So as European leaders admit they can’t find the money to make the EFSF (Europe’s bank bail out fund) anything like the size they all said it had to be, but they are saying nevertheless that the EU gives itself 10 days to fix the crisis. The latest plan is to turn to the IMF for help.
Normally I would see this as just yet another empty attempt to manipulate the news the populace with the twin idea that there is a desperate crisis but luckily governments are at full steam taking those hard decisions to deal with it. Decisions like cutting all public spending but doing nothing about corporate tax avoidance or the tens of billions still locked up in insolvent banks (Think The bad bank part of Northern Rock or RBS).
But combine the tight deadline with the announcement that 6 central banks have just agreed to lower the cost of US swaps lines by 0.5% and it takes on a whole other character. The swap lines are essentially how the Fed lends money (dollars) to European banks.
The central banks press release is that this is to ease liquidity. Which they are quick to say there is no need for except in dollars. All domestic currencies they say are in fine supply. As if domestic currencies being fine is some sort of good news. That’s like saying on a sinking ship that there aren’t enough life vests but luckily there are plenty of beer mugs.
The substance is that the banks are now facing a lock up of short term funding. The just announced bank downgrades have made short term funding for the banks even more desperate. The reason for making Fed swaps cheaper isn’t because there just happens to be some short term blip in the need for dollars. It is, as I have been saying, that the banks are on the very edge of a full blown funding crisis and no one but the Fed has money.
The ECB is not buying up ‘enough’ (from a bankers point of view) of the bank’s and nation’s rotten debt and the debt markets are wary of buying any debt even German debt at prices anyone can afford. So the Fed and the others have agreed to use the Fed and the dollar as the emergency funding conduit. How this will play inside America in its domestic political scene is anyones’s guess. But I don’t think it will be pretty.
The global slow down is here. Growth is a fiction. China’s exports to Europe have according to a report in Bloomberg, “Fallen off a cliff”. China has responded by lowering reserve requirements for its banks suddenly reversing all the work it was doing to cool property speculation. Why? because they are caught in teh downdraft and are now worried about a hard landing of sudden credit contraction which would implode the unstable banking and property bubble. So they are choosing instead to stoke up the engines of speculation and easy money make the problem much worse but to be dealt with later. Because right now they are on the edge of our crisis and don’t like the view.
Meanwhile in Europe itself the politics of massively divisive and unfair austerity for the masses and ‘soft touch’ for the wealthy is just hotting up. According to
European Central Bank Executive Board member Juergen Stark …. the only way for the region to exit its debt crisis is for governments to reduce budget deficits and embrace wage cuts and other structural changes.
“There is only one instrument left, which is adjustment in relative prices in wages, in salaries, in costs,…
Wages and pensions are what he means by costs. In other words European workers must now be forced to compete toe to toe with Chinese labor costs even though the cost of living in Europe is vastly higher than living in China. Of course the obvious solution to that conundrum is to make the cost of living here more like that of living in China. Which is a simple matter of doing away with workers rights, health care, education and any sort of pension at all. The outlines of a plan emerging here I think.
This is a BANK funding crisis, but it is nations of ordinary people who are being blamed and forced to pay for all the corruption, stupidity, greed and lies which caused it and are still causing it.
“Britain (and the Eurozone) are not facing a sovereign debt crisis. We are not facing a crisis of the public finances. Instead: we are facing the biggest ever crisis of the private financial system.
Why? Because the “greatest expansion in debt of all the world’s economies” is not going to be paid back.
“The greatest expansion of debt in all the world’s economies” must first be written off, ‘de-leveraged’ or paid down.
As this process grinds relentlessly forward, the banks that lent “the greatest expansion of debt in all the world’s economies” face bankruptcy – if not now, in the near future.
That is the crisis we all face. The bankruptcy of the global private banking system – based in our backyard.
The mobilising of finance for the Eurozone is to bail out private banks that engaged “in the greatest expansion of debt.” Although you would not believe this from media reporting, its purpose is not to bail out sovereign governments. The stubborn refusal of German politicians (with whom I have some sympathy) to agree to further taxpayer-backed bailouts of the private finance sector means that private banks face imminent bankruptcy.”
http://goo.gl/Ct47O
The world economic system have set themselves up for the ‘Perfect Storm’ by choosing to aid the global financial system banking on currency swaps. These very same currencies, not to mention economies, have within recent months proven themselves highly volatile and nearly each of those economies within various stages of stagflation. This is an unwanted marriage, and marriages such as that, only head in one direction…
By choosing to incorporate the support for the world’s debt burden into the major economies, they have created a contagion effect – ideal environment for the virus (or rather cancer) to spread. If someone has a contagious virus, or if the body has a cancer, you isolate it and treat it (including extreme measures such as cutting it out)
4 things can happen: a) It works, but then we have a world economic system which will demand greater co-operation and hence lead to a economic world order b) It fails, and every major economy gets knocked creating a domino effect and a worldwide economic collapse c) World leaders re-think the ‘terms of agreement’ regarding a global standard for trade, and instead of a currency choose something such as gold or platinum, hence repositioning a country’s true wealth or d) governments and businesses allow for a ‘natural’ correction, which in effect leads to a collapse, but then we ‘reboot the system’ from scratch….and if so, we choose a new Financial Operating System – my proposal – a Social Economy, based on a social ecosystem not driven by capitalism and greed, but collaboration and mutual benefit
Welcome Siegfried,
I am with you. A new system. A new philosophy. Total reboot.
Good luck with that. You are talking about changing human nature. We may get a different system, eventually, but I wouldn’t bet on capitalism and greed being absent from it.
“According to the French philosopher Henri-Louis Bergson, “great political mistakes almost always come from the fact that men forget that reality shifts, that it is in continual movement. Out of ten political mistakes, there are nine which consist of simply believing to be true that which has ceased to be”.
We are at a time where it is more important than ever that we all, as individuals and citizens face “that which has ceased to be” and actively seek new solutions.
http://goo.gl/kapbz
Meanwhile: who watches the watchers?:
http://goo.gl/9dgZc
juxtaposed with:
http://goo.gl/PKh8i
Funny, isn’t it, how there are a Big 4 of accountancy firms, a Big 4 in banks (not just in the UK – http://en.wikipedia.org/wiki/Big_Four_%28banking%29 ), a big 4 of supermarkets, a Big 3 of ratings agencies…
There seems to be some kind of principle operating here – and not very well, to put it mildly.
Didn’t we have a reboot already? Paris, 1789.
Its all about Goldman isn’t it?
http://www.thetotalcollapse.com/goldman-sachs-conquers-europe/
‘Was failed German bond auction orchestrated?’
“Goldman Sachs and US banks have guaranteed perhaps one trillion dollars or more of European sovereign debt by selling swaps or insurance against which they have not reserved. The fees the US banks received for guaranteeing the values of European sovereign debt instruments simply went into profits and executive bonuses. This, of course, is what ruined the American insurance giant, AIG, leading to the TARP bailout at US taxpayers’ expense and Goldman Sachs’ enormous profits.”
http://goo.gl/u2hNe
Not any old author for the above piece:
“Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury.”
He should know what he’s talking about…
The free marketeers are angry:
‘The entire global economic system is collapsing’
http://goo.gl/jGNNv
On the upside I have always been fond of frey Bentos tinned pies Particularly the Steak and Kidney and mince and onion. Unfortunately in sweden the finer points of british compo ration culture doesn’t seem to have caught on so Dried Pulses knäckebröd and sill strömming it is. Johanna and I discussed buying next years vegetable seeds etc this afternoon. This is very serious.
Recorded this the other day seems very Apt.
http://www.youtube.com/watch?v=RGGWxXy5odQ
Over at the Telegraph they are in fits of rage and contrdicting themselves at every turn. They call it things like gross government stupidity,and slightly missing the point the money is going to the banks.
I wonder what was promised in return?
Look everything is fine! The BBC lists this item no.4 or 5 and Robert Peston is a bit surprised but reassuring that everything is in hand. The EU crisis isn’t mentioned so it is clearly sorted .
But there have been some terrible things happening because of the strike …for example, private florists whose employees haven’t been able to get into work so they are likely to be short of Holly wreaths for Christmas.
I despair of our media !!! … thank goodness for David Malone, Bill Mitchell, Real World Economics and a few others…
I’m glad we don’t have TV anymore, I could never resist the temptation to turn on BBC’s pointless 24hr news, resulting in me having to fight the urge to do an Elvis Presley on the telly. Had a look at the Guardian website where an article describes Iran as being isolated, and then I find this :-
SCARY !!!
http://globaleconomicanalysis.blogspot.com/2011/11/china-to-protect-iran-even-if-result.html
Stevie
Iran is the Poland of WW3. Russia & China are laying down a notional red line here (geddit?) and saying “that is a step too far” for the Anglo-American currency warfare model.
The BRIC boc has slowly been developing a counterweight to the US dollar hegemony, and Iran is perhaps the strongest BRIC ally in the middle east. Taking out Iran would diminish this rising threat, but the US is caught. Leave Iran alone and the Anti-dollar movement grows slowly stronger. Invade / attack Iran and risk severe retaliation.
The US is the one getting impatient here, as it is the cornered bear.
& we are the bullies sidekick, I read somewhere that if you watched Fox news you ended up knowing less about what was really going on than if you hadn’t watched it. It seems the BBC & the rest of the mainstream are trying to emulate this, Goebbels would be thrilled.
I’ve found it impossible to watch the BBC’s economics coverage without hyperventilating. At least Fox News isn’t regarded (except by itself) as ‘fair and balanced’.
The BBC has simply become a repository for bank press releases, with little or no examination of the underlying causes of economic instability.
It’s the same talking heads, drawn from a ridiculously narrow range of opinion banging on and on about sovereign debt, government profligacy, living beyond ‘our’ means, etc., etc. combined with a largely uncritical obeisance to the workings of ‘the market’.
We are all on the same page David – thanks for your website and your excellent writing.
One question I had is this “Do you/we know how to assess what the total amount on deposit at banks in Europe (primarily) is ?”.
The reason I ask is that I guess when I see suggestions that any real ‘solution’ will cost in the order of trillions of Euro, I am left wondering “But how much would it cost to simply insure depositors funds, instead”.
One could go an additional step and say “how much would it cost to let the banks fail, but to pay out 100% of depositors funds up to, say, EUR 50,000, then 50% of anything between 50,000 and 500,000 and then 30% of anything betweem 500,000 and 5,000,000 and then 10% of anything over that”. Very simplistic, and just numbers out of thin air, but I am sure you get the gist.
It just seems there is such a ridiculous amount of time and effort going in to finding a ‘solution’, and we even have now bypassed more sensible topics/solutions and are discussing far more extreme topcs such as “how the EUR will break up” – and yet there really hasn’t been any debate about the most obvious solution of all. WHether or not the EUR is a ‘good idea’ is a secondary topic, but to (already) be discussing its break up AS A ‘SOLUTION’ to the banking/debt crisis, is quite odd.
So, in order to shake the thinking away from that which is to protect (primarily) equity and bond holders, I wonder if the cost of saving depositors (only), instead, can be assessed and presented coherently. This would then potentially enable a wider populace to be able to grasp the concept, and then ask the question of every politician/beaurocrat “why don’t you do this, rather than spending MORE money, and and yet actually NOT fix the problem in any lasting sense ?”
It may be that we are talking tens of trillions of EUR on deposit, in which case what I am talking about is all pie in the sky. But if the numbers are smaller, then orderly bank failure, accompanied by large amounts of depositor protection, (including 100% up to a certain minimum to ensure that no-one actually is left with ‘nothing to live on’, must SURELY be the option which is DEMANDED by everyone.
Unfortunately the degree to which the central bankers and politicians now just sleep walk along without any genuine understanding of the ‘person in the street’, and, ergo, exactly what their objective as a central banker or a politician actually is, has moved well past the point where any benefit of the doubt can be given, and is now firmly in the land of farce.
Anyway, all food for thought – once again, thanks for your excellent writing, and fighting the cause.
Cheers
Frank
BTW – I used to work at a bank, as a trader. Don’t shoot me, I am on your side ! But if I can share any insights with you at any time, I’d be happy to. You have my email address – my email address is my real number and the above name is not – so pls send me a message if you’d like to know more. If not, I continue to wish you all the endeavours
Golem,
I hope your bloomberg quote is accurate this time.
I found the orginal de Juan article quoted your prior article and on Bloomberg and all the details (in English) on the propsed funding involved. Its a fund the basis for which already has existed in law in Spain for more than two years. The details on it I saw are available on El Pais ( which is loosely the Spanish equivalent to the Manchester Guardian ) and they have been there since January last. Its not new at all. And the make up is not as presented in Bloomberg.
I have had time to read some of his articles too. I see no weasel words anywhere. He is quite calm but very succint on the nature of financial colapses and very clear on who is to blame and also he propses equitable solutions in precise detail. He is almost a classical writer in his scope and universal line of thought. All in all I see a very different person, article and set of suggestions to what was presented by Bloomberg or followed up on by yourself in your prior piece.
I’m going to pick one piece from an article of his, I could have picked 10 others just as easily, on the subject of finicancial crises and their solutions and let you get a clear impression of his thoughts on the subject;
” 7. Las situaciones de insolvencia nunca son declaradas por el banquero. Ni son siempre identificadas por el supervisor, hasta que la entidad se queda ilíquida. Entonces, se intenta salvar la situación de insolvencia con soluciones de liquidez, que no la resuelven.”
“7. Insolvency situations are never reported by the bankers in question ( note he uses bankers not bank ). Neither are always identified by the supervisor ( regulator/auditor ) until the entity is left illiquid. Then they try to save the insolvency situation with liquidity-based solutions, which do not resolve it.”
from http://www.expansion.com/2010/04/27/opinion/1272400203.html.
Want to know any more?
Morning Joe R,
Yes I hope so too. It is difficut when they misrepresent what is new and what people have actually said. Sadly there is only so much checking I can do. I wish I could do more but there are only so many hours in my day.
From your quotes it sounds as if, as you have said, that Mr Aristobulo de Juan is on the side of sanity in his views on the corruption and lying which goes on at the banks and their regulators. And if nothing comes of the suggestion of using deposit protection funds to guarantee a bad bank then that is a good thing.
David,
I’d like to make four comments after which I’m going to keep myself to myself from now on and concentrate on my new life here in Brazil, and not on European problems;
1) On Mr de Juan – apparently he worked at the World Bank before and I guess I would have a good opinion of that institution because of what I have read of and by Joseph Stilgiltz.
The piece by de Juan I linked above is a 20 point run down on what happens and how to attempt to resolve a financial crash in a given country. Some similar things were mooted in Ireland during 2008/2009 with the adopton of the “temporary” bank guarantee. Basically the solution which would have penalised the banks was hi-jacked and turned in to a permanent never ending financial bailout for the boys. Put another way 19.5 of the required 20 points were never implemented, just the half point that saw the banks get money but it was all sold to the population as the solution to our problems. This is the real danger – if the likes of Mr de Juan suggestions being promoted solely as a sly PR exercise for more huge bank bailouts in disguise – i.e. where there is no will to implement all the measures as laid out.
2) The funding mentioned for the bad bank in the piece did have some money allocated to it from a deposit guarantee fund, some 2.75 billion or so. The majority, the other 90% comes from the exchequer. This 2.75 billion is not a huge figure for a country of 45 million people. Its 60 euro per head or so. Eire has thrown or agreed to throw 45 billion or so at the black hole that was Anglo Irish Bank alone, that is 11,000 euro per head of population there. It has and will not solve anything. It made rich people richer and poor people poorer.
I think too that deposit guarantee funds are simply a huge bluff, governments don’t have enough money to cover deposits in the event of large scale bank runs or complete collapses. Think about it – and do some figures for the UK or any other country. Its all just to keep the little peoples money in place!
My next two points are tips which I hope will help you David if you wish to follow up on pieces from outside of the anglophone world;
3) A considered piece by an native English language correspondent who is based in a given non-english speaking country is usually far, far more reliable than a small mis-translated news piece like the one on Bloomberg. For example the Guardian have a correspondent Giles Tremlett in Spain. Bloomberg and others have quotas of news to output and its easy to pump out something like this without checking it -well anglophones aren’t gonna know the difference, are they if its wrong or right?
4) And finally if you do wish to follow up on something from abroad – it would be worth doing a quick search of the country’s media to gauge if its being reported domestically, where and how big an issue it is – e.g. use a google engine for a given country and input with some keywords and see if any articles pop up on that subject.The headlines that come up and where they are would give you a quick idea about the topic’s relevance in a country.
And you could do worse than to ‘google translate’ a piece if you had to. I don’t think newspapers pay for translation if they can avoid it. I think googles doing the work there. Your translation via a translation site might be no worse than what they are writing an article off.
Thats it. Sin é.
Good luck and keep up the good work!
All good advice. I will try to follow as much of it as my energy allows.
I wish you and yours all good things in Brazil.
Hope you’ll come back and say hello now and again and perhaps even wish us luck. There is no Brazil for me and my family. This is home. This is it.
Good Luck Joe.
…Danny Alexander on BBC refusing to deny a major European bank is about to go bust… clearly he knows a name.. any ideas?
The key is who is alreadt hurting and most reliant on short term funding.
Answer –
In Italy UniCredit. this includes Bank Austria with its massive Easter Europe exposure.
In France Credit Agricole.
In Ireland Allied Irish
In Spain any of the Cajas.
In UK Lloyds and RBS
Then there is the question of who are/were the major short term money sugar daddies. Answer – among others, Wells Fargo.
Just take a look at how wonderfully healthy they are after they swallowed Wachovia.
Any
“Word on the street is Agricole . . . ”
– Johnny the Shoeshine
“A lot of these highly leveraged, highly structured products, I analogize them to nuclear power,” said John Lovi, an attorney with Steptoe &
SonJohnson LLP who handles cases involving derivatives and isn’t involved in the Abbar case. “There’s no doubt that it’s complicated and you better have your best and brightest on it and be watching it closely because when it goes bad, it goes really bad.”The collapse of the deal came as Citigroup itself was posting record losses caused by the financial crisis and its investments in collateralized debt obligations, another form of derivative. The bank lost a total of $29.3 billion in 2008 and 2009 and took a $45 billion taxpayer bailout. Senior executives allowed their hunt for more revenue to eclipse proper risk management, according to a 2008 Federal Reserve Bank of New York inspection report.
Pandit, who took the top job in December 2007, disbanded part of the hybrid team in 2008 and began to wind down the structuring side of the business, the people said. He has since begun an effort to convince investors that the bank’s culture has changed to one of “responsible finance.”
http://goo.gl/SzabY
You would think that, if these ‘financial WMDs’ were so risky, they might have been regulated?
The Goldman Boys make their move:
“Mario Draghi has become explicit about what it will take for the ECB to have a more active role in the European sovereign debt crisis. Addressing the European Parliament in Brussels, Draghi said:
“what I believe our economic and monetary union needs is a new fiscal compact – a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made.”
…
“What is clear then is that any fiscal integration will require fiscal discipline aka austerity and this in turn is the prerequisite for any imminent ECB liquidity and for Eurobonds over the medium-term. Yes, budget cuts will deepen the recessions in the periphery. But, there is no way around it; politically, no solution in Europe will unlock the sovereign debt crisis without fiscal consolidation. All of the political leaders are aware that this is so.”
http://www.creditwritedowns.com/2011/12/the-ecb-is-open-to-extending-its-role-in-debt-crisis.html
What would go down nicely now would be something to distract attention from a bankers’ powergrab.
#Iran is trending . . .
Charles, you do sterling work. Thank you for it.
We are under attack. The usury system cannot proceed in any other way than to grow, forever. The ambassadors of this system, such as Draghi, can only push one message; ‘Kneel before us, subjugate yourselves to the demands this system makes of you!’ There is no possible recognition of the fact that money is nothing without people working to produce goods and services to buy and sell. Hence, money should be our servant, not our master. Wealth should be what our lives are about, not money. Since we are under attack from the money masters, we must fight them in the interests of our health, wealth, and futures.
Rebellion, organised around a vision of a new system, is our obligation. Occupy is part of the fightback, but there are other aspects to it. There are many working on alternatives, which must be assessed and discussed. For that reason I have just posted a long report on two Germans doing just that; Andreas Popp and Rico Albrecht. Their proposal interests me greatly because it is very close to Charles Eisenstein’s, which deftly ticks all the boxes I think need ticking.
http://thdrussell.blogspot.com/2011/12/from-here-to-there.html
Charles you are right on the money the knives are out for Iran. Libya has gone by without a wimper the blood of the Corporate Fascist is up and they ceased to recognise they would be sensible not to believe their own BS long ago, the supposed Saudi Ambassador assassination plot tells all we need to know how low they will stoop.
Slow motion train wreck in progress!
Hi Golem,
I’ve been following your posts for several years with great intrigue. I’ve never posted until now. I am considering removing all of my funds from Barclays PLC to the Royal Bank of under the mattress.
Do you have any links for any reputable co-operative banks that have emerged as an alternative since the credit crisis?
Keep up the great work
Best wishes
John
Hello Mudhutrentarrears,
I recognize your name from Guargian days perhaps? Welcome.
I would say the easiest switch is to The Cooperative Bank. They are ethical, so far as I know not very leveraged and have not ever played in the risky sub rpime lending and funding world. I think back in 09 they had a write down of 80 million or so and that was their lot.
You have a good memory for names!
Thanks a lot for the info. I will research their current status.
2012 is going to be an ‘interesting’ year.
Best wishes to you and yours
I’ve recently switched from Lloyds-TSB to Smile (the Co-op’s online bank), and it has been (all things considered) relatively painless.
It was quite liberating to make the switch after being with Lloyds for over 25 years!
I’ve not so much as had a call or letter from them yet, asking me why I’m leaving them.
If they ever do, then all I’ll say is “You’re too big to care, and too leveraged for my liking”.
I moved to the Co-op this year.
Who knows how solvent they are, but I would not entirely trust any online accounts. In the event of a bank run, I want a branch I can queue up around!
Mr S
There’s nothing to worry about there. All the money that gets paid in every month just goes straight out again!
So there’s nothing much in there to queue up for!
PositiveMoney have put together a good resource on moving your money to a more ethical bank:
http://www.positivemoney.org.uk/2011/01/move-your-money-to-a-mutual/
I switched to the Co-op about 6 months ago and feel much better as a consequence. Their customer service is very good too.
But rather than leaving any money in the bank I’ve been using what (if any) is left over at the end of every month to buy a silver bullion coin.
Jamie
Seems like you’re always 3 steps ahead of me!
I reckon I’ll need to move a bit quicker in 2012 as the pace of change is picking up now…………
Well Hawkeye, at least you can spell your own name.
But yes, I agree. The pace of change is picking up and the fear seems to percolating downwards rapidly. I attended a PositiveMoney meetup last week and there were several people there just looking for advice on how to protect themselves in the face of the oncoming collapse. Seems like the BBC isn’t fulfilling its remit!
I did it again. Long day…
From Michael Hudson:
—————————-
“Every economy is planned. This traditionally has been the function of government. Relinquishing this role under the slogan of “free markets” leaves it in the hands of banks. Yet the planning privilege of credit creation and allocation turns out to be even more centralized than that of elected public officials. And to make matters worse, the financial time frame is short-term hit-and-run, ending up as asset stripping. By seeking their own gains, the banks tend to destroy the economy. The surplus ends up being consumed by interest and other financial charges, leaving no revenue for new capital investment or basic social spending.
This is why relinquishing policy control to a creditor class rarely has gone together with economic growth and rising living standards. The tendency for debts to grow faster than the population’s ability to pay has been a basic constant throughout all recorded history. Debts mount up exponentially, absorbing the surplus and reducing much of the population to the equivalent of debt peonage. To restore economic balance, antiquity’s cry for debt cancellation sought what the Bronze Age Near East achieved by royal fiat: to cancel the overgrowth of debts.
In more modern times, democracies have urged a strong state to tax rentier income and wealth, and when called for, to write down debts. This is done most readily when the state itself creates money and credit. It is done least easily when banks translate their gains into political power. When banks are permitted to be self-regulating and given veto power over government regulators, the economy is distorted to permit creditors to indulge in the speculative gambles and outright fraud that have marked the past decade. The fall of the Roman Empire demonstrates what happens when creditor demands are unchecked. Under these conditions the alternative to government planning and regulation of the financial sector becomes a road to debt peonage.
Finance vs. Government; Oligarchy vs. Democracy
Democracy involves subordinating financial dynamics to serve economic balance and growth – and taxing rentier income or keeping basic monopolies in the public domain. Untaxing or privatizing property income “frees” it to be pledged to the banks, to be capitalized into larger loans. Financed by debt leveraging, asset-price inflation increases rentier wealth while indebting the economy at large. The economy shrinks, falling into negative equity.
The financial sector has gained sufficient influence to use such emergencies as an opportunity to convince governments that that the economy will collapse they it do not “save the banks.” In practice this means consolidating their control over policy, which they use in ways that further polarize economies. The basic model is what occurred in ancient Rome, moving from democracy to oligarchy. In fact, giving priority to bankers and leaving economic planning to be dictated by the EU, ECB and IMF threatens to strip the nation-state of the power to coin or print money and levy taxes.
The resulting conflict is pitting financial interests against national self-determination. The idea of an independent central bank being “the hallmark of democracy” is a euphemism for relinquishing the most important policy decision – the ability to create money and credit – to the financial sector.
Rather than leaving the policy choice to popular referendums, the rescue of banks organized by the EU and ECB now represents the largest category of rising national debt. The private bank debts taken onto government balance sheets in Ireland and Greece have been turned into taxpayer obligations. The same is true for America’s $13 trillion added since September 2008 (including $5.3 trillion in Fannie Mae and Freddie Mac bad mortgages taken onto the government’s balance sheet, and $2 trillion of Federal Reserve “cash-for-trash” swaps).
This is being dictated by financial proxies euphemized as technocrats. Designated by creditor lobbyists, their role is to calculate just how much unemployment and depression is needed to squeeze out a surplus to pay creditors for debts now on the books. What makes this calculation self-defeating is the fact that economic shrinkage – debt deflation – makes the debt burden even more unpayable.
Neither banks nor public authorities (or mainstream academics, for that matter) calculated the economy’s realistic ability to pay – that is, to pay without shrinking the economy. Through their media and think tanks, they have convinced populations that the way to get rich most rapidly is to borrow money to buy real estate, stocks and bonds rising in price – being inflated by bank credit – and to reverse the past century’s progressive taxation of wealth.
To put matters bluntly, the result has been junk economics. Its aim is to disable public checks and balances, shifting planning power into the hands of high finance on the claim that this is more efficient than public regulation. Government planning and taxation is accused of being “the road to serfdom,” as if “free markets” controlled by bankers given leeway to act recklessly is not planned by special interests in ways that are oligarchic, not democratic. Governments are told to pay bailout debts taken on not to defend countries in military warfare as in times past, but to benefit the wealthiest layer of the population by shifting its losses onto taxpayers.
http://goo.gl/tfNi0
A high quality article by Richard Heinberg on the Infinite Growth fallacy:
http://www.guardian.co.uk/commentisfree/2011/nov/30/end-of-growth
Great to see someone like him in the mainstream(ish) media, and some enlightened comments too.
‘We’ve had it backward for the last 30 years’
“I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. (MSFT) in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc. (AMZN)
Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate. That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.
That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.
And that’s what has been happening in the U.S. for the last 30 years.
Since 1980, the share of the nation’s income for fat cats like me in the top 0.1 percent has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007, from 42 percent at the peak of U.S. productivity in the early 1960s, and about 30 percent during the expansion of the 1990s. In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.
Richard Hanauer: http://goo.gl/bdXwM
It’s good that some of the highest earners are questioning the model, but I would argue that technological unemployment is one of the core reasons why this obscene wealth gap has been possible. Labour cannot bargain as once it did, since it is not needed as once it was. Goetz Werner is a very successful German business man who found a chain of chemists in the 1970s (similar in reach and scope to Boots) based on making its production and retail sides as sustainable and environmentally friendly as possible. For some years now he has been campaigning for a guaranteed income. Here are some of his arguments (my translations);
“The economy does not have the role of creating jobs. On the contrary. The role of the economy is to free people from jobs. And that is precisely what we have managed to do wonderfully well over the last 50 years. [snip]
No businessman wakes up in the morning wondering how to stuff more employees into his business. The very idea is absurd. The question should be asked the other way around: How can I, with as little effort and as few resources as possible, do as much for the customer as I possibly can? How can I better organize my business? And better organized always means: minimize work. This is a foundational business principle. [snip]
Indeed a fisherman told me that Icelanders today, thanks to factory-ships, can catch four times as much fish with four times fewer fishermen than 30 years ago. Do you see? 75 percent of people are simply no longer needed. There are such examples everywhere. Our ability to produce things exceeds our need to consume them. This is a simple fact, and no job market reform can change that. [snip]
We really have to ask ourselves: What is the real role of the economy? There are two. The first: It must supply people with goods and services. Never in history has the economy fulfilled this role as well as today. In fact we see a massive oversupply. Even though most factories are by far under-utilized, we can produce everything we can desire. [snip]
We’re moving into a society in which jobs are disappearing. The simple question is what all these people are to do with all their time, which is a cultural question. The problem we have does not lie in the jobs market, but in the culture. Sadly, this subject is barely visible in society today. And yet it is precisely here that we have work to do.”
Taken from an interview in the Stuttgarter Zeitung, 02 July 2005.
In my opinion we need to be bold in our thinking, since the old values are pretty much useless now. We cannot expect people to derive a sense of belonging and usefulness from physical labour, or even from soft skills, especially if these require no imagination or wisdom, and are therefore automatable. And yet it is precisely this sense of contributing something useful to our community that we so crave. I agree with Werner, the answer to this riddle does not lie in the job market, nor does it like in ever increasing economic growth and mindless consumption. Those facts alone require a complete overhaul of our socioeconomics. Complete overhaul.
Reggie Middleton the super squid hunter is at it again:
http://www.zerohedge.com/contributed/goldman-sachs-outed-international-tv
It’s as if Goldman Sachs has completely lost the plot and decided to double down its bets. It is going for broke in Europe and the Anglo-American econosphere. It seems to have the taste of victory in its mouth and just won’t stop at anything. Yet the more it gambles on gaining further control, the more it is leeching its hosts.
If the peasants revolt in the Goldman annexed territories, then Russia, China and Iran could exploit their vulnerability.
Meanwhile, the sensible periphery are discreetly withdrawing from the ominous battleground (c.f. Venizuela repatriating their gold and South Korea on a buying spree).
Interesting that we have to tune in to Moscow to find out what’s happening!
I have often pondered that too, Charles.
But Russia and Iran have a vested interest in bringing down the US/UK banking oligarchy too, hence they are not afraid to air such contrarian views on their national TV stations (i.e. RT & Press TV).
Too many good articles and links every day, so WTF here’s another !
Andy Haldane of the BoE on Regulation and Systemic Risk —
” “The banking industry is also a pollutant. Systemic risk is a noxious by-product. Banking benefits those producing and consuming financial services – the private benefits for bank employees, depositors, borrowers and investors. But it also risks endangering innocent bystanders within the wider economy – the social costs to the general public from banking crises”
He then goes on to discuss the costs of systemic risk and possible responses to it, noting that this can be a combination of both regulation and prohibition. In a typically entertaining but hard-hitting style Mr Haldane puts in context the current and growing debate about taxes on banks. He estimates that an annual systemic levy needed to cover the costs of financial crises would be in excess of the market capitalisation of the largest global banks. In his words again:
“Fully internalising the output costs of financial crises would risk putting banks on the same trajectory as the dinosaurs, with the levy playing the role of the meteorite” ”
http://www.icffr.org/Research/UK-Bank-of-Englands-Mr-Haldane-Takes-a-Look-at-the.aspx
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Here is link to the recent Financial Stability Report from BoE with comments from FT such as —
“” Isn’t it depressing when a central bank (BoE, below) has to report that parts of the regulatory framework have cracks so big that they are a looming threat to the stability of the financial system? Is there no angle from which danger isn’t coming from these days?””
http://ftalphaville.ft.com/blog/2011/12/01/776281/boe-charts-risk-weights-you-cant-trust/
————————————————————-
My Question .
So if the BoE knows all this, why aren’t they doing something about it ?
Are they looking at Prohibition of some instruments and very tight Regulation of others, or not ?
“So if the BoE knows all this, why aren’t they doing something about it ?
The whole point of ‘deregulation’ was to strip govt. and central banks of their ability to ‘interfere’ in the market. The irony is that the private banking system is now looking for ‘political leadership’ – they want govt.s to save them but without ‘interfering’!
You just have to think of private bankers as if they are spoilt teenagers, then it all fits into place. They’re never going to be satisfied – and it’s always somebody else’s fault.
I don’t know if anyone saw Kyle Bass, hedge fund manager, on the BBC last week. I thought he was very clear at presenting his side of things. He does say some rude things about Europe though! http://www.youtube.com/watch?v=rsCGI7s1SBg
Would second Kyle Bass’s recommendation of McLean/Nocera’s All The Devil’s Are Here – taken in conjunction with Sherrill’s article on S&Ls in the 80s, which acts as a prequel (http://goo.gl/slxfi) it goes a long way to explaining how we got here. Although they’re both US-centric, the ramifications were global.
John Cassidy’s How Markets Fail and, particularly as austerity starts to bite, Naomi Klein’s Shock Doctrine are also essential reading. George Cooper’s The Origin of Financial Crises gives an excellent explanation of Minsky’s theories on the inherent instability that ensures asset bubbles, and Steve Keen’s Debunking Economics explains why the orthodox solutions can’t work.
p.s. am assuming you’ve all got David’s Debt Generation – just about the only contemporaneous account of the grisly details of a slow-motion economic implosion.
Sweden
I have this theory that I’m working on: the Vikings that charged down from the Nordic countries leaving death and destruction in their wake, were the red-in-tooth-and-claw looters, rapers and pillagers, looking for conquest and profit, competing for a quick buck – spreading across Britain in waves, the last being the Norman (North-Men) Conquest, where they appropriated the land and the wealth and got people competing on the ‘Anglo-Saxon’ model, which then spread through emigration to the New World and ended up on Wall Street.
Meanwhile, back home in Scandinavia, the less rapacious nurturers got together and decided that now the testosterone levels had subsided, they could build a society on mutual respect and co-operation, where no-one had to wave their willies in the air to get attention, or trample on others to get to the top.
As a result:
“Swedish Success
Sweden’s success lies in part in its focus on income equality, Swedish Prime Minister Fredrik Reinfeldt said in an interview last month. Sweden has the world’s highest tax burden as a percentage of gross domestic product after Denmark. The two countries also boast some of the most equal income distributions in the world, according to the Organization for Economic Cooperation and Development.
Sweden’s financial regulator will require the country’s biggest banks to target capital buffers of at least 10 percent of their risk-weighted assets by 2013, with the ratio rising to 12 percent two years later. The Basel Committee on Banking Supervision sets a minimum target of 7 percent by 2019. Sweden’s government says the more rigorous capital standards are necessary to protect taxpayers from potential losses.
It costs 15 percent less to insure against a default of Nordea Bank AB (NDA), based in Stockholm, than it does to guard against a credit event at Germany’s biggest lender, Deutsche Bank AG, credit default swap spreads show. Standard & Poor’s yesterday raised the ratings of SEB AB and Swedbank AB, two of Sweden’s four biggest banks, to A+ from A, citing their access to funding and earnings prospects.
Declining Debt
Sweden’s government debt will narrow to 36.3 percent of GDP this year from 40.2 percent before the global financial crisis started in 2007, according to the European Commission’s latest estimates published Nov. 10. Danish government debt will reach 44.1 percent, compared with a euro-area average of 88 percent, according to the commission. Norway has a $530 billion wealth fund built from its oil income, compared with outstanding debt of 609 billion kroner ($105 billion).
“We have a strong fundamentally weighted allocation to those countries from a fiscal sustainability perspective and from a diversity perspective,” said Gregor MacIntosh, head of rates in Geneva at Lombard Odier Investment Managers, which oversees $37 billion. “They aren’t issuing debt hand over fist unlike some of the other more embattled nations.”
http://goo.gl/UaJZ2
Well, it’s just a theory . . . I know it needs work.
I remember thinking at the time Iceland let it’s banks collapse, that the Icelanders would have said to the IMF ” What ! you want to loot & pillage our country, no way, we know all about that, that’s what we used to do to the likes of you “.
Yes, the Icelanders’ atavistic return to the rape-pillage model was obviously doomed to failure because: a) they were obviously a bit rusty after several centuries of herring fishing, and b) their most rapacious genes had already been exported.
More proof of my thesis, I would suggest.
A bunch of herring fishermen who kicked Britain’s ass during the ” Cod Wars “. I am full of admiration for them & I agree with your thesis.
The conspiracy theorist in me asks: Does Goldman Sachs, JP
Morgan and others of their ilk have a presence in the Scandinavian
countries, either in the banking system or in a government advisory / think-tank role?
I haven’t looked it up but I just can’t help wondering…
On cue: Iran set to wrap its teeth around America’s fist: http://goo.gl/RVPUJ
“Iran might become so fearful of an overt war that it starts one itself.”
Apparently: “. . . in the event of war, “NATO’s missile-defense installations will be attacked by Iran.”
It’s deja vu all over again.
Still . . . at least it makes the Goldman Sachs takeover look like small beer.
A way forward?: http://goo.gl/67hMM
“make the banks small enough and simple enough to fail” + “full transparency in the derivatives market”
It’s a start.
The revisionism continues apace. Read the interview with Jacques Delors in the Telegraph and you will search in vain for any reference to excessive borrowing in the private sector – the private banking collapse and rescue by governments with public funds has been airbrushed from history.
Instead, we are led to believe that the crisis in the eurozone is the direct result of fiscal mismanagement by sovereign governments ’in the run up to’ the crisis (Independent)
For Delors: “Markets are markets. They are now bedevilled by uncertainty. If you put yourself in the position of investment funds, insurance companies and pension funds, you will understand they are looking for a clear signal.”
In other words: traders, who look for certainty, stability and equilibrium have been poorly served by profligate governments that have not been quick enough to say that that will write a blank cheque to cover all future private losses and impose the level of austerity deemed necessary to underwrite that commitment.
The choice is “either to accept a greater transfer of sovereignty or to submit to a common discipline”.
Apparently, there is a difference between ‘submitting to a common discipline’ and ‘accepting a greater transfer of sovereignty’ – though I haven’t quite worked through the nuances.
As for the suspension of democracy: ‘This does not bother Mr Delors at all. “This is not the first time in history that we have put in a non-political person to ensure the transition. The markets [Goldman Sachs] are reassured that there is a man in place [ex-Goldman Sachs] who knows what he’s doing. He can calm the many, many antagonisms.”
http://goo.gl/6cFbo
How can we possibly find a solution, when we continue to wilfully misrepresent the problem?
A brilliant rejoinder to the ‘markets are reassured by bankocrats’ brigade:
re: “our obsession with markets and the theory that markets do not lie. Markets are the collective expression of individual greed. They are the overview of a no-holds-barred fight of individual interests, scrambling to make money. They position themselves, posture, exaggerate and lie all the time.”
Alex Andreou: http://goo.gl/YMhab
Interesting view on the fallacy of composition, the ‘madness’ of the drive-to-austerity-death-spiral, and the argument for ‘raising the floor, rather than lowering the ceiling’:
http://youtu.be/O8PVlzbSoqY
We ‘must’ cut wages and conditions to compete with China – and yet China depends on a mass consumer market fuelled by a western workforce with disposable income. As that income is cut to the bone, so the Chinese export market collapses and we all go down together.
So, even on their own terms, the neoliberals’ prescription – repeated in the Independent today – of ratcheting down wages by playing one set of workers off against another makes little sense.
Probably pretty obvious, but I just realised that 1% coincides with the estimated percentage of psychopaths within the population.
http://en.wikipedia.org/wiki/Psychopathy
Simply put – Incompetent governors who have failed their states are desperately manoeuvring for a second chance using the same technology, tools and ingredients while expecting their failure to be borne and all the costs associated with their second chance by those they govern?
Sounds like a logical proposal to me – but only if you are a governor!
“This is a policy designed to destroy government. It is a policy designed to destroy the welfare state. It is a policy designed to destroy democracy. And it will do all those things. It is a policy designed to create social instability and turmoil. And it will do that too.”
Richard Murphy: http://goo.gl/rxCQF
mycket rolig
The Scandinavians have got something right they dealt with the 92 Banking crisis here much more sensibly, In common with Libya and their absence of Debt I am kind of fearful that we may be scheduled for regime Change By Obama and the Washington Hawks?
Telegraph:
RBS report won’t examine role of Goodwin and McKillop in bank’s collapse
The Financial Services Authority’s report into the collapse of Royal Bank of Scotland will not examine in any detail the role played by Sir Fred Goodwin and Sir Tom McKillop, its two most senior directors.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8933475/RBS-report-wont-examine-role-of-Goodwin-and-McKillop-in-banks-collapse.html
Royal Bank of Scotland collapse: the 10 questions the FSA must answer
A year ago, the Financial Services Authority failed to publish its report on Royal Bank of Scotland’s collapse. A new report will be released later this month – The Sunday Telegraph assesses the key issues.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8933151/Royal-Bank-of-Scotland-collapse-the-10-questions-the-FSA-must-answer.html
Excellent piece by Golem & great comments and links by other contributors as ever.
Following a comment I posted a week or so back, Irish online news site Journal.ie asked if they could repost the comment as an opinion piece in their ‘Column’ section. It appears today:
“We need big changes to the Eurozone – or we need to leave.”
http://www.thejournal.ie/readme/column-we-need-big-changes-to-the-eurozone-%E2%80%93-or-we-need-to-leave/
Regular readers here will recognise the MMT & functional finance flavour 😉
Came across this clip when reading David Orrell’s Economyths
http://goo.gl/OQd5X
It’s worth remembering, now that we’re back in the paradigm that ‘the market’ knows best how close we came to a cataclysmic market failure – and how the banking system only survived what would have to have been (should have been?) wide-scale nationalisation through bailouts by the public sector.
@ Charles Wheeler
Could the massive withdrawal of funds from the market at that time be explained by the widespread use of computerised trading, with stock falls beyond a certain level triggering off automatic sales? It’s scary to think that a stockmarket armageddon could be set off without human intervention.
Good point – and automated high frequency trading is set to accelerate, by the millisecond!: http://goo.gl/jVONd
But, if you believe something called ‘the markets’ are omniscient and human intervention is the weak link, that’s a good thing . . . No?
Meanwhile:
“Austerity won’t put the repricing/bubble burst genie back in the bottle.
A funny thing happens when more of the national income is diverted to debt service (making interest payments and rolling over existing debt into new higher-interest debt): there is less surplus available for investment and consumption, which means that both productivity based on investment and consumption based on debt will plummet.
This leaves the nation with lower productivity and lower GDP, which means there is also less tax revenues being collected and more bankruptcies as companies and individuals accept the reality that their debts cannot be paid.
The repricing genie responds to this decline in national income, surplus and taxes by repricing risk of default even higher, and so the interest rate is also repriced higher. This makes servicing the mountain of existing debt even more costly, and so even less national income is available for consumption, investment and taxes.
This is called a positive feedback loop: each action reinforces the other, i.e. a self-reinforcing feedback loop. Debt and risk are repriced higher, the burden of debt service reduces national income available for investment, consumption and taxes, which further reprices risk higher, and so on.
So you see, Europe, there is only one choice: either accept the endless debt serfdom of ever-rising interest payments and lower income and productivity, or rebel against your pathetic lackey leadership and renounce the entire mountain of unpayable debt. Grasp the nettle and renounce the euro as the fundamental cause of your fantasy and collapse, and revert to national currencies which enable the market to discover the price of your underlying productivity and ability to borrow money.”
http://goo.gl/bFUtF
@Charles Wheeler
So, Northern EU countries have been to Euromed countries as China has been to the West.
Note the following, on the other hand:
“Grasp the nettle and renounce the euro as the fundamental cause of your fantasy and collapse, and revert to national currencies which **enable the market to discover the price** of your underlying productivity and ability to borrow money.”
– and:
“Let the banks implode in bankruptcy, clear the worthless “assets” of debt from the books, and **let the market price currencies and everything else**. The only other choice is debt-serfdom.”
On this view, then, the market rules, because you can’t buck the market (which is thus personified as a human-like agent); to paraphrase Reagan, “let capitalism be capitalism”.
So were the hardline capitalists – the ones who believed in economic Darwinism – right all along? Is there any alternative? Are we all capitalists now – and wouldn’t that make us market-serfs?
There is a weird symmetry between social democrats who recognise the limits of markets, and market fundamentalists who argue that the banks should have been allowed to fail. Both reject the current form of corporatocracy, but seek very different solutions.
You could argue that, had there been no euro, the markets would have been able to price clubmed currencies more realistically against the DM – maybe short-circuiting the so-called vendor-financing between North and South?
But this commentator – like the majority – looks at the euro in isolation from the global asset-bubble. Still, his predictions on the debt-deflationary impact of austerity are convincing.
The pro-marketeers also have trouble with the fact that, without significant government intervention, ‘free-markets’ lead inexorably to the huge polarization of wealth and political power – and rising inequality – that caused the crisis
David Orrell quotes George Soros: “To understand what is going on we need a new paradigm. The currently prevailing paradigm, namely that financial markets tend towards equilibrium is both false and misleading; our current troubles can be largely attributed to the fact that the international financial system has been developed on the basis of that paradigm.”
In other words, as Minsky explains, without regulation markets are inherently primed to explode.
Telegraph:
“Reuters reports comments from ECB Governing Council member Athanasios Orphanides, who has said that the decision to ask private holders of Greek government debt to accept a haircut was a “terrible mistake”. He said that the decision to impair the value of Greek bonds had triggered contagion. He said:
“It was a terrible mistake. By forcing the impairment of any state bond we have triggered concern internationally of all state bonds in the euro zone and that’s one of the key reasons we have a problem. It is because of this tragic mistake in the euro zone that the yields of so many bonds are so high.” ”
So, rather than big bond-holders taking a haircut, governments must sacrifice the people on the altar of austerity to placate the god of the market. But that market is itself largely made up of big players who are also big bond-holders. Sounds like a form of blackmail to me.
Interesting graph showing how the last time the income of the top 0.1 % was at it’s highest was just before the Great Depression, which then, after huge misery led to a progressive more equal period. Will we get a progressive period this time round ?
http://www.mn2020hindsight.org/view/graph-of-the-day-return-of-the-robber-barons
We didn’t really recover from the Great Depression until we had to mobilise for war – which effectively resulted in a command and control economy – handing the reins of economic power back to government. Indeed, in 1937 FDR was intent on switching back to balanced budgets, returning to the orthodoxy he had campaigned on in 1932 – when he castigated Hoover for his deficit financing, calling for: “immediate and drastic reductions of all public expenditures”.
The war gave politicians the economic tools and the political will to reconstruct the workings of the economy at Bretton Woods. Plus, there was a much more communitarian spirit in a population which had to depend on one another to survive, fighting side-by-side irrespective of economic class or social background, when the idea that ‘we’re all in this together’ was more than a political slogan.
Nevertheless , there were plenty who argued that post-war Britain couldn’t possibly afford the welfare reforms of the Beveridge Report, and that we should retrench and pay off debts.
So, it’s hard to see how the current power-brokers’ grip on enforced austerity (with its inevitable ‘death-spiral’) can be loosened before economic catastrophe brings us all down ‘together’.
I’ve posted this before, but it’s essential viewing for anyone who wants to understand our descent into an Asyn Rand-inspired dystopia:
http://goo.gl/Rxtay
Surely Charles; the enforcement of austerity and the subsequent dip in societal standards is axiomatic to the strategies of the present crises.
It is the idiom of the ‘free’ markets to claim control by using the chaos they create.
Agreed. a la Naomi Klein’s Shock Doctrine
Personally I would add WW2 as part of that depression period, approx. 15 years of misery at a gigantic cost to the human race. The robber barons sowed the seed for the evils that resulted in their greed, if we are repeating the cycle the future looks very scary. I wonder if we will ever do something to stop the actions of the elites, financial & political that lead to widespread death & destruction for the many. It’s obvious from the history of the Great Depression to see who & what caused it & yet it is being allowed to happen again with untold consequences for the human race. Hitler gets blamed rightly for his crimes, but he only rose to power because of the fertile ground that was laid for him, due to the actions of a few during 1929 & before. We as a species surely can cop on to the fact that we face a very uncertain future simply in order to make a very small percentage of greedy people even richer.
” Those who ignore history are forever doomed to repeat it ”
Rant over
Here’s a good example of verbal diarrhea spewed from the hole in the face of WhistleblowerIRLs friend the illustrious finance minister Michael Noonan on behalf of the German vassal state, The Republic of Ireland.
http://namawinelake.wordpress.com/2011/12/04/budget-2012-ten-memorable-michael-noonan-quotes-from-budget-2011-that-look-set-to-come-back-to-bite-him-on-the-bum/
I probably should make it clear that as far as I know WhistleblowerIRL & Noonan are not friends.
I watched all five episodes – thanks for the link. Ever read ‘The Asylum’ – Leah McGrath?
The People Business.
Introduction.
This exercise is about us. All of us, the Homo sapiens that dominate this planet we call earth and the world we manufacture in order to pass our time on it.
As a species we are dominant. We have conquered land, sea and sky, beginning to probe into the universe and in most cases can choose either to decimate or manage every other species on earth from whale to virus – though, with one exception, the latter causes us the greater problems. Animal, vegetable or mineral we regard as resources dormant until we uncover their latent potentials, which are then ours for exploitation. The exception is our inability to competently manage relationships within our own species.
We are not unique in our exploitation. Viruses exploit anything that suits them in the animal and vegetable world, whales exploit the food of the oceans, plants the nutrients of sun, soil and rains, and minerals the geophysics created by change through the ages. However it is only our specie that can reason and understand these things. And even if we don’t understand, we know that there are others in our species that do and if the need arises, we can study their understanding and learn from them.
Even in this team learning approach we are not unique, though other species may use the suckling bribe in order in order to establish its practice. Nor are we unique in our flaws, the propensity to kill or intimate anger or violence is used through most if not all of the species. Even our ability to reason is not unique; a dog learns tricks or performs duties because it associates it with – probably in some, to it, mysterious way – a duty or game pleasing to its master. That’s still reasoning.
So in the natural sense we have no specifically unique qualities. We can’t dive like a whale, run at the speed of a cheetah or fly like a bird but by the development of our brain and its ability to construct abstract thought we can beat the abilities of the natural species in all these ventures. Now abstract thought isn’t inventiveness. Man didn’t invent fire; he witnessed it through some natural occurrence. Just as he noticed a round rock was easier to roll than a square one. The abstract was in seeing how both of these could be used to advantage.
This was the time when Homo sapiens began to exploit his nature; the foundation of civilization and the gestation of the People Business.
What won’t be included in this discourse are masses of dates, statistics, graphs or formula. Whether this genesis of abstract thought happened one hundred thousand, fifty or thirty thousand years ago is largely irrelevant.
As is recorded history; which in itself is a product of abstract thought – perhaps a fairly advanced thought, since the need was seen to hold an account of the past in order to explain the present and to try and shape the future – but in essence its only a sophistication of folk lore, tribal squabbles, a record of animal movement and numbers and the time to reap and sow. And as a record of account in The People Business it has proved to be flawed through the abilities to apply the same abstract capabilities to its construction, interpretation and exploitation.
So, dismissing all the yesterdays as irrelevant, how do we handle our day and hopefully our tomorrows, in what, by the sheer chance of birth, is the business we are thrust in to.
I suppose the first thing we must recognise is that ‘The People Business’ has a hierarchy. A hierarchy created sometimes by the same chances awarded by birth, at others by the environment we find ourselves in and the values that environment regards as our potential usefulness as a resource in the business.
Taking the above as a given surely we have to ask a question as to the purpose and objectives of this business that only death or imbecility (at times not even that) excuses us from participating in.
But before we do we have to consider how we are capable of asking it.
Nature created this earth and every form of life that’s ever been on it and, while we may be capable of exploiting the elements of nature we are a long way off, if ever, of being able to claim dominion over them. Nature is by its nature a dictator. Perhaps generally benign, avuncular, acquiescent it never the less has no care whether we as a species choose to continue to thrive on its planet or be wiped out by nature itself or by self destruction. This is the irrevocable ‘given’ without which the gestation of ‘T he People Business’ would never have been seen nor formed and must be the primary factor on which the scales of values and solvency of the business is measured.
The role of Nature accepted, we then have to ask; whether in the affairs of humanity, any concept, system, practice or ideology which doesn’t improve the wellbeing, contentment, security and advancement of the majority of the species and its survival, has any claim to legitimacy or continuance by establishment or custom?
If the answer is no – we have gazillions of problems to sort out.
If the answer is yes – then life for most will continue to be a vale of tears waiting for a death date.
While I believe the answer to the question as posed would result in an overwhelming majority of No’s over the Yes’s, it leads us to ponder on what we actually mean by concepts such as wellbeing, contentment, security, advancement and how we tie these in with the species survival.
This is a problem that has exercised the minds of philosophers and thinkers throughout the ages. At the basic level they have divided it into two camps, called one Determinism, and the other Free Will. Again at the basic level Determinists maintain every happening in life or nature is preordained and humanity has no more control over its outcome than a rock can change into a horse; therefore humanity has no capacity for exercising or claiming the ability of true Free Will. We could call this the God camp.
Advocates of Free Will argue; we have to have free will because we have the ability to make choices. That while we may feel anger enough to kill in some circumstance, we choose not to and choose instead to adopt reason and apply restraint.
Throughout the ages these arguments have developed and formed sects then sub sects; some with a tentative toe in the other camp while others firmly straddle both while rejecting some of each, and so on. Candidly much of the argument is esoteric, often to the level of vanity, and could be summed up as an argument over whether a static ball bearing is downside up or upside down.
Yet the paradox of this hypothesis is not only how little consideration we give to it in our daily lives, it is the scale in which we use it to form our values, morality and our place in society. To clarify, I’ll give you an example – Scientists generally consider themselves free thinkers. While that may well be a true and honest belief, much of their work as scientist is to un-cover and understand inherent qualities and potentials in whatever subject or substance they’re working on. Whether their work proves true or false or they trip over the discovery of the millennium is entirely determined by the inherent qualities that have always existed in that subject or substance. So as individuals they practice free will, or think they do; but in work they’re controlled and measured by determinism.
Confused? Well aren’t we all, and that includes those who are devoting their lives to defining the solution. But take some heart, generally these people are looking for truth with no malicious intent or goal of global dominance; perhaps a little glory and personal comfort from a prize or two and again generally, they’re a pretty egalitarian lot who want to serve humanity.
So in order to define the purpose(s) of The People Business we have to accept another irrevocable truth.
a) God – is not an excuse.
b) gods – are not an excuse irrespective of the promises they make or the forms they adopt.
And beliefs are doubts that can only be truly dispelled by truths.
John Souter 2010
Guess Which Country Has Debt Of Nearly 1000% Of GDP…
http://www.businessinsider.com/g10-countries-by-total-debt-to-gdp-2011-12
And look where the source of the enormous leverage is. That’s right, the UK Gvt is a mere amateur compared with the financial sector’s debt overhang. Lucky us tax payers are here to backstop any losses, eh?
Well, they did call it Big Bang back in 1986, but obviously the explosion was delayed…
Just in from the FT:
“Standard and Poor’s has warned Germany and the five other triple A members of the eurozone that they risk having their top-notch ratings downgraded as a result of deepening economic and political turmoil in the single currency bloc.
The US ratings agency is poised to announce later on Monday that it is putting Germany, France, the Netherlands, Austria, Finland, and Luxembourg on “creditwatch negative”, meaning there is a one-in-two chance of a downgrade within 90 days.”
That should concentrate Sarkozy’s and especially Merkel’s mind wonderfully.
EUR Tumbles: S&P About To Put Europe’s AAA Club (Including Germany, France And Austria) On “Creditwatch Negative”
Those credit ratings agencies certainly have chutzpah – given that the debts they are downgrading link directly back to the AAA-rated debts they were rubber-stamping for huge fees back in the noughties – subsequently off-loaded onto government accounts.
Shouldn’t we ask why we allow private firms who wouldn’t know a conflict of interest if it hit them between the eyes to continue to pontificate on anything more than the the credit worthiness of a whelk stall?
Perhaps we should get some independent agency to go over the track record of S&P, Moody & Fitch to see if they can hold a candle to Michael Fish’s predictive capacity?
We’ve seen the biggest collapse in financial history, which was not only not predicted by the ratings agencies, but fuelled by them (they couldn’t see that the housing market couldn’t keep rising forever) – what would have to happen before their competence was brought into question?
It’s a crucial point, because their downgradings threaten to produce a self-fulfilling prophecy. Just as their misrating of AAA on the way up gave investors a false sense of security, leading to more borrowing and higher asset prices, their edicts on the way down will inevitably signal the shorting of certain bonds – effectively facilitating an organized serial attack.
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“Furthermore, the recent track-record of rating agencies has been nothing short of lamentable. In the words of Paul Krugman, S&P’s decision to downgrade US debt is analogous to the story of “[a] young man who kills his parents, then pleads for mercy because he’s an orphan.” America’s deficit is largely a result of stimulating an economy that crashed following the financial crisis of 2008. S&P, along with its sister agencies played a large role in assigning AAA credit-ratings to collateralised debt obligations (CDOs) and other mortgage backed securities, which have subsequently turned into toxic-waste. S&P also gave Lehman Brothers an A-rating right until the month it filed for chapter-11, and perhaps worse still US treasury officials spotted a $2tn mistake in S&P’s calculations, which the rating agency acknowledged, but proceeded to complete the downgrade anyway.”
http://goo.gl/XACqi
“Further complicating the issue is that the major agencies make money by charging private issuers for a rating. They are paid by those they judge. Critics say this created perverse incentives such that at the height of the credit boom in 2005 to 2007, the agencies recklessly awarded Triple A ratings to complex exotic structured instruments that they scarcely understood.
They have profited handsomely. In the three-year period ending in 2007, the height of the credit boom, S&P’s operating profit rose 73 percent to $3.58 billion compared to the three-year period ending in 2004. The comparable gain for Moody’s over the same period was 68 percent to $3.33 billion.”
http://goo.gl/4okaP
“as investors are well aware, the credit ratings agencies have a track record — and it is not pretty.
For whatever reasons — including some pretty outrageous conflicts of interest — they have systematically under-predicted almost every major debt crisis that we’ve had in the last fifty years.
The big misses included the Third World debt crises of the 1980s, the Japan debt crisis of the late 1980s, the Asian and Russian debt crises of 1997-99, the Argentine debt crisis of 2001-02, the global banking crisis of 2007-2009, and the Euro-debt crises of the last two years — as well as private corporate debt fiascos like Enron and AIG.
Now, badly burned by all these miscalled balls, the umpires at credit agencies have decided to call more strikes.
From Eastern Europe and the “PIIGS” to the US federal government, and state and local governments, they have recently been over-predicting one fiscal crisis after another, demanding radical reductions in deficits.”
http://goo.gl/7p9KV
Quite. My reporting of the news did not imply any approval of the ratings agencies, far from it. But like it or not, the impact of that news will certainly be felt.
It would surely be better if the business of rating countries were given over to an international not-for-profit body, though as the example of FIFA shows, that too could be open to corruption.
IMO the ratings agencies vary between 50% & 100% in the political derivation of their sovereign debt ratings. (S&P’s absurd downgrade of US gov debt hit the 100% mark.)
With that in mind, the downgrade (or threats) of Euro governments’ debt has a single purpose in common with all the other ratcheting up of pressure.
That purpose is to steamroller an even greater straightjacket of ersatz euro fiscal union which gives the banks even more power over the financial affairs of states. And do this as permanently as possible with the shortest possible period for public debate & challenge.
It gets right up my nose that despite a few murmers of ‘democratic illegitimacy’, most mainstream media still portray the ECB, various finance sector players & political leaders all as the ‘honest brokers’ they are certainly not.
The problem is that the debt has to go away. Either by repayment or by destruction whether gently by inflation or roughly, by liquidation of lenders and borrowers.
The decisions remain to be taken in Japan, too! 1989 to 2011! LONG TIME! LOVE YOU LONG TIME!!!
Depressions hang around like unpaid whores. Payoff! Who loses for every debt is someone’s asset! Who has not got the juice? GS decided that Lehmans had to go, pour encourager les autres, but mainly to enable GS to make loadsamoney!
Who else has to go? The alternative is austerity for the mob. GS will be the last! Should take decades though…….. Who is there to take these tough decisions…..?