkabagkurashikku.com/]mcm 店舗 店舗[/url] [url=http://www.mcmchiipubagkireii.com/]mcm 店舗 新作[/url] [url=http://www.mcmosharebagguseru.com/]mcm 2013[/url] [url=http://www.kakuyasubagnosekai.com/]mcm リュック アウトレット[/url] [url=http://www.mcmchoubibagguyasui.com/]mcm リュック 新作[/url] nyir

    lwju [url=http://www.annkabagkurashikku.com/][/url] [url=http://www.mcmchiipubagkireii.com/][/url] [url=http://www.mcmosharebagguseru.com/][/url] [url=http://www.kakuyasubagnosekai.com/][/url] [url=http://www.mcmchoubibagguyasui.com/][/url]

  78. nike canada April 19, 2013 at 3:05 am #

    Great work! This is the type of information that are supposed to be shared across the web. Disgrace on Google for no longer positioning this put up upper! Come on over and discuss with my site . Thank you =)

Trackbacks/Pingbacks

  1. The real reason banks are so desperate for the ECB to start the printing presses | Ian Fraser - November 19, 2011

    [...] Fraser’s introduction: This blog was written by  Golem XIV, a pseudonym for filmmaker and author David Malone. David’s core argument is that banks, not [...]

  2. Credit Crunch 2.0? | Falling Awake - November 19, 2011

    [...] Buckle up – Credit Crunch 2 51.036918 -1.105170 GA_googleAddAttr("AdOpt", "1"); GA_googleAddAttr("Origin", "other"); GA_googleAddAttr("theme_bg", "ffffff"); GA_googleAddAttr("theme_text", "333333"); GA_googleAddAttr("theme_link", "0066cc"); GA_googleAddAttr("theme_border", "f2f7fc"); GA_googleAddAttr("theme_url", "ff4b33"); GA_googleAddAttr("LangId", "1"); GA_googleAddAttr("Autotag", "business"); GA_googleAddAttr("Tag", "current-affairs"); GA_googleAddAttr("Tag", "economics"); GA_googleFillSlot("wpcom_sharethrough"); Share this:FacebookTwitterRedditDiggEmailLike this:LikeBe the first to like this post. [...]

  3. How the 1% hijack your wealth - November 20, 2011

    [...] an excellent article at Golem XIV explaining in depth some of the murky ways this practice is used with particular reference to MF [...]

  4. Poor little Euro « It is Obvious - November 25, 2011

    [...] http://www.golemxiv.co.uk/2011/11/buckle-up-credit-crunch-2/ [...]

  5. The miracle of solvency | Ian Fraser - January 18, 2012

    [...] Fraser’s introduction: This blog was written by Golem XIV, a pseudonym for filmmaker and author David [...]

  6. The market: about as invincible as Spain’s ‘Grande y Felicísima Armada’ | Ian Fraser - March 16, 2012

    [...] Fraser’s introduction: This blog was written by Golem XIV, a pseudonym for filmmaker and author David Malone. [...]

Leave a Reply