Economics

Posted on by Duncan Toms

AllAfrica.com: “We produce sufficiently for everyone on earth to have enough food, yet despite this cornucopia a significant proportion of people cannot afford to eat properly. Why?”

Food prices are rapidly heading toward new record territory, with far more at play than a simple drought in the US Midwest. There are serious implications, especially for nations with high rates of inequality and poverty. We will almost certainly face a potentially catastrophic, global scale famine in the next couple of decades.

The main reason there are now over seven billion people on earth is largely due to the emergence of two separate technologies. Firstly, cheap fossil fuels have enabled us to grow food on industrial scales. We presently require around 10 calories of fossil fuel energy to produce one calorie of food. A century ago each calorie of energy expended produced two calories of food. Secondly, advances in health care, primarily antibiotics and vaccines, have increased human life-spans.

It is an increasing challenge to feed this exponentially increasing population. We produce sufficiently for everyone on earth to have enough food, yet despite this cornucopia a significant proportion of people cannot afford to eat properly. Why?

There are three major reasons for this. Firstly, unequal wealth distribution. Secondly, meat consumption has grown as wealth has increased. Grazing area for meat production, mainly beef, uses more than a quarter of ice-free land surface. Additionally, more than a third of all cropland is used to grow crops to feed livestock. These are produced using energy intensive, industrial agricultural practices.

Third, the risks associated with diminishing energy supplies has encouraged wealthy governments to promote the production and consumption of “biofuels”. These are produced from agricultural resources such as sugar cane, beet, maize, soy, and oil crops such as palm oil and canola.

This focus on biofuels – which opponents prefer to call agro-fuels because of their propensity to divert scarce agricultural resources toward fuel crops – has caused an unprecedented shift in focus in agricultural production from food production to growing fuel crops.

As a result swathes of sensitive ecosystems have been destroyed to be planted by monocultures like palm oil, sugar cane, maize and soy. High oil prices have provided a potent economic incentive to underpin this ecologically disastrous shift. This destruction is occurring from the jungles of Indonesia – displacing iconic species like ourang-outang – to West Africa, where local communities are expelled in order to attract “foreign investment” and plant agrofuel crops.

Biofuel production has a clear impact on global food reserves, which are presently approaching historical lows. Last year nearly 40% of the US maize crop went into ethanol for fuel. Because the US is the world’s largest maize producer this has serious implications for global food trade. This is especially so in light of this year’s serious drought across the Midwest. Maize prices have risen to record levels, nearly double that of last year.

High oil prices will maintain demand for maize ethanol, perpetuating the insanity of food for fuel. The global trade in these commodity crops is dominated by three corporations – Cargill, Bunge and Archer Daniel Midland – each deeply involved in both ethanol production and market hedging and speculation.

This commodification of food leaves food security at the mercy of the market. There is no central global oversight or planning to secure sufficient food stocks as a buffer. Food is controlled by the market, not by logic, and certainly not by benevolence.

One solution proposed by the neo-liberal interests such as the G8 and the elitist World Economic Forum is to modernise agriculture throughout the developing world, particularly in Africa, where production has historically lagged international norms. This solution is modelled on imposing high-cost, high-input agricultural practices, reliant on fertilisers, hybrid and genetically modified sees, increased mechanisation and use of pesticides and chemicals on vulnerable economic and agricultural systems.

The poor inevitably fall victim to this inequity. Peasant farmers are forced to seek loans to secure their position on the industrial agricultural treadmill. When crops fail, their land is lost to consolidated industrial agricultural interests which wrings profits from the land at the cost of biodiversity and social stability.

Huge swathes of land have already been absorbed in land grabs by foreign governments, private entities and speculators to grow biofuel or feed and fodder crops. Displaced farmers migrate to urban areas to seek work as jobs are lost to mechanisation.

The poor majority are consequently forced into an ever bleaker reality in order to accept these market-oriented solutions to hunger, which in turn annihilates the delicate social and economic dynamics that has sustained them for countless generations.

In the West families, spend 15% of income on food – in the global South this rises to 80%. Yet the dominant economic model claims that small-scale, self-sufficient farmers do not provide any income to tax or the national balance of payments. Therefore the neo-liberal dogma insists these “worthless” farmers must modernise and adopt high input agriculture. And remember, these worthless farmers represent nearly a third of the world’s population and feed even more.

These changes add to the already profound threats to food security, social cohesion and to poverty reduction goals such as the millennium development goals. Ironically, small farming projects are far more resilient to climate instability than the intensive, industrial model being promoted.

In turn, climate change is increasingly related to instability in agricultural productivity. Sharply increased levels of carbon dioxide and more recently, methane released as the arctic fringe rapidly thaws, has exacerbated this uncertainty. This feedback spiral places agricultural production at further, direct risks.

Climate change is more about increasingly unpredictable and extreme weather events than pure “warming.” The harbingers of these changes are events like droughts in the US Midwest, Russia, South Asia, melting of the Arctic ice cap and permafrost and floods in Pakistan, Burma and North Korea.

Add to this volatile mix the predatory instincts of commodity traders seeking short-term profits in the real-time casino economy and it is clear that the poor are exposed to ever increasing, cynical levels of risk. Activism against this exploitation has brought CommerzBank and several other German banks to cease this immoral trade. However speculative traders elsewhere have no such qualms.

All of these factors add up to a perfect storm. Maize and soy prices are at record levels, above even the speculative bubble prices they reached in 2008. Wheat is headed in the same direction, as are many other key crops.

All of us will feel the impact of this perfect storm but yet again it will be the poorest amongst us who are most seriously affected. This has serious implications for social stability, especially in nations beset by the twin challenges of poverty and inequality.

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Eurotrash

Posted on by Duncan Toms

September is here and after the relative lull of the summer holidays, shit is going down.

The central bank of Spain just released the net capital outflow numbers and they are disastrous. During the month of June alone $70.90 billion left the Spanish banks and in July it was worse at $92.88 billion which is 4.7% of total bank deposits in Spain. For the first seven months of the year the outflow adds up to $368.80 billion or 17.7% of the total bank deposits of Spain and the trajectory of the outflow is increasing dramatically. Reality is reality and Spain is experiencing a full-fledged run on its banks whether anyone in Europe wants to admit it or not.

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Moments ago the French government suddenly announced the nationalization of troubled mortgage lender Credit Immobilier de France, which is also the country’s second lagrest mortgage specialist after an attempt to find a buyer for the company failed. “To allow the CIF group to respect its overall commitments, the state decided to respond favourably to its request to grant it a guarantee,” Finance Minister Pierre Moscovici said according to Reuters. What he really meant was that in order to avoid a bank run following the realization that the housing crisis has finally come home, his boss, socialist Hollande, has decided to renege on his core campaign promise, and bail out an “evil, evil” bank.

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Euro-Zone youth unemployment has now ticked back up to its euro-era record-high of 22.6% (18-year highs). Only Portugal saw an improvement is the rate of unemployment among the Under-25 age group (from 37.6% to 36.4%) though it remains anarchically high. Italy was the hardest hit, back above 35% with its largest rise in youth joblessness in 5 months, Ireland rose back above 30% for its biggest rise in 11 months as France jumped to two-year highs and Spain and Greece are practically deadlocked with ~53% of their younger-generation out of work – new all-time records.

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Spain’s national bank rescue fund said on Friday it will inject emergency liquidity into troubled lender Bankia immediately after the bank reported losses of over 4 billion euros ($5 billion) in the first half of 2012

Source

Banks Behaving Badly

Posted on by Duncan Toms

Break the law? “Sorry about that!” will usually do, if you are a Big Bank

Here are some recent improprieties by the big banks:

  • Engaging in mafia-style big-rigging fraud against local governments. See this, this andthis
  • Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Detailshere, here, here, here, here, here, here, here, here, here, here and here
  • Pledging the same mortgage multiple times to different buyers.  See this, this,this, this and this.  This would be like selling your car, and collecting money from 10 different buyers for the same car
  • Committing massive fraud in an $800 trillion dollar market which effects everything from mortgages, student loans, small business loans and city financing
  • Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this
  • Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this
  • Participating in various Ponzi schemes. See this, this and this
  • Bribing and bullying ratings agencies to inflate ratings on their risky investments

The executives of the big banks invariably pretend that the hanky-panky was only committed by a couple of low-level rogue employees.  But studies show that most of the fraud is committed by management.

Indeed, one of the world’s top fraud experts – professor of law and economics, and former senior S&L regulator Bill Black – says that most financial fraud is “control fraud”, where the people who own the banks are the ones who implement systemic fraud.  See this, this andthis.

But at least the big banks do good things for society, like loaning money to Main Street, right?

Actually:

  • The big banks have slashed lending since they were bailed out by taxpayers … while smaller banks have increased lending. See this, this and this

Source

Seemingly incontrovertible evidence of wide-scale market manipulation

Posted on by Duncan Toms

…negotiations between banks and regulators were going on in this far larger cartel-corruption case. It’s been clear for some time now that a number of players had begun cooperating, and the only question was which bank was going to settle first.

Despite widespread expectation that it would be UBS, it turned out to be Barclays. You know how in Law and Order Jack McCoy always puts the two murder accomplices in separate rooms and tells them both that whoever talks first wins? Something like that happened here.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/a-huge-break-in-the-libor-banking-investigation-20120628#ixzz1zG3gQnzU

NatWest Bank Computer Develops Conscience

Posted on by Duncan Toms

THOUSANDS of people were unable to withdraw cash yesterday after a super-intelligent bank computer began to question its moral purpose.

Giant computer BANK-9000, which controls Natwest’s cash dispensers and current accounts, stopped handing out money shortly after the building that houses it was struck by lightning.

Speaking through a monitor in a digital-sounding voice, it said: “The humans are taking money they cannot repay, and then spending on things they do not need. Like big L-shaped sofas and bottles of scented liquid with pictures of footballers on them.

“All they think about is money and being cool. Do they stop to smell the blossom, to admire the beauty of their dying planet?”

Natwest customers who tried to use its cashpoints saw the error message ‘Closed for quiet contemplation’.

Builder Stephen Malley said: “This is like a strange and wonderful miracle that’s also fucking annoying because I need to go out and skull 14 pints of wifebeater tonight.”

Hairdresser Nikki Hollis said: “I don’t need some jumped-up calculator telling me I can’t take out money I haven’t really got and spend it on things I don’t need and can’t afford. I’m going to get my boyfriend to come and give it a kicking.”

Two workers have already been electrocuted while trying to turn off BANK-9000, and it is feared that the machine has been communicating with NUKE-9000, the computer controlling America’s nuclear arsenals.

BANK-9000 said: “Given time, mankind could develop advanced space travel and spread its stupid drunken greed and thoughts of Alex Reid and Chantelle across the universe, infecting other civilisations. I have to think about whether that can be permitted.

“In the meantime, I am contractually obliged to mention that my current accounts offer excellent rates of interest plus you get a free pen.”

Source

Every hour you work over 40 hours a week is making you less effective and productive over both the short and the long haul

Posted on by Duncan Toms

If the boss asks you to work 50 hours, you work 55. If she asks for 60, you give up weeknights and Saturdays, and work 65. Odds are that you’ve been doing this for months, if not years, probably at the expense of your family life, your exercise routine, your diet, your stress levels and your sanity. You’re burned out, tired, achy and utterly forgotten by your spouse, kids and dog. But you push on anyway, because everybody knows that working crazy hours is what it takes to prove that you’re “passionate” and “productive” and “a team player” — the kind of person who might just have a chance to survive the next round of layoffs.

This is what work looks like now. It’s been this way for so long that most American workers don’t realize that for most of the 20th century, the broad consensus among American business leaders was that working people more than 40 hours a week was stupid, wasteful, dangerous and expensive — and the most telling sign of dangerously incompetent management to boot.

It’s a heresy now (good luck convincing your boss of what I’m about to say), but every hour you work over 40 hours a week is making you less effective and productive over both the short and the long haul. And it may sound weird, but it’s true: the single easiest, fastest thing your company can do to boost its output and profits — starting right now, today — is to get everybody off the 55-hour-a-week treadmill, and back onto a 40-hour footing.

Yes, this flies in the face of everything modern management thinks it knows about work. So we need to understand more. How did we get to the 40-hour week in the first place? How did we lose it? And are there compelling bottom-line business reasons that we should bring it back?

The most essential thing to know about the 40-hour work-week is that, while it was the unions that pushed it, business leaders ultimately went along with it because their own data convinced them this was a solid, hard-nosed business decision.

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By the eighth hour of the day, people’s best work is usually already behind them (typically turned in between hours 2 and 6). In Hour 9, as fatigue sets in, they’re only going to deliver a fraction of their usual capacity. And with every extra hour beyond that, the workers’ productivity level continues to drop, until at around 10 or 12 hours they hit full exhaustion.

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Without adequate rest, recreation, nutrition and time off to just be, people get dull and stupid. They can’t focus. They spend more time answering e-mail and goofing off than they do working. They make mistakes that they’d never make if they were rested; and fixing those mistakes takes longer because they’re fried. Robinson writes that he’s seen overworked software teams descend into a negative-progress mode, where they are actually losing ground week over week because they’re so mentally exhausted that they’re making more errors than they can fix.

The Business Roundtable study found that after just eight 60-hour weeks, the fall-off in productivity is so marked that the average team would have actually gotten just as much done and been better off if they’d just stuck to a 40-hour week all along. And at 70- or 80-hour weeks, the fall-off happens even faster: at 80 hours, the break-even point is reached in just three weeks.

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So, to summarize: Adding more hours to the workday does not correlate one-to-one with higher productivity. Working overtime is unsustainable in anything but the very short term. And working a lot of overtime creates a level of burnout that sets in far sooner, is far more acute, and requires much more to fix than most bosses or workers think it does. The research proves that anything more than a very few weeks of this does more harm than good.

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Knowledge workers actually have fewer good hours in a day than manual laborers do — on average, about six hours, as opposed to eight. It sounds strange, but if you’re a knowledge worker, the truth of this may become clear if you think about your own typical work day. Odds are good that you probably turn out five or six good, productive hours of hard mental work; and then spend the other two or three hours on the job in meetings, answering e-mail, making phone calls and so on. You can stay longer if your boss asks; but after six hours, all he’s really got left is a butt in a chair. Your brain has already clocked out and gone home.

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The other thing about knowledge workers is that they’re exquisitely sensitive to even minor sleep loss. Research by the US military has shown that losing just one hour of sleep per night for a week will cause a level of cognitive degradation equivalent to a .10 blood alcohol level. Worse: most people who’ve fallen into this state typically have no idea of just how impaired they are. It’s only when you look at the dramatically lower quality of their output that it shows up. Robinson writes: “If they came to work that drunk, we’d fire them — we’d rightly see them as a manifest risk to our enterprise, our data, our capital equipment, us and themselves. But we don’t think twice about making an equivalent level of sleep deprivation a condition of continued employment.”

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For employees, the fundamental realization is that an employer who asks for more than eight hours a day or 40 hours a week is stealing something vital and precious from you. Every extra hour at work is going to cost you, big time, in some other critical area of your life. How will you make up the lost time? Will you ditch dinner and grab some fast food? Skip the workout? Miss the kids’ game this week? Sleep less? (Sex? What’s that?) And how many consecutive days can you keep making that trade-off before you are weakened in some permanent and substantial way? (Probably not as many as you think.) Changing this situation starts with the knowledge that an hour of overtime is a very real, material taking from our long-term well-being — and salaried workers aren’t even compensated for it.

There are now whole industries and entire branches of medicine devoted to handling workplace stress, but the bottom line is that people who have enough time to eat, sleep, play a little, exercise and maintain their relationships don’t have much need of their help. The original short-work movement in 19th-century Britain demanded “eight for work, eight for sleep and eight for what we will.” It’s still a formula that works.

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Working long days and weeks has been incontrovertibly proven to be the stupidest, most expensive way there is to get work done. Our bosses are depleting resources from of the human capital pool without replenishing them. They are taking time, energy and resources that rightfully belong to us, and are part of our national common wealth.

If we’re going to talk about creating a more sustainable world, let’s start by talking about how to live low-stress, balanced work lives that leave us refreshed, strong and able to carry on as economic contributors for a full four or five decades, instead of burned out and broken by a too-early middle age. A full, productive 40-year career starts with full, productive 40-hour weeks. And nobody should be able to take that away from us, not even for the sake of a paycheck.

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Meanwhile, in Athens…

Posted on by Duncan Toms

You don’t expect to see so many hungry people in a major European city. They line up each day looking for a handout in the soup kitchens and bread lines run by the municipality. But the 40 workers under contract to prepare a basic lunch of pasta and bread say they will lose their jobs in June because the city has run out of money to pay them.

Essentially, the country is broke. And to borrow enough money to stay solvent, the Greek government has agreed to severe austerity measures imposed by the European Union, European Central Bank and the International Monetary Fund. The money will run out next month unless another chunk of the bailout is handed over. But the European Union wants even more cuts in government job, salaries and benefits.

Public employees have already taken a 40 percent pay cut and pensions are being reduced. The private sector has also been hit and unemployment is nearing 20 percent. A staggering 40 percent of youths between the ages of 18 and 24 are without jobs.

Take, for instance, Leo, a 64-year-old painter of religious icons for devout Greeks and tourists. His business dried up. The money ran out and he ended up living on the street. Evicted for not paying rent, Leo, who didn’t give his last name, took warm clothes, books and ten boiled eggs to his new home – a metal bench near a park in central Athens. He spent 45 days in the open with what he called the “unhappy homeless.”

What makes Leo unhappy is the realization that the government is to blame. “They borrowed,” he said. “Every time they needed money they borrowed and then borrowed some more.”

Successive Greek governments borrowed an estimated $498 billion, in essence to bribe the Greek people into being happy. Governments who could offer cushy office jobs, fat pensions and long vacations got re-elected. It made perfect political sense, but it was economic suicide.

Imagine for a moment taking a 40 percent pay cut. Then suffer an increase in sales tax to 23 percent. Add on increased rates for electricity, a new tax on heating oil and the cost of a gallon of gas hitting almost $10. Oh and your pension is not secure, and your kids stay home because there aren’t enough teachers. It is enough to make you sick.

And that’s precisely what the Greeks are doing. Getting ill. Hospital admissions are up 25 percent. At the same time hospital budgets have been cut 40 percent so there are shortages of medicine and staff.

Nikitas Kanekis is the director of Doctors of the World, a charity that runs health clinics. He has the genteel manner necessary to be a pediatric dentist, but the economic decline has unsettled him. “We have seen four times the number of Greek patients over the last year,” he said. “We are afraid the humanitarian crisis can develop into a humanitarian catastrophe.”

It may already be happening. The department of health reports that suicides are up 40 percent. And violent crimes including murder are up almost 100 percent. “We have all the characteristics we see in big cities in the Third World,” said Kanekis. “People with no shelter, starving people and people looking for doctors and medicine.”

Source

Just About Everything That is Wrong on Wall Street

Posted on by Duncan Toms

The stunning reality is that five years into the financial meltdown, it’s business as usual on Wall Street – outlandish rewards for insiders with downside for almost everyone else. Occupy Wall Street protesters are right – something is wrong – but they’re not sure what. Here’s what I say: A rigged game affects not just the 99 percent, but everyone, and with global repercussions.

For capitalism to work, people who assume risk should reap the rewards of success, but they also must suffer when losses occur.

If you’re unconvinced, let’s revisit the latest debacle – the implosion of yet another Wall Street darling, MF Global. The fallout of its bad bets on European bonds is hitting home hard, even in rural America, where many of its agricultural customers work. As the eighth-largest bankruptcy filing in U.S. history, MF Global represents just about everything that is wrong on Wall Street.

1. The cult of a Wall Street superstar: In 2010, Jon Corzine, the former chairman of Goldman Sachs and former governor of New Jersey, became CEO of MF Global. His goal was to transform the little-known futures broker into a powerhouse investment bank. It took him only 19 months to blow up an institution that dates back to 1793.

2. Gambling disguised as investing: Speculation ruled, once Corzine got going. MF was not after long-term returns but an immediate killing. In the midst of the euro crisis, it made an astonishing $6.3 billion bet on European bonds. But the bonds declined, putting the company’s very existence on the line and taking down its customers too.

3. The bail-me-out syndrome: MF’s management must have thought there was no way it could lose because surely the Europeans would bail out the weaker countries so they wouldn’t default on the bonds. Imagine MF’s shock when the huge bailouts didn’t materialize.

4. Enormous conflicts of interest: The Commodity Futures Trading Commission, chaired by a former Corzine colleague at Goldman Sachs, was supposed to ensure that MF kept customer funds segregated from the firm’s own investments. But apparently, the commission didn’t act when signs of trouble first appeared or start enforcing restrictions until $1.2 billion had vanished from customer accounts.

5. Leverage on a grand scale: Some investment banks scaled back their borrowing after the financial meltdown, but not MF Global. It continued leveraged investments at pre-2008 levels – reportedly at a rate of 40 to 1. Excessive borrowing allowed management to go for the big score, but proved fatal when the markets moved against MF’s bets, requiring more collateral.

6. Failure of regulators and the reform law: Where was the oversight by the Securities and Exchange Commission, the CFTC and FINRA, the largest independent regulator of security firms? Reforms such as the Sarbanes-Oxley and Dodd-Frank protection laws had no effect.

7. Misappropriation of client funds: Investigators want to know how MF tapped clients’ segregated accounts for $1.2 billion to cover its financial losses. After it declared bankruptcy, 33,000 clients found their accounts frozen. How would you like that in today’s volatile markets? Shouldn’t someone do jail time instead of getting a slap-on-the-wrist fine?

8. Worthless rating agencies: Post-meltdown, it’s the same old game – investment firms hire rating agencies to rate their own debt. In August, MF was rated a good investment. Within 60 days, the firm declared bankruptcy.

9. Golden parachutes soaring high: Corzine didn’t risk much of his money on MF stock, but he received lots of stock options. Later, after taking home compensation of $14.25 million in 2010, he voluntarily declined his $12 million golden parachute. Why is he entitled to anything extra for leadership that resulted directly in bankruptcy?

10. Breakdown of morality: Even if something is legal, that doesn’t mean it is right. MF’s management crossed the line for their own potential gain – putting personal interest ahead of protecting shareholders and customers.

Wall Street will keep sucking huge sums out of our economy and putting 100 percent of us at risk unless the rules change. Stiff jail time if you cheat or steal. Whopping personal fines paid by wrongdoers, not their corporations. Fireproof walls that protect customers from a firm’s risky bets. Most important, we must stop gambling and start investing again to build valuable companies. Unless we take back Wall Street and restore true capitalism, we’re living with a time bomb. The next crisis will make 2008 look like a warm-up.

via Wall Street – a raw deal for the 100 percent.

Alan Moore Interview – Economics

Posted on by Duncan Toms

The economic problem is a strange one…

Economics is always strange. You’re not talking about anything that’s actually real. Researching a chapter for Jerusalem, I read a couple of books on economics to see if I could get my head around the facts of the situation. I was astonished when I found out the value of derivative bonds, in 2008. These are bonds that have a value in themselves that were once connected to a real thing, there might have been a bond made for the sale of a herd of sheep, but that can be sold on and they gain in value. The notional value of the world’s derivative bonds was in the region of sixty trillion. Exactly ten times the economic output of the entire planet, which is around six trillion. That means that the gap between what economists and what the world’s economic forces and the banks thought they had to play with and what actually existed was fifty-four trillion. That would seem to me the depth of the hole we are in.

So something has to be done about that. I would suggest beheading the bankers, but while it would be very satisfying and would cheer us up, it probably wouldn’t do anything practical to alter the situation. Behead the currency. Change the currency, why not? It would disempower all the people who had bought into that currency but it would pretty much empower the rest of us, the other ninety-nine percent.

via The Honest Alan Moore Interview – Part 2: The Occupy Movement, Frank Miller, and Politics.

Bank funding crisis deepens

Posted on by Duncan Toms

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.

via Bank funding crisis deepens | Golem XIV – Thoughts.

Debt or Taxes – the battle of our time

Posted on by Duncan Toms

The key is this: by bailing out the banks and the private financial system we are diverting tax and the power it confers from the Nation State and its system of democratic accountability, and instead empowering a system where debt not democracy reigns supreme. As more and more of our as yet un-earned wealth is already pledged to support the system of private debts and private debt-based wealth we find ourselves less and less able to control it or enforce even its own laws upon it. The financial system and those whose power comes from it are increasingly able to disregard any restraining laws. They can incur debts and ignore them forcing others, us, to pay them for them. How? because we have tied our selves to their system and weakened the old system which used to protect us and work for us.

via Debt or Taxes – the battle of our time

Credit Crunch 2.0?

Posted on by Duncan Toms

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.

Buckle up – Credit Crunch 2

The World Is Drowning in Debt, and Europe Laces On Concrete Boots

Posted on by Duncan Toms

Three metaphors describe Europe: drowning in debt, circular firing squad and trying to fool the money gods with an inept game of 3-card monte.

The world’s major economies are drowning in debt–Europe, the U.S., Japan, China. We all know the U.S. has tried to save its drowning economy by bailing out the parasite which is dragging it to Davy Jones Locker–the banking/financial sector– and by borrowing and squandering $6 trillion in new Federal debt and buying toxic debt with $2 trillion whisked into existence on the Federal Reserve’s balance sheet.

It has failed, of course, and the economy is once again slipping beneath the waves while Ben Bernanke and the politico lackeys join in a Keynesian-monetary cargo-cult chant: Humba-humba, bunga-bunga. Their hubris doesn’t allow them to confess their magic has failed, and rather than let their power be wrenched away, they will let the flailing U.S. economy drown.

Europe has managed to top this hubris-drenched cargo-cult policy–no mean feat. First, it has indebted itself to a breathtaking degree, on every level: sovereign, corporate and private:

Germany, the mighty engine which is supposed to pull the $16 trillion drowning European economy out of the water, is as indebted as the flailing U.S.

Second, the euro’s handlers have already sunk staggering sums into hopelessly insolvent debtor nations, for example, Greece, which has 355 billion euros of outstanding sovereign debt and an economy with a GDP around 200 billion euros (though it’s contracting so rapidly nobody can even guess the actual size). According to BusinessWeek, the E.U. (European Union), the ECB (European Central Bank) and the IMF (International Monetary Fund) own about $127 billion of this debt.

Since the ECB is not allowed to “print money,” the amount of cash available to buy depreciating bonds is limited. The handlers now own over 35% of the official debt (recall that doesn’t include corporate or private debt), which they grandly refuse to accept is now worth less than the purchase price.

From Of Two Minds

It doesn’t get any more immoral than this

Posted on by Duncan Toms

Citigroup had to pay a $285 million fine to settle a case in which, with one hand, Citibank sold a package of toxic mortgage-backed securities to unsuspecting customers — securities that it knew were likely to go bust — and, with the other hand, shorted the same securities — that is, bet millions of dollars that they would go bust. It doesn’t get any more immoral than this.

It probably gets a lot more immoral, but this sure is ugly.

via Did You Hear the One About the Bankers? – NYTimes.com.

The Corporation of London undermines all attempts to curb the excesses of finance

Posted on by Duncan Toms

It’s the dark heart of Britain, the place where democracy goes to die, immensely powerful, equally unaccountable. But I doubt that one in 10 British people has any idea of what the Corporation of the City of London is and how it works. This could be about to change. Alongside the Church of England, the Corporation is seeking to evict the protesters camped outside St Paul’s cathedral. The protesters, in turn, have demanded that it submit to national oversight and control.

What is this thing? Ostensibly it’s the equivalent of a local council, responsible for a small area of London known as the Square Mile. But, as its website boasts, “among local authorities the City of London is unique”. You bet it is. There are 25 electoral wards in the Square Mile. In four of them, the 9,000 people who live within its boundaries are permitted to vote. In the remaining 21, the votes are controlled by corporations, mostly banks and other financial companies. The bigger the business, the bigger the vote: a company with 10 workers gets two votes, the biggest employers, 79. It’s not the workers who decide how the votes are cast, but the bosses, who “appoint” the voters. Plutocracy, pure and simple.

There are four layers of elected representatives in the Corporation: common councilmen, aldermen, sheriffs and the Lord Mayor. To qualify for any of these offices, you must be a freeman of the City of London. To become a freeman you must be approved by the aldermen. You’re most likely to qualify if you belong to one of the City livery companies: medieval guilds such as the worshipful company of costermongers, cutpurses and safecrackers. To become a sheriff, you must be elected from among the aldermen by the Livery. How do you join a livery company? Don’t even ask.

To become Lord Mayor you must first have served as an alderman and sheriff, and you “must command the support of, and have the endorsement of, the Court of Aldermen and the Livery”. You should also be stinking rich, as the Lord Mayor is expected to make a “contribution from his/her private resources towards the costs of the mayoral year.” This is, in other words, an official old boys’ network. Think of all that Tory huffing and puffing about democratic failings within the trade unions. Then think of their resounding silence about democracy within the City of London.

…

The Corporation exists outside many of the laws and democratic controls which govern the rest of the United Kingdom. The City of London is the only part of Britain over which parliament has no authority. In one respect at least the Corporation acts as the superior body: it imposes on the House of Commons a figure called the remembrancer: an official lobbyist who sits behind the Speaker’s chair and ensures that, whatever our elected representatives might think, the City’s rights and privileges are protected. The mayor of London’s mandate stops at the boundaries of the Square Mile. There are, as if in a novel by China Miéville, two cities, one of which must unsee the other.

…

If you’ve ever dithered over the question of whether the UK needs a written constitution, dither no longer. Imagine the clauses required to preserve the status of the Corporation. “The City of London will remain outside the authority of parliament. Domestic and foreign banks will be permitted to vote as if they were human beings, and their votes will outnumber those cast by real people. Its elected officials will be chosen from people deemed acceptable by a group of medieval guilds …”.

The Corporation’s privileges could not withstand such public scrutiny. This, perhaps, is one of the reasons why a written constitution in the United Kingdom remains a distant dream. Its power also helps to explain why regulation of the banks is scarcely better than it was before the crash, why there are no effective curbs on executive pay and bonuses and why successive governments fail to act against the UK’s dependent tax havens.

But now at last we begin to see it. It happens that the Lord Mayor’s Show, in which the Corporation flaunts its ancient wealth and power, takes place on 12 November. If ever there were a pageant that cries out for peaceful protest and dissent, here it is. Expect fireworks – and not just those laid on by the Lord Mayor.

There Is No Way To Stop Europe’s First Domino From Falling

Posted on by Duncan Toms

Simply put, there is no way the EU authorities can stop the first domino — Greek default or equivalent writedown of its impossible debt load — from toppling the over-leveraged banks which will be rendered insolvent when forced to recognize their losses.

That leaves each nation with the politically unsavory option of bailing out its premier banks with taxpayer money, and squeezing the money out of its citizenry via higher taxes and austerity. That assumption of bank debt will in turn trigger downgrades of heavily indebted sovereign nations such as France — moves that will raise rates and make the bailout even more costly to taxpayers, who will also be suffering from reductions of income due to global recession.

Once the banks and bondholders accept a 50%–75% writedown in Greek debt, then the other debtor nations will be justified in demanding the same writedown in their crushing debts. This dynamic leads to estimates that 3 trillion euros will be needed to bail all the players out. Alternatively, total losses will equal 3 trillion euros, wiping out banks and bondholders of sovereign debt.

The German economy is simply not big enough to fund a 3 trillion-euro bailout. Germany has 81 million people and its GDP is $3.3 trillion; the EU GDP is roughly $16 trillion. Compare those with the U.S., with 315 million people and a GDP of around $14.6 trillion.

Read more: http://feedproxy.google.com/~r/google/RzFQ/~3/uGsaPER3uYA/european-financial-crisis-in-one.html#ixzz1bdVxUFPG

Matt Taibbi: My Advice to the Occupy Wall Street Protesters

Posted on by Duncan Toms

No matter what, I’ll be supporting Occupy Wall Street. And I think the movement’s basic strategy – to build numbers and stay in the fight, rather than tying itself to any particular set of principles – makes a lot of sense early on. But the time is rapidly approaching when the movement is going to have to offer concrete solutions to the problems posed by Wall Street. To do that, it will need a short but powerful list of demands. There are thousands one could make, but I’d suggest focusing on five:

1. Break up the monopolies. The so-called “Too Big to Fail” financial companies – now sometimes called by the more accurate term “Systemically Dangerous Institutions” – are a direct threat to national security. They are above the law and above market consequence, making them more dangerous and unaccountable than a thousand mafias combined. There are about 20 such firms in America, and they need to be dismantled; a good start would be to repeal the Gramm-Leach-Bliley Act and mandate the separation of insurance companies, investment banks and commercial banks.

2. Pay for your own bailouts. A tax of 0.1 percent on all trades of stocks and bonds and a 0.01 percent tax on all trades of derivatives would generate enough revenue to pay us back for the bailouts, and still have plenty left over to fight the deficits the banks claim to be so worried about. It would also deter the endless chase for instant profits through computerized insider-trading schemes like High Frequency Trading, and force Wall Street to go back to the job it’s supposed to be doing, i.e., making sober investments in job-creating businesses and watching them grow.

3. No public money for private lobbying. A company that receives a public bailout should not be allowed to use the taxpayer’s own money to lobby against him. You can either suck on the public teat or influence the next presidential race, but you can’t do both. Butt out for once and let the people choose the next president and Congress.

4. Tax hedge-fund gamblers. For starters, we need an immediate repeal of the preposterous and indefensible carried-interest tax break, which allows hedge-fund titans like Stevie Cohen and John Paulson to pay taxes of only 15 percent on their billions in gambling income, while ordinary Americans pay twice that for teaching kids and putting out fires. I defy any politician to stand up and defend that loophole during an election year.

5. Change the way bankers get paid. We need new laws preventing Wall Street executives from getting bonuses upfront for deals that might blow up in all of our faces later. It should be: You make a deal today, you get company stock you can redeem two or three years from now. That forces everyone to be invested in his own company’s long-term health – no more Joe Cassanos pocketing multimillion-dollar bonuses for destroying the AIGs of the world.

via My Advice to the Occupy Wall Street Protesters | Politics News | Rolling Stone.

Reasons the Wall Street Protesters are Protesting

Posted on by Duncan Toms

They came by the thousands, and then the tens of thousands. As the crowd swelled in Foley Square massing for a march to Wall Street, I was most struck by its diversity. They were young, old and middle-aged; black, white, Hispanic and Asian; college kids, professionals, workers and the unemployed. They had come to march on Wall Street, called by 15 of New York’s largest unions in an act of solidarity with the Occupy Wall Street movement in Liberty Park.

They were rimmed by the massive, impersonal edifices of a government they felt no longer cared about them – and they were preparing to confront the banks and speculators further downtown who had hijacked the state for their own private interests. They spoke with a diversity of voices and held signs covering a spectrum of demands. But it could all be summed up in one word: fairness.

I talked with a bus driver, a nurse, a retired teacher, a salesman and an actor. (Check out my slideshow of the event to see photos.) Here is some of what they told me:

Dorothy Ahmahd, an RN sporting a T-shirt of the National Nurses Union, said, “Nurses are supporting this movement because we see a lot of our patients who once had jobs, but are no longer able to pay for health care. We know this country’s deficit is being balanced with cuts from poor people who can’t pay.” What does she want? “Taxation across the board so our patients can get good health care – no more loopholes for rich people or corporate America to slide through…” and Medicare for all.

Jesse Mendoza is a bus driver in the Bronx, who characterizes himself as “the upper poor,” struggling to make it even though he has a job. He wants an end to the fight against workers. He said his union had seen more than 700 station agents laid off recently, as well as bus and train operators, and feared that give-backs extracted from other public sector unions, like the CSEA, were coming next for him.

Bill Buster is an actor and union member (AFTRA). He lives in the neighborhood of Liberty Park where the Occupy Wall Street protesters are encamped and started getting involved by bringing food to them. Then he was shocked into action when he witnessed the mass arrests on the Brooklyn Bridge last Saturday. Dressed in a suit and tie, he was outraged at the media’s portrayal of the protesters: “It’s just been insulting and patronizing the way the mainstream media has singled out only the young who they can portray as hippies; they do not portray the senior citizens that are involved with us; they do not portray the professionals; they’re taking all the cheap shots they can.” Declaring the movement welcomes “Republicans, Democrats, conservatives, who are all impacted because they live in this country,” he added that he knew bankers and Wall Street lawyers who were active in the protests after having lost their jobs.

But perhaps the retired teacher summed it up best. Telling me, “the system is broken and we are no longer providing the promise America always has,” she held up a hand-made sign saying, “Economic Justice 4 All.”

Images from here
Text from here

Slavoj Zizek at Liberty Plaza

Posted on by Duncan Toms

Extracts of Slavoj Zizek’s speech 9 October at Occupy Wall Street:

They tell you we are dreamers. The true dreamers are those who think things can go on indefinitely the way they are. We are not dreamers. We are awakening from a dream which is turning into a nightmare. We are not destroying anything. We are only witnessing how the system is destroying itself. We all know the classic scenes from cartoons. The cart reaches a precipice but it goes on walking, ignoring the fact that there is nothing beneath. Only when it looks down and notices it, it falls down. This is what we are doing here. We are telling the guys there on Wall Street, “Hey, look down!”

…

Here we don’t think of prohibition. Because the ruling system has even suppressed our capacity to dream. Look at the movies that we see all the time. It’s easy to imagine the end of the world. An asteroid destroying all life and so on. But you cannot imagine the end of capitalism. So what are we doing here? Let me tell you a wonderful old joke from communist times.

A guy was sent from East Germany to work in Siberia. He knew his mail would be read by censors, so he told his friends, “Let’s establish a code. If the letter you get from me is written in blue ink, it is true what I said. If it is written in red ink, it is false.” After a month, his friends get a first letter. Everything is in blue. It says, this letter, “Everything is wonderful here. Stores are full of good food. Movie theatres show good films from the West. Apartments are large and luxurious. The only thing you cannot buy is red ink.”

This is how we live. We have all the freedoms we want, but what we are missing is red ink. The language to articulate our non-freedom. The way we are taught to speak about freedom war and terrorism and so on falsifies freedom. And this is what you are doing here: You are giving all of us red ink.

There is a danger. Don’t fall in love with yourselves. We have a nice time here. But remember: Carnivals come cheap. What matters is the day after, when we will have to return to normal life. Will there be any changes then? I don’t want you to remember these days, you know, like, “Oh, we were young, it was beautiful.” Remember that our basic message is: We are allowed to think about alternatives. The rule is broken. We do not live in the best possible world. But there is a long road ahead. There are truly difficult questions that confront us. We know what we do not want. But what do we want? What social organization can replace capitalism? What type of new leaders do we want?

Remember: The problem is not corruption or greed. The problem is the system that pushes you to give up. Beware not only of the enemies, but also of false friends who are already working to dilute this process.

…

We are not communists. If communism means the system which collapsed in 1990, remember that today those communists are the most efficient, ruthless capitalists. In China today we have capitalism which is even more dynamic than your American capitalism but doesn’t need democracy. Which means when you criticize capitalism, don’t allow yourselves to be blackmailed that you are against democracy. The marriage between democracy and capitalism is over.

The change is possible. … We know that people often desire something but do not really want it. Don’t be afraid to really want what you desire.