Category Archives: neo-liberalism

Jonathan Cook on “Brexit Hysteria and the Liberal Mind”

I do not ordinarily reprint articles in full, but have decided to break with normal policy to promote Jonathan Cook’s exceptionally important article. Cook understands and brilliantly dissects the febrile atmosphere after Brexit and urges a way forward.

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The enraged liberal reaction to the Brexit vote is in full flood. The anger is pathological – and helps to shed light on why a majority of Britons voted for leaving the European Union, just as earlier a majority of Labour party members voted for Jeremy Corbyn as leader.

A few years ago the American writer Chris Hedges wrote a book he titled the Death of the Liberal Class. His argument was not so much that liberals had disappeared, but that they had become so coopted by the right wing and its goals – from the subversion of progressive economic and social ideals by neoliberalism, to the enthusiastic embrace of neoconservative doctrine in prosecuting aggressive and expansionist wars overseas in the guise of “humanitarian intervention” – that liberalism had been hollowed out of all substance.

Liberal pundits sensitively agonise over, but invariably end up backing, policies designed to benefit the bankers and arms manufacturers, and ones that wreak havoc domestically and abroad. They are the “useful idiots” of modern western societies.

The liberal British media is current awash with articles by pundits on the Brexit vote I could select to illustrate my point, but this one by Guardian columnist Zoe Williams, I think, isolates this liberal pathology in all its sordid glory.

Here is a revealing section, written by a mind so befuddled by decades of neoliberal orthodoxy that it has lost all sense of the values it claims to espouse:

“There is a reason why, when Marine le Pen and Donald Trump congratulated us on our decision, it was like being punched in the face – because they are racists, authoritarian, small-minded and backward-looking. They embody the energy of hatred. The principles that underpin internationalism – cooperation, solidarity, unity, empathy, openness – these are all just elements of love.”

A love-filled EU?

One wonders where in the corridors of the EU bureaucracy Williams identifies that “love” she so admires. Did she see it when the Greeks were being crushed into submission after they rebelled against austerity policies that were themselves a legacy of European economic policies that had required Greece to sell off the last of its family silver?

Is she enamoured of this internationalism when the World Bank and IMF go into Africa and force developing nations into debt-slavery, typically after a dictator has trashed the country decades after being installed and propped up with arms and military advisers from the US and European nations?

What about the love-filled internationalism of NATO, which has relied on the EU to help spread its military tentacles across Europe close to the throat of the Russian bear? Is that the kind of cooperation, solidarity and unity she was thinking of?

Williams then does what a lot of British liberals are doing at the moment. She subtly calls for subversion of the democratic will:

“The anger of the progressive remain side, however, has somewhere to go: always suckers for optimism, we now have the impetus to put aside ambiguity in the service of clarity, put aside differences in the service of creativity. Out of embarrassment or ironic detachment, we’ve backed away from this fight for too long.”

That includes seeking the ousting of Jeremy Corbyn, of course. “Progressive” Remainers, it seems, have had enough of him. His crime is that he hails from “leftwing aristocracy” – his parents were lefties too, apparently, and even had such strong internationalist principles that they first met in a committee on the Spanish civil war.

But Corbyn’s greater crime, according to Williams, is that “he is not in favour of the EU”. It would be too much trouble for her to try and untangle the knotty problem of how a supreme internationalist like Corbyn, or Tony Benn before him, could be so against the love-filled EU. So she doesn’t bother.

Reversing the democratic will

We will never know from Williams how a leader who supports oppressed and under-privileged people around the world is cut from the same cloth as racists like Le Pen and Trump. That would require the kind of “agile thinking” she accuses Corbyn of being incapable of. It might hint that there is a leftwing case quite separate from the racist one – even if Corbyn was not allowed by his party to advocate it – for abandoning the EU. (You can read my arguments for Brexit here and here.)

But no, Williams assures us, Labour needs someone with much more recent leftwing heritage, someone who can tailor his or her sails to the prevailing winds of orthodoxy. And what’s even better, there is a Labour party stuffed full of Blairites to choose from. After all, their international credentials have been proven repeatedly, including in the killing fields of Iraq and Libya.

And here, wrapped into a single paragraph, is a golden nugget of liberal pathology from Williams. Her furious liberal plea is to rip up the foundations of democracy: get rid of the democratically elected Corbyn and find a way, any way, to block the wrong referendum outcome. No love, solidarity, unity or empathy for those who betrayed her and her class.

“There hasn’t been a more fertile time for a Labour leader since the 1990s. The case for a snap general election, already strong, will only intensify over the coming weeks. As the sheer mendacity of the leave argument becomes clear – it never intended to curb immigration, there will be no extra money for the NHS, there was no plan for making up EU spending in deprived areas – there will be a powerful argument for framing the general election as a rematch. Not another referendum, but a brake on article 50 and the next move determined by the new government. If you still want to leave the EU, vote Conservative. If you’ve realised or knew already what an act of vandalism that was, vote Labour.”

A coup in the making

Williams and the rest of the media, of course, are not making these arguments in a vacuum. Much of the Labour shadow cabinet has just resigned and the rest of the parliamentary party are trying to defy the overwhelming democratic will of their membership and oust Corbyn. His crime is not that he supported Brexit (he didn’t dare, given the inevitable reaction of his MPs) but that he is not a true believer in the current neoliberal order, which very much includes the EU.

Here is what one of the organisers (probably a shadow cabinet minister) of this coup-in-the-making says:

“The plan is to make Corbyn’s job as leader extremely difficult in the hope of pushing him to resign, with most MPs refusing to serve as shadow ministers, show up on the frontbench in the House of Commons, support him at PMQs or formulate policy under his leadership.”

This was presumably said with a straight face, as though Corbyn has not been undermined by these same Blairite MPs since day one of his leadership. This is not a new campaign – it has simply been forced to go more public by the Brexit vote.

Labour MPs do not just want to oust a leader with massive support among party members. They have hamstrung him from the outset so that he could not lead the political revolution members elected him to begin. And now he is being made to pay the price because he privately backs a position that, as the referendum has just shown, has majority support.

The neoliberal prison

The Brexit vote is a huge challenge to the left to face facts. We want to believe we are free but the truth is that we have long been in a prison called neoliberalism. The Conservative and Labour parties are tied umbilically to this neoliberal order. The EU is one key institution in a transnational neoliberal club. Our economy is structured to enforce neoliberalism whoever ostensibly runs the country.

That is why the debate about Brexit was never about values or principles – it was about money. It still is. The Remainers are talking only about the threat to their pensions. The Brexiters are talking only about the role of immigrants in driving down wages. And there is good reason: because the EU is part of the walls of the economic prison that has been constructed all around us. Our lives are now only about money, as the gargantuan bail-outs of the too-big-to-fail banks should have shown us.

There is a key difference between the two sides. Most Remainers want to pretend that the prison does not exist because they still get privileges to visit the living areas. The Brexiters cannot forget it exists because they are never allowed to leave their small cells.

The left cannot call itself a left and keep whingeing about its lost privileges while denouncing those trapped inside their cells as “racists”. Change requires that we first recognise our situation – and then have the will to struggle for something better.

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Jonathan Cook won the Martha Gellhorn Special Prize for Journalism. His latest books are “Israel and the Clash of Civilisations: Iraq, Iran and the Plan to Remake the Middle East (Pluto Press) and “Disappearing Palestine: Israel’s Experiments in Human Despair” (Zed Books). His website is www.jkcook.net.

Click here to read the same article published by Counterpunch.

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this is the EU — so take it or leave it… #5. Greece and the tyranny of Brussels

“In the euro area, the countries in the periphery have nothing at all to offset austerity. They are simply being asked to cut total spending without any form of demand to compensate. I think that is a serious problem.

“I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that’s what’s happened in Greece.

“It is appalling and it has happened almost as a deliberate act of policy which makes it even worse”. [Bold highlight added]

— Lord Mervyn King, former Governor of the Bank of England. 1

“The Greek people have been living through hell during the last six years, and unfortunately they trusted that Tsipras [PM] would put an end to the extreme austerity measures, which are combined with a total undemocratic regime. Unfortunately, instead of putting an end, he put his signature to a third memorandum, which is even worse than the previous two…

“People are back on the streets protesting for their rights and dignity because right now they’re being asked to pay taxes which amount to almost the totality of their revenue. They’re asked to give up their homes… They’re asked to surrender public property, which is privatized at very, very low prices. And, they’re also asked to give up democracy”

— Zoe Konstantopoulou, lawyer and former Speaker of Hellenic Parliament. 2

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On 13th July [2015], the democratic elected Greek government of Alexis Tsipras was brought to its knees by the European Union. The “agreement” of 13th of July is in fact a coup d’état. It was obtained by having the European Central Bank close down the Greek banks and threaten never to allow them to open up again, until the Greek government accepted a new version of a failed program. Why? Because official Europe could not stand the idea that a people suffering from its self-defeating austerity program dared elect a government determined to say “No!”.

So begins the call for “A plan B in Europe” put together by a group of prominent European left-leaning politicians from Parti de Gauche (France), Die Linke (Germany), Red Green Alliance (Denmark), Socialist Party (SP) (Ireland), Bloco de Esquerda (Portugal), and Syriza (Greece). Top of the bill is Yanis Varoufakis (a principle author, I imagine, given some of the polemical flourishes within this signed but otherwise uncredited page-long call to action).

The piece continues:

We must learn from this financial coup. The euro has become the tool of economic and governmental dominance in Europe by a European oligarchy hiding behind the German government, delighted to see Mrs Merkel doing all the « dirty work » other governments are incapable of undertaking. This Europe only generates violence within nations and between them: mass unemployment, fierce social dumping and insults against the European Periphery that are attributed to Germany’s leadership while parroted by all the “elites”, the Periphery’s not excluded. The European Union has thus become an agent of an extreme right wing ethos and a vehicle for annulling democratic control over production and distribution throughout Europe. 3

Click here to read the full statement.

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Now let us go back nine months – back to the eve of the Greek referendum during the dog days of last summer, and just before the extraordinary ‘oxi’ vote which momentarily reverberated across our western hemisphere.

Yanis Varoufakis [3:45 mins in]: Let me tell you something which is probably unknown. Ever since we declared the referendum and we incensed our European partners we had the most interesting proposals coming from Brussels. Perhaps this referendum and the impasse it represents concentrated several minds in Brussels and we’ve had some really good proposals – proposals we would sign on the dotted line for.

Paul Mason: You have a proposal you would sign on the dotted line for?

Varoufakis: Yes, we do.

Mason: Where is it?

Varoufakis: Well, I’m not going to tell you. It’s somewhere in this building. But the crucial part of the story is that before this proposal becomes a genuine negotiating document which we can sign off on Monday, the people have to empower us with a “no”.

From the Channel 4 news interview embedded above broadcast on July 3rd 2015 that is also available here.

You can find the same clip here on Varoufakis’ blog.

Shortly thereafter [July 5th] the people of Greece, perhaps in light of Varoufakis’ advice, went to the polls and voted overwhelming in favour of rejecting the Eurogroup deal with its demands for increasing doses of “austerity” and ‘Washington Consensus’-style ‘conditionalities’ — the enforced privatisation of public services and other forms of so-called ‘deregulation’. To which the response from Brussels was to immediately double down by issuing still harsher neoliberal demands. With this, the mask of European social democracy fell away completely.

Nobel laureate economist, Paul Krugman, was one who helped to promote the hashtag #ThisIsACoup when he wrote in the New York Times:

This Eurogroup list of demands is madness. The trending hashtag #ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for.

Left Unity (which has a loose alliance with political parties Syriza and Podemos) also sent a message of support to the Greeks:

The people of Greece have resisted every threat, every piece of establishment propaganda telling them a No vote would mean ruin, and asserted their democratic rights. This will be a No heard around the world.

Now is the time to celebrate – and to step up our solidarity ahead of the Troika’s next move. Come along to what will now be a victory rally at the TUC’s Congress House, organised by Greece Solidarity Campaign.

And the Greeks had indeed empowered their government with a resounding ‘no’, but instead of fighting on, Syriza under Tsipras’ leadership swiftly capitulated in what must be one of the fastest political U-turns of all time. In response, Varoufakis resigned, refusing to criticise his friend Tsipras, and also declining an invitation to join a small breakaway faction who hoped to restore the party’s anti-austerity ticket on which Tsipras and Syriza had stood little more than six months previously.

So there is a mystery here that remains. Varoufakis, who prides himself on openness, has simply never explained what actually happened during those most momentous days in early July. Specifically, what became of that proposal from Brussels he was so keen “to sign on the dotted line”. Surely he owes the Greek people a fuller explanation.

Moreover, while Varoufakis was quick to attribute blame for the Eurogroup failures on the inflexibility of Wolfgang Schäuble and fellow German Karl Lamers, he has to a large extent absolved other key players including, most notably, President of the ECB, Mario Draghi for their part in “the coup” (his words).

I have consistently defended Varoufakis and Tsipras and been scathing of others on the left for being too hurried in passing judgement and unduly hypercritical (as many earlier posts testify). Caught up in the drama, like others hoping Syriza’s election signified the beginning of truly revolutionary reforms, I confess that I became a cheerleader for both.

With the benefit of hindsight it is clear that Syriza and Varoufakis were both tremendously guilty of an over-reliance on the efficacy of “reasonableness” (more here), because ‘reasonableness’ only ever makes headway when it engages with opposition that is principled and reasoned. Against the irrational, it is blunt, and against the unscrupulous it becomes a danger to itself. Yet Syriza and Varoufakis seem incapable of learning this simple lesson. This is what Varoufakis wrote in the abstract to his “Confessions of an Erratic Marxist” [December 2013]:

Should we use this once-in-a-century capitalist crisis as an opportunity to campaign for the dismantling of the European Union, given the latter’s enthusiastic acquiescence to the neoliberal policies and creed? Or should we accept that the Left is not ready for radical change and campaign instead for stabilising European capitalism? This paper argues that, however unappetising the latter proposition may sound in the ears of the radical thinker, it is the Left’s historical duty, at this particular juncture, to stabilise capitalism; to save European capitalism from itself and from the inane handlers of the Eurozone’s inevitable crisis. 4

Throughout the crisis, he and the party he once represented at the Eurogroup meetings have been chewed up and spat out time and again and yet his response has been to remain unruffled and reasonable in his continued fight (hardly the right word) “to save European capitalism from itself”.

Today Varoufakis leads a parallel campaign Democracy In Europe 2025 made up of lecture tours and larger academic-style conferences making speculative calls for a Plan B in Europe. Beyond the well-meaning rhetoric, the movement is entirely bereft of strategy. And my immediate question to Varoufakis is actually this: why must we wait until 2025 to bring democracy (a gift of the ancient Greeks) back to Europe? After all he knows better than most that a week in politics is an exceedingly long time – so a decade might as well be an aeon.

Here then, to redress the balance of earlier posts (at the risk of angering readers and friends alike), I present the condemnatory appraisal courtesy of political commentator James Petras, who in March 2015 (a mere two months after Syriza were elected) wrote the following:

The vast majority of Greeks, who voted for Syriza, expected some immediate relief and reforms.  They are increasingly disenchanted.  They did not expect Tsipras to appoint Yanis Varoufakis, a former economic adviser to the corrupt neo-liberal PASOK leader George Papandreou, as Finance Minister. Nor did many voters abandon PASOK, en masse, over the past five years, only to find the same kleptocrats and unscrupulous opportunists occupying top positions in Syriza, thanks to Alexis Tsipras index finger.

Nor could the electorate expect any fight, resistance and willingness to break with the Troika from Tsipras’ appointments of ex-pat Anglo-Greek professors.  These armchair leftists (‘Marxist seminarians’) neither engaged in mass struggles nor suffered the consequences of the prolonged depression.

Syriza is a party led by affluent upwardly mobile professionals, academics and intellectuals.  They rule over (but in the name of) the impoverished working and salaried lower middle class, but in the interests of the Greek, and especially, German bankers.

They prioritize membership in the EU over an independent national economic policy.  They abide by NATO, by backing the Kiev junta in the Ukraine, EU sanctions on Russia, NATO intervention in Syria/Iraq and maintain a loud silence on US military threats to Venezuela! 5

[bold highlight added]

Click here to read the full article by James Petras.

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By latest estimates total Greek debt is 384 billion euros, or US$440 billion. That’s approaching nearly twice the size of Greece’s annual GDP.  A decade ago, in 2007-08 before the global crash, Greek debt was roughly half of what it is today, in terms of both total debt and as a percent of GDP.  Greek debt was actually less than a number of Eurozone economies.  So Greece’s debt has been primarily caused by the 2008-09 crash, Greece’s six year long economic depression [that] followed, the extreme austerity measures imposed on it by the Troika during this period which has been the primary cause of its long depression, and the Troika’s piling of debt on Greece to repay previously owed debt.

Contrary to European media spin, it’s not been rising Greek wages or excessive government spending that has caused the US$440 billion in Greek debt. Since 2009 Greek annual wages have fallen from 23,580 to less than 18,000 euros. Government spending has fallen from 118 billion euros to 82 billion.

writes Jack Rasmus in an extremely detailed overview of the state of the Greek crisis in light of the recent parliamentary vote (passed by a narrow margin of 153 to 145) to implement the latest demands of “the Troika” in order to ensure another tranche of unpayable loans. “Bailouts” that, as Rasmus explains at length, are then returned directly to the creditors:

As a recent in depth study by the European School of Management and Technology, ‘Where Did the Greek Bailout Money Go?, revealed in impeccably researched detail, Greek debt payments  ultimately go to Euro bankers. For example, of the 216 billion euros, or US$248 billion, in loans provided to Greece by the Troika in just the first two debt deals of May 2010 and March 2012, 64 percent (139 billion euros) was interest paid to banks on existing debt; 17 percent (37 billion euros) to Greek banks (to replace money being taken out by wealthy Greeks and businesses and sent to northern Europe banks), and 14 percent (29 billion euros) to pay off hedge funds and private bankers in the 2012 deal. Per the study, less than 5 percent of the 216 billion euros went to Greece to spend on its own economy. As the study’s authors concluded, “ the vast majority (more than 95 percent) went to existing creditors in the form of debt repayments and interest payments”.  And that’s just the 2010 and 2012 Troika deals. Last August’s third deal is no doubt adding more to the totals. 6

[bold highlight added]

Click here to read Jack Rasmus’ full article published in Counterpunch.

The cycles of debt-repayment might literally be never-ending, because Greece will never be able to fully repay all of its (odious) debts. It is a situation compounded because Greece’s already floundering economy is completely suffocated by the Troika’s imposed “austerity” regime.

But this disastrous situation is no accident. The trap in which Greece finds itself satisfies two neo-liberal objectives. Firstly, Greece becomes so impoverished that it is forced to sell state assets at rock-bottom prices. Secondly, the sustained wealth transfer from the pockets of the ordinary Greeks into the hands of the bankers helps to prop up a failed financial system.

Setting the bizarre academic justifications aside, and overlooking the deeper reasons Greece became so indebted in the first place, what we see is how the Troika – two thirds of which is the EU – has put the sanctity of debt repayment far above the sanctity of human well-being. So whenever Greece comes up gasping for air, the IMF and the EU repeatedly pushes it back under again:

The media persists in calling the looting of Greece a “bailout.”

To call the looting of a country and its people a “bailout” is Orwellian. The brainwashing is so successful that even the media and politicians of looted Greece call the financial imperialism that Greece is suffering a “bailout.”

writes former Assistant Secretary of the Treasury for Economic Policy and former Associate Editor of the Wall Street Journal, Paul Craig Roberts in a recent article entitled “We Have Entered The Looting Stage of Capitalism”. In the piece, Roberts explains the EU’s role and the IMF’s apparent policy shift as follows:

Having successfully used the EU to conquer the Greek people by turning the Greek “leftwing” government into a pawn of Germany’s banks, Germany now finds the IMF in the way of its plan to loot Greece into oblivion.

The IMF’s rules prevent the organization from lending to countries that cannot repay the loan. The IMF has concluded on the basis of facts and analysis that Greece cannot repay. Therefore, the IMF is unwilling to lend Greece the money with which to repay the private banks.

The IMF says that Greece’s creditors, many of whom are not creditors but simply bought up Greek debt at a cheap price in hopes of profiting, must write off some of the Greek debt in order to lower the debt to an amount that the Greek economy can service.

The banks don’t want Greece to be able to service its debt, because the banks intend to use Greece’s inability to service the debt in order to loot Greece of its assets and resources and in order to roll back the social safety net put in place during the 20th century. […]

The way Germany sees it, the IMF is supposed to lend Greece the money with which to repay the private German banks. Then the IMF is to be repaid by forcing Greece to reduce or abolish old age pensions, reduce public services and employment, and use the revenues saved to repay the IMF.

As these amounts will be insufficient, additional austerity measures are imposed that require Greece to sell its national assets, such as public water companies and ports and protected Greek islands to foreign investors, principally the banks themselves or their major clients. […]

In other words, Greece is being destroyed by the EU that it so foolishly joined and trusted. The same thing is happening to Portugal and is also underway in Spain and Italy. The looting has already devoured Ireland and Latvia (and a number of Latin American countries) and is underway in Ukraine.

The current newspaper headlines reporting an agreement being reached between the IMF and Germany about writing down the Greek debt to a level that could be serviced are false. No “creditor” has yet agreed to write off one cent of the debt. All that the IMF has been given by so-called “creditors” is unspecific “pledges” of an unspecified amount of debt writedown two years from now.

The newspaper headlines are nothing but fluff that provide cover for the IMF to succumb to pressure and violate its own rules. The cover lets the IMF say that a (future unspecified) debt writedown will enable Greece to service the remainder of its debt and, therefore, the IMF can lend Greece the money to pay the private banks. […]

We have entered the looting stage of capitalism. Desolation will be the result. 7

Click here to read Paul Craig Roberts’ full article.

The overarching agenda of the EU – a plan rarely mentioned above a murmur – is to fuse its member nations under unelected technocratic governance for the benefit of a few corporations and the oligarchs who own them. So the notion that sticking by the EU is some sense an act of European solidarity is extremely misguided. Having already sold many of its people down the river, however, we are rapidly approaching a critical and perilous moment.

The far-right is now on the rise in many parts of Europe – Greece being an example, although thankfully Golden Dawn remains very much a minority party. And this swing towards ring-wing extremism is a direct consequence of the EU’s savage economic policies combined with its abject failure to save refugees and resolve the so-called “migrant crisis” (more in a later piece). As this alarming political shift occurs, the EU does next to nothing to address it. No debt relief for Greece or the other struggling member states. No let up on enforced “austerity” or privatisation. Neo-liberalism to the bitter end. But then, after Greece was collectively punished for the insolence of its ‘oxi’ vote last summer, only the most dewy-eyed believers can remain in serious doubt of the EU’s callous indifference towards the plight of its poorest citizens.

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1 Quote taken from “Euro depression is ‘deliberate’ EU choice, says former Bank of England chief” written by Mehreen Khan, published in The Telegraph on March 1, 2016. http://www.telegraph.co.uk/business/2016/03/01/europes-depression-is-deliberate-eu-choice-says-former-bank-of-e/ 

2 Quote taken from an article entitled “The Ugly Truth Behind the Greek Bailout” written by Robert Hunziker, published by Counterpunch on May 10, 2016. http://www.counterpunch.org/2016/05/10/the-ugly-truth-behind-the-greek-bailout/ 

3 From a statement entitled “A plan B in Europe” from Plan B for Europe. https://www.euro-planb.eu/?page_id=96&lang=en. The statement continues:

It is a dangerous lie to assert that the euro and the EU serve Europeans and shield them from crisis. It is an illusion to believe that Europe’s interests can be protected within the iron cage of the Eurozone’s governance “rules” and within the current Treaties. President Hollande’s and Prime Minister Renzi’s method of behaving like a “model student”, or in fact a “model prisoner”, is a form of surrender that will not even result in clemency. The President of the European Commission, Jean-Claude Juncker, said it clearly: « there can be no democratic choice against the European treaties ». This is the neoliberal adaptation of the « limited sovereignty » doctrine invented by the Soviet leader Brezhnev in 1968. Then, the Soviets crushed the Prague Spring with their tanks. This summer, the EU crushed the Athens Spring with its banks.

We are determined to break with this “Europe”. It is the basic condition needed to rebuild cooperation between our peoples and our countries on a new basis. How can we enact policies of redistribution of wealth and of creation of decent jobs, especially for the young, ecological transition and the rebuilding of democracy within the constraints of this EU? We have to escape the inanity and inhumanity of the current European Treaties and remould them in order to shed the straightjacket of neoliberalism, to repeal the Fiscal Compact, and to oppose the TTIP.

We live in extraordinary times. We are facing an emergency. Member-states need to have policy space that allows their democracies to breathe and to put forward sensible policies at the member-state’s level, free of fear of a clamp down from an authoritarian Eurogroup dominated by the interests of the strongest among them and of big business, or from an ECB that is used as a steamroller that threatens to flatten an “uncooperative country”, as it happened with Cyprus or Greece.

4 From “Confessions of an Erratic Marxist in the Midst of a Repugnant European Crisis” written by Yanis Varoufakis, published on December 10, 2013. http://yanisvaroufakis.eu/2013/12/10/confessions-of-an-erratic-marxist-in-the-midst-of-a-repugnant-european-crisis/ 

5 From an article entitled “Lies and Deceptions on the Left: The Politics of Self Destruction” written by James Petras, published by Global Research on March 22, 2015. http://www.globalresearch.ca/lies-and-deceptions-on-the-left-the-politics-of-self-destruction/5438105

6 From an article entitled “Greek Debt Negotiations: Will the IMF Exit the Troika?” written by Jack Rasmus, published in Counterpunch on May 26, 2016. http://www.counterpunch.org/2016/05/26/greek-debt-negotiations-will-the-imf-exit-the-troika/ 

7 From an article entitled “We Have Entered The Looting Stage Of Capitalism” written by Paul Craig Roberts, published on May 25, 2016. http://www.paulcraigroberts.org/2016/05/25/we-have-entered-the-looting-stage-of-capitalism-paul-craig-roberts/ 

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this is the EU — so take it or leave it… #3. ‘The Brussels Business’

“Who runs the European Union?” This is the question front and centre of the excellent 2012 documentary The Brussels Business which takes the viewer on “a journey into the corridors of power of the biggest economy on earth – the European Union.” What filmmakers Matthieu Lietaert (Belgium) and Friedrich Moser (Italy) find is a Byzantine complex of corporate entanglements and high-powered lobby groups.

Assiduously researched and documented, the real importance of this film is that almost uniquely it presents an exposé of the European Union from a leftist perspective:

Produced by:
Steven Dhoedt (VisualAntics – Be)
Friedrich Moser (green + blue communication – Austria)

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Additional: latest example of EU corporatocracy at work

On Tuesday [May 31st] the European Commission together with Facebook, Twitter, YouTube and Microsoft announced a code of conduct “to combat the spread of illegal hate speech online in Europe”:

The definition of illegal online content is based on the Framework Decision on Combatting Racism and Xenophobia which criminalises the public incitement to violence or hatred directed against a group of persons or a member of such a group defined by reference to race, colour, religion, descent or national or ethnic origin. 1

In accordance with the directive, views and opinions that the aforementioned corporations deem “hate speech” will be removed within 24 hours, whereas “alternative” content deemed “a counter narrative” to “hate speech” will be actively promoted. In other words, the tech giants who already own most of the internet will be put in charge of policing it too:

In short, the “code of conduct” downgrades the law to a second-class status, behind the “leading role” of private companies that are being asked to arbitrarily implement their terms of service. This process, established outside an accountable democratic framework, exploits unclear liability rules for companies. It also creates serious risks for freedom of expression as legal but controversial content may well be deleted as a result of this voluntary and unaccountable take down mechanism. 2

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1 http://ec.europa.eu/news/2016/05/20160531_en.htm

2

Today, on 31 May, European Digital Rights (EDRi) and Access Now delivered a joint statement on the EU Commission’s “EU Internet Forum”, announcing our decision not to take part in future discussions and confirming that we do not have confidence in the ill considered “code of conduct” that was agreed.

Launched at the end of 2015, the “EU Internet Forum” was meant to counter vaguely defined “terrorist activity and hate speech online”. The discussions were convened by the European Commission and brought together almost exclusively US-based internet companies and representatives of EU Member States. While no civil society organisations were invited to attend the discussions on terrorism, several civil society representatives were allowed to take part in some of the discussions on online hate speech. However, civil society was systematically excluded from the negotiations that led to the voluntary “code of conduct” for IT companies – an official document that was presented today, despite the lack of transparency and public input into its content.

From the joint statement released by European Digital Rights (EDRi) and Access Now on May 31, 2016. https://edri.org/edri-access-now-withdraw-eu-commission-forum-discussions/ 

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this is the EU — so take it or leave it… #2. TTIP and other “free trade” deals

Irish MEP Luke “Ming” Flanagan visits the TTIP reading room where he can read texts that have already been agreed on – in the language of the EU this constitutes “democratic oversight”. He is not allowed a camera or tape recorder:

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The agreement we have secured means that the EU Member States will fully support the European Commission’s recent trade strategy. Central to this strategy are ambitious and comprehensive trade deals that will substantially boost the UK’s growth and economic security. […]

Concluding all the trade deals already underway could ultimately be worth in total more than £20 billion a year to UK GDP. These include the UK’s top trade priority: an agreement between the EU and the US (the Transatlantic Trade and Investment Partnership), which alone could add £10 billion to UK GDP. 1

Taken from “The Best Of Both Worlds”; the government policy document that explains Cameron’s negotiated deal with the EU. The Transatlantic Trade and Investment Partnership (TTIP) features centrally in the new arrangements.

The first point to note in the extract reprinted above is that a claim that TTIP “will substantially boost the UK’s growth and economic security” is certainly bogus. Long-term economic projections of any kind are notoriously unreliable under the best of circumstances, but here we have a far from impartial assessment. Indeed, as its title “The Best of Both Worlds” makes blatant, this is a sales pitch.

Embedded below is an excellent short film produced by wikileaks about the American-led “free trade agreements” collectively known as the 3Ts: namely Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and the lesser known Trade in Services Agreement (TISA). Quite literally everyone should watch this film:

In reality, these treaties have little to nothing to do with facilitating trade in any ordinary sense, but enable a greater transfer of power away from democratic government and into the hands of the unelected corporatocracy. Operating at their heart is a parallel judicial system known as the Investor-state dispute settlement (ISDS), which is conducted on the basis of secret tribunals open solely to the transnational corporations (our governments do not have access).

This legal arrangement permits companies to sue states for anything that adversely affects their profits. Thus, under the rules of TTIP (the precise details of which remain as a closely guarded secret), national governments will lose jurisdiction to a kangaroo court that sits in judgement of all impediments to profit-making. Paring back regulations under the guise of “free trade” will thereby rig the market still more in the favour of a few special interests.

Such a thoroughgoing dismantlement of regulations has tremendous ramifications both for individuals and for our communities. It threatens the environment, our education system, healthcare (the NHS is especially endangered) and even privacy. In short, if ratified the 3Ts will impact the lives of all of those who live in signatory nations (and that includes nearly all developed countries). The EU is committed to signing two of these treaties – TTIP and also TISA.

Here are a few extracts from a detailed analysis of TTIP published by Der Spiegel International and entitled “Corporation Carte Blanche: Will US-EU Trade Become Too Free?”:

Lori Wallach had but 10 minutes to speak when she stepped up to podium inside Room 405 at George Washington University, located not too far away from the White House. Her audience was made up of delegates currently negotiating the trans-Atlantic free trade agreement between the United States and the European Union.

They had already spent hours listening to presentations by every possible lobbying group — duty bound to hear myriad opinions. But when Wallach, a trade expert for the consumer protection group Public Citizen, took the stage, people suddenly started paying attention. The 49-year-old Harvard lawyer, after all, is a key figure in international trade debates.

“The planned deal will transfer power from elected governments and civil society to private corporations,” she said, warning that the project presents a threat of entirely new dimensions. [bold emphasis added]

The same article, which was published more than two years ago, then outlines how TTIP will impact our societies:

After the third round of negotiations, an unusually broad alliance of anti-globalization groups, NGOs, environmental and consumer protection groups, civil rights groups and organized labor is joining forces to campaign against TTIP.

These critics have numerous concerns about the treaty – including their collective fear that the convergence of standards will destroy important gains made over the years in health and nutrition policy, environmental protection and employee rights. They argue the treaty will make it easier for corporations to turn profits at the public’s expense in areas like water supply, health or education. It would also clear the path for controversial technologies like fracking or for undesired food products like growth hormone-treated meat to make their way to Europe. Broadly worded copyrights would also restrict access to culture, education and science. They also believe it could open the door to comprehensive surveillance. 2

Click here to read the full article in Der Spiegel.

More recently [Feb 22nd], the Guardian published an article exposing how “TTIP deal poses ‘real and serious risk’ to NHS, says leading QC”:

The controversial transatlantic trade deal set to be agreed this year would mean that privatisation of elements of the NHS could be made irreversible for future governments wanting to restore services to public hands, according to a new legal analysis.

The legal advice was prepared by one of the UK’s leading QCs on European law for the Unite trade union, which will reveal on Monday that it has been holding talks with the government about the Transatlantic Trade and Investment Partnership (TTIP) deal between Europe and the US.

Unite believes the government has been keeping Britain in the dark over the impact of the deal and argues the NHS should be excluded from the trade deal. The government dismissed the idea that TTIP poses a threat as “irresponsible and false”.

TTIP would give investors new legal rights, which extend beyond both UK and EU law as well as NHS contracts, according to Michael Bowsher QC, a former chair of the Bar Council’s EU law committee who was tasked by Unite to prepare the advice.

Bowsher said he had concluded that the deal poses “a real and serious risk” to future UK government decision making regarding the NHS.

“We consider that the solution to the problems TTIP poses to the NHS – and which is likely to provide the greatest protection – is for the NHS to be excluded from the agreement by way of a blanket exception contained within the main text of TTIP,” Bowsher said. 3

Click here to read the full article published in the Guardian.

I disagree, however. Ad hoc exclusions are entirely insufficient. TTIP is so dreadful that we should fight to stop it clean in its tracks.

Voting to remain, gives assent to Cameron’s negotiated EU agreement as summarised in the “The Best Of Both Worlds” policy document and everything contained within it. Since TTIP is central to the agreement, a vote to remain will then be reinterpreted as a signal of our tacit approval to go ahead with TTIP.

If, on the other hand, we vote to leave the EU, then this automatically keeps Britain out of TTIP and potentially nips TTIP in the bud altogether. There are, of course, other “trade deals” in the pipeline, and we need to be committed to blocking them all. First and foremost though, the target must be TTIP.

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Additional:

On May 3rd, Press TV invited Paul Craig Roberts, the former Assistant Secretary of US Treasury, to debate with Sean O’Grady, the Finance Editor of The Independent over TTIP and the other “free trade agreements”:

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1 From paragraph 2.62–3 on p. 23–24 of “The Best Of Both Worlds: the United Kingdom’s special status in a reformed European Union”, published by UK government in February 2016 to “satisf[y] the duty to provide information set out in section 6 of the European Union Referendum Act 2015”.

2 From an article entitled “Corporation Carte Blanche: Will US-EU Trade Become Too Free?” written by Michaela Schiessi, published in Der Spiegel on January 23, 2014. http://www.spiegel.de/international/business/criticism-grows-over-investor-protections-in-transatlantic-trade-deal-a-945107.html

3 From an article entitled “TTIP deal poses ‘real and serious risk’ to NHS, says leading QC” written by Ben Quinn, published in the Guardian on February 22, 2016. http://www.theguardian.com/business/2016/feb/22/ttip-deal-real-serious-risk-nhs-leading-qc

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Whoops austeritypocalypse! or why unbounded economic reasonableness runs into such trouble…

Q: At the onset of the crisis, the former Finance Minister Papaconstantinou likened the Greek economy to the “Titanic” heading straight for the iceberg. Do you also feel as if you are standing on the bridge of the “Titanic”?

A: No. The “Titanic” sank a while ago. We’re steering the lifeboat and throwing lifebelts to those drowning around us.

This was the response Greek Prime Minister, Alexis Tsipras, gave in an exclusive interview to German magazine Stern1

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“austerity”, what is it good for…?

As the economies of the western world continue to flounder, with Germany too (Europe’s last remaining industrial powerhouse) reeling just a little from the greater crisis, debt reduction is still regarded as the key component to any recovery programme. To meet these ends, all our governments have been overseeing huge cuts in public services, welfare payments especially gouged, in concerted efforts to reduce their deficits. This death of our societies by a thousand cuts of “austerity” being the recommended cure which mainstream economists have called for, and though alternative voices have no less insistently pointed out that “austerity measures” are inherently counterproductive (since they reduce tax revenues), these dissenting voices continue to be marginalised.

A few years ago Thomas Herndon stepped forward. Herndon, a university student and thus less rigid in his outlook, caused quite a rumpus – as a consequence, he has since been rewarded with his own wikipedia entry. This sudden burst of fame coming after he inadvertently stumbled upon grievous errors in an influential paper entitled Growth in a Time of Debt (published 2010), authored by eminent Harvard professors, Carmen Reinhart and Ken Rogoff – Rogoff, a former chief economist at the IMF.

In their paper, Reinhart and Rogoff had purported to show that whenever national debt is in excess of 90% of GDP, growth is “roughly cut in half”. This correlation had subsequently been quoted by policy-makers across the world, as well as routinely served up as empirical proof that there was simply no viable alternative to our continuing “austerity” programmes. Most notably, perhaps, former EU Commissioner for Economic and Monetary Affairs, Olli Rehn, leant rather heavily on Reinhart and Rogoff’s work.

But then doubting Thomas Herndon decided to check their figures for himself. And, to his own astonishment, discovered that one of the most frequently cited justifications for the imposed “austerity” strategy actually rested upon a few careless mistakes on a spreadsheet!

[Herndon had] spotted a basic error in the spreadsheet. The Harvard professors had accidentally only included 15 of the 20 countries under analysis in their key calculation (of average GDP growth in countries with high public debt).

Australia, Austria, Belgium, Canada and Denmark were missing.

Oops.

Herndon and his professors found other issues with Growth in a Time of Debt, which had an even bigger impact on the famous result. The first was the fact that for some countries, some data was missing altogether. 2

Click here to read more in this BBC news article.

Taken aback by this unexpected challenge from a novice, Reinhart and Rogoff felt obliged to issue a response:

We are grateful to Herndon et al. for the careful attention to our original Growth in a Time of Debt AER paper and for pointing out an important correction to Figure 2 of that paper. It is sobering that such an error slipped into one of our papers despite our best efforts to be consistently careful. We will redouble our efforts to avoid such errors in the future.

Confessing to their blunder, but keen also to defend their professional reputation, they casually added:

We do not, however, believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work.

There has since been no halt to the economic gouging and scourging of Europe. Despite the more immediate evidence coming out of Greece, Spain, Portugal, and every other place where such “measures” have been most strongly administered, that prove “austerity” isn’t working. And even when all other factors, social and human factors, are set aside, and success or failure is judged within the exceedingly narrow terms of its proponents, we see that the sovereign debt burdens in all these countries have continued to rise. 3

Given such a lack of success, the response is obviously to double-down. Apply more stringent “austerity”; if the original cuts have failed, then they needed to be deeper. In former times the doctors would just have ordered more leeches, or the priests would have demanded a tightening of the cilice. Tougher love. Just too bad if the supposed antidote is the worst of the poison, because orthodoxy asserts that, poison or not, it is the best and only remedy. The really important thing is to never let mere facts (especially incalculable costs like human misery) get in the way of a damned fine economic theory!

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 whose debt is it anyway…?

But how did these sovereign debt burdens arise in the first place? Or put another way, the related question might be asked, to whom are the debts actually owed? This second question is rarely broached, but in 2013 award-winning business journalist, Harald Schumann, sought a direct answer to precisely this question. He journeyed across the stricken eurozone countries and poised the question to those working inside the so-called “Troika” (IMF, European Central Bank and EU Commission) as well as significant politicians, economists, lawyers, journalists and even the occasional central banker. The result, a brilliantly constructed documentary entitled The Secret Bank Bailout, is embedded below:

I highly recommend watching the documentary in full, but would also like to offer a brief overview.

Schumann asks which parties were actually rescued by the bailouts, and finds that contrary to what ordinary Germans were led to believe (this is a German documentary originally titled Staatsgeheimnis Bankenrettung) the people living in the poorer eurozone states received barely a penny of this apparent ‘foreign aid’ – our own media perpetuates the self-same falsehood.  Because rather than letting the creditors and the banks absorb their speculative losses, these financial institutions were deemed “too big too fail” and protected. So the bailouts were never used to support the governments, but always passed on to the creditors of major banks, especially ones in Germany and France, who had taken the unwise risks that caused the crisis – the original losses often due to property bubbles in places like Spain and Ireland. (The whole notion of “too big too fail” is, of course, a contravention of even the most basic tenets of free market capitalism.)

And who have been the ultimate recipients of all this bailout money? Well, that has remained a closely guarded secret. We ought to be asking why, of course, which Schumann’s documentary does. He also seeks to penetrate the secret itself.

In the next sections, I will present a further overview comprising highlights of Schumann’s discoveries, and following the same route (then a little beyond it) as he investigated country by country, across the blighted eurozone.

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 Ireland

The Irish people have been forced to take on 70 billion euros of additional debt to pay off foreign creditors.

Stephen Donnelly, independent Irish MP, says that the ECB held the Irish government virtually at gunpoint:

“The suspicion is that European Central Bank said ‘You will continue to pay these bondholders [the mainly foreign creditors] to whom you owe nothing or we will pull the emergency funding out of your banking system, thereby collapsing your banking system, thereby collapsing your economy.’ To me that is gunboat diplomacy… [with a little prompting] or blackmail. It is a very, very serious threat for a central bank to have made in actually forcing a sovereign nation to surrender its sovereignty to bailout an independent group of investors. Was the ECB acting illegally?”

Brian Hayes, Irish Deputy Minister of Finance:

“Of course that was a position that was foisted on the Irish people as a result of the decisions taken… It was the majority view of the ECB that this money had to be paid back.”

And where did the Irish bailout money go? A full breakdown of the bondholders of Anglo Irish bank is available here. (The list was publicly released by blogger Guido Fawkes.)

Germany has the most with 15 of the bond holders. Who between them hold 5.3 trillion euros.

France is next with 10 bond holders.  Who have an estimated 4 trillion.

Britain is third with 9 who have around 3 trillion.

The Swiss have 6 but who have about 8.5 trillion.

America has only three and hold only a trillion.

Other nations include, Spain, Belgium, Portugal, Holland Finland, Norway, Sweden, Poland, South Africa and Italy.

The bondholders include some of the world’s largest banks: Deutsche, Soc Gen, Barclay’s, PNB Paribas, UniCredit (who don’t appear on the list but own Pioneer Investments) and Wells Fargo (also not on the list but who own European Credit Management). There is also Goldman Sachs and Rothschild Group4

As Harald Schumann says “It’s like a Who’s Who of the financial world.”

Back to Stephen Donnelly:

“No country on earth in history has ever paid that amount of money back without having its own monetary policies… you gradually bleed, year on year on year. And now you really do depend on Europe. There was a quote by Nelson Mandela where he said something like: ‘It is the greatest tragedy of the human condition that we must endure so much pain before arriving at a compromise that we always knew was going to be needed.’”

The first lesson, therefore, is that the solution – any practicable solution – has to include debt cancellation.

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 Spain

The Spanish people have been forced to take on 40 billion euros of additional debt to pay off foreign creditors.

Harald Schumann confronted Luis De Guindos, Spanish Minister of Finance, with advice he was given Stephen Donnelly that they would be better to let (some of) the banks fail because “banks have to be allowed to fail”. But Luis De Guindos disagrees:

“I think that the Irish situation is totally different from the Spanish situation. As I have said before, the size of the balance-sheet of the Irish banks in comparative terms with the GDP of Ireland was three times larger than the case of Spain. So I think that while in the case of Ireland the cost of recapitalising the banks has been above 20% of the Irish GDP, in the case of Spain we are talking 4% of GDP. So it’s a totally different situation and it’s not comparable at all.”

But economist Juan Rallo disagrees with De Guindos, and beginning with the figures themselves: “The real figure is not 40 billion, but 80 or 90 billion…”

And who are the creditors of the Spanish banks (particularly Bankia)? When Schumann manages to get hold of a list (thanks to “friendly people that help me”) he discovers that Deutsche Bank again features prominently.

Juan Moreno is a lawyer working with the 15M protest movement, who filed the lawsuit for the closure of Bankia to save the Spanish taxpayers from a bailout. When asked if the system would have collapsed, Moreno says:

“If you were to drop Bankia it would probably lead to the collapse of other banks, but not the big banks like BBVA, Santander, La Caixa, [Banco] Sabadell, or [Banco] Popular.”

Back to Luis De Guindos:

“A money market economy with fiat money is unstable. And we have an example that we let the banks go down… it was the Great Depression. It was the worst depression we had over the last century.”

Juan Moreno’s response:

“It’s all scaremongering. I don’t want that, I want numbers. I want to know what would really happen if they were to go bankrupt… With what we know now we would say this bank is beyond saving. We can’t continue to pour billions of euros into it. The creditors must take losses…

“The trial uncovered that the bank figures were falsified by upper management, but now we discover that the same had happened at the lower management levels. So a banking culture developed where employees were rewarded with bonuses so that the upper level did not realise how bad things were at the local branch level… The judge said that there was indeed public control of the bank, but the government supervisors played along. Letting the fox guard the hens is good for nothing.

“They’re all criminals: those in charge of Bankia and the public supervisors. If they’d let the savings banks go bankrupt, we would have found out what the politicians did with the money. Much of the debt that cannot be repaid is money that went to political parties, to city administrations, for work in the autonomous southern regions to companies connected to the government. These revelations would have made the political class disappear.”

So what is Moreno’s advice to the Germany citizens who are paying to prop up this corrupt system…?

“Numbers. The balance-sheet. It’s simple. You have to know the facts and apply the laws.”

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 Cyprus

Meanwhile, depositors in Cypriot banks (savers as opposed to taxpayers) had more than 6 billion euros seized overnight in a so-called bail-in to pay off foreign creditors. This has crippled many businesses and stifled economic growth in a different way.

Panicos Demetraides, Governor of the Central Bank of Cyprus:

“It’s a change from past bailouts that we have had to bail-in on this occasion [from] uninsured depositors in the two big Cypriot banks. The burden of this bail-in has been borne partly by non-residents, but also partly by residents, Cypriot companies and households. About two-thirds of the burden has been borne actually by non-residents and one-third by residents.”

But as German MP Gerhard Schick (Green Party) explains:

“The European Central Bank allowed the Cypriot Central Bank to give money to banks in Cyprus even though they were insolvent. That’s a real mistake because then non-functioning structures are upheld and taxpayers’ money – and that’s what we’re talking about with a central bank – is endangered. In this way the ECB slowed down the rescue programme and made it possible for many creditors to withdraw their money and invest it elsewhere… The ECB was a creditor acting in self-interest to protect its own money. This conflict of interest should never have been allowed to happen, but it did because central bank money was put into bad banks.”

Back to Panicos Demetraides:

“Certainly the delays offered more informed investors [the chance] to protect their own investments. And they put the less informed investors at a disadvantage.”

Does this mean the ECB allowed other European banks time to withdraw their money? That must be some sort of rumour, says Demetraides. It is a rumour that must persist until there is an independent investigation, but as Gerhard Schick points out:

“The problem is that the ECB is a closed shop, and neither the European Parliament nor national parliaments are really able to call it to account when it breaks the rules.”

Harris Georgiades, Cypriot Minister of Finance:

“For us it was a take it or leave it situation. A decision that we accepted under pressure, and with no time to negotiate extensively. Essentially both of our kneecaps have been broken, and now we are asked to run.”

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 Greece

Greece entered the crisis with a debt-to-GDP ratio of 110% and with around 10% unemployment. It was then put through an “austerity programme” supposedly designed to tackle the debt. Five years and several thousand suicides later, unemployment currently stands at 30% and debt-to-GDP is at around 180%.

This tremendous spike in debt remains in spite of ‘haircuts’ known as the Greek “Private sector involvement” or PSI, the first announced in July 2011, and quickly followed by PSI Mk2 (after PSI Mk1 failed), which involved a impressive sounding 50% reduction in the face value of Greek government bonds (GGB). 5 But then, as Yanis Varoufakis, current Greek Finance Minister, but as then a lowly Professor of Economics, wrote soon after:

In short, and so as not to overlabour the point, PSI Mk2 is dead in the water. The shenanigans of the shadow banking sector (which, lest we forget, includes not only the hedge funds but also, remarkably, the ‘proper’ banks shady Special Vehicles) plus the predictable deterioration of the Greek economy have put paid to it. The negotiations may go on for a little while longer, the announcement of a brilliant agreement may be made but, in truth, the idea that the Greek haircut will put Greece’s debt-to-GDP ratio back on a course towards 120% has sunk without trace. And if you need hard evidence for this, the European Summit of 9th December provided it even before 2011 was seen off: Officially, Europe’s great and good announced the end of PSI as a policy of the new ESM; Europe’s future central, permanent bailout fund. It had all been a mistake, they seemed to confess. 6

Greece has never been bailed out, only the European banks (well over 90% of the bailout money returning to them), and likewise the ‘haircut’ actually caused more problems than it solved. In particular, it permitted the looting of social security and public pension funds that are mandated by law to invest in government bonds – the following is taken from a special report published by Reuters:

Greece’s pension funds – patchily run in the first place, say unionists and some politicians – have been savaged by austerity and the terms of the international bailout keeping the country afloat.

Workers and pensioners suffered losses of about 10 billion euros ($13 billion) just in the debt restructuring of March 2012, when the value of some Greek bonds was cut in half. That sum is equal to 4.6 percent of the country’s GDP in 2011.

Many savers blame the debacle on the Bank of Greece, the country’s central bank, which administers three-quarters of pension funds’ surplus cash. Pensioners and politicians accuse it of failing to foresee trouble looming, or even of investing pension fund money in government bonds that it knew to be at high risk of a ‘haircut’ – having their value reduced. 7

Click here to read the full Reuters report.

In June 2014, Yanis Varoufakis was interviewed by Harald Schumann. Excerpts would feature in another collaboration between Arpad Bondy and Schumann; their follow-up documentary The Trail Of The Troika (in German, Macht ohne Kontrolle – Die Troika), which plotted another route across the continent in order to show how “austerity measures” have utterly failed to rescue the eurozone economies, and how in the process “the Troika” has also flagrantly breached its own European treaty regulations. Unfortunately, an English version of this more recent documentary is at present unavailable on youtube or elsewhere (so far as I can ascertain – but I will certainly embed a version as and when I find one). Meanwhile, uploads of the various interviews filmed during its making are now freely available, and embedded below is Schumann’s unabridged interview with Varoufakis, of which I have again selectively transcribed some of the answers he gave last summer:

What was the bailout for? The bailout was not in order to bail Greece out. Greece was never bailed out. The bailout loan that was extended in May of 2010 had a very singular, simple purpose. It was to transfer banking losses from the asset books of banks, not only Greek ones, but also French ones and German ones, onto the shoulders of the taxpayers. Initially the Greek taxpayers – because they knew that these shoulders were too weak to bear those losses, eventually it was always part of the plan to transfer them onto the shoulders of the German, and the French, and the Dutch and the Finnish taxpayers. And “the Troika” is here supervising this sinister transfer. [5:45 mins]

Smart people in Brussels, especially in Frankfurt, and of course Berlin, knew in May 2010 that Greece would never be able to repay its debts. They knew that again in the Spring of 2012 when they extended the second loan. They know it again now. In their minds they have already written off a very large bulk of the billions and billions that was given to the Greek state to give to the Greek banks and to give to the rest of the banks. All other things being equal, of course, “the Troika” would much rather more money was repaid than less money. But all other things are not equal. At this very moment in time, as we speak, while the Greek banks have huge black holes that we all know, even though they are not being admitted to, something similar is happening in the rest of the eurozone. Deutsche Bank, Finanzbank, BNP Paribas are skating on thin ice. They will never admit to it. And part of the angst and of the anxiety of the powers in Brussels, in Frankfurt, in Berlin, is how not to admit to the German, to the French, to the Dutch, to the Finnish people, that their banking sector was never really put back on an even keel. 8 [7:15 mins]

In 2010, what they had done was this: they lied to the Greek people and to the German people. They said to the Greek people: We have avoided bankruptcy. And they said to the German people that the Greeks, they were waivered, now we are going to punish them with austerity. But we will lend them the money because European solidarity demands that. In reality, what they were doing was transferring banking losses from the bankers – the European bankers, all of them – onto the shoulders first of the Greek taxpayers and eventually onto the German taxpayers, because the Greek taxpayers could not shoulder all of this money.

So they had lied to the German taxpayers. They said: We are not going to haircut the Greek debt. They were always going to haircut the Greek debt. They knew it. What they did with first bailout loan was to shift that big bulk, a 110 billion, from the bankers’ loss book onto the shoulders of Europe’s taxpayers. And then, after that had been effected, of course then they had to haircut – to do what they said they were never going to do – and who did they haircut? They haircut the small bondholders and the pension funds… So the PSI, the second bailout, the haircut of the private sector, was part of the original process of shifting the burden of adjustment and the cost of the crisis from the shoulders of those who caused it, onto the shoulders of those who didn’t cause it in Greece and in Germany. And all that in the name of European solidarity. And then they wonder why right-wing parties of the extreme part of the spectrum are winning power – or, at least, winning seats in the European Parliament. [21:30 mins]

Asked whether he thought the 2008 crisis had been caused as a result of incompetence or due to a more deliberate act of conspiracy, Varoufakis replied:

It wasn’t a conspiracy. It was a very simple operation: How do we stay in power? Mr [Jean-Claude] Juncker said it. Once he admitted: we know what needs to be done, we just don’t know how to do it and remain in power. Now don’t forget that before 2008, 2010, all parties of government, whether they were Christian-Democratic, Social-Democratic, it doesn’t matter. They had developed this extremely close relationship with the financial sector. They had looked at the financial sector as the cow that would bear the milk from which they would feed all, not only their political parties and careers, but also the welfare state – from the point of view of the Social-Democrats.

There was a kind of Faustian bargain between our politicians and bankers. We will let you do what you want, and you pay us a small amount proportional in order to fund our states. So when the crisis hit – which was completely unexpected for them – they had neither the analytical power nor the moral authority to go to these bankers and say: You know what, you’re out. You’re bankrupt, we’re taking over the banks… 9 [24 mins]

Finally, here was what Yanis Varoufakis, the economist (and not yet Finance Minister) said when asked for “any realistic proposal [to] how the dire economic situation in Greece can be improved”:

Well, we have to stop doing what we are doing and do something quite diferent. And there are two levels at which you should see this, because let’s not forget that once we have a monetary union you can’t talk about the overcoming of the crisis in one part of it in isolation to the others. It would be like talking about how South Dakota would escape the Great Depression in 1933 without the rest of the United States going through the New Deal. So we need a New Deal for Europe… 10 [32:30 min]

But, I have to insist: The solution must be European, because the crisis is European. And there are things we can do within two weeks to end this euro-crisis without violating any of the European Union treaties as long as we have the political will to do it. 11 [34:30 min]

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there is a better alternative… (and always was)

Q: Your Finance Minister Varoufakis said that he is not afraid of an Armageddon.

A: He said in parliament: if you enter into negotiations, you are not seeking a breakup. But you have to keep a breakup in mind as a contingency. I share this view.

 

Q: So you have a Plan B in case Greece does decide to exit from the single currency?

A: We don’t need a contingency plan because we will stay in the eurozone. But we won’t achieve this objective at the expense of the weak – like our previous government.

 

– Alexis Tsipras in same interview published in Stern magazine.

On April 16th, Varoufakis was invited to speak at a press conference hosted by the Brookings Institute which is based in Washington. In answer to a question about being trapped in a position where the Greeks are left with little alternative but to default, Varoufakis replied:

I would willingly, eagerly and enthusiastically accept any terms offered to us if they made sense. I would have no problem with the Memorandum of Understanding if it was founded upon a reform programme that attacked the worse cases of rent-seeking in Greece, and made the reforms that were necessary in order to enhance efficiency and social justice. If it came for the planet Mars, if it came from Berlin, if it came from Brussels, if it came from Portugal, from Slovakia, I don’t care which, I would have embraced it. The problem we have with these conditions – you know, the take it or leave it conditions – is not so much the authoritarianism, it is that fact that we’ve tried that medicine and it hasn’t worked…

It is almost precisely three years ago since I wrote a post entitled ‘austerity’ or ‘Grexit’: is there really no better alternative for Greece? There have since been more than two and a half years of unrestrained “austerity” (prior to Syriza’s victory), a “take it or leave it” Hobson’s choice, which has deepened the crisis not only in Greece but across the entire eurozone. ‘Grexit’ has never been a realistic alternative, and as Syriza have maintained from the outset, they have no intention whatsoever of ditching the euro. So ‘Grexit’ becomes ‘Grexident’, in other words, an impossibility. Because any accidental Greek exit can only occur if it is accidentally on purpose, and that would mean ‘Grexpulsion’ – a term the mainstream has yet to adopt for obvious reasons.

In Washington, Varoufakis was once again unequivocal about Syriza’s position:

“Toying with ‘Grexit’, which is something we don’t do – we are refusing to discuss it, because as I have said before even worrying about it is like worrying about being hit by a comet in a universe in which comets are attracted to you if you are worried about them – toying with ‘Grexit’ and ideas of amputating Greece is profoundly anti-European because anybody who claims that they know what the effect of a ‘Grexit’ is, are deluded.” [52 mins]

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Which brings us to an impasse. Accept “austerity” or get out! Jump off a cliff or suffer slow death by a thousand cuts. Is there really no genuine alternative for the Greeks?

Well, the answer to that question actually depends upon what you value. If you think that all debts are sacrosanct, then it necessarily follows that the Greeks must go on paying the banks to their bitter end. That the debt is unpayable doesn’t matter. That the debt is the consequence of so much ineptitude and malfeasance within the banking system doesn’t matter either. The Greeks must cough up because otherwise the chaos will worsen (or so we are again constantly given to believe). But if you value human life above money, and recognise that debts that cannot be repaid will never be repaid, then you can begin to think more constructively. In fact, the alternative becomes immediately and blindingly apparent. Since a debt cancellation will inevitably come sooner or later, the only real question is how much longer must the Greeks be punished in the meantime.

A way-out of all this mess is entirely possible. It doesn’t involve “austerity” and does not necessarily require a Greek exit from the eurozone. What is needed is simply an end to the bottomless banker bailouts and then new money being made available for reconstruction projects and other productive enterprise within Greece, Spain and elsewhere. Such a ‘New Deal’ injection is unlikely to be offered by the IMF, and neither will it be supported by the likes of Angela Merkel. But it can be fought for by the Greek people themselves, and in this battle to stop the wanton destruction of their nation, as fellow Europeans we should stand with them, recognising that the same aggressive financial interests that have already eviscerated Greece, will be pillaging our own lands soon enough.

The paragraphs above are taken from the post I wrote three years ago – yet so little has significantly altered that it remains pertinent enough to repeat it.

Back to Varoufakis who puts flesh on those barest of bones regarding the ‘New Deal’ option for Europe (and presenting the way ahead without any recourse to deficit spending by governments – so heretical to the neo-liberals):

Europe as a whole, the eurozone as a whole, is typified not only by a mountain of great private and public debts, which we do have. But there is another mountain hiding behind it: a huge mountain of idle savings with nowhere to go. And it should be our joint project to energise, to motivate, those idle savings, to help them overcome their great fear that keeps them idle, and channel them into productive investments – not investments into assets, but investments into real productive capacity. Now, how do we do this? Well, we have the European Investment Bank [EIB] that could do this. And we have the European Central Bank which is embarking on quantitative easing. Well, why can’t the EIB fund a major ‘New Deal’ for Europe, that channels investment to the private sectors of the countries and regions within countries that have a major output gap? [44 mins]

The whole of Varoufakis speech at the Brookings Institute and the subsequent Q+A session is embedded below:

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last frenzy of reasonableness…?

Just days after Syriza were swept to election victory on January 26th, economist and former US Assistant Secretary of the Treasury for Economic Policy under Reagan, Paul Craig Roberts, published an article entitled “Is Democracy Dead In The West?” which began:

We will find out the answer to the question posed in the title in the outcome of the contest between the new Greek government, formed by the political party Syriza, and the ECB and the private banks, with whose interests the EU and Washington align against Greece.

Roberts, once known as the “Father of Reaganomics” but more recently a repentant neo-liberalist and outspoken opponent of the financial elites, continues:

The new [Syriza] government wants to moderate the agreements made by previous Greek governments that sold out the Greek people. The new government wants to stop giving away at bargain prices Greek public assets to clients of its creditors, and the new Greek government wants to raise the Greek minimum wage so that the Greek people have enough bread and water on which to live.

However, for the private bank creditors, for Merkel’s Germany that stands behind the banks, for Washington which could care less about the Greeks, for the Greek elites who see themselves as “part of Europe,” Syriza is something to be rid of.

Adding that:

A purpose of the “Greek financial crisis” is to establish that EU members are not sovereign countries and that banks that lend to these non-sovereign entities are not responsible for any losses with regard to the loans. The population of the indebted countries are the responsible parties. And these populations must accept the reduction of their living standards in order to ensure that the banks do not lose any money.

This is the “New Democracy.” It is a resurrection of the old feudal order. A few super-rich aristocrats and everyone else serfs obliged to support the ruling order. 12

Click here to read Paul Craig Robert’s full article.

The question is, who is actually right here? Certainly we ought to acknowledge that elements in Paul Craig Roberts’ more conspiratorial outlook are irrefutable, recognising that Goldman Sachs did indeed deliberately help to hide previous government debt in order to extend credit to Greece. The Greeks were set up; this has been established – details of Goldman Sachs involvement can be found in this previous post.

Varoufakis is diplomatic, arguably too diplomatic. But then, is Paul Craig Roberts unduly pessimistic when he says that Syriza can now do “very little”, and, in either case, is the very moderate and rather modest approach of Varoufakis a good one, pragmatically speaking? Extending a hand of friendship being unlikely to impress “the powerful rich interest groups that rule the West [who] could not care less about the people over whom they rule” (to quote Roberts again, who knows them well, of course). Yet it may be effective in another way, such relentless persuasion and his “frenzy of reasonableness” at least winning the more public battle for hearts and minds. My own view is that Varoufakis (and Syriza) have adopted a sensible stance, which is in fact evidenced by the harsh criticism they have received from both extreme flanks. Appearing too flexible has made him a target for derision from the more radical (and Communist) left-wing, whereas standing his ground irritates his more powerful opponents working within the establishment (who lash out publicly whenever Varoufakis is out of earshot).

Meanwhile, ‘Grexident’, German Finance Minister Wolfgang Schäuble’s own portmanteau neologism (I gather), is now trending on twitter – not literally, of course, because it doesn’t have a celebrity angle. But the hashtag certainly exists and the tweets that include it are mostly German and Greek, alternating like a stack of incomprehensible post-it-notes. And sadly, the word ‘Grexident’ isn’t the only eurozone nonsense currently trending:

Academic-turned-finance minister Varoufakis was called “a time-waster, a gambler and an amateur”, a source privy to the closed-door talks told the news service Bloomberg.

This is according to a Guardian article published on Friday [April 24th] and entitled “Time is running out for Greece, says Eurogroup chief”. The article continues:

Jeroen Dijsselbloem, head of the eurogroup of finance ministers, told reporters in Latvia it was a “highly critical” meeting as Greece had still not agreed a comprehensive and detailed list of reforms.

Although there were positive signs, there remained “wide differences to bridge on substance”, he said.

“We are all aware that time is running out … too much time has been lost.” […]

Dijsselbloem warned on Friday that after the lack of recent progress it would be very hard to consider a new programme for Greece to cover its funding needs beyond June. He ruled out giving Greece an early slice [of] bailout cash. […]

ECB president Mario Draghi also betrayed his exasperation and warned that central bank could impose tougher conditions in return for keeping Greek banks afloat.

Weeks ago, the Riga meeting had been pencilled in as the moment when the eurozone could sign off an aid payment for Greece, but in the event ministers vented their frustration with Varoufakis for Greece’s failure to bridge the gap with creditors.

Just to remind you, Mario Draghi is not only the former vice chairman of Goldman Sachs – directly implicated in bringing the crisis to Greece – but serves as a trustee of the Brookings Institute13

So watching Varoufakis descend into the belly of the beast that is the Brookings Institute and to receive such a warm welcome and nonjudgmental reception, I must confess that I was instantly reminded of the film, Goodfellas, Martin Scorsese’s gangster classic, and of one scene in particular:

“If you’re part of a crew, nobody ever tells you that they’re going to kill you. It doesn’t happen that way. There weren’t any arguments or curses like in the movies. So your murderers come with smiles. They come as your friends, the people who have cared for you all of your life, and they always seem to come at a time when you’re at your weakest and most in need of their help.”

But Varoufakis is not easily daunted, and so, as the Guardian piece describes:

Varoufakis said the talks [in Latvia] were “intense”, but remained confident that the two sides will resolve their differences in time.

“We agreed that an agreement will be difficult but it will happen and it will happen quickly because that is the only option we have,” he told a press conference.

Varoufakis later declared: “We want an agreement and we are willing to make compromises to achieve this … The cost of not having a solution would be huge for all of us, Greece and the eurozone”. 14

In saying so, he is quite correct. Not only the Greeks, but the Germans too, whose major banks are set to carry the heaviest losses in the event of default, ought to be aware of the extreme dangers of such brinksmanship. A basic instinct for self-preservation is what Varoufakis is relying on, but for so long as the banks and other financial institutions remain confident of receiving further bailouts, it is the German taxpayers who ought to worry – as should the rest of us – because so long as they remain “too big too fail” (i.e., untouchable) then bankers like Mario Draghi and co really have nothing at stake. For once the Greeks are unable to shoulder the debt burden, as Varoufakis reminded us last summer, it will be passed on to the shoulders of the Germans and the French.

Indeed, the people of Europe stand to lose enormously if this so-called ‘Grexident’ (in reality ‘Grexpulsion’) leads to ‘Grexit’ and then to ‘Grextagion’ as it will be doubtless be called; as idiotically named as it will have been idiotically contracted and spread. Because, if no compromise can be reached in spite of Varoufakis’ tireless efforts, then sooner then we imagine we may all be standing in the Greek people’s shoes.

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Update:

A weekend can be a very long time in politics…

Unbeknownst to me, on Sunday 26th [the day before I posted this article] Yanis Varoufakis had put out a tweet in which he quoted the words of Franklin D Roosevelt, who famously said “They are unanimous in their hate for me; and I welcome their hatred”, adding simply “A quotation close to my heart (& reality) these days”:

This would be one of his final acts as chief negotiator at the Eurogroup meetings:

Greece moved to inject fresh momentum into problem-plagued talks with creditors on Monday, reshuffling its negotiating team to try and defuse tensions over its outspoken finance minister. […]

In a bid to ease tensions with lenders, the Syriza party-led coalition said the minister of international financial relations, Euclid Tsakalotos, would take over the coordination of the new team. The appointment will see the economics professor, who was raised in the UK, assuming a more active role in face-to-face negotiations with creditors.

So writes Helena Smith in the Guardian [April 27th], her report released a mere two hours after I posted.

Varoufakis told us that before he took the job he had written a pre-prepared resignation letter to carry around with him at all times, just in case he ever found himself sounding too much like a politician. Hopefully this will not be needed, and news that he has been “removed” is perhaps a little exaggerated:

[However,] one well-placed Athens official insisted that Varoufakis’s role had been upgraded “in many ways”. The official added: “To make him resign would be to retreat and the government would never do that.”

Three months after his elevation to power, prime minister Alexis Tsipras has come under extraordinary pressure to remove Varoufakis. Yet last night Tsipras said that his finance minister “is an important asset for the government, and [with creditors] he speaks their language better then they do”. In a wide-ranging interview aired on Greek TV, Tsipras rejected suggestions that his government had any intention of sacrificing the politician. Now that negotiations with creditors were in the final straight, Greece had to reorganise its negotiating team, the PM said. […]

But insiders insisted that the politician still enjoyed Tsipras’ confidence, even if the young premier was now reaching out to the German chancellor Angela Merkel in an effort to reach a political solution.

With his high popularity ratings at home, Varoufakis is credited with internationalising the country’s debt problem and raising questions over austerity economics.

“They [creditors] couldn’t counter his economic arguments rationally so they went for him claiming he didn’t understand eurozone rules and regulations, that his reforms weren’t good enough,” said one official. “Tsipras knows this is not about Varoufakis, but his government, because it has dared to take on the system that is Europe’s neoliberal doctrine. He knows that if one goes the other goes too, which is why Varoufakis is here to stay.”

I very much encourage Tsipras to stick by Varoufakis, certainly in the capacity of his chief economic advisor, if not within government itself. We so very seldom see anyone of such intelligence, integrity and courage in public office. The world needs more politicians like Varoufakis, not less.

Please note that I corrected this update after mistakenly believing that Varoufakis had stepped down from his role as Greek Finance Minister. Apologies for posting the incorrect original version.

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1 From an interview published as “Give us six more months, and we will be another country”, written by A. Albes, F. Batzoglou, A. Petzold, published by Stern on February 18, 2015. http://www.stern.de/politik/ausland/interview-with-greek-primeminister-alexis-tsipras-give-us-six-more-months-and-we-will-be-another-country-2174273.html

2 From an article entitled “Reinhart, Rogoff… and Herndon: The student who caught out the profs” written by Ruth Alexander, published by BBC news on April 20, 2013. http://www.bbc.co.uk/news/magazine-22223190

3 Here are some interesting graphs taken from an wikipedia article entitled “European sovereign-debt crisis”, which show the rise in the levels of Greek, Spanish and Portuguese debt since 1999 as compared to the average of the eurozone:

 

 

 

All three graphs (and others including those for Ireland and Cyprus) show a marked turning point around 2007–8, providing further evidence not only that “austerity” hasn’t worked (even within its own terms of debt reduction), but that the western world is actually faced with a systemic banking crisis that flared up at that time. The debt-to-GDP ratios have flattened towards the end, but even so the downturn is mostly in the projected regions.

And this is from an article written by Tyler Durden and posted on zerohedge from February 18, 2013:

“Beleaguered Prime Minister Mariano Rajoy just broke another record. As if a plague of corruption scandals was not enough, Spain’s debt-to-GDP has now reached levels not seen in over 100 years. As El Pais reports, Spanish debt levels rose at an alarming EUR 400 million per day in 2012 making for the largest annual increase in debt in the nation’s history – all the while proclaiming austerity.”

And here’s another helpful graph that goes along with the article, showing once more that rather than reducing the nation’s debt, “austerity measures” are more closely correlated to the growth of that debt:

 

 

http://www.zerohedge.com/news/2013-02-18/chart-day-spanish-debt

4 These details of a summary of more detailed notes complied here: http://www.golemxiv.co.uk/2010/10/who-are-the-bond-holders-we-are-bailing-out/ 

5 Based on figures taken from an article entitled “Greece’s PSI is Dead on Arrival: An error in search of a rationale but also a failure that may prove a harbinger for the Modest Proposal” written by Yanis Varoufakis, published on January 11. 2012:

Back to the drawing board, our European leaders came up with a deeper haircut in October 2011. They called it PSI Mk2 and even had the foolish Greek PM fall on his sword, to be replaced by a hitherto loyal ECB functionary, so as to ensure that PSI Mk 2 would become Greece’s new light on the hill; a beacon of the last glimmer of hope for a desperate nation. PSI Mk 2 envisaged an impressive sounding 50% reduction in the GGBs’ face value which, in present value terms, would result in a haircut no less than 60% (since the interest rates charged on the new bonds, that would be swapped with the old ones, could not exceed the interest rates charged by the ECB and the EU for the original bailout funds). In other words, holders of GGBs would be hair-cut in two ways: a 50% reduction in face value and an interest rate less than 5% which would cut further into the present value of the old GGBs.

http://yanisvaroufakis.eu/2012/01/11/greeces-psi-is-dead-on-arrival-an-error-in-search-of-a-rationale-but-also-a-failure-that-may-prove-a-harbinger-for-the-modest-proposal/ 

6 Ibid.

7 From a special report entitled “Greeks rage against pension calamity” written by George Georgiopoulos & Lefteris Papadimas, published in Reuters on November 30, 2012. http://www.reuters.com/article/2012/11/30/us-greece-crisis-pensions-idUSBRE8AT0CV20121130

8 Varoufakis adds:

“The one thing if I were, I am not, but if I were the CEO of Deutsche Bank, I would be very wary of the dangers from “the Troika” in Athens that is casting a critical gaze into what is happening to Greek banks. Because if “the Troika” takes a keen interest, it will have to declare that the Greek banks are beyond salvation. And the only possible outcome of that would be nationalisation of these banks.”

9 Varoufakis  adds:

“There is no doubt that there was a great deal of incompetence. Our leaders, and I have to say most of my profession – speaking as an economist – had become steadily lobotomised since the late 1970s. We didn’t have leaders who understood macroeconomics… You just let the markets perform their triumphant trick and everything will be fine. Politicians were convinced of that, their careers went swimmingly, their cosy relation with the financial sector was working out for them beautifully. When the whole thing, this bubble, collapsed, they were found wanting analytically – they didn’t understand what happened – they believed their own rhetoric and when they started realising the truth, at that point they had already misled parliaments and electorates to such an extent that they would much rather die than confess to the sins of omission and commission.” [25:45 min]

10 Varoufakis offers the following example:

Regarding the Greek situation, the Greek debt, for instance. What we need to do is, we need, since the German government is going to find it politically very difficult to go to the parliament in Berlin and say: Well, it was all a mistake, we have to write off their debt. What you can do is you can create euphemisms – you can create what Keynes referred to as bisque bonds, GDP-related bonds. The Greek government could issue particular bonds that it exchanges for the debt that the ESF [European Social Fund] holds. And those bonds could specify that they can last 30 years let’s say. In 30 years they become extinct whether they have been repaid or not. And that the coupons, the repayments, on a year to year basis depend on the level of growth in Greece. So if growth is more than 3% then it specifies particular payment. That way Mr Schäuble will be able to look at his parliamentarians and say: We haven’t haircut it, but the extent to which the Greek debts will be repaid will be linked to our success in helping Greek growth. So you make them partners in Greek growth as opposed to bailiffs who come in and take your furniture away and throw you out on the street. [33:15 min]

11 The details go as follows:

Three things: The first thing we need to do is deal with the banking sector troubles throughout the eurozone. And the way I would do it – because we know we have declared this banking union which is really a term confirms there is no banking union – so what we should do about banks is this: Banks that are found out by the ECB in September (when the ECB assumes the role of the single supervisor of the banking system) to be wanting in terms of recapitalisation to have bad assets that have not been declared so far, they should accept money from the ESM – from the European stability mechanism – directly, not through the governments, directly. And the ESM should get shares, the shareholders should be wiped out and the ECB should appoint a new board of directors – hopefully not from within the country in which the bank is domiciled. This way you Europeanise these banks. In 6 months, 12 months, you resell them – you will resell them with a profit because those shares will be purchased by the ESM at very low prices. And then the ESM gets money back, the European taxpayers get their money back, TARP-like. And you do it step by step. You don’t Europeanise all 6,000 banks. The banks that are in trouble…

The second thing you do is to deal directly with the public debt, which is getting worse everywhere – except in Germany because of the low, low interest rates due to the fact that the crisis is proceeding. The European Central Bank should make a simple announcement tomorrow morning that will cost it nothing, zero. And the announcement is this: From now on, every time a government bond matures, the ECB will service, will pay, for the proportion of that bond that corresponds to the country’s Maastricht compliant legal debt. So in the case of Italy it will be half of it. So the European Central Bank will pay for this, not the Italian government. Now I said it won’t cost the European Central Bank anything, so how can that be if it pays half of it? The answer is the ECB issues its own bonds and sells them to the Chinese, to the Russians, to whoever wants to buy them at very, very low interest rates – because the ECB is such a sterling institution – and immediately opens a direct debit account for Italy. And says to Italy: Look, within ten years, this amount of money has to go in there in order to repay the Chinese. So in other words, what I’m suggesting is that the ECB should play a management role for public debt in Europe that costs nothing, that doesn’t require printing a single euro, and does not violate any treaty. Because ths is not a bailout…

And then we have the big problem of growth. Of investment. We have an amazing dearth of investment in Europe, both in the north and in the south. Even in Germany. So what we need is really a Roosevelt-like New Deal – a very large investment programme. I am not talking about a 100 million here and a 100 million there. We need something between 8 and 9% of eurozone GDP to be invested in productive activities… That would be what we need in order to avert deflation and in order to restart growth in Europe. Now we have the European investment Bank in Europe. The European Investment Bank is three times the size of the World Bank. It could very easily effect such a large scale investment-led recovery programme in Europe. The reason why it doesn’t do it, is because the convention is that 50% of every project is funded from a nation state. The nation state is bankrupt. Waive it. And what should we do instead? We should have either the ECB issuing more bonds in order to support the EIB bonds or something simpler than that. Everyone now, including Mr [Mario] Draghi and Mr [Jens] Weidmann [President of German Bundesbank], are speaking about the need for quantitative easing in Europe. Or at least they are considering it. Now we do not want American-style or British-style quantitative easing because this simply inflates bubbles… Mr Draghi’s worried about quantitative easing because he doesn’t know which assets to buy. German assets? Italian, you know, we are going to start arguing like children amongst ourselves, as to whose assets should be purchased. Bu the European Investment Bank issues European bonds, EIB-bonds. Why not have the EIB effect quantitative easing by purchasing EIB-bonds to such an extent that the EIB ca start a New Deal for Europe programme of 8–9% of eurozone GDP with the ECB buying only its bonds, which are European bonds?  And also they are triple-A bonds. Now that a combination of those three measures would deal with the banking sector crisis, it would create a rational way of managing the Maastricht compliant and legal part of the debt… and you have a massive investment-led recovery programme.

12 From an article entitled “Is Democracy Dead In The West?” written by Paul Craig Roberts, published on January 29, 2015. http://www.paulcraigroberts.org/2015/01/29/democracy-dead-west-paul-craig-roberts/ 

13 From Bloomberg Business (bold highlight added):

Mr. Mario Draghi has been the President of Executive Board and President of European Central Bank since November 2011. Mr. Draghi served as Governor of Banca d’Italia SpA since December 29, 2005 until November 01, 2011. He served as Managing Director of The Goldman Sachs Group, Inc. until January 2006. He served as Director-general of Italy’s treasury. He served as an Adviser to the Bank of Italy, an Executive Director of the World Bank and as a member of the Group of Seven deputies. He served as the Chairman of Financial Stability Board. He has been a Director at Bank For International Settlements since June 2012. He serves as a Trustee of The Brookings Institution. He has been Member Of Governing Council of European Central bank since January 16, 2006. He served as a Member of Governing Board at Banca d’Italia SpA and served as its Member of General Councils. He served as Member of Board of Governors – Italy of Asian Development Bank until November 2011. He served as Director of Bank For International Settlements from September 2011 to November 01, 2011. Mr. Draghi has a Doctorate in Economics from the Massachusetts Institute of Technology.

http://www.bloomberg.com/research/stocks/private/person.asp?personId=13154633&privcapId=5774394

14 From an article entitled “Time is running out for Greece, says Eurogroup chief” written by Graeme Wearden, published in the Guardian on April 24, 2015. http://www.theguardian.com/business/2015/apr/24/time-is-running-out-for-greece-says-eurogroup-chief-jeroen-dijsselbloem

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Filed under analysis & opinion, austerity measures, Cyprus, debt cancellation, did you see?, Germany, Greece, Ireland, neo-liberalism, Spain

Syriza must win and be seen to win: we need solidarity across Europe

In current discussions of what Greece might or might not get in the way of concessions from the Eurozone, there has so far been relatively little appreciation of one basic political reality: as far as the governments of Spain, Portugal, Ireland, probably Italy and perhaps even France are concerned, Syriza must fail and must be seen to fail.

So begins an article by neo-liberal economic guru Andrew Lilico in Wednesday’s Telegraph. Why? Well, because of the domino effect. Although no debt deal has been reached so far, if the other Eurozone finance ministers were to agree some kind of a compromise and bailout package with Syriza, then it is a near certainty that other European nations, starting with those suffering the worst of the “austerity”, would follow suit.

Here is Lilico to elucidate further:

The reasons differ slightly between countries. The easiest case to see is perhaps Spain. In Spain, the governing party is the centre-right Partido Popular led by Mariano Rajoy. It is currently facing pressure from a far-left party, Podemos, allied to Syriza. Indeed the Podemos leader Pablo Iglesias even campaigned in partnership with Syriza and, following Syriza’s victory, at his own party’s rally he proclaimed: “Syriza, Podemos – we will win [venceremos]!” Podemos is currently leading in the polls, ahead of an election later this year. The very last thing Rajoy can afford is for Syriza’s approach to be seen to succeed, emboldening and vindicating Podemos.

As for Portugal and Ireland, where the governments stuck to bailout conditions despite the domestic pain, how would they sell concessions to Syriza to their own voters? Suppose they go back and say: “We were suckers. We shouldn’t have made all those cuts. Instead, what we really should have done was to raise the minimum wage, hire back the public sector staff that had been fired, say we weren’t going to pay our debts to our eurozone partners, cosy up to the Russians and tell the Germans they didn’t feel nearly guilty enough about World War Two. Then everyone would have said we were ‘rock stars’ and and [sic] forgiven our debts.” Do you reckon that would go down well?

Lilico is horrified by all this, saying that he worries about “amateurish hard-left lunacy” which might somehow make, what he necessarily concedes is an already terrible situation, worse again. Not that Lilico is an impartial observer. He may write for the Guardian as well as The Telegraph, but that’s just how it works these days. The mainstream left and right merged long ago. So when he suddenly pops up to ward us away from Syriza, remember that he has his own interests to worry about. Potentially serious repercussions for his consultancy firm Europe Economics, which lists as its clients government departments, regulators, the European Commission and the European Parliament. With that in mind, here’s a little more of what he writes:

The best way for [Syriza] to fail would be for it to capitulate utterly and crawl back to Greece with its tail between its legs and a few cosmetic patronising “concessions” such as renaming the “Troika” the “Consultative Committee” (or, if it makes them feel better, the “Symvouleftiki Epitropi”). If it won’t do that — and there’s a good chance that if it did try to do that then the Greek government would collapse, anyway — then things get a bit more complicated. Because if it’s bad and dangerous for Syriza to succeed inside the euro, it would be disastrous for it to succeed outside the euro.

In short, Syriza must not be allowed to succeed under any circumstances, and although he may claim to speak “from the perspective of [the] eurozone governments”, it is more accurate to say that Lilico speaks here from the perspective of the bankers and the super-rich. For instance, in the hypothetic instance of Syriza’s success, Lilico predicts a calamity. This is what he foresees:

[Syriza] would nationalise the banks and many other industries, print money to cover public spending, overthrow property rights and impose wealth taxes in a desperate attempt to obtain revenue, and many other crazy things. 1

All these, at least to the mindset of Lilico and his powerful ilk, are “crazy things”. Thus, imposing every kind of tax on wealth becomes, ipso facto, a crazy thing. And as for “print[ing] money to cover public spending”, well printing money to bail out the banks is just fine, of course. That’s called Quantitative Easing which, combined with historically low interest rates (recently turned negative in some places), is all that’s keeping the ever more precarious Ponzi scheme afloat. So don’t be mistaken: what worries Lilico is not the unfettered overproduction of money ‘out of thin air’, but an awful dread that some significant part of this new money might be misdirected “to cover public spending”. Money for public expenditure instead of funnelled into the pockets the bankers (like almost all of the money from the previous ‘Greek bailouts’); to Lilico, this is unthinkable. As for “overthrow[ing] property rights”, well I’m really not sure what Lilico means, but I think the problem might lie in his inherent inability to see beyond a certain characterisation of Syriza. His own hard-right lunacy obscuring the fact that Syriza’s actual demands are both democratic and reasonable.

In the end it is the people who matter, and in Greece, the people are suddenly taking to the streets in droves. Not to shout down government injustices, but to add their own chorus of support. Yes, pro-government rallies without a can of tear gas in sight. Can you imagine? Lilico can’t.

However, the main trouble still facing the majority of us (the 99 percent) is that evangelists of loopy free-market, neo-liberal economics such as Andrew Lilico have been ruling the roost for decades. Intent only to smooth the way for business as normal, they are already the technocrats and they have a great deal to lose if the system were ever to be radically reformed. Unfortunately, these people are now embedded, and not only within ‘think tanks’ and ‘policy forums’, but also throughout academia, which in itself ensures any dissenting voice – anyone who does not fully subscribe to the current economic orthodoxy – is conveniently sidelined as a heretic.

Yanis Varoufakis is a perfect example of just such a heretic. A Professor of Economic Theory at the University of Athens, yet Lilico entirely brushes aside his alternative vision on the grounds that it is “amateurish”. For having cornered the market in supplying economic “expertise”, the likes of Lilico are very handsomely rewarded in their role as ‘consultants’: in reality, one of an increasing number of unelected and unaccountable architects of policy, who pocket a small fortune irrespective of results. Small wonder Lilico fears Syriza’s success.

Those wishing to see real political change should get behind Syriza. I suggest that we give those like Lilico good cause to keep on squealing.

*

The following statement and call for action is taken from the Greece Solidarity Campaign website:

The European Central Bank is trying to force the new anti-austerity Greek government to its knees. Its actions provoked mass demonstrations in Athens last week in support of the government anti-austerity stance.  On Wednesday 11 February the Eurozone Finance Ministers have called an Emergency Meeting with Greece where Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis will present their plans.

The Greece Solidarity Campaign, Syriza London and other organisations are calling for a Mass Rally in support of the people of Greece on Sunday 15th February at 13.00 in Trafalgar Square. This is part of an international wave of rallies and protests in support of Greece taking place across Europe. Come along with friends and colleagues to show your support for the first anti-austerity government in Europe.

1 From an article entitled “Eurozone leaders believe Syriza must fail and be seen to fail”, written by Andrew Lilico, published in The Telegraph on February 11, 2015. http://www.telegraph.co.uk/finance/11406154/Eurozone-leaders-believe-Syriza-must-fail-and-be-seen-to-fail.html

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Filed under analysis & opinion, austerity measures, Britain, campaigns & events, debt cancellation, Greece, neo-liberalism, Spain

“Sell-Off”: new documentary charts the abolition of the NHS

A crowd-funded documentary called simply “Sell-Off” about the privatisation of NHS has just been released. The film is approximately one hour in length and constructed around interviews with those who now work, or have formerly worked, inside the NHS. With a general election around the corner, producer and director Peter Bach has decided to release his film early, and make it freely available on the internet. Embedded below is the version currently uploaded on youtube:

To read an earlier and extended post about the role of New Labour in the on-going privatisation of the NHS you might like to click here.

You can also click here to watch or else download a version on vimeo.

Click here for further information about the documentary and if you wish to make a contribution on the StartJOIN website.

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Filed under analysis & opinion, Britain, did you see?, neo-liberalism

sixty years of Bilderberg and all that…

Throughout the last decade and longer, the news media has been leaking the story of a new kind of global technocratic leadership. Often this has revolved around talk of “Davos Man”, a new taxonomic sub-group (or rather super-group) which evokes (in my own mind at least) the image of a silhouetted yet still pinstriped figure leading our ancestors out of the primordial sludge and striding forth at the head of that catwalk procession of ever more erect hominids. Java Man, Peking Man… you know what’s coming:

Davos Man is most publicly embodied in Bill Gates, the ubiquitous chairman of the Microsoft Corporation. He appeared recently, as do all main speakers at the gathering, both in person and blown up on a huge television screen. Mutterings were heard from some techies in the hall as the giant head spoke; they find the quality of Microsoft products mediocre. But to most of the executives, he is a heroic figure, and not just because he built a huge business from scratch.

That comes from an article published by The Independent as far back as 1998, which provided one of the first reports on the annual Davos shindig in the Alps – officially known as the World Economic Forum – and from whence “Davos Man” cometh. The article tells us that:

Along the main street a snake of limousines writhes in front of the conference hall, where there are guards, police dogs, and metal detectors. Each of the 2,000 people who descend on the village need an electronic security badge to enter the hall, but the badge does more than keep out riff-raff. It has an electronic code which allows the bearer to read and send messages on an elaborate computer system, and so to arrange meetings and to cut deals – in the coffee lounges, on the ski slopes, or at the exquisite dinners whose seating plans are frequently disrupted by the press of business.1

With regards to these early sightings of Davos Man in the flesh (so to speak), Richard Sennett the author of the piece, explains how these “monarchs of capitalism [who] assembly their courtiers and meet to plot all our futures” prefer to see themselves. Like Gates, our new crop of plutocrats are “ruthless and greedy”, but unlike the older crew, they are more “flexible” with a greater “tolerance for fragmentation” (whatever that means precisely) and, most importantly, these guys are properly connected – not that the old guard wasn’t.

A more recent article published by the Financial Times (in 2011) offers, however, an alternative view of the rise of Davos Man, pointing out how “As the World Economic Forum grew in importance and prominence, so outside observers [i.e., the corporate media] began to identify a new creature – ‘Davos Man’” Although the label itself was originally intended as a pejorative, apparently:

The phrase was coined by political scientist Samuel Huntington (of “Clash of Civilisations” fame). Huntington was no fan of “Davos man”, whom he regarded as elitist and loyal only to his own financial interests and to his international peer group. The delegates at Davos, Huntington later wrote disapprovingly, “have little need for national loyalty, view national boundaries as obstacles that are thankfully vanishing, and see national governments as residues from the past whose only useful function is to facilitate the elite’s global operations.”2

This is interesting because Samuel Huntington is someone very much on the inside track. Closely connected with this same “elite” (his word), Huntington is most renowned for his forecast of a coming “Clash of Civilisations”, whilst he also co-authored a notorious report – produced by another globalist group known as the Trilateral Commission – entitled “The Crisis of Democracy”, in which Huntington frets about future problems arising from “an excess of democracy” in the western world. The solution, he (and his fellows) advise, is to ensure we (Homo plebeians) are far too disorientated and beleaguered to organise any serious or sustained challenge against the powers-that-be.

Here is what Noam Chomsky wrote about the Trilateral Commission and Huntington’s report back in 1981:

The Trilateral Commission was founded at the initiative of David Rockefeller in 1973. Its members are drawn from the three components of the world of capitalist democracy: the United States, Western Europe, and Japan. Among them are the heads of major corporations and banks, partners in corporate law firms, Senators, Professors of international affairs – the familiar mix in extra-governmental groupings. Along with the 1940s project of the Council on Foreign Relations (CFR), directed by a committed “trilateralist” and with numerous links to the Commission, the project constitutes the first major effort at global planning since the War-Peace Studies program of the CFR during World War II. […]

The Trilateral Commission has issued one major book-length report, namely, The Crisis of Democracy (Michel Crozier, Samuel Huntington, and Joji Watanuki, 1975). Given the intimate connections between the Commission and the Carter Administration, the study is worth careful attention, as an indication of the thinking that may well lie behind its domestic policies, as well as the policies undertaken in other industrial democracies in the coming years. […]

The report argues that what is needed in the industrial democracies “is a greater degree of moderation in democracy” to overcome the “excess of democracy” of the past decade. “The effective operation of a democratic political system usually requires some measure of apathy and noninvolvement on the part of some individuals and groups.” This recommendation recalls the analysis of Third World problems put forth by other political thinkers of the same persuasion, for example, Ithiel Pool (then chairman of the Department of Political Science at MIT), who explained some years ago that in Vietnam, the Congo, and the Dominican Republic, “order depends on somehow compelling newly mobilized strata to return to a measure of passivity and defeatism… At least temporarily the maintenance of order requires a lowering of newly acquired aspirations and levels of political activity.” The Trilateral recommendations for the capitalist democracies are an application at home of the theories of “order” developed for subject societies of the Third World.

In Short, “The Crisis of Democracy” provides a blueprint for our current race to the bottom and politico-economic subjugation. As Chomsky details at the end of the same article:

The crucial task is “to restore the prestige and authority of central government institutions, and to grapple with the immediate economic challenges.” The demands on government must be reduced and we must “restore a more equitable relationship between government authority and popular control.” The press must be reined. If the media do not enforce “standards of professionalism,” then “the alternative could well be regulation by the government” – a distinction without a difference, since the policy-oriented and technocratic intellectuals, the commissars themselves, are the ones who will fix these standards and determine how well they are respected. Higher education should be related “to economic and political goals,” and if it is offered to the masses, “a program is then necessary to lower the job expectations of those who receive a college education.” No challenge to capitalist institutions can be considered, but measures should be taken to improve working conditions and work organization so that workers will not resort to “irresponsible blackmailing tactics.” In general, the prerogatives of the nobility must be restored and the peasants reduced to the apathy that becomes them.

This is the ideology of the liberal wing of the state capitalist ruling elite, and, it is reasonable to assume, its members who now staff the national executive in the United States….3

You can read my own fuller critique of Huntington’s “The Crisis of Democracy” in the lower half of this earlier post.

Huntington is himself well connected and part of the big club which Davos is just a smaller and supposedly more cuddly offshoot. So all this brouhaha about the rights and wrongs of Davos Man is really nothing more or less than internal bickering about the proper way for plutocrats to tyrannise. Naturally, the Financial Times are keen to play up this supposed schism (just as chocolate manufacturers are keen to bring out tantalisingly novel candy bars), and especially so when provided with the opportunity to pour scorn on an editorial, “In Praise of Davos Man”, published by their immediate competitors at The Economist. Oddly, the author of the piece which challenges The Economist‘s “paean to Davos Man”, Gideon Rachman, concedes in his own article (parenthetically) “I was working for The Economist at the time, but did not write the editorial in question”. He might just as well have added “Splitters! Splitters…!”

Which brings me at last to the main point of my own piece – that Davos Man plus Trilateralist Man [Left Twix and Right Twix, as the advert puts it] are gathering again and under cover of that more perennial darkness which cloaks the premier confab of all globalist confabs – the annual Bilderberg meeting, which kicks off tomorrow in Copenhagen. Founded in 1954, it is precisely sixty years to the weekend since “the great and the good” first secretly convened at the Hotel de Bilderberg in Oosterbeek in the Netherlands.

Sixty years is a long time in (geo-)politics, and so the poisonous fruits of their clandestine bargaining are scattered and rotting all around – from the banking crisis and “austerity” to mass surveillance; and from dismantlement of the NHS to privatisation of the post office (and everything else besides). Neo-liberal policies that have opened the way to the success of racist Marine Le Pen’s Front National and to the lesser gains of neo-Nazis Golden Dawn in Greece, combined with directly neo-conservative assaults that have deliberately aided the spread of Islamist fundamentalism and inflamed wars across the Middle East and beyond. This has all occurred under Bilderberg’s watch – and yet Bilderberg takes little blame, because they are unaccountable. The media makes sure they remain so.

Last year I joined the protests when the Bilderbergers met at Watford and witnessed for myself the enormous state protection afforded this “private meeting”. There were an estimated three thousand of us coralled within the ‘free speech paddock’ staring out across a canal and about half a mile of rolling Hertfordshire parkland to the hotel on the hill. A steel cordon had been erected in the distance, just to make sure. As a helicopter buzzed overhead, the police and G4S security guards all faced us, although the criminals were behind them of course – Henry Kissinger, the world’s greatest living war criminal, enjoying five-star hospitality and the chance to impart wisdom to the likes of Peter Mandelson, George Osbourne, Ed Balls — there was also a surprise appearance by our illustrious leader David Cameron.

I shot the video below, which features activist Charlie Skelton and Labour MP Michael Meacher speaking at Watford:

This year I can’t make it and so will look out for analysis from across the alternative media, keeping an eye out for Charlie Skelton in particular, who will be reopening his annual Bilderblog. Here are a few extracts from Skelton’s first article of this summer, in which he pries into the Bilderberg connection to the Transatlantic trade deal known as TAFTA (and also TTIP). He begins:

Next week, at the Marriott Hotel in Copenhagen, the annual trade and policy summit held by the Bilderberg Group will throw open its doors for three days of top level talks, from May 29th to June 1st. I say “throw open its doors”… the doors will remain, as ever, firmly closed to the public and press. Unless you happen to own a newspaper, or run a publishing conglomerate, or be the Executive Chairman of Google, chances are you’re not going.

It’s remarkable how many bank bosses and corporate CEOs manage to clear their diary, every year, for a full three days of conferencing at Bilderberg. Last year, BP sent its Group Chief Executive, the Michelin Group sent its CEO, while HSBC was represented by both the Group Chairman and the Vice Chairman. From Goldman Sachs came two board members, including their Vice Chairman. And Royal Dutch Shell left a skeleton crew back at headquarters: the company sent its Chairman, CEO, and CFO – and in case that wasn’t enough, they also sent along a director, Josef Ackermann. Who’s also on the board of Investor AB, the £20 billion asset management company. Which also sent its CEO and Chairman. You get the picture.

All this corporate brass spending three days conferencing with media moguls and billionaire investors wouldn’t matter so much, but for the fact that quite a few of the participants who get locked away with them are politicians. And senior politicians at that.

In 2013, the Bilderberg conference was attended by seven Finance Ministers, three Foreign Ministers, two deputy Prime Ministers, and two serving Prime Ministers: Mark Rutte, the PM of Holland, and our very own David Cameron. With them: the President of the European Commission, José Manuel Barroso; EU Commissioner, Viviane Reding; the head of the IMF, Christine Lagarde; and various other politicians and policymakers.

He ends:

For now, if we want transparency at Bilderberg, it’s going to have to be provided by the politicians. Luckily, many of them who go to Bilderberg are avowed champions of transparency. Like David Cameron (Bilderberg 2008, 2013) who launched a war on out-of-control lobbying in a speech back in 2010, when he attacked the “far-too-cosy relationship between politics, government, business and money”.

In that speech, Cameron described lobbying as “the next big scandal waiting to happen.” At Bilderberg, that scandal happens every year. This year, it’s happening in Copenhagen, at the Marriott Hotel, from May 29th to June 1st.4

Click here to read Charlie Skelton’s full article, in which he points to the many conflicts of interest that arise in light of TTIP and the surrounding secrecy of Bilderberg.

We also now have this year’s official (and thus almost certainly incomplete) Bilderberg attendee list. Reading down, it quickly becomes evident that this is more than just an out-of-control lobbying group (as bad as that is). So here is just a small selection of famous (or not) names and associations which are indicative of a broader agenda:

Victor Halberstadt – Professor of Economics at Leiden University

Yiping Huang – Professor of Economics at National School of Development, Peking University

Christine Lagarde – Managing Director, International Monetary Fund

Benoît Coeuré – Member of the Executive Board, European Central Bank

Stephen Poloz – Governor of the Bank of Canada

H.R.H. Princess Beatrix of the Netherlands

H.M. the Queen of Spain

And then more worryingly, I feel:

Anders Fogh Rasmussen – Secretary General of NATO

Gen. David Petraeus (as Chairman of KKR Global Institute)

Eugene Rumer – Senior Associate and Director of the Russia Carnegie Endowment for International Peace

John Sawers – Chief of UK Secret Intelligence Service

Ahmet Üzümcü – Director-General, Organisation for the Prohibition of Chemical Weapons

Just for the record, two other notables on his year’s list are:

Martin Wolf – Chief Economics Commentator at the Financial Times…

and, not to be outdone, John Micklethwait – Editor-in-Chief at The Economist.

Let’s pray they will at last see eye-to-eye about the wondrous rise of Davos Man… but then, who is more Davos, I wonder – Wolf or Micklethwait. It has to be Micklethwait, doesn’t it…?

Oh, nearly forgot… another attendee of some note: dear old Henry Kissinger, who is, coincidentally it seems, also Chairman of Kissinger Associates, Inc.

Click here to read the full (official – and thus incomplete) list of this year’s Bilderberg attendees at zerohedge.

1 From an article entitled “The Dizzy life of Davos man”, written by Richard Sennett, published by The Independent on October 11, 1998. http://www.independent.co.uk/arts-entertainment/the-dizzy-life-of-davos-man-1177451.html

2 From an article entitled “What’s on the mind of Davos Man?” written by Gideon Rachman, published in the Financial Times on January 28, 2011. http://www.ft.com/cms/s/2/3a6d0774-2977-11e0-bb9b-00144feab49a.html#axzz331G9ApDa

3 From an article entitled “The Carter Administration: Myth and Reality” written by Noam Chomsky and published in 1981. http://www.chomsky.info/books/priorities01.htm

4 From an article entitled “Bilderberg and transatlantic trade: a lobbying scandal waiting to happen” written by Charlie Skelton published by transparency.org.uk. http://www.transparency.org.uk/news-room/blog/12-blog/917-bilderberg-and-transatlantic-trade-a-lobbying-scandal-waiting-to-happen

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Filed under analysis & opinion, Charlie Skelton, Denmark, neo-liberalism, Noam Chomsky

never let a good Ukrainian crisis go to waste…

On Thursday [April 17th] Democracy Now! welcomed back Stephen Cohen, Professor Emeritus of Russian Studies and Politics at New York University and Princeton University, to discuss the deepening crisis in Ukraine. Cohen, a specialist on Russia and the Soviet Union, is the author of numerous books on the subject including his latest Soviet Fates and Lost Alternatives: From Stalinism to the New Cold War. He was asked “Are we seeing the beginning of a new Cold War?” and “what exactly is happening right now in Ukraine?” Cohen’s response began as follows:

Those are big questions. We are not at the beginning of the Cold War, a new one; we are well into it—which alerts us to the fact, just watching what you showed up there, that hot war is imaginable now, for the first time in my lifetime, my adult lifetime, since the Cuban missile crisis, hot war with Russia. It’s unlikely, but it’s conceivable. And if it’s conceivable, something has to be done about it.

You did two things on your introduction which were very important. Almost alone among American media, you actually allowed Putin to speak for himself. He’s being filtered through the interpretation of the mass media here, allegedly, what he said, and it’s not representative. The second thing is, let us look just what’s happening at this moment, or at least yesterday. The political head of NATO just announced a major escalation of NATO forces in Europe. He did a Churchillian riff: “We will increase our power in the air, in the sea, on the land.” Meanwhile, as negotiations today begin in Geneva, we’re demanding that Russians de-escalate. And yet, we, NATO, are escalating as these negotiations begin.

So, if you were to say what is going on in Ukraine today—and, unfortunately, the focus is entirely on eastern Ukraine. We don’t have any Western media—in eastern Ukraine. We don’t have any Western—any Western media in western Ukraine, the other half of the country. We’re not clear what’s going on there. But clearly, things are getting worse and worse. Each side has a story that totally conflicts with the other side’s story. There seems to be no middle ground. And if there’s no middle ground in the public discourse, in the Russian media or the American media, it’s not clear what middle ground they can find in these negotiations, though personally, I think—and people will say, “Oh, Cohen’s a Putin apologist”—but it seemed to me that the proposals the Russians made a month ago for resolving the conflict are at least a good starting point. But it’s not clear the United States is going to accept them.

I will come back to some of Cohen’s further points in a moment, but first I’d like to just try to understand why, as Cohen points out, there is such a lack of media coverage across Ukraine and in particular in the western half of the country.

Below is a video (I can’t find a still frame) recorded in mid-March featuring a statement by Vitali Klitschko as he warned of an impending catastrophe in Crimea should it vote to join Russia in the recent referendum. Klitschko has since been sidelined, of course, but what strikes me as odd is that he was standing in front of a board much like the kind of sponsorship boards we see behind interviews of Premier League footballers. Similar except that the ex-sportsman here was backed by just one logo. You can see that it reads “Ukraine Crisis Media Center”:

Now if you type “Ukraine Crisis Media Center” into the Google image search you will find many other Ukrainian political figures giving statements in front of that same logo board. So just who are the “Ukraine Crisis Media Center”?

Well, they have a website and you can search for details there, but in fact you will find very few and none at all about their own sponsors. Instead, what you will read is this:

Ukrainian Crisis Media Center is launched to provide the international community with objective information about events in Ukraine and threats to national security, particularly in the military, political, economic, energy and humanitarian spheres. During this crisis period, the Center on a 24/7 basis will provide support to all the media who cover events in Ukraine.

Having failed to find further information on their website, I decided to email the organisation [on Thursday April 3rd] and asked the following:

I cannot find any information on your site about where financial support for the media center comes from. Without information on who is backing the venture how can we be sure that your coverage is wholly impartial?

I have not received a reply.

In the meantime, I also searched the web for insight from other places – and came across a glowing report published in Kyiv Post which began as follows:

Much like the EuroMaidan Revolution itself, the Ukraine Crisis Media Center sprang to life with speed, spontaneity, creativity, competence – and a strong sense of mission.

Although the center has been open only since March 4, its third floor headquarters in the Hotel Ukraine on 4 Institutska St. is already a required daily stop for dozens of Ukrainian and foreign journalists.

Continuing:

The group came together at Razumkov Center in Kyiv on March 2.

Nataliya Popovych, the president of Kyiv’s PRP Group, an affiliate of the global Webber Shandwick company, is among the founders.

Popovych said that the Kremlin is fast on its feet in spreading lies about Ukraine, whose government is often slow to respond to allegations and counter untruths.

Well, here’s one of the details I was searching for – so who is Nataliya Popovych?

Nataliya started career in Leo Burnett, one of the leading advertising agencies in the world, and continued in Romyr & Associates, Canadian government and public relations firm. After getting Master degree and probation in USA, Nataliya has become a head of PRP Ukraine, a Weber Shandwick Affiliate Company in Ukraine, and in a year became the President of PRP Group, Weber Shandwick partner on CIS markets.

And PRP? You probably won’t be surprised to learn that they are a PR company:

PRP is more than an integrated solutions agency. It is a creative concept. It is a strategy. It is the management of reputations in a new era. It is the ability to communicate and create goodwill. It is integrated solutions which engage audiences into the lives of companies and brands.

That’s taken from their current LinkedIn profile and the profile of Nataliya Popovych is from PR Congress.

But back to the article in the Kyiv Post:

She [Nataliya Popovych] considers Ukrainians to be loving, peaceful and tolerant people and, while she didn’t consider herself a follower of iconic and controversial nationalist hero Stepan Bandera (1909-1959), she is now “proud to be called a Banderite.”1

And for those who don’t know who Stepan Bandera was, then here are a few extracts taken from a detailed and rather generous biography written by Professor of History at Yale University, Timothy Snyder, and published by The New York Review of Books around the time Viktor Yushchenko (President after the “Orange Revolution”) was voted out of office in 2010:

The incoming Ukrainian president will have to turn some attention to history, because the outgoing one has just made a hero of a long-dead Ukrainian fascist. By conferring the highest state honor of “Hero of Ukraine” upon Stepan Bandera (1909-1959) on January 22, Viktor Yushchenko provoked protests from the chief rabbi of Ukraine, the president of Poland, and many of his own citizens. It is no wonder. Bandera aimed to make of Ukraine a one-party fascist dictatorship without national minorities. During World War II, his followers killed many Poles and Jews. Why would President Yushchenko, the leader of the democratic Orange Revolution, wish to rehabilitate such a figure? Bandera, who spent years in Polish and Nazi confinement, and died at the hands of the Soviet KGB, is for some Ukrainians a symbol of the struggle for independence during the twentieth century. […]

Consistent as the rehabilitation of Bandera might be with the ideological competition of the mid-twentieth century, it makes little ethical sense today. Yushchenko, who praised the recent Kiev court verdict condemning Stalin for genocide, regards as a hero a man whose political program called for ethnic purity and whose followers took part in the ethnic cleansing of Poles and, in some cases, in the Holocaust. Bandera opposed Stalin, but that does not mean that the two men were entirely different. In their struggle for Ukraine, we see the triumph of the principle, common to fascists and communists, that political transformation sanctifies violence. It was precisely this legacy that east European revolutionaries seemed to have overcome in the past thirty years, from the Solidarity movement in Poland of 1980 through the Ukrainian presidential elections of 2005. It was then, during the Orange Revolution, that peaceful demonstrations for free and fair elections brought Yushchenko the presidency. In embracing Bandera as he leaves office, Yushchenko has cast a shadow over his own political legacy.2

All of which helps to explain something else that has been puzzling me… why every other story about what’s happening in Ukraine is entitled “Ukraine Crisis: something or other” – the reason being that “Ukraine Crisis” is more or less the brand name that Nataliya Popovych and other “Ukrainian nationalists” have adopted — a list of the founders of the “Ukraine Crisis Media Center” is available at the end of the same Kyiv Post article.3

So what is this new political brand promoting?

*

The “war on terror” is dead, long live the new cold war!

Returning to Stephen Cohen, here is what he had to say about the rise of this new cold war:

As a historian, I would say that this conflict began 300 years ago, but we can’t do that. As a contemporary observer, it certainly began in November 2013 when the European Union issued an ultimatum, really, to the then-president, elected president, of Ukraine, Viktor Yanukovych, that “Sign an agreement with us, but you can’t have one with Russia, too.” In my mind, that precipitated this crisis, because why give a country that has been profoundly divided for centuries, and certainly in recent decades, an ultimatum—an elected president: “Choose, and divide your country further”? So when we say today Putin initiated this chaos, this danger of war, this confrontation, the answer is, no, that narrative is wrong from the beginning. It was triggered by the European Union’s unwise ultimatum.

Now flash forward to just one month ago, about the time I was with you before. Remember that the European foreign ministers—three of them, I think—went to Kiev and negotiated with Yanukovych, who was still the president, an agreement. Now, the Russians were present at the negotiation, but they didn’t sign it. But they signed off on it. They said, “OK.” What did that agreement call for? Yanukovych would remain president until December—not May, when elections are now scheduled, but December of this year. Then there would be a presidential election. He could run in them, or not. Meanwhile, there would be a kind of government of national accord trying to pull the government together. And, importantly, Russia would chip in, in trying to save the Ukrainian economy. But there would also be parliamentary elections. That made a lot of sense. And it lasted six hours.

The next day, the street, which was now a mob—let’s—it was no longer peaceful protesters as it had been in November. It now becomes something else, controlled by very ultra-nationalist forces; overthrew Yanukovych, who fled to Russia; burned up the agreement. So who initiated the next stage of the crisis? It wasn’t Russia. They wanted that agreement of February, a month ago, to hold. And they’re still saying, “Why don’t we go back to it?” You can’t go back to it, though there is a report this morning that Yanukovych, who is in exile in Russia, may fly to eastern Ukraine today or tomorrow, which will be a whole new dimension.

But the point of it is, is that Putin didn’t want—and this is reality, this is not pro-Putin or pro-Washington, this is just a fact—Putin did not want this crisis. He didn’t initiate it. But with Putin, once you get something like that, you get Mr. Pushback. And that’s what you’re now seeing. And the reality is, as even the Americans admit, he holds all the good options. We have none. That’s not good policymaking, is it?

Click here to read a full transcript or watch the latest interview with Stephen Cohen on the Democracy Now! website.

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The United States spent over a decade hunting down Osama Bin Laden at financial a cost running into multiple trillions and a human cost of more than a million lives, yet since his demise the jihadist cause that Bin Laden once spearheaded is stronger than ever. Forces of al-Qaeda and other near identical jihadist factions now hold control of a large region of Iraq and Syria that exceeds the area of Britain, whilst other Islamist gangs run amok throughout Libya. Thus, after a decade of dirty wars executed by means of “shock and awe” air strikes, the perpetual overhead threat of drones and the knock at the door that ends with secret rendition to faraway torture sites, the “war on terror” has been lost. “Terror” reigns supreme as the victor: terror from all sides that is.

But then, it is hard to imagine any foreign policy that could have manufactured and spread terrorism more effectively than the policies enacted during this decade-long “war on terror”. Blowback? Up to a point. But, we must not forget that all of the many al-Qaeda factions that have gained so much territory could never have done so without our help. Whether indirectly, with the establishment of the power vacuum in Iraq, or more purposefully, with Nato bombers opening the way for the Islamist insurgency in Libya. But mostly, the gains of al-Qaeda are thanks to the very generous funding of one of America and Britain’s closest allies, that bastion of freedom and democracy, Saudi Arabia. Saudi Arabia, the birthplace of Bin Laden, and the nation known to have the closest ties to those accused of the 9/11 attacks. Attacks that provided the very springboard from which the “war on terror” was launched all those years ago. These are the facts and none can be refuted, so make of them what you will – if it was a plot for a film it would seem ludicrously far-fetched.

Of course, the “war on terror” lost a great deal of its public appeal with the bludgeoning of Iraq, and so under Obama we’ve had “humanitarian interventions”. But this new gloss has also flaked away, with the majority of people in the West absolutely sick of war. That said, the wars go on regardless – wreaking havoc but still satisfying the insatiable thirst for blood demanded by our military-industrial-financial complex.

None of these wars have had anything to do with stamping out terrorism or, surely more laughably, the West’s desire to bring “freedom and democracy”. The United States’ covert backing of al-Qaeda is nothing new and neither is the West’s more brazen support of al-Qaeda’s primary sponsor Saudi Arabia? If the wars were about either terrorism or “freedom and democracy”, then the Saudi regime would surely have topped the charts of “the axis of evil”.

In truth, the game never changed. And sadly it is a game (at least to those currently holding power) – as Zbigniew Brzezinski, one of America’s leading geopolitical strategists, makes clear not least with the title of his notorious book on Eurasian geostrategy, “The Grand Chessboard”. In it he wrote:

In brief, for the United States, Eurasian geostrategy involves the purposeful management of geostrategically dynamic states and the careful handling of geopolitically catalytic states, in keeping with the twin interests of America in the short-term: preservation of its unique global power and in the long-run transformation of it into increasingly institutionalized global cooperation. To put it in a terminology that hearkens back to the more brutal age of ancient empires, the three grand imperatives of imperial geostrategy are to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected, and to keep the barbarians from coming together.4

This neo-imperialist game is much the same as the older imperialist game, in which only the strategies have been updated. It is about control of territory, of energy resources, of financial systems, and it has (and always did) amount to a series of proxy wars against the competing interests of competing powers. Traditionally Russia have been the great adversary, but now there is China too. So the Cold War that officially concluded with the fall of the Berlin Wall in October 1989… ended only in name. With the Ukrainian crisis (or should that be “Ukraine Crisis”) the chill that remained has become considerably icier. Treacherously so. But our military-industrial-financial complex needs perpetual war just to keep the racket going, or, when that ceases to be an option (as it now has), to maintain the illusion of an imminent threat against us. Bin Laden is dead, so a new Cold War is just the ticket. On top of which, as Brzezinski also explained in his book:

“Ukraine, a new and important space on the Eurasian chessboard, is a geopolitical pivot because its very existence as an independent country helps to transform Russia. Without Ukraine, Russia ceases to be a Eurasian empire.”

Here’s Stephen Cohen again:

The real debate going on in NATO—the real debate, because this is a distraction—is what Rasmussen said in your earlier clip—he’s the political head of NATO—that we’re building up, as we talk, our forces in eastern Europe. Now, understand what’s going on here. When we took in—”we” meaning the United States and NATO—all these countries in eastern Europe into NATO, we did not—we agreed with the Russians we would not put forward military installations there. We built some infrastructure—air strips, there’s some barracks, stuff like that. But we didn’t station troops that could march toward Russia there. Now what NATO is saying, it is time to do that. Now, Russia already felt encircled by NATO member states on its borders. The Baltics are on its borders. If we move the forces, NATO forces, including American troops, to—toward Russia’s borders, where will we be then? I mean, it’s obviously going to militarize the situation, and therefore raise the danger of war.

And I think it’s important to emphasize, though I regret saying this, Russia will not back off. This is existential. Too much has happened. Putin—and it’s not just Putin. We seem to think Putin runs the whole of the universe. He has a political class. That political class has opinions. Public support is running overwhelmingly in favor of Russian policy. Putin will compromise at these negotiations, but he will not back off if confronted militarily. He will not.

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A trade war opens the way for new trade deals

The new cold war isn’t only a military escalation, it also potentially marks the beginning of a new trade war. But due to reliance on Russia imports (especially when it comes to energy) EU sanctions on Russia will be difficult, and so one way forward could involve loosening trade restrictions between the EU and the US.

The following passages are taken from a press release by the European Council following the recent EU-US Summit in Brussels. It begins:

Recent events in Ukraine have confirmed that strong cooperation between the European Union and the United States on peace and security is of critical importance.

Continuing under the next heading “Economy and global challenges” as follows:

Reinforcing economic growth and job creation remains central on both sides of the Atlantic. The EU and the United States have taken important steps to stabilise financial conditions and overcome the crisis. The EU remains committed to building a deep and genuine economic and monetary union, including a banking union. […]

The EU and US leaders renewed their commitment to a strong Transatlantic Trade and Investment Partnership (TTIP). this should go beyond a free trade agreement and reaffirm Europe and the United States’ shared values of democracy, individual freedom, the rule of law and human rights, and a common commitment to open societies and economies. [bold highlights maintained from original source]

And what is TTIP? Here are additional notes at the end of the same press release:

The EU and US have decided to take their economic relationship to a higher level by agreeing to launch negotiations on a comprehensive trade and investment agreement. It aims to remove trade barriers in a wide range of economic sectors to make it easier to buy and sell goods and services between the EU and the US.

In fact, I have already touched on the subject of the Transatlantic Trade and Investment Partnership (TTIP) as well as its sister treaty the Trans-Pacific Partnership (TPP) . Both of these “free-trade agreements” appear to have alternative and conflicting names and acronyms and in the case of TTIP it is also known as the Transatlantic Free Trade Area, abbreviated as TAFTA, which is how it appeared in that earlier post. Why trade agreements need to have multiple names becomes more apparent when you realise what this commitment to “freeing up regulations” will mean. Here are a few extracts from a detailed analysis published by Der Spiegel International and entitled “Corporation Carte Blanche: Will US-EU Trade Become Too Free?”:

Lori Wallach had but 10 minutes to speak when she stepped up to podium inside Room 405 at George Washington University, located not too far away from the White House. Her audience was made up of delegates currently negotiating the trans-Atlantic free trade agreement between the United States and the European Union.

They had already spent hours listening to presentations by every possible lobbying group — duty bound to hear myriad opinions. But when Wallach, a trade expert for the consumer protection group Public Citizen, took the stage, people suddenly started paying attention. The 49-year-old Harvard lawyer, after all, is a key figure in international trade debates.

“The planned deal will transfer power from elected governments and civil society to private corporations,” she said, warning that the project presents a threat of entirely new dimensions. [bold emphasis added]

How will TTIP help to transfer even more power out of democratic control and into the hands of the major corporations? Well, let us count the ways:

After the third round of negotiations, an unusually broad alliance of anti-globalization groups, NGOs, environmental and consumer protection groups, civil rights groups and organized labor is joining forces to campaign against TTIP.

These critics have numerous concerns about the treaty – including their collective fear that the convergence of standards will destroy important gains made over the years in health and nutrition policy, environmental protection and employee rights. They argue the treaty will make it easier for corporations to turn profits at the public’s expense in areas like water supply, health or education. It would also clear the path for controversial technologies like fracking or for undesired food products like growth hormone-treated meat to make their way to Europe. Broadly worded copyrights would also restrict access to culture, education and science. They also believe it could open the door to comprehensive surveillance.5

Click here to read the full article in Der Spiegel.

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Fracking for freedom (and digging for victory)

I have already highlighted at the end of an earlier and rather more extended post how energy giants Chevron and Exxon Mobil have been getting ready to move their operations to Ukraine with the intention of exploring both conventional and “unconventional” resources (otherwise known as “fracking”). On Saturday’s Keiser Report, Max Keiser spoke to freelance journalist JP Sottile of Newsvandal.com, who also occasionally writes for the Guardian, about not only how Big Oil, but also Big Agra, have their eyes fixed on Ukraine. Sottile names the people and corporations hoping to take advantage of Ukraine’s exceptional fertile lands. Here are some excerpts of what he had to say [from about 13 mins in]:

“One of the bones of contention with Russia, Europe, and its transit point Ukraine, is Russia’s domination of the natural gas market in Europe. So I thought it was very interesting when the deal was announced that Chevron was involved in developing shale gas in Ukraine. Now that would have been with the previous government of Yanukovych – and I believe that that led to a lot of the pressure coming out of Moscow for Yanukovych to reject the economic deal between Ukraine and Europe, and that then of course led to a cascading number of events, which led to the deposing of Yanukovych and the ‘crisis in Ukraine’ as it is now called.”

Beyond the oil and gas, Sottile has also looked closely into the interests of agricultural giants Cargill and Monsanto, who are keen to exploit Ukraine’s riches closer to the surface:

US-Ukraine Business Council is an investor in the US-Ukraine Foundation where Ms [Victoria] Nuland was speaking on December 13th [about how the US had already spent $5 billion helping Ukraine realise its “European aspirations”] and also on December 13th, that was the day that Cargill invested in a Black Sea port to help open the Russian market to its agriculture. Well, Cargill is also heavily invested in Ukraine in a company called Ukrlandfarming. The just bought a two hundred thousand dollar stake in Ukrlandfarming. In fact they bought that stake – or it was announced – on the very day, January 12th of this year, that fifty thousand Ukrainians flooded Kiev to protest the government of Yanukovych.

They are all connected through Freedom House – a guy there who worked with Ms Nuland, who is Assistant Secretary of State for European and Eurasian Affairs, she had a Deputy Assistant Secretary of State for European and Eurasian Affairs, a guy named David Kramer. David Kramer serves on – he’s actually head of Freedom House – Freedom House is one of the organisations that the United States uses to stoke democracy movements around the world. It is actually responsible, along with the National Endowment for Democracy, for funding many of the opposition forces there in Ukraine. And David Kramer also serves on the US-Ukraine Business Council. If you go the US-Ukraine Business Council – which is a very interesting organisation – on the executive board of the US-Ukraine Business Council you’ll find Cargill, Monsanto, John Deere, CNH International (which is a farming equipment and tractor-making company), Eli Lilly and DuPont Pioneer – DuPont Pioneer being the genetically modified organisms and agricultural wing of DuPont. And they all serve together under the guidance of a guy named Morgan Williams. Morgan Williams is CEO and President of US-Ukraine Business Council, and he has been a fixer for Archer Daniels Midland, Cargill, [and] other big agricultural companies in Ukraine for the last fifteen to twenty years.

There is an expression from my part of the world that goes: “where there’s muck, there’s brass”. Well, as Sottile’s investigations reveal, there’s loads of muck in Ukraine and not just in oil and gas deposits. Perhaps, as he suspects, the bigger prize is the land itself. Either way, the vultures are already circling. Except that they are more predatory than the much maligned vulture. Rather than waiting for a crisis to happen they have been directly involved in fomenting one, and now, as their “Ukraine Crisis” escalates, they won’t be planning to let it to go to waste.

Click here to read more about this in JP Sottile’s article entitled “Ukraine, Chevron, Condi Rice and Shale Gas… join the dots” published by The Ecologist magazine on March 18th.

1 From an article entitled “Crisis Media Center springs into action” written by Brian Bonner, published by Kyiv Post on March 14, 2014. https://www.kyivpost.com/guide/about-kyiv/crisis-media-center-springs-into-action-339299.html 

2 From an article entitled “A Fascist Hero in Democratic Kiev” written by Timothy Snyder, published by The New York Review of Books on February 24, 2010. http://www.nybooks.com/blogs/nyrblog/2010/feb/24/a-fascist-hero-in-democratic-kiev/

3Founders of Ukraine Crisis Media Center include:

Valeriy Chaly, Razumkov Centre, deputy foreign minister of Ukraine (2009-2010)
Ivanna Klympush-Tsyntsadze, Yalta European Strategy, director
Nataliya Popovych, PRP, president
Natalia Olbert-Sinko, PRP in Ukraine, executive director
Yaryna Klyuchkovska, independent communications consultant
Gennadiy Kurochka, CFC, founder and managing partner
Vasyl Myroshnychenko, CFC, partner
Alina Frolova, R.A.M. 360, CEO
Volodymyr Degtyaryov, NewsFront PR agency, director
Ivetta Delikatnaya, AGL, director of development
Maxim Savanevskyi, PlusOne DA, managing partner
Andriy Zagorodskiy, Newsplot, director

From the same article entitled “Crisis Media Center springs into action” written by Brian Bonner, published by Kyiv Post on March 14, 2014. https://www.kyivpost.com/guide/about-kyiv/crisis-media-center-springs-into-action-339299.html 

4 Extract from The Grand Chessboard, Chapter 2 “The Eurasian Chessboard”, p. 40, written by Zbigniew Brzezinski, published in 1997. It is available at http://en.wikiquote.org/wiki/Zbigniew_Brzezinski 

5 From an article entitled “Corporation Carte Blanche: Will US-EU Trade Become Too Free?” written by Michaela Schiessl, published by Der Spiegel International on January 23, 2014. http://www.spiegel.de/international/business/criticism-grows-over-investor-protections-in-transatlantic-trade-deal-a-945107.html

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Filed under al-Qaeda & DAESH / ISIS / ISIL, analysis & opinion, fracking (shale & coal seam gas), Max Keiser, neo-liberalism, Ukraine

the price of everything

The following article is Chapter Nine of a book entitled Finishing The Rat Race which I am posting chapter by chapter throughout this year. Since blog posts are stacked in a reverse time sequence (always with the latest at the top), I have decided that the best approach is to post the chapters in reverse order.

All previously uploaded chapters are available (in sequence) by following the link above or from category link in the main menu, where you will also find a brief introductory article about the book itself and why I started writing it.

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When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life — will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease…”

John Maynard Keynes 1

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Have you ever wondered what it’s like to be rich? Here I don’t just mean well-off, with a paltry few tens of millions in the bank, I mean proper rich – megabucks! So much money that, as I heard one comedian put it (aiming his joke squarely at the world’s richest entrepreneur), if Bill Gates were to stuff all his cash under the mattress, then due to interest alone, if he fell out of bed he’d never hit the ground!

I suppose what I’m wondering is this – and perhaps you’ve found yourself thinking along similar lines – why are these super-rich guys always so intent on accruing ever greater wealth when they already possess more than enough funds to guarantee the needs of a small country. Think about it this way: Gates and the others are, barring a few very necessary legal constraints, completely at liberty to do whatever they choose at every moment of every day. They can eat the best food, drink the most delicious vintage wines, smoke the finest cigars, play golf morning, noon, and evening, and then after the sun goes down, and if it is their wont, have liaison with the most voluptuous women (or men) available. Quite literally, they have means to go anywhere and do everything to their heart’s content and all at a moment’s notice. Just imagine that. So why be bothering about sales at all? I mean wouldn’t you eventually get bored of simply accumulating more and more money when you’ve already got so much – and let’s face it, money itself is pretty boring stuff. So just what is it that keeps them all going after it? After all, there are only so many swimming pools, grand pianos, swimming pools in the shape of grand pianos, Aston Martins, Lear Jets, and acreages of real estate that one man (or woman) can profitably use (in the non-profit-making sense obviously). Economists would call this the law of diminishing marginal utility, although in this instance it is basic common sense.2

Presented with evidence of this kind, some will say that here is further proof of the essential greediness of human beings. That, as a species, we are simply never satisfied until we have the lot. Fine then, let us take on this modern variant of original sin, since it certainly holds more than a grain of truth. For the sake of argument, we might presume that all men and women are greedy to an almost limitless extent. That this is truly the natural order, from our conception having been evolutionarily programmed to grab as much as we can for ourselves – our most primeval reflex being to snatch.

So I shall not waste too much time here. Only to say that I do not find such unrestrained cupidity within the circles of people with whom I have chosen to associate, most being happy enough to share out the peanuts and fork out for the next round of beers, quite oblivious to outcomes in terms of commensurate returns. What comes around goes around… There is, of course, no doubting that most folks will, very naturally, if opportunity arises, take good advantage to feather their own nests. Making life a little more comfortable for themselves, and reserving the ample share of their fortune for their immediate family and closest friends. But then, why not…? Charity begins at home, right?

What most don’t do (at least in the circles I know best) is devote their whole lives to the narrow utilitarian project outlined above. And why? Because, though quite understandably, money and property are greatly prized assets, they offer lesser rewards than companionship and love. And, in any case, pure generosity is its own reward – and I do mean “is”, and not “has” or “brings” – the reward being an inseparable part of the act itself: a something received as it was given, like a hug, like a kiss. That said, if you still prefer to believe that we are all to a man, woman and child, innately and incurably selfish and greedy, then next time you take a look into the mirror, do consider those all-too beady eyes staring back. It’s very easy to generalise about mankind when you forget to count yourself in.

But if not intractably a part of human nature, then we must find other reasons to account for how our world is nevertheless so horribly disfigured by rampant and greedy exploitation. For if greed is not an inherently human trait, and here I mean greed with a capital Grrr, then this monomaniacal obsession is all too frequently acquired, especially in those who approach the top of the greasy pole. There is an obvious circularity in this, of course. That those whose progress has depended upon making a buck, very often become addicted. As money-junkies, they, like other addicts, then prioritise their own fix above all else. Whether or not these types are congenitally predisposed to becoming excessively greedy, we have no way of knowing. What we can be certain of is this: that by virtue of having acquired such great wealth, they disproportionately shape the environment they and we live in. So they are not merely money-junkies, but also money-pushers. If you’re not a money-junkie then you don’t know what you’re missing. There’s nothing new in this. This is the way the world has been for many centuries, and perhaps ever since money was first invented.

So here’s Oscar Wilde addressing the same questions about money and our unhealthy relationship to it; his thoughts leaping more than a century, during which time very little has apparently changed:

“In a community like ours, where property confers immense distinction, social position, honour, respect, titles, and other pleasant things of this kind, man, being naturally ambitious, makes it his aim to accumulate this property, and goes on wearily and tediously accumulating it long after he has got far more than he wants, or can use, or enjoy, or perhaps even know of. Man will kill himself by overwork in order to secure property, and really, considering the enormous advantages that property brings, one is hardly surprised. One’s regret is that society should be constructed on such a basis that man has been forced into a groove in which he cannot freely develop what is wonderful, and fascinating, and delightful in him – in which, in fact, he misses the true pleasure of joy and living.”3

Embedded below is a recent interview [from December 2013] Pulitzer Prize-winning journalist Chris Hedges gave on “The Real News” in which he talked about – based to a large extent on his own personal experience – how the super rich are isolated and disconnected from the rest of society. He explains how this creates a deluded sense of entitlement and a pathological callousness:

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Isn’t money funny stuff! Funny peculiar, I mean. We just take it so much for granted, almost as though it were a natural substance (disappointingly, of course, it doesn’t actually grow on trees). But when we do think about it, money has far stranger properties than anything in the natural world. And our relationship to it is more peculiar than our relationship to almost anything else.

Money, that’s what I want… sang the Beatles on one of their less celebrated tracks. But the truth will out. So just why did the Beatles want money, and, for that matter, why do I, and why do you? It doesn’t work, you can’t eat it, and it’s not, of a rule, a thing of special beauty. Money is absolutely useless in fact, right until you decide to swap it for what you actually want.

Money can’t buy me love, true again, but it might buy me a chocolate bar. Because money is really just a tool, a technology: a highly specialised kind of lubricant, that enables people to exchange their goods and services with greater ease and flexibility. The adoption of a money system enabling levels of parity for otherwise complex exchanges to be quickly agreed and settled. The great thing about money being, to provide a concrete illustration, that although £1 of tinned herring is probably equivalent to about thirty seconds of emergency plumbing (if you’re lucky), you won’t require crates of herring to pay for the call-out. So far so simple.

Except wait. We all know how the price of herring can go up as well as down, and likewise for the price of emergency plumbers. So why such a dynamic relationship? Well, there’s “the market”, a price-fixing system that arises spontaneously, regulating the rates of exchange between goods and services on the basis of supply adjusting to match demand. Thus by a stroke of good fortune, we find that money is not merely a lubricant for exchange, but also regulatory of useful production and services. This, at least, is the (widely accepted) theory.

Prices rise and fall in accordance with demand. Things that are in short supply become expensive, things that are abundant are cheaper. This is basic economic theory and it means, amongst other things, that in every transaction the “real value” of your money is actually relative, for the simple reason that the amount required depends not only on what you’re after, but also upon whether or not other people are after the same kind of thing. Money then, in terms of its “real value” to any individual or group, is something that is constantly varying. We might call this “the relativity of money”.

One consequence of the relative nature of money, is that the useful value of money overall can also rise and fall. It is possible that wholesale, retail and labour costs can all more or less rise or fall together, although the general tendency, as we all know from experience, is for overall rising costs. Indeed such “inflation” is regarded as normal and expected, and, as a consequence, it comes to seem just as natural as money itself. Yet since you always need more and more money to buy the same things then the value of your money must, in some important way, be constantly falling. But just why does money as a whole lose its value in this way? What makes yesterday’s money worth less than today’s? Well it turns out that this is a huge question and one that economists have argued long and hard about.

One partial account of inflation goes as follows: businesses and people in business are constantly looking for a little bit more. For how else can they maximise profits? In direct consequence, we, as customers, necessarily require more dosh to pay for the same goods or services. But to enlarge our budget, this automatically requires a commensurate increase in income, which means successfully negotiating for a larger salary. In the bigger picture then, the businesses supplying our wants and needs, are now needing to cover their larger wage-bills, which means higher prices to compensate. So prices and incomes rise together, with money becoming worth less and less precisely because everyone is trying to accumulate more and more of it. This endless tail-chasing escalation, which is given the fancy title of “the price/wage spiral”, serves as an excellent example of why money is really very odd stuff indeed.

And what is money in any case? The first traders most likely exchanged shells, precious stones, or other baubles to aid in bartering, but then naturally enough, over time these exchanges would have been formalised, agreements arising with regards to which objects and materials were most acceptable as currency. The material that became most widely accepted was eventually, of course, gold. But why gold? Well, no one actually knows but we can make some educated guesses.

Firstly, gold is scarce, and it is also rare in other ways – for instance, having a unique and unusual colour, which just happens to correspond to the colour of the Sun. The fact that it is almost chemically inert and so doesn’t tarnish, means that it also shines eternally, and so again is like the Sun. Indeed, Aldous Huxley, in Heaven and Hell (his sequel to The Doors of Perception) points out that almost every substance that humans have ever regarded as valuable shares this property of shininess. To Huxley this is evidence that even money owes it origins, in part at least, to a common spiritual longing. Our wish to own a precious piece of paradise.

But back to more mundane matters, if gold (or any other substance) is chosen as your currency, then there arises another problem. How to guarantee the quantity and quality of the gold in circulation? For if gold is worth faking or adulterating then it’s certain that somebody will try cheating.

Well, one answer could be the adoption of some kind of official seal, a hallmark, and this solution leads, naturally enough, to the earliest forms of coinage. But then, if the coins are difficult to counterfeit, why bother to make them out of gold in the first place? Just the official seal would be enough to ensure authenticity. And why bother with metal, which is bulky and heavy. So again it’s an obvious and logical leap to begin producing paper banknotes. The value of these coins and banknotes, although far less intrinsically valuable in material terms than the gold they represent, is still backed by the promise that they are redeemable into gold. But hang on, what’s so special about the gold anyway (aside from its shininess). And doesn’t the gold, which is now locked up in bullion reserves, in fact have real uses of its own? And doesn’t this mean that the gold also has a monetary value? So why not cut loose from the circularity and admit that the value of money can exist entirely independent from the gold or from any other common standard. Indeed, why couldn’t the issuing authority, which might be a government but is more often a central bank, simply make up a “legal tender”4 with no intrinsic or directly correlated value whatsoever and issue that? Not that the money issued need even correspond to the amount of real coins or paper banknotes in circulation – most of the world’s money being bits and bytes, ones and zeroes, orbiting out in cyber-space. Which brings us to just how funny money has now become.

The Pound Sterling, the various dollars, the Euro and every major currency on Earth are, to apply the correct terminology, “fiat currencies”5 With fiat currencies there is no parity to the value of any other commodities and so they are, if you like, new forms of gold. As such, and given their shifting relative values, these new fiat currencies can also be traded as another kind of commodity. Money, in the form of currency, becoming an investment in itself. Money is strange stuff indeed.

Yet money also remains as an instrument. And we use this instrument to measure just about everything. To establish the value of raw materials and manufactured items. The value of land and, by extension, the value of the space it occupies. The value of labour, and thus a value on the time used. And, since works of art are also bought and sold, money is even applied as a measure of such absolutely intangible qualities as beauty.

So money is basically a universally adaptable gauge, and this is its great strength. It is perhaps the big reason why its invention gradually caught on in such a fundamental way. From humble trading token, money has risen to become a primary measure of all things. But remember, remember… Money, whether fiat currency or gold standard, can never be real in the same way as tins of herring and plumbers are real, and neither is “monetary value” an absolute and intrinsic property, but only ever relative and acquired. Money, we ought to constantly remind ourselves (since we clearly need reminding) is nothing without us or without our highly structured civilisation – intrinsically, it is worthless. It is very strange stuff.

Perhaps the future benchmark for money will no longer be gold but ‘virtual gold’ in the form of cryptocurrencies – bitcoin being currently the most well-known of these. One advocate of these alternatives to traditional forms of money is financial expert Max Keiser. On February 3rd 2014, he spoke with coder, hacker and cryptocurrency specialist Andreas Antonopoulos about the regulation of bitcoin transactions; the advent of bitcoin derivatives, which he believes these are less of a threat than ordinary derivatives (a subject I’m coming to next); the fact that unlike gold, cryptocurrencies can be ‘teleported’; and a future in which bitcoin is used widely by businesses as much as by individuals. He says that a time is coming when the prevalent misgivings and doubts about bitcoin and other cryptos have long since been forgotten. Is he right? I don’t know and remain highly skeptical, but I find the debate an interesting one:

Incidentally, there are less radical and more tangible alternatives to the currencies we now have in circulation. “Treasury notes” are one such alternative and these have historical precedence in the form of both the American “greenback” and the UK’s Bradbury Pound. To read more about this and also for links to campaigns to reintroduce them please read the addendum at the end of the chapter.

*

Little more than a century ago, and even in the richest corners of the world, there were no dependable mechanisms to safeguard against the vicissitudes of fortune. If you weren’t already poor and hungry (as most were), then you could rest assured that potential poverty and hunger were waiting just around the corner. Anyone with aspirations to scale the ladder to secure prosperity faced the almost insurmountable barriers of class and (a generally corresponding) lack of education. A lower class person of such ambitions would be very well aware that if they could step onto the ladder at all, there was very little in the way of protection to save them in the event of falling; errors of judgement or sheer misfortune resulting in almost certain and unmitigated personal disaster. This was the sorry situation for people at all levels of society aside from the highest echelons.

One tremendous advantage then, of living in a modern society, is that, aside from having slightly less restricted social mobility (not that we now live in the classless society we are told to believe in), there are basic safety nets in place, with additional protection that is optionally available. For those languishing at the bottom of the heap, there are the reliable though meagre alms provided through a welfare system, whilst for the ever-expanding middle classes there is plenty of extra cover in the form of saving schemes, pension schemes, and, in the event of the most capricious and/or calamitous of misfortunes, the ever-expanding option of insurance policies. If the Merchant of Venice had been set in today’s world then the audience would feel little sympathy for his predicament. Why had he ventured on such a risk in the first place, casting his fortune adrift on dangerous waters? Why hadn’t he protected his assets by seeking independent financial advice and taking out some preferential cover? It’s a duller story altogether.

Systems for insurance are essential in any progressive civilisation. Protection against theft, against damage caused by floods, fires and other agents of destruction, and against loss of life and earnings. Having insurance means that we can all relax a bit, quite a lot, in fact. But it also means that, alongside the usual commodities, there’s another less tangible factor to be costed and valued. That risk itself needs to be given a price, and that necessarily means speculating about the future.

Indeed, speculations about the future have become very much to the forefront of financial trading. As a consequence of this, at least in part, today’s financial traders have become accustomed to dealing in “commodities” that have no intrinsic use or value whatsoever. They might, for example, exchange government bonds for promises of debt repayment. Or, feeling a little more adventurous, they might speculate on the basis of future rates of foreign exchange, or in interest rates, or share prices, or rates of inflation, or in a multitude of other kinds of “underlying assets” (including that most changeable of underlying variables: the weather) by exchange of promissory notes known most commonly as “derivatives”, since they derive their value entirely on the basis of the future value of something else. And derivatives can be “structured” in any myriad of ways. Here are a just few you may have heard of :–

  • futures (or forwards) are contracts to buy or sell the “underlying asset” up until a future date on the basis of today’s price.
  • options allow the holder the right, without obligation (hence “option”), to buy (a “call option”) or to sell (a “put option”) the “underlying asset.”
  • swaps are contracts agreeing to exchange money up until a specified future date, based on the underlying value of exchange rates, interest rates, commodity prices, stocks, bonds, etc.

You name it: there are now paper promises for paper promises of every conceivable kind. Now the thing is that because you don’t need to own the “underlying asset” itself, there is no limit to the amounts of these paper promises that can be traded. Not that this is as novel as it may first appear.

Anyone who’s ever bought a lottery ticket has in effect speculated on a derivative, its value in this case being entirely dependent upon the random motion of coloured balls in a large transparent tumbler at an allocated future time. All betting works this way, and so all bets are familiar forms of derivatives. And then there are, if you like, negative bets. Bets you’d rather lose. For instance, £200 says my house will burn down this year, is presumably a bet you’d rather lose, but it is still a bet that many of us annually make with an insurance company. And general insurance policies are indeed another form of familiar derivative – they are in effect “put options”.

However there is one extremely important difference here between an ordinary insurance policy and a “put option” – in the case of the “put option”, you don’t actually need to own the “underlying asset”, which means, to draw an obvious comparison, you might take out house insurance on your neighbour’s property rather than your own. And if their house burns down, ah hum accidentally, of course, then good for you. Cash in your paper promise and buy a few more – who knows, perhaps your neighbour is also a terrible driver. There are almost numberless opportunities for insuring other people’s assets and with only the law preventing you, then why not change the law. Which is exactly what has happened, with some kinds of derivatives circumventing the law in precisely this way, and permitting profitable speculation on the basis of third party failures. When it comes to derivatives then, someone can always be making a profit come rain or shine, come boom or total financial meltdown.

But, why stop there? Especially when the next step is so obvious that it almost seems inevitable. Yes, why not trade in speculations on the future value of the derivatives themselves? After all, treating the derivative itself as an “underlying asset” opens the way for multiple higher order derivatives, creating with it, the opportunity for still more financial “products” to be traded. Sure, these “exotic financial instruments” quickly become so complex and convoluted that you literally need a degree in mathematics in order to begin to decipher them. Indeed those on the inside make use of what are called “the Greeks”, and “the Higher Order Greeks”, since valuation requires the application of complex mathematical formulas comprised of strings of Greek letters, the traders here fully aware, of course, that it’s all Greek to the rest of us. Never mind – ever more financial “products” means ever more trade, and that’s to the benefit of all, right…?

Deregulation of the markets – kicked off in Britain by the Thatcher government’s so-called “Big Bang” and simultaneously across the Atlantic through the laissez-faire of “Reagonomics”6 – both enabled and encouraged this giddying maelstrom, allowing in the process the banking and insurance firms, the stockbrokerage and hedge funds that make up today’s “finance industry” to become the single most important “wealth creator” in the Anglo-American world. Meanwhile, declines in manufacturing output in Britain and America meant both nations were becoming increasingly dependent on a sustained growth in the financial sector – with “derivatives” satisfying that requirement for growth by virtue of their seemingly unbound potential. Indeed, having risen to become by far the largest business sector simply in terms of profit-making, many of the largest banks and insurance groups had become “too big to fail”7. Failure leading potentially to national, if not international, economic ruin. Which is how the very systems that were supposedly designed to protect us, systems of insurance, have, whether by accident or design, left us more vulnerable than ever.

And then came the bombshell, as we learnt that the banks themselves were becoming bankrupt, having gambled their investments in the frenzy of deregulated speculation. Turns out that some of the money-men didn’t fully understand the complexity of their own systems; a few admitting with hindsight that they’d little more knowledge of what they were buying into than the rest of us. They’d “invested” because their competitors “invested”, and, given the ever-growing buoyancy of the markets at the time, not following suit would have left them at a competitive disadvantage. A desperate but strangely appropriate response to the demands of free market capitalism gone wild.

*

It is currently estimated that somewhere in the order of a quadrillion US dollars (yes, that’s with a qu-) has been staked on derivations of various kinds. Believe it or not, the precise figure is actually uncertain because many deals are brokered in private. In the jargon of the trade these are called “over the counter” derivatives, which is an odd choice of jargon when the only thing the average customer buys over the counter are drugs. Could it be that they’re unconsciously trying to tell us something again?

So just how big is one quadrillion dollars? Well, let’s begin with quadrillion. Quadrillion means a thousand trillion. Written at length it is one with a string of fifteen zeros. A number so humungous that it’s humanly impossible to properly comprehend: all comparisons fail. I read somewhere that if you took a quadrillion pound coins and put them side by side then they would stretch further than the edge of the solar system. The Voyager space programme was, of course, a much cheaper alternative. Or how about this: counting a number every second, it would take 32 million years to count up to a quadrillion… Now obviously that’s simply impossible – I mean just try saying “nine hundred and ninety-nine trillion, nine hundred and ninety-nine billion, nine hundred and ninety-nine million, nine hundred and ninety-nine thousand, nine hundred and ninety-nine” in the space of one second! You see it really doesn’t help to try to imagine any number as big as a quadrillion.

However, there are still useful ways to compare a quadrillion dollars. For instance, we can compare it against the entire world GDP which turns out to be a mere 60 trillion US dollars8. One quadrillion being nearly twenty times larger. Or we might compare it against the estimated monetary wealth of the whole world: about $75 trillion in real estate, and a further $100 trillion in world stock and bonds. So one quadrillion is a number far exceeding even the total monetary value of the entire world – material and immaterial! A little freaky to say the least! Especially when we discover that many of these derivatives are now considered to be “toxic assets”, which is a characteristically misleading way of saying they are worth nothing – yes, worthless assets! – whatever the hell that means!

So just like the Sorcerer’s Apprentice, it seems that the spell has gone out of control, and instead of these mysterious engines making new money out of old money, the system has created instead an enormous black hole of debt. A debt that we, the people, are now in the process of bailing out, with extremely painful consequences. Efforts to save us from a greater catastrophe having already forced the British and US governments to pump multiple hundreds of billions of public money into the coffers of the private banks. Yet the banks and the economy remain broken of course, because how is any debt larger than the monetary value of the entire world ever to be repaid?

Another tactic to halt descent into a full-blown economic meltdown has involved the issuance of additional fiat currency in both Britain and America; a “quantitative easing” designed to increase the supply of money by simply conjuring it up (a trick that fiat currency happily permits). Money may not grow on trees but it can most certainly be produced out of thin air. But here’s the rub. For in accordance with the most basic tenets of economic theory, whenever extra banknotes are introduced into circulation, the currency is correspondingly devalued. So you may be able to conjure money from thin air, but all economists will readily agree that you cannot conjure “real value”, meaning real purchasing power. Indeed this common mistake of confusing “nominal value” (i.e., the number of pounds written on the banknote) with “real value”, is actually given a name by economists. They call it: “the money illusion”. And it’s useful to remind ourselves again that money has only relative value.

To understand this, we might again consider money to be a commodity (which in part it is, traded on the currency markets). As such, and as with all other commodities, relative scarcity or abundance will alter its market value, and, in obedience to the law of supply and demand, more will automatically mean less. This is just as true for the value of money as it is for tins of herring, plumbers, scotch eggs and diamonds. So it seems that if too much of our quantitative is eased, then we’d better be prepared for a drastic rise in inflation, or much worse again, for hyperinflation. Printing too much money is how hyperinflation has always been caused.

Our future is bleak, they tell us. Our future is in the red. So much for security, so much for insurance. We’d apparently forgotten to beware of “the Greeks” and of the “higher order Greeks” when they’d first proffered gifts.

*

I said earlier, just in passing, that money is actually pretty boring stuff, and it is… Truly, madly and deeply boring! So when I hear on the news how “the markets” are hoping that the latest round of “quantitative easing” will enable governments to provide the necessary “fiscal stimulus”, I am barely even titillated. Whilst explanations, both in the popular press and supposedly more serious media, that like to describe such injections of new money as in some way analogous to filling up my car with imaginary petrol provide me only with a far, far more entertaining distraction: to wit, a magical car that runs on air.

But then, of course, money isn’t really stuff at all! More properly considered, money is perhaps a sort of proto-derivative, since its worth is evidently dependent upon something other than the paper it’s (increasingly not) written on. So what is it that money’s worth depends upon? What underlies money? Well, the accepted answer to this question is apparently that money is a “store of value”. Although this leads immediately to the obvious follow-up question: in this context, what precisely is the meaning of “value”? But, here again there is a problem, since “value”, although a keystone to economic thinking, has remained something of an enigma. Economists unable to agree upon any single definitive meaning.

Is “value” a determinant of usefulness? Or is it generated by the amount of effort required in the production of things? Or perhaps there is some other kind of innate economic worth? For instance in a thing’s scarcity. And can this worth be attributed at the individual level or only socially imputed?

There are a wide variety of definitions and explanations of “value”, that, being so foundational, have then encouraged the various branches of economic theory to diverge. And here is another important reason why economics is in no way equivalent to the physical sciences. Ask any physicist what energy is, and they will provide both an unambiguous definition and, no less importantly, offer established methods for measurement. Because of this, if ever one physicist talks to another physicist about energy (or any other physical quantity) they can be absolutely certain that they are talking about the same thing. Which is very certainly not the case when economists talk about “value”.

“A cynic is a man who knows the price of everything and the value of nothing,” said Oscar Wilde, distinguishing with playful wisdom the difference in human terms between “price” and “value”. The great pity is that the overwhelming majority of today’s economists have become so cynical – but then perhaps they always were.

*

As part of his on-going assault against religion, Richard Dawkins recently published a book called The God Delusion. It’s the old hobby-horse again; one that he shares with a great many millions of other broadly liberal, literate and intelligent people. That religion is an evil of which humanity must rid ourselves totally. And yes, much of religion has been dumb and dangerous, this I will very readily concede (and already have conceded in earlier chapters). But really and truly, is it “the God delusion” that we should be most concerned about in these torrid times? For regardless of Dawkins claims, it is quite evident that religion is a wounded animal, and for good or ill, the secular world is most certainly in the ascendant. Right throughout the world, aside from a few retreating pockets of resistance, faith in the old gods has been gravely shaken. It is not that human faith, by which I mean merely a belief and/or worship of something greater, is extinguished, for it never can be, but that it has been reattached to new idol-ologies. And in those parts of the world where the old religions have been most effectively disarmed or expelled, namely the West, one idol-ology above all others has gathered strength from Religion’s demise.

Richard Dawkins has said many times that instructing young children in religious obedience is a form of psychological child abuse and on this point I wholeheartedly support him. Children’s minds are naturally pliable for very sound developmental reasons. But is it less pernicious to fill their precious minds with boundless affection for let’s say Ronald McDonald? For this is merely one stark but obvious illustration of how a new fundamentalism has been inculcated in the young. Devotion to the brand. Love of corporations. Worship of the dollar and the pound.

This new kind of fundamentalism has long since swept across the world, but it is unusual, although not unique, in that it denies its own inherent religiosity whilst claiming to have no idols. This is the fundamentalism of free market neoliberal economics. The Father, Son and Holy Ghost having been forsaken, only to have been usurped by the IMF, the World Bank and the WTO. If you think I’m joking, or that this is mere hyperbole, then think again. When things are tough we no longer turn to the heavens, but instead ask what sacrifices can be made to “reassure the markets”. Sacrifices to make it rain money again.

By far and above, here is the most pernicious delusion of our age. And it has next to nothing to do with God, or Yahweh, or Allah, or even the Buddha. The prophets of our times talk of nothing besides profits or losses. They turn their eyes to the Dow Jones Index, trusting not in God, but only in money. So I call for Dawkins to leave aside his God delusion, for a moment, and pay a little attention to the rise and rise of “the money delusion”. If future historians reflect on our times, this is what they will see, and given the mess this “money delusion” is creating they will scratch their heads in disbelief and disgust.

*

I have already discussed the so-called “money illusion” – of mistaking nominal banknote value for real purchasing value – but this is merely one of many nested and interrelated illusions that make up “the money delusion”. Illusions that have become so ingrained within our permitted economic thinking that they are completely taken for granted.

Foundational is the belief that individuals always make rational choices. According to the definition of making rational choices, this requires that we all choose with consistency and always with the aim of choosing more over less. That a huge advertising industry now exists to tempt us into irrationality is never factored in. Nor are the other corrosive influences that so obviously deflect our rational intentions: the coercion of peer pressure, our widespread obsession with celebrities and celebrity endorsement, and that never-ending pseudo-scientific babble that fills up many of the remaining column inches and broadcast hours of our commercial media. We are always eager for the latest fashionable fads, and perhaps we always were. Yet this glaring fact, that people make wholly irrational choices time and again, whether due to innate human irrationality or by deliberate design, is of little concern to most economists. It is overlooked and omitted.

Likewise, a shared opinion has arisen under the name of neoliberalism that economics can itself be neutral, usefully shaping the world without the nuisance of having to rely on value judgements or needing any broader social agenda. If only individuals were left to make rational choices, as of course they do by definition, or so the idea goes, and the market could also be unshackled, then at last the people will be free to choose. Thus, goes the claim, individual freedom can only be guaranteed by having freedom within the marketplace. Freedom trickling down with the money it brings. “Wealth creation” alone must solve our problems by virtue of it being an unmitigated good.

Of course, back in the real world, one man’s timber very often involves the destruction of another man’s forest. Making profits from the sale of drugs, tobacco and alcohol has social consequences. Factories pollute. Wealth creation has its costs, which are very often hidden. There is, in other words, and more often than not, some direct negative impact on a third party, known to economists as “spillover” or “externalities”, that is difficult to quantify. Or we might say that “wealth creation” for some is rather likely therefore to lead to “illth creation” for others.

Illth creation? This was the term coined by romantic artist, critic and social reformer, John Ruskin, and first used in his influential critique of nineteenth century capitalism entitled Unto This Last. Ruskin had presumably never heard of “the trickle-down effect”:

“The whole question, therefore, respecting not only the advantage, but even the quantity, of national wealth, resolves itself finally into one of abstract justice. It is impossible to conclude, of any given mass of acquired wealth, merely by the fact of its existence, whether it signifies good or evil to the nation in the midst of which it exists. Its real value depends on the moral sign attached to it, just as sternly as that of a mathematical quantity depends on the algebraical sign attached to it. Any given accumulation of commercial wealth may be indicative, on the one hand, of faithful industries, progressive energies, and productive ingenuities: or, on the other, it may be indicative of mortal luxury, merciless tyranny, ruinous chicane.”9

*

We are in the habit of regarding all money as equal. Presuming that the pounds and pence which make up my own meagre savings are equivalent in some directly proportional manner to the billions owned by let’s say George Soros. A cursory consideration shows how this is laughable.

For instance, we might recall that on “Black Wednesday” in 1992, Soros single-handedly shook the British economy (although, the then-Chancellor of the Exchequer Norman Lamont was left to shoulder the blame)10. But to illustrate this point a little further, let me tell you about my own small venture into the property market.

Lucky enough to have been bequeathed a tidy though not considerable fortune, I recently decided to purchase a house to live in. The amount, although not inconsiderable by everyday standards (if compared say with the income and savings of Mr and Mrs Average), and very gratefully received, was barely sufficient to cover local house prices, except that I had one enormous advantage: I had cash, and cash is king.

For reasons of convenience, cash is worth significantly more than nominally equivalent amounts of borrowed money. In this instance I can estimate that it was probably worth a further 20–30%. Enough to buy a far nicer house than if I’d needed to see my bank manager. A bird in the hand…

Having more money also has other advantages. One very obvious example being that it enables bulk purchases, which being cheaper, again inflates its relative value. The rule in fact is perfectly straightforward: when it comes to money, more is always more, and in sufficient quantities, it is much, much more than that.

But then, of course, we have the market itself. The market that is supposedly free and thus equal. The reality being, however, that since money accumulates by virtue of attracting its own likeness, the leading players in the market, whether wealthy individuals or giant corporations, by wielding larger capital resources, can operate with an unassailable competitive advantage. These financial giants can and do stack the odds even higher in their favour by more indirect means, such as buying political influence with donations to campaign funds and by other insidious means such as lobbying – all of which is simply legally permitted bribery. The flaunted notion of a free market is therefore the biggest nonsense of all. There is no such thing as a free market: never has been and never will be.

The most ardent supporters of free market neoliberalism say that it is a non-normative system, which permits us finally to rid ourselves of disagreements over pesky value judgements. The truth, however, is very much simpler. By ignoring values, it becomes a system devoid of all moral underpinning. Being morally bankrupt, it is unscrupulous in the truest sense of the word.

*

If I had enough money and a whim, I might choose to buy all the plumbers and tins of herrings in Britain. Then, since money is (in part) a measure of scarcity, I could sell them back later with a sizeable mark-up. Too far-fetched? Well, perhaps, but only in my choice of commodity. The market in other commodities has without any question been cornered many times in the past. For instance, by the end of the 1970s, two brothers, Nelson Bunker and William Herbert Hunt, had accumulated and held what was then estimated to be one third of all the world’s silver. This led to serious problems both for high-street jewellers11 and for the economy more generally12, and as it happened, when the bubble burst on what became know as “Silver Thursday”, it also spelt trouble for the brothers’ own fortune. Fortunately for them, however, the situation was considered so serious that a consortium of banks came forward to help to bail them out13. They had lost, their fortune diminished, although by no means wiped out. As relatively small players they’d played too rough; meanwhile much larger players ensure that the markets are routinely rigged through such manufacture of scarcity. Going back as early as 1860, John Ruskin had already pointed out a different but closely-related deficiency in any market-driven capitalist system of trade:

“Take another example, more consistent with the ordinary course of affairs of trade. Suppose that three men, instead of two, formed the little isolated republic, and found themselves obliged to separate, in order to farm different pieces of land at some distance from each other along the coast: each estate furnishing a distinct kind of produce, and each more or less in need of the material raised on the other. Suppose that the third man, in order to save the time of all three, undertakes simply to superintend the transference of commodities from one farm to the other; on condition of receiving some sufficiently remunerative share of every parcel of goods conveyed, or of some other parcel received in exchange for it.

“If this carrier or messenger always brings to each estate, from the other, what is chiefly wanted, at the right time, the operations of the two farmers will go on prosperously, and the largest possible result in produce, or wealth, will be attained by the little community. But suppose no intercourse between the landowners is possible, except through the travelling agent; and that, after a time, this agent, watching the course of each man’s agriculture, keeps back the articles with which he has been entrusted until there comes a period of extreme necessity for them, on one side or other, and then exacts in exchange for them all that the distressed farmer can spare of other kinds of produce: it is easy to see that by ingeniously watching his opportunities, he might possess himself regularly of the greater part of the superfluous produce of the two estates, and at last, in some year of severest trial or scarcity, purchase both for himself and maintain the former proprietors thenceforward as his labourers or servants.”14

By restricting the choices of others, one’s power over them is increased, and it this that brings us to the real reason why money becomes such addiction, especially for those who already have more than they know what to do with. For truly the absolute bottom line is this: that money and power become almost inseparable unless somehow a separation can be enforced. And whilst wealth, especially when excessive, accumulates, as it almost invariably does, then along with it goes the accumulation of power. This is underlying and centralising mechanism has perhaps always operated at the heart of all civilisation. But even the power of money has its limits, as Ruskin points out:

“It has been shown that the chief value and virtue of money consists in its having power over human beings; that, without this power, large material possessions are useless, and to any person possessing such power, comparatively unnecessary. But power over human beings is attainable by other means than by money. As I said a few pages back, the money power is always imperfect and doubtful; there are many things which cannot be reached with it, others which cannot be retained by it. Many joys may be given to men which cannot be bought for gold, and many fidelities found in them which cannot be rewarded with it.

“Trite enough, – the reader thinks. Yes: but it is not so trite, – I wish it were, – that in this moral power, quite inscrutable and immeasurable though it be, there is a monetary value just as real as that represented by more ponderous currencies. A man’s hand may be full of invisible gold, and the wave of it, or the grasp, shall do more than another’s with a shower of bullion. This invisible gold, also, does not necessarily diminish in spending. Political economists will do well some day to take heed of it, though they cannot take measure.”15

Until such a time, every action and probable outcome must continue to be evaluated on the basis of strict cost and benefit estimates. Our “ponderous currencies” literally enabling a figure to be set against each human life – an application fraught with the most serious moral dilemmas and objections – and beyond even this, we have price tags for protecting (or else ruining) the natural environment all our lives depend upon. For only the market can secure our futures, optimally delivering us from evil, though inevitably it moves in mysterious ways. Which is how the whole world – land, water, air and every living organism – came to be priced and costed. Everything set against a notional scale that judges exclusively in terms of usefulness and availability, such is the madness of our money delusion.

We are reaching a crisis point. A thoroughgoing reappraisal of our financial systems, our economic orthodoxes, and our attitudes to money per se is desperately required. Our survival as a species may depend on it. Money ought to be our useful servant, but instead remains, at least for the vast majority, a terrible master. As a consequence, our real wealth has been too long overlooked. Time then for this genii called money to be forced back tight inside its bottle. Ceaselessly chasing its golden behind, and mistaking its tight fist for the judicious hand of God, is leading us ever further down the garden path. Further and further away from the land it promises.

Next chapter…

*

 Addendum: Q & A

Back in April 2012, I forwarded a draft of this chapter to friends in Spain (a nation already suffering under imposed “austerity measures”). They sent an extended reply which raised two interesting and important questions. Both questions along with my replies are offered below:

Q1: You seem to be saying that printing money (as the US and UK, who are in control of their own currency, are doing ) is as bad as dealing with the debt problem by means of austerity (the “Merkozy” approach). But the latter is surely definitely worse.

A. I think these are simply two sides of the same scam. The bankers create an enormous unpayable debt and then get governments to create new money to bail them out. This is sold to us as a way of bailing out a few chosen victims (Greece, Spain, Portugal, Ireland) although it simply means a huge transfer of wealth from public into private hands. To make that money useful to the bankers (and the rest of the ruling elite) ‘austerity measures’ are put in place which not only steal money off the average person but also permit the fire sale of national assets. Meanwhile, in Britain and America, the governments are helping to pay for these bailouts by creating money out of thin air, which means the real value of our money is reduced through inflation (effectively a hidden tax). If the money were invested in infrastructure or education or whatever, then this could potentially be a good thing (even though it still creates inflation), so certainly QE could have been beneficial but not when you use the money only to keep afloat a huge Ponzi scheme. But then you ask later…

Q2: ‘but how come the pound is high now and the euro low’

A. That’s a very good question and I won’t pretend that I understand this completely, but I gather there are plenty of ways for keeping currencies higher than they ought to be by manipulating the markets [incidentally, the Forex Scandal to manipulate and rig the daily foreign exchange rates did not come to light until Summer 2013]. The market is rigged in any case by virtue of the fact that the dollar remains the world’s reserve currency and that oil is traded entirely in dollars. But essentially what’s going on here is a huge currency war, and the euro is constantly under attack from speculators. I am fairly certain that the chickens will come home to roost sooner or later in America and Britain (and in Germany too), but meanwhile the governments simply go about cooking the books and telling us how inflation is only 4% or whatever when fuel prices, for instance, have rocketed during the past few years. In any case, we get ‘austerity’ too, not as hardline yet as the ‘austerity’ being imposed elsewhere, but it will come – of this I have no doubt. Either it will happen slowly, or worse, there will be a huge war and the ‘austerity’ will be brought into place to justify the expense of that. This is a deliberate attack by the bankers against the people of the world, and until the people of the world say that’s enough, and most of the debts are cancelled outright, I don’t see any way this can be reversed.

*

Another topic I briefly touched upon in the chapter above is the matter of inflation. What is it and what causes it? My answers were sketchy, in part, because I wished to avoid getting too bogged down in technicalities beyond my training. But this question about the causes of inflation is, in any case, an extremely thorny one. Different schools of economists provide different explanations.

One less orthodox account that I have frequently come across is that our fractional reserve banking system when combined with a central bank’s issuance of a fiat currency is inherently inflationary. That in the long term, and solely because of these extant monetary mechanisms, inflation is baked into the cake. So I wrote to a friend who holds with the above opinion and asked if he would explain “in the briefest terms that are sufficient” why he and others believe that central bank issuance of currency and fractional reserve banking are the primary underlying cause of inflation. Here is his succinct but detailed reply:

In a central bank system, money is created in the first instance by governments issuing bonds to banks and banks “printing” money and handing it over to the government in return. The government then owe the banks the money plus interest. If they ever pay back any of the principal, then a corresponding amount of bonds are handed back, i.e. cancelled. In that case, the money repaid goes out of existence!

Before elaborating any further, let’s take a step back. Fractional reserve lending doesn’t require central banks, nor does it require governments to create money by issuing bonds in exchange for it. Fractional reserve lending is simply the act of taking someone’s money to “look after it”, then turning around and lending a fraction of it to someone else. If the lender has enough depositors, then sum of all the unlent fractions of each deposit should cover him if one of them suddenly comes through the door asking for all their money back in one go. As I’m sure you know, if too many turn up at once looking for their money, a run ensues. Fractional reserve banking doesn’t even require a government sanctioned paper currency to exist. Depositors can simply deposit something like gold and the lenders can issue receipts which become the paper currency.

In olden times, when depositors of gold first found out that the goldsmiths they were paying to store their gold safely were lending it out for a percentage fee, they were outraged. The goldsmiths appeased them by offering them a cut of the fee for their interest in the scam. Accordingly, this money became known as ‘interest’.

So where do central banks fit in? Countries like the Unites States prior to 1913 have operated without central banks. There were thousands of banks of all sizes. To compete with one another, they had to endeavour to offer higher interest to depositors, lower interest rates to borrowers or to cut the fraction of deposits that they kept in reserve. This latter aspect was what caused banks occasionally to go to the wall, to the detriment of their depositors.

Central banking avoids this risk because the same fractional reserve ratio applies to all the banks under a central bank’s jurisdiction. However, it is really a way to avoid competition and if the system ever does get into trouble, the government feel obliged to bail it out or risk collapse of the whole system.

Now to answer your question about inflation.

In a fractional reserve central bank system, money is created as I’ve described by the government issuing bonds to the bank, receiving money created out of thin air and having to pay interest on it. When they spend it by paying salaries of government employees, contractors, arms manufacturers and so on, that money goes straight into bank accounts and the bankers can’t wait to lend out as much of it as possible, up to the limit of whatever fractional reserve ratio applies. So now there is a double claim on the money. The government employee thinks their salary is sitting in the bank but 90 percent of it is in the pocket of a borrower who thinks it’s theirs as long as they keep up with interest. That borrower, will inevitably either put the borrowed sum in their own bank account or spend it. Either way it will end up in another bank account somewhere. Then the same thing happens again; up to 90 percent of it gets lent out (81 percent of the original government-created money) and so on…

We end up in a situation where all of the money in circulation has arisen from someone somewhere, signing the dotted line to put themselves in debt. The money isn’t backed by a commodity such as gold. Instead it is backed by the ability of the borrower to repay. All these borrowers, including the government are paying interest. If interest is to be paid on every penny in circulation, then it doesn’t take a genius to figure out that new money must be continuously ‘created’ to keep paying this. That occurs by governments constantly borrowing so that their debts keep on increasing and borrowers constantly borrowing more and more. This seems to work as long as prices, wages and asset values keep increasing. Generation after generation, workers can afford to pay more and more for the houses that they live in because the price of the house keeps going up so it looks like good collateral to the lender and also their wages keep going up, so the borrower can meet payments in the eyes of the lender.

Working out what the rate of inflation is at any given time is practically impossible. Government figures such as RPI and CPI are just another tool for the propagandists to use as they see fit at any given time. However for the banks to gain anything from the game, the rate of inflation must be:

  • less than the rate of interest paid by borrowers and;
  • greater than the rate of interest paid to savers.

This is why savers money is ‘eroded’ if they just leave it sitting in a bank account.
Now imagine a different system where:

  • governments issue paper money by printing it themselves;
  • the amount in circulation is absolutely fixed;
  • there is no central bank but there are plenty of independent banks.

In such a country, there is no need for the government to have any debt and there is ample historical evidence of nations that have existed without government debt for very long stretches of time. What borrowers there are have to find the interest by earning it from the fixed pool of currency that is in circulation. There is little need for anyone to borrow but that’s something that most people you speak to have difficulty accepting. That’s because they’ve only ever lived in a system where they spend their lives in the service of debt and cannot conceive of it being any different.

The bankers right at the top of the system aren’t out to grab hold of all the money in the world. They’re not after all the tangible in the world either. Their only goal is to ensure that as much human labour as possible is in the service of debt.

Now for something different. How can this whole thing go horribly wrong for the bankers? I don’t just mean a run on banks or a recession. That happens periodically and is known as the business cycle. People lose confidence and are reluctant to borrow for a number of years, then they regain confidence and start to borrow again and the whole thing picks up and the cycle repeats.

What can go horribly wrong is if, after generations and generations and generations of increasing prices and debts, everyone gets more spooked by debt than ever before and totally fixated on repaying it. They sell assets but there are so many folk doing that that asset prices start to decline. That spooks people further. A spiral is under way. Banks try to ‘stimulate’ the economy by lowering interest rates but there is very little confidence around, especially if asset prices are declining compared with debts and wages aren’t rising either (or may be in decline), so that the ability to repay debt is impaired. This decline can be long and protracted. Also there can be many ups and downs along the way, although the long term trend is down. Ups can be deceptive as they are perceived as “coming out of the recession” by those used to the normal business cycles we’ve experienced throughout the whole of the twentieth century. In this way, asset prices can bleed away until eventually they reach something like a tenth of of their peak value. This process can reach a very late stage before a lot of people recognise what’s really going on. This is just a scenario but one worth considering seriously. We could be in for long term deflation but it will be well under way and too late for many people in debt by the time it gets mainstream acknowledgement.

A closely-related question and one that automatically follows is why do countries bother having central banks at all? Instead of a government issuing bonds, why not directly issue the currency instead, thereby cutting out the middle men? It is an approach that actually has a number of historical precedents as pointed out in this open letter to Obama urging him to reissue ‘greenbacks’ and the campaign in Britain to print ‘treasury notes’ like the Bradbury Pound. So in a further reply to my friend I asked him, “do you think that the re-issuance of ‘greenbacks’ in America or the Bradbury Pound in the UK might offer a realistic solution to the current crisis?” His response:

The issue of greenbacks or whatever you call them (essentially government-issued money) would probably make no immediate difference. Already, the money created by quantitative easing is not working its way into the system, so why would money issued by any other means?

In the longer term, such a fundamental upheaval would make a huge difference as the government wouldn’t need to be in debt the whole time and people wouldn’t have to keep paying increasing prices for houses and cars on top of interest. Pensioners wouldn’t be on a treadmill, having to ‘invest’ their savings just in vain an effort to keep up with inflation.

There’s a risk that the government might be tempted to print more and more money, which is often cited as a point in favour of the present system. It is claimed that having to pay interest and ultimately repay the whole principal is a disincentive in this respect. However, the current system ensures constant “printing” all the time as there’s no way that everyone involved can pay interest otherwise.

There’s talk at the moment about banks charging people a few percent for holding their money on deposit, i.e “negative interest”. People think they’ll lose money as their account balances will go down over time. However, it’s no different to being paid say six percent interest at a time when inflation is at 9 percent and the cheapest loan you can get is 12 percent.

I’m amazed at how people in the alternative media can inform us that banks are going to charge us ‘negative interest’ for our deposits, express outrage and then in the next breath claim that we’re in a hyperinflationary environment. Low/negative interest is a sure sign of massive deflationary pressure. I don’t know what’s going to happen but I’m convinced that deflation’s the one to watch. It has the potential to catch people out.

Getting back to your original question, the direct issuing of money by the government would represent a seismic shift of power from bankers to governments; a shift in the right direction, no doubt. It’s only possible if everyone knows what’s exactly going on. We’re a very long way off yet. Peoples’ understanding of the banking scam is very very poor.

I would add that very much front and centre in that scam is the role of the central banks. These extraordinarily powerful commercial bodies that adopt the outward appearance of public institutions when in fact they work for commercial interests. The US Federal Reserve, for instance, is a de facto private corporation and all of its shareholders are private banks. The status of the Bank of England is more complicated. This is what the main wikipedia entry intriguingly has to tell us:

Established in 1694, it is the second oldest central bank in the world, after the Sveriges Riksbank, and the world’s 8th oldest bank. It was established to act as the English Government’s banker, and is still the banker for HM Government. The Bank was privately owned [clarification needed (Privately owned by whom? See talk page.)] from its foundation in 1694 until nationalised in 1946.[3][4] 

Original references retained.

Clarification needed indeed! Anyway, nowadays it is officially (since 1998) an ‘independent public organisation’. However, the BoE is not really as independent as it might first appear, since along with eighteen other central banks from around the world (including the US Federal Reserve) it is a member of the executive of “the central bank for central banks” – the little known Bank for International Settlements (BIS) based in Basel, Switzerland. To hear more about the history, ownership and function of this highly profitable (tax free and extraterritorial) organisation, I recommend listening to this interview with Adam LeBor, author of the recently released book The Tower of Basel:

For my own more detailed thoughts on effective remedies to the on-going financial crisis please read this earlier post.

*

Please note that for the purposes of ‘publishing’ here I have taken advantage of the option to incorporate hypertext links and embed videos – in order to distinguish additional commentary from the original text all newly incorporated text has been italised.

*

1 From “The Future”, Essays in Persuasion (1931) Ch. 5, John Maynard Keynes, CW, IX, pp.329 — 331, Economic Possibilities for our Grandchildren (1930).

2 Adam Smith applied “the law of diminishing utility” to solve “the paradox of water and diamonds”. Water is a vital resource and most precious to life and yet it is far less expensive to purchase than diamonds, comparatively useless shiny crystals, which in his own times would have been used solely for ornamentation or engraving. The reason, Smith decides, is that water is readily abundant, such that any loss or gain is of little concern to most people in most places. By contrast, the rarity of diamonds means that, although less useful overall, any loss or gain of use is more significant, or to put it more formally the “marginal utility” is greater.

3 Extract taken from The soul of man under socialism by Oscar Wilde (first published 1891).

4 Legal tender is a technical legal term that basically means an offer of payment that cannot be refused in settlement of a debt.

5 Fiat (Latin), “let it be done” meaning that these currencies are guaranteed by government decree only.

6 Milton Friedman pays homage to Ronald Reagan’s record on deregulation in an essay entitled “Freedom’s friend” published in the Wall Street Journal on June 11, 2004. Drawing evidence from The Federal Register, “records the thousands of detailed rules and regulations that federal agencies churn out in the course of a year”, Friedman contrasts Reagan’s record with that of Presidential incumbents before and since: “They [the rules and regulations] are not laws and yet they have the effect of laws and like laws impose costs and restrain activities. Here too, the period before President Reagan was one of galloping socialism. The Reagan years were ones of retreating socialism, and the post-Reagan years, of creeping socialism.” For socialism read regulation. http://online.wsj.com/news/articles/SB108691016978034663

7 Definition of “too big to fail” taken from Businessdictionary.com: “Idea that certain businesses are so important to the nation, that it would be disastrous if they were allowed to fail. This term is often applied to some of the nation’s largest banks, because if these banks were to fail, it could cause serious problems for the economy. By declaring a company too big to fail, however, it means that the government might be tempted to step in if this company gets into a bad situation, either due to problems within the company or problems from outside the company. While government bailouts or intervention might help the company survive, some opponents think that this is counterproductive, and simply helping a company that maybe should be allowed to fail. This concept was integral to the financial crisis of the late 2000s.”

8 According to IMF economic database for October 2010, World GDP is $61,963.429 billion (US dollars).

9 Unto This Last is based on a collection of four essays first published in the monthly Cornhill Magazine, 1860, and then reprinted as Unto This Last in 1862. This extract is drawn from his second essay: “The Veins of Wealth”

10 George Soros proudly explains the events of “Black Wednesday” on his official website: “In 1992, with the economy of the United Kingdom in recession, Quantum Fund’s managers anticipated that British authorities would be forced to break from the European Exchange Rate Mechanism (ERM) then in force and allow the British pound to devalue in relation to other currencies, in particular the German mark. Quantum Fund sold short (betting on a decline in value) more than $10 billion worth of pounds sterling. On September 16, 1992—later dubbed “Black Wednesday”—the British government abandoned the ERM and the pound was devalued by twenty percent.” http://www.georgesoros.com/faqs/archive/category/finance/

11Last year [1979] Bunker and his syndicate began buying silver again, this time on a truly gargantuan scale. They were soon imitated by other speculators shaken by international crises and distrustful of paper money. It was this that sent the price of silver from $6 per oz. in early 1979 to $50 per oz. in January of this year. Chairman Walter Hoving of Tiffany & Co., the famous jewelry store, was incensed. Tiffany ran an ad in the New York Times last week asserting: ‘We think it is unconscionable for anyone to hoard several billion, yes billion, dollars worth of silver and thus drive the price up so high that others must pay artificially high prices for articles made of silver from baby spoons to tea sets, as well as photographic film and other products.’” Extract taken from “He Has a Passion for Silver”, article published in Time Magazine, Monday 7April, 1980. http://content.time.com/time/magazine/article/0,9171,921964-2,00.html

12Many Government officials feared that if the Hunts were unable to meet all their debts, some Wall Street brokerage firms and some large banks might collapse.” Extract taken from “Bunker’s busted silver bubble”, article published in Time Magazine, Monday 12 May, 1980. http://content.time.com/time/magazine/article/0,9171,920875,00.html

13What may deal the Hunt fortune a fatal blow is the fallout from the brothers’ role in the great silver-price boom and bust of 1980. Thousands of investors who lost money in the debacle are suing the Hunts. On Saturday the brothers lost a civil case that could set an ominous precedent. A six-member federal jury in New York City found that the Hunts conspired to corner the silver market, and held them liable to pay $63 million in damages to Minpeco, a Peruvian mineral-marketing company that suffered heavy losses in the silver crash. Under federal antitrust law, the penalty is automatically tripled to $189 million, but after subtractions for previous settlements with Minpeco, the total value of the judgment against the Hunts is $134 million.” Extract taken from “Big bill for a bullion binge”, article published in Time Magazine, Monday 29 August, 1988. http://content.time.com/time/magazine/article/0,9171,968272-1,00.html

14 Extract also taken from the second essay, entitled: “The Veins of Wealth” of Unto This Last by John Ruskin.

15 Ibid.

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