Money, debt, magic...

The Chaotist current (a rare esoteric school of thought of the second half of the 20th century) provided me with some useful tools to understand the nature of Reality and how magic (or magick as they spell it) is nothing but the ability to persuade others as in the case of publicity (or of course the more classic but otherwise similar case of illusionism). In this sense it is a useful break up with the dominance of rationalism and materialism in modern thought helping us, once you get pass their esoteric formalisms, which are nothing but a cover up, a misleading cue and/or an elaborate joke, to understand the deep reality behind mere objectivism. That is the mental or subjective reality and the social reality that arises from the interaction of these subjectivities.

Another contemporary current that heavily dwelt in the importance of subjectivity but from a Marxist and more rationalist and revolutionary perspective, was Situationism. That's the kind of forces that LSD and the like liberated, I guess.

Maybe the most important concept I appropriated from Chaotism is that of godform, which, as I understand it, means some concept believed by many to be true, turning to have some sort of life of its own, not being fully controllable by anyone in particular. Typical cases of godforms are, of course, gods or equivalents such as Yaveh, Vishnu, Zeus, Allah, 'God' (Deus), Buddha, Tao, Baron Samedi, Pachamama, Yemaya, etc.

Regardless of their values and connection with aspects of reality or interactions between them, what really imbues them of a life of sorts is the belief of their followers. They feed on faith and die off when people stops believing in them.

Ideologies are also godforms, again regardless of their goodness or evilness: they feed on faith and can die off if people stops believing in them. Only the most powerful magi (some prophets, messiahs, caliphs, popes, buddhas, ayatollahs, master propagandists or great revolutionary leaders) can have some control over them, however, human life span is rather brief, while that of godforms transiting the social continuum can be much longer (though eternal is just an exaggerated claim).

But the godform of our time above all others is Money. As everyone with a critical mind who has studied Economics (as I did for some time) knows this discipline is not any science but a doctrine and dogma. Of course, it has some scientific elements of sorts, nothing can exist against the daily reality check, but these are just tools for the main objective of the discipline that is to create a cult around certain school of economics, namely liberalism.

Money as such is merely a token of debt, which by virtue of its token nature can be circulated more easily than merchandises. I produce something with my recognized work and I get paid in said tokens, which represent social debt in my favor which I can the spend in things I need or desire. It requires some historical developments such as social and economical complexity and private property, but otherwise it is that simple. Either it is a consensus valuable item, such as cows, salt, shells or gold, or it is guaranteed by the power of social organization itself, namely the state, in which case it can be perfectly a paper note or even a mere accountancy annotation on a register, which is what you use nowadays when you write down a check or pay with a debit card.

But their token or merely accountancy nature makes control of money, such an important social and economic tool, a key resort of power. You can gain control of money by accumulating it but the real power is in issuing it. There are two ways of issuing money: physically creating it, which is normally a privilege of the state (though historically often subcontracted to private minters), or virtually creating it by means of accountancy magic (i.e. lending well beyond what one has, a privilege of banks mostly). The differences between the various types of effective money supply are typically called M1, M2, M3 and by other similar names (M1 means physical cash plus "real" accounts while M3 means the whole amount of virtual money circulating in accountancy annotations). M3 can be many times M1, as you can see in this graphic for the Eurozone (the USA does not anymore publish M3 figures, surely to hide some grave economic facts caused by over-printing and over-lending by the Fed):

There are much worse cases than EU, indeed, specially in regard to disparate growth of M3 in comparison to M1 and M2. As the exclusive components of M3-M2 are almost never in the hands of common people (as well as most of M2-M1), the disparate growth of this kind of virtual inflationary money supply generally means that the elite becomes richer while the commoners lose.

But maybe more important than all these esoterisms of the Economic "science" it is the fact that bankers can lend money they do not own (they lend on account of your deposited money) and that gives them key control over all the monetary flux, specially if they act with some consensus (oligopoly) and have the complicity of the states, much more if they meet regularly at global level (Davos, Trilateral Commission, etc.) and have secretariats and offices to ensure that their wishes come true (IMF, OCDE, World Bank, etc.).

Where do I want to go? Actually I mostly wanted to introduce a couple of economic articles published at Global Research:

Zoltan Zigedy writes from Hungary on the debt trap imposed by the IMF to his country (and so many others - I recently mentioned India for example)

For decades, left critics of the International Monetary Fund (IMF) have maintained that the IMF is merely a tool for enforcing the interests of financial elites, especially those in the US. Predictably, this view has been scornfully dismissed by those in power and their media lackeys who posture the institution as the benefactor of needy countries. The persistent history of the IMF’s extortionate funding, linked to austere cuts in social spending, is simply dismissed as pressing fiscal responsibility on countries lacking the spine to address their profligacy. Such are the myths that sustain faith in global capitalism.

But a close look at the IMF in action reveals the politics lurking behind its high-sounding mission statements. Read the whole article...

It is painfully ironic that Hungary, the poster child of EU and IMF draconian deficit contention policies and former socialist bloc recycling to capitalism is subject to such a extortion by the imperial financial oligarchy.

Naturally this is raising nostalgia for communism because, whatever the faults and limitations of the old system, nobody ended up begging in the streets or having to live on welfare for lack of jobs.

It reminds me when, 21 or 22 years ago, I went on a visit to the European Parliament with people of the movement against the Leizaran highway (as unpaid and informal journalist for an alternative news agency). Besides of our host, we were welcomed and briefed by some liberal MEP who said that EU was ready to welcome specifically Hungary "if they adopted democracy". I had to ask an uncomfortable question: what if Hungary adopted democracy but kept a socialist economic system? He replied that in that case they could not enter EU because blah blah market economy blah blah.

I had to ask, you know. I was barely 20 but I knew already that it was not a matter of mere formal democracy.

The other article, by Ellen Brown, is quite curious because it is an apology of the Commonwealth Bank of Australia... before it was privatized.

The bank was created with zero capital and a small loan from the government on the quite reasonable belief that central banks are backed by the whole wealth of the country (i.e. by the moral authority of the government as social organizer and representation). It was the only bank with zero capital, yet it worked perfectly well (what illustrates well the virtual and faith-based nature of money).

But woe! The bank not only lent at low rates to private financiers, as most central banks do, but it also lent to the general public at similarly low rates and kept a reputation as "the people's bank" until its privatization 15 years ago. Of course, that's considered "socialist" by Thatcherian/Reaganist standards but it's what used to work and therefore it is being demanded again.

Geopolitics of the 21st century: shares of global wealth in 2015

This map represents the share of the World Domestic Product (Purchase Power Parity) in 2015, according to the latest (2010) estimates by the IMF (direct source: Wikipedia). Countries with less than 1% of WDP(PPP) not shown.

Click to enlarge
(In lighter blue: countries closely allied with the USA)

By 2015 the Chinese GDP(PPP) will be almost as large as that of the USA and China should overcome the USA in this measure before 2018. Another thing is the nominal GDP but this depends a lot of the artificially-set exchange rate of the renminbi (yuan).

By 2015 India will also be the third global power measured in these macroeconomic figures, having displaced Japan but still a long way to go to rank in the 1st tier. Otherwise the list of 19 countries concentrating more than 1% of global wealth is exactly the same as today but the order will have changed somewhat in favor of developing countries, with much higher growth rates and much better resistance so far to the global economic crisis.

In fact the crisis seems to be largely a crisis of the imperial World order: a clear sign of decline of the neo-European imperial system inaugurated some 500 years ago. It is also a sign of decline of the Anglosaxon-dominated industrial global economy of the last 2-3 centuries, a subset of the previous and its apogee.


A century ago...

Besides that, the situation also reminds me of the other great systemic crisis we know well: the one triggered by Germany surpassing Britain in GDP at the beginning of the 20th century, leading to the two World Wars and, eventually, the global hegemony of the USA.

There are many differences, of course, but there are also similitudes.

Some of the differences are that:

• the main scenario now is not in Europe but in Asia,
  
• that the USA (in the role of early 20th century Britain) is not deploying anything like splendid isolation, but rather has a huge imperial system and is the active self-designed paladin of the old world order, encompassing a large list of wealthy and powerful countries, notably Japan and Germany.
  
• that nuclear weapons make a world war most unlikely to happen as such
• that the rising stars have huge numbers of people to feed and keep content (one thing is GDP and another very different one GDP per capita)
• that China is far from being the militarist power Germany was and favors instead soft power

In my opinion, the comparison is still valid anyhow and has the following "casting":

• The USA in the role of Britain, the established but declining first global power
• China in the role of Germany (including Austria-Hungary), the dynamic but somewhat isolated challenger
• India in the schizophrenic role of both France and, specially, Italy: the third power in the geostrategic scenario: a more modest rising star with high dependence on who controls the seas
  
• Russia as herself and the Ottoman Empire: the semi-colonies of Germany (China) which made up somewhat for its lack of overseas territories

It's very approximate but you get the idea, right? Not sure if Japan should play the role of France or what but India and Italy give me much of the same vibe indeed, including the parallel between the Hymalayas and the Alps, as well as the fact that, much like Italy became relevant in parallel to Germany, India has done the same in parallel to China.

Europe definitively seems to have no major role, specially as it's far away from the Asian scenario. The only chance it could have would be through a real political and military union but that is far from happening. That's probably one of the reasons why Europe is being hit so hard in this economic crisis: it has lost some of its strategic relevance and is therefore disposable.

So which are the new Balcans? Obviously the Greater Middle East, including Central Asia. SE Asia could also play such role to some extent but also that of Scandinavia if they are luckier.

The parallel is, admittedly, only valid to some extent but it is still valid.

What really made me think of this parallel is the fact that for the first time in many many decades, the established global power is going to be soon replaced in the macroeconomic realm by someone else, exactly what provoked WWI.


So what?

These macroeconomic figures are no trivial fact: they represent real power much better than any other data. You can have as many recruits as you wish (soldiers, spies, lobbyists, etc.) but in order for them to be effective you have to be able to pay them, train them and specially equip them. Nowadays GDP generally gives a much more real measure of military prowess than number of troops or any other such figure. The same is true in the plane of economic and political influence.

Then... should we expect a WW-III? I hope not and I do not think so (nuclear deterrence). But we should expect localized wars in the line of Afghanistan and Iraq, as well as political instability (coups, revolutions) associated to this global confrontation each day more apparent.

Then is it more like a Cold War II? Yes, I think so. However, the USSR was never in position to really challenge the USA as China is right now. On the other hand, the USSR had a much more solid and exportable ideology China has abandoned in favor of capitalist competition (but consider Nepal, the Indian Maoists and even the Thai Red Shirts). Finally China is being careful of not overspending in the military department, as the USSR did with catastrophic results, as well as not to challenge prematurely the US hegemony and allow the Empire to get stuck itself in its own new editions of the Vietnam War, knowing that it cannot win them and that they'll cost it dearly.

But China also has its own challenges: in order to succeed economically, it must exploit mainly its own population in a phenomenon I call "internal colonialism". This is obviously bound to produce growing discontent, whose unavoidable revolutionary results are by the moment being deferred by means of certain redistribution of the newly acquired national wealth. China also faces major ecological problems, which are partly its own and partly interconnected with the rest of the world, such as global warming. Another problem is their partial dependence of its main rival as market for its products. Additionally, China has some unsolved geostrategic issues, notably securing access to the oil resources, along with the chain of US military bases/allies offshore, specially Taiwan.

Well, interesting and intriguing scenario the one we are heading into, right?

The financial coup and the end of Europe as we know it

Economist Michael Hudson has a new article at Counterpunch (Spanish language version at Sin Permiso) analyzing what he bluntly describes as financial coup.

Some key paragraphs:

A balanced budget in an economic downturn means shrinkage for the private sector. Coming as the Western economies move into a debt deflation, the policy means shrinking markets for goods and services – all to support banking claims on the “real” economy.

(...) The idea is to create an artificial financial crisis, to come in and “save” it by imposing on Europe and North America a “Greek-style” cutbacks in social security and pensions.

(...) It is diametrically opposed to the original liberalism of Adam Smith and his successors. The idea of a free market in the 19th century was one free from predatory rentier financial and property claims. Today, an Ayn-Rand-style “free market” is a market free for predators. The world is being treated to a travesty of liberalism and free markets.

(...) Latvia is the prime example. Despite a plunge of over 20 per cent in its GDP, its central bankers are running a budget surplus, in the hope of lowering wage rates.

(...) Beyond merely shrinking the economy, the neoliberal aim is to change the shape of the trajectory along which Western civilization has been moving for the past two centuries. It is nothing less than to roll back Social Security and pensions for labor, health care, education and other public spending, to dismantle the social welfare state, the Progressive Era and even classical liberalism.

(...) The problem is that there is not enough economic surplus available to pay the financial sector on its bad loans while also paying pensions and social security. Something has to give.

(...)

What really is causing the financial and fiscal squeeze, of course, is the fact that that government funding is now needed to compensate the financial sector for what promises to be year after year of losses as loans go bad in economies that are all loaned up and sinking into negative equity.

(...)

This is not the familiar old 19th-century class war of industrial employers against labor, although that is part of what is happening. It is above all a war of the financial sector against the “real” economy: industry as well as labor.

(...)

Latvia has been held out as the poster child for what the EU is recommending for Greece and the other southern EU countries in trouble: Slashing public spending on education and health has reduced public-sector wages by 30 per cent, and they are still falling. Property prices have fallen by 70 percent – and homeowners and their extended family of co-signers are liable for the negative equity, plunging them into a life of debt peonage if they do not take the hint and emigrate.

(...)

The explanation, of course, is that today’s economic planning is not being done by elected representatives. Planning authority has been relinquished to the hands of “independent” central banks, which in turn act as the lobbyists for commercial banks selling their product – debt. From the central bank’s vantage point, the “economic problem” is how to keep commercial banks and other financial institutions solvent in a post-bubble economy. How can they get paid for debts that are beyond the ability of many people to pay, in an environment of rising defaults?

(...)

This is why I say that Europe is dying. If its trajectory is not changed, the EU must succumb to a financial coup d’êtat rolling back the past three centuries of Enlightenment social philosophy. The question is whether a break-up is now the only way to recover its social democratic ideals from the banks that have taken over its central planning organs.

I could add many things but would be mere extensions on this analysis. Sadly enough, Hudson is right and, unless the People of Europe reacts very strongly, the continent will be plunged in a matter of years into the most dystopic scenario with the vast majority of citizens dumped into misery conditions, industries fleeing or dying out and mafias running the only remnants of the economy.

The corruption of the parliamentary representation system, with nearly all politicians being nothing but puppets of their financial patrons and with nearly no free media surviving, plus the destruction of effective state sovereignty is leaving Europe (and the World) on the hands of the big bankers, who have only one goal: to keep their profits high for as long as possible, concentrating all the wealth in their hands, without any real plan for the future other than that.

Capitalism has taken off its mask. It still tries to sell workers' austerity as something "good" but in fact they have no project whatsoever anymore. The Cold War illusion of welfare under capitalist conditions is all but dead now: class war has become very real.

But by the moment at least, the bad news is that the oligarchs are winning the war. For how long?

Iceland setting example: 10 bankers on trial

Unlike any other country affected by the hyper-abusive criminal practices of the banking sector (not the USA, not Britain, not Spain, not Germany, not Greece...), the small Nordic republic is doing the right thing: rounding up the corrupt bankers and putting them on trial.

Main stockholders and managers of three large Icelandic banks, Kaupthing, Landsbanki and Giltnir, are being prosecuted in their country for the crime of fraudulent appropriation of funds via ad-hoc loans from their own banks. The state administrators of the banks, now nationalized, are also considering raising charges against the auditor of these banks, Pricewaterhouse Coopers, for collaboration with the fraud.

The accused bankers are however exiled in foreign countries like the USA and the UK, and while their assets are being frozen, extradition is not yet granted.

Source: EstrategumTrading (in Spanish).

Spanish budget cuts less than quarterly benefits of just four companies

I'd say this is a very relevant figure: it means that taxing these companies 25% on benefits would allow the government to keep spending. As there are many more companies, the tax could be much lower, of course.

According to the labour union Basque Workers' Solidarity (ELA), just four large Spanish companies, Banco Santander, Banco Bilbao Vizcaya Argentaria (BBVA), Telefónica and ENDESA, earned in the last quarter more (6.6 billion euros) than the local IMF's puppet, Rodríguez Zapatero, aims to cut in public spending this year (five billion euros).

But instead of taxing them, the government gives them public aid: 61 billion that would have been much better spent in much needed pensions, direct public investment and unemployment aid.

This is an outraging situation not restricted to Spain. In fact it's the generalized abuse in which EU countries, following US lead, have fallen in: tax the poor to give to the rich.

Nothing less than 3.7 trillion euros have been gifted to the banks after squeezing them from the public. And now they say it's time to cut welfare and salaries. Are we dumb or what?!

The public aid to banks reaches the 12% of the European GDP and is going to reach as much as 22%.

Meanhiwle stocks sink anyhow... I wonder if some remnant of common sense in the brains of the vampires is telling them that this rape is just the last untenable bubble and that they are going to even devour the very states and imperial that allow their mere existence. If so, it doesn't matter if you sell or buy because neither kind of paper is going to be worth anymore.

You know I have very bad opinion of Capitalism but something I never really expected it to do was to suicide in this stupid way. I though they'd fight till the last penny but seems that they prefer to destroy all society as long as they can have their dose of benefits today.

Damn junkies! They can never think of tomorrow!

Source: Gara[es].

Financial madness: how they rob us in daylight and how things will only get worse

There is an interesting spat of economic articles at Global Research these days. Really too much for me to fully understand and analyze but indeed enough to get me on my toes because no one of them is the least hopeful.


The Goldman Sachs ripoff

Maybe the most visible to the usual media reader/watcher/listener is the new Goldman Sachs scandal, analyzed by Patrick O'Connor and Barry Grey at The Goldman Sachs Indictment. They blame the Zionist corporation of precipitating the collapse of the housing bubble in their benefit and they say that GS is going to get out of this one with just a fine, a drop on the ocean of what they robbed, largely because the Obama administration is largely made up with their men. Only one real person is indicted, a 31 years old junior trader, while the infamous GS CEO, Mr. Blankfein, nor their customer, Paulson Inc., are named in the cause.

Their actions—exhibiting an insatiable and manic drive for personal enrichment—have produced devastating consequences for tens of millions of ordinary people, not only in the United States, but around the world. Millions have lost their jobs, their homes and their life savings. Untold numbers of young people have lost their chance for a college education. Untold numbers of old people have been driven into poverty and an early death.

And Reagan, the prophet of late Capitalism, said that "greed is good"... What do you think? Good for whom?

This same story is also dealt with in another article by Robert Scheer. He begins with rough words:

The story of the financial debacle will end the way it began, with the super-hustlers from Goldman Sachs at the center of the action and profiting wildly. Never in U.S. history has one company wielded such destructive power over our political economy, irrespective of whether a Republican or a Democrat happened to be president.

At least the robber barons of old built railroads and steel mills, whereas Goldman Sachs makes its money placing bets on people losing their homes. On Tuesday, Goldman announced a 91 percent jump in profit to $3.46 billion for the quarter, while the dreams of millions of families continue to be foreclosed and unemployment hovers at 10 percent because of a crisis that that very company did much to cause.

And ends with even more discouraging words:

It is insulting to the spirit of populist revolt, which has been fundamental to the success of America’s grand experiment in democracy, that a fat-cat Republican-funded tea party revolt is now the vessel of popular anti-Wall Street discontent. That vessel ought to be our president, who campaigned as a champion of the common people.

Certainly Machiavelli himself would scold Obama badly. His ideal prince would cut the GS head quickly before more damage is made and also to score in popular support, which for Machiavelli is a critical asset for any leader worth that name (and who wants to stay as leader).


Mafianomics

I borrowed this subtitle from Mafianomics by Michael Werbowski. You thought the GS ripoff is bad enough? Well, I'm really sad to inform you that it is only the tip of the proverbial iceberg: the system is rotten to the core.

But Werbowski is kind of soft and imprecise: he complains about how bad is today's capitalist speculation and how immoral is profit for the sake of it, regardless of the pain it causes to society. But for a Red like myself this sounds a bit like idealizing some sort of cavalier feudalism or benevolent slavery and complaining that reality never meets the ideal. Capitalism is that way: rotten scam and organized robbery from the beginning. You should know better.

More interesting and detailed is the article by Ellen Brown titled Computerized front-running and financial fraud. Here we are placed in front of the daily reality of the mafioso scam.

It was initially just a patented program to take on the role of the specialist (the specialized brokers that are the pillars of the stock market) and make it more efficient and faultless. But, after the dot.com crash, the patent had to be sold and ended up in the "wrong hands": a private investment corporation. The program was hence altered to do exactly the opposite of what it was supposed to do: to take advantage of stock market weaknesses. This would have been illegal in EU but seems to be legal in the USA. Also other 132 such "improvements" have been patented after the original one by Keiser.

So nowadays there is a whole array of broker companies taking advantage, thanks to supercomputers, of mere instants in data transmission and processing to make their own speculative bids and ripoff everybody else, who do not have such means.

The details are even more complex and I'd say interesting and, of course, Goldman Sachs is denounced as the ring leader of this mafia, but you better read the original article to get the whole picture.


The new financial bubble.

Another rather worrisome piece is the article by Washington's Blog titled Are interest rate derivatives a ticking time bomb? Here we can read about one of the methods of institutional ripoff by well organized financial mafias and what is seemingly another bubble that will soon blow out on our faces.

What are interest rate derivatives? I could not get a clear idea, sincerely. It is a complex financial instrument designed to hedge financial risks. But, as the article states clearly, people tend to overestimate their ability to understand complex financial instruments. So I won't be so arrogant when even the bosses of the credit default swap scandal had no idea what they were dealing with. I'll better admit my own ignorance.

But whatever they are it is important to understand that they are based on notional values (i.e. the money on which they are based never really changes hands: it's essentially an accountancy tool) and that's the only way the derivatives' market is ten times the size of the global GDP. In other words, while the real economy (more or less, as GDP has some flaws too) amounts to 60-70 trillion USD, the derivatives' market is estimated in 600 trillion.

If that's not a bubble you tell me what is it.

The authors admit that, in theory, these complex financial instruments are designed to keep the balance of the scales but they also warn that theory and practice may not go hand by hand. And when George Soros himself warns against them, then it really gets worrisome:

I must state at the outset that I am in fundamental disagreement with the prevailing wisdom. The generally accepted theory is that financial markets tend toward equilibrium and, on the whole, discount the future correctly. I operate using a different theory, according to which financial markets cannot possibly discount the future correctly because they do not merely discount the future; they help to shape it. In certain circumstances, financial markets can affect the so-called fundamentals which they are supposed to reflect. When that happens, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. Such boom/bust sequences do not arise very often, but when they do they can be very disruptive, exactly because they affect the fundamentals of the economy…

The trouble with derivative instruments is that those who issue them usually protect themselves against losses by engaging in so-called delta, or dynamic, hedging. Dynamic hedging means, in effect, that if the market moves against the issuer, the issuer is forced to move in the same direction as the market, and thereby amplify the initial price disturbance. As long as price changes are continuous, no great harm is done, except perhaps to create higher volatility, which in turn increases the demand for derivatives instruments. But if there is an overwhelming amount of dynamic hedging done in the same direction, price movements may become discontinuous. This raises the specter of financial dislocation. Those who need to engage in dynamic hedging, but cannot execute their orders, may suffer catastrophic losses.

This is what happened in the stock market crash of 1987. (...)

There is much more but you better read it yourself.

Psychopaths are compulsive reward seekers

New research finds that what really characterizes psychopaths is not lack of fear or empathy but their extreme quest for rewards, no matter what because they get much higher levels of dopamine for rewards such as drugs or money.

J.W. Buckholtz et al., Mesolimbic dopamine reward system hypersensitivity in individuals with psychopathic traits. Neuroscience 2010. Open access.

Nicely synthesized at Science Daily.

This is important in itself for psychology, psychiatry and neurology. But what I read really makes me think that we live in a psychopathic society, where such psychopathic greed has replaced the basic human values of cooperation and social justice.

If you think about it, the psychopath is the ideal capitalist individual: without emotional or social attachments (which they are unable to feel) and only focused on profit (monetary rewards) and consumerism (product rewards).

The fact that the psychopathic tendencies also exist, maybe to lesser degree, among normal, well adjusted, people, albeit irregularly and not so exaggerated, should make us all think what we really want: a human society or a psychopathic society based on the greed of liberal economics.

Raise salaries to tackle the crisis

Interesting quasi-Keynesian economical theory the one explained by Alberto Garzón Espinosa at Altereconomía and developed originally by A. Badhuri and S. Marglin: European economies are in fact wage-led, not profit-led, hence destroying salaries will only sunk the economy further, what the system needs therefore is higher salaries.

The problem is that the Economic Doctrine, as in the seminaries... oops, I mean faculties of economics of virtually all universities ignores such fundamentals. The Doctrine says, erroneously, that economies are by definition profit-lead.

Demand is obviously driven mostly by the purchasing power of the people and if you destroy this purchasing power in order to minimize costs you destroy the demand and hence the economy. It doesn't matter how much the capitalist saves because he won't find a market for his super-cheap products if there is no demand.

This is, by the way, the fundamental contradiction of Capital as described by Marx more than a century ago. And that's why The Capital developed the now deprecated Keynesianism, as mechanism of defense when it faced its first structural crisis in the 1930s. But then came Thatcher and Reagan and their hordes of neoclassical priest-economists and decided that somehow the remedy was worse than the illness (was it?) and launched Reaganomics: plunder today that, in the immortal word of Keynes himself, "the future will take care of its own business".

Problem is that the future is today. Meh!

Meanwhile they created The Bubble, temporarily replacing the wage-based demand by a credit-based one. It could not last of course and millions of people and even whole nations were pushed into irrational indebtment in order to generate a spurious demand not sustained by the economy itself, i.e. by the salaries. It was nothing but a pyramid scam (Madoff? Thousands like him rule the world today!)

Whatever the case, the thesis defended by Garzón Espinosa is solid (not in vain it's consistent with the methodical analysis of the only economist worth that name ever: Karl Marx) and shows that the neoclassical remedies promoted by the FMI and acolytes, demanding salary reduction in order to reduce costs of a production that will nevertheless not find any significant demand, are fundamentally wrong. This is probably the case for any large economy anywhere but it's clearly true for Europe, which lives essentially on internal demand.

However, and this is my criticism, in order to make it work properly, a good deal of protectionism would be needed as well, at least while other countries/regions resort to the neoclassical recipes of the FMI. Otherwise the regional demand would be largely "wasted" in foreign products, not supporting the local economies. This is contrary to the interests of the Global Capital, particularly in the Toyotist paradigm, so the recipe cannot in fact be implemented within the system.

A change of system, a change of socio-economical paradigm is needed in order to save the economy, which is, let's not forget it, our very survival.

Greece accuses US and British speculators, Greenspan involved

It has been known yesterday that the Greek intelligence services have discovered that four multinational corporations based in the USA and UK were behind the artificial devaluation of its bonds, selling them "massively" and "buying them again at reduced prices at the end of the day". This information was published yesterday by To Vima newspaper (though I gather it from Gara).

The financial corporations accused are: Moore Capital, Fidelity International, Paulson & Co (these three from the USA) as well as Brevan Howard from the UK. All them are described in Wikipedia as "hedge funds", so it seems just another case of speculative attack by the usual financial criminals against the real economy. It is noticeable that former Fed chairman Alan Greenspan is nowadays "adviser on economic issues and monetary policy" for Paulson & Co.

So guess I would not be too wrong if I'd directly blamed Greenspan for the financial attack against Greece and more in general for the speculative attacks against the periphery of the Eurozone. However blaming the speculators alone would be naive, as it's obvious that EU played it wrong when it did not provide the euro with the appropriate political resorts and is playing it wrong now when it does not allow for a devaluation of the european currency, which would only help the continental economy, favoring much needed exports.

Prime Minister Giorgos Papandreu explained that these attacks are not directed against just Greece but that have a further goal: the euro.

Meanwhile the class conflict in Greece, sparked by the FMI-style draconian measures, is reaching extremes that will probably force a rethink of the policy because the strike public workers of the customs sector is leaving Greece without gasoline and other first need products. This upcoming wednesday a general strike has been called.

The recolonization of India?

India (then also including other countries, like Pakistan and Bangladesh) used to be considered the central piece of the British empire, the jewel of the crown. It was not, of course, to the benefit of Indians themselves but to the benefit of the British Empire and more precisely of the British capitalists. It was such a common place that when the Nazis outlined their plans for the conquest and colonization of Russia, they said they wanted it to become "the India of Germany".

Since independence however India has maintained a highly protectionist policy, for good or bad. This has to some extent favored the national capital up to the point that some years ago Mittal bought European steel industries becoming a global number one in the sector. Any pragmatic economist will have to admit that protectionism, even if it has some downs, is generally beneficial for the national capital and hence for the nation as whole, very specially if such country is not in a hegemonic position. Neither France nor Germany, much less Russia, Japan or China would have developed their economies without some level of protectionism. The situation might have been slightly different for the great powers of the Capitalist era, Britain first and the USA later, but even these have practiced protectionism to some extent and continue to do so.

Now I read at Asia Times Online that India is yielding to the pressure by USA and specially EU to broadly open its market. An Indian diplomat, speaking anonymously, seems to have declared that there is an understanding between the EU and his government that tariffs should be removed from 90% of all goods traded by both sides.

Is this good for India? On one side, Indian products would have an increased and comparatively affluent market, on the other, European capitalists may find interesting to outsource part of their production to the Asian giant, where salaries are much much lower and de facto regulations on workers' rights and environmental issues are much lower in general. On first sight, it might even look beneficial for India and perilous for Europe, at least for the European working class, mostly unable to compete with a huge and overexploited labor force, sometimes highly qualified.

But there are serious issues for India too: European subsidized food producers, heavily reconverted by the dark magic of Brussels' policies into large mechanized landowners can totally disrupt the Indian primary sector, dumping masses of farmers into increased misery. EU also has a GNP that is 14 times that of India, which means that, even if it may be a good market for certain Indian products, it will also have the upper hand in all negotiations: it won't be an equal partnership for sure.

Finally there is serious concern over all social issues, including ecology and labor rights. It is well known that labor in India, specially unqualified labor and notably large numbers of children, are exploited in very poor conditions. Certifications exist denying such practices but they are generally not worth the paper they are written on. Of course, neither Brussels nor New Delhi are paying any attention to such concerns: they are only interested in what may benefit their respective capitalist classes. For example a business lobbyist grunted at a draft of such treaty because it would include products considered to be of critical importance to the exporters he represented. This means that EU will pressure for a deal that is not as good for Indian exporters and is better for European capitalist interests.

Meanwhile social and environmental pressure groups are kept at bay from the halls of the EU decision-makers. And that's surely the case also in India.

Is this part of the price (price or prize?, hard to say: look at poor Mexico for comparison) that India gets for sliding towards the Atlantic bloc? How good or bad is it going to be for India and particularly for the Indian people? And for Europeans too, barring a few capitalists: is it going to be any good? After all commodity prices are relatively low in Europe and quality standards are generally high, so one wonders what will India export: pieces for car makers, some textiles, raw steel and loads of tea and other "exotic" commodities that can't be produced in Europe.

I would like second opinions, of course, but I'm under the impression that any such treaty will leave India too dependent on EU for a balanced national development.

Krugman and The Crisis in Spain

It has been news in Spain and Europe recently certain reports that claim that the Iberian Kingdom is "a menace for the Eurozone" and blah-blah. Of course, the conservatives have echoed them in an attempt to win the next elections.

Economics Nobel Prize Paul Krugman deals at Sin Permiso with the reality of this local aspect of the global crisis. As I suspected, the reality is quite clear: there is no debt problem in Spain, which has only a very moderate indebtment, well below the OECD average, only surpassed by Italy and Greece in the Eurozone, and by Japan out of it.

Public debt as percentage of GDP (source: OECD)

In fact, by these standards of indebtedness, central Eurozone countries like Germany or France are in much more perilous positions.

So what's the real problem with the Spanish economy? As Krugman explains, the case is that in the last decade or two there has been a terrible speculative bubble of mainly real state prices, that has caused salaries (and prices) to go up. Not much more has sustained the Spanish economy in all this time and now that the bubble is over (even if housing prices are still not dropping too much) Spanish workforce is accustomed to "high" salaries, what makes it non-competitive in the global market and particularly in the EU.

He says that the recipe now should be inflation but, as Spain has not anymore monetary autonomy, it can't do that.

However what Krugman, after all a capitalist economist, even if Keynesian, does not deal with are the following issues:

In Spain the main expense, by large, of any family or individual worker is housing. If housing prices don't fall, salaries can hardly decrease. But there are such powerful olygopolistic interests in the housing bubble that real state prices, excepted maybe some vacation localities, are not yet falling. We the people expect, reasonably, drops of 30-50% in housing prices but so far, almost two years after the real state/credit bubble crash, housing costs have not varied at all. Homes remain unsold and people has to struggle to pay for them or wait painfully in provisional situations until the "invisible hand" of market finally acts.

Also credit remains extremely elusive. My brother, an engineer with a stable job as executive director of a small but well-doing company, had to get a state-subsidized home. And when he asked for credit to pay for it, he was told that ok... but only because it was not much money, otherwise he would not get any credit. Another brother of mine, an economist with experience and a stable job, is still living in a shared apartment. Myself I have got in lenghty but futile arguments with my landlord after he decided to raise the rent almost 20%. It's still cheap in comparison with most other stuff you can find around.

There is a structural problem in the Spanish economy and that is house prices. Workers' basic expenses are housing, food, clothing and basic services such as electricity, gas or water. Of these housing is by far the most costly and can be almost as much as a regular worker earns. With this situation it's plainly impossible that salaries can go down. How are you going to work for less than 1000 euros/month if housing alone may cost you 700 or more? You must decline any such offer because it's not absolute money what counts but how much can you pay for it.

So, in my humble opinion, what Spain needs, in the context of capitalist market forces, is not inflation but deflation. And that means first of all, forcing housing prices down severely. As the market forces do not seem to work in this still speculative context (even if now is a resistence speculation rather than a benefit driven one) the government should intervene somehow. But that is beyond the ideological scope of the system: neither the socialdemocrats nor the conservatives will do such thing.

So what happens? That unemployment climbs up until almost unheard of levels: more than four million people right now are searching for a job... but, of course, they can't still accept salaries that would not allow them to pay the rent (or mortgage). Other living costs are not low either but housing is the main one and therefore the main problem.

EU rules on "free market" do not help, because they introduce too many constraints on what a government can do. For example, if a (most reasonable) law would be made to force empty homes to be sold/rented or expropriated at half cost, that would violate the EU directives and put the state in serious legal trouble. If the state would increase its debt to massively build subsidized homes at cheap prices, as is much needed, EU would again complain.

So I guess that there is no realistic exit within the parameters of capitalism and EU. So I wonder: what are all those grunters complaining about? Spain is a perfectly normal capitalist economy where oligopolies work to maximize benefits at the cost of the working class. Just business as usual.

Maybe they fear that the working class may get unruly and shatter the status quo? Maybe that's what they are really worried about but they should then address the needs of the people and not just those of the corporations and the tiny elite that owns them. But that would be "socialism" and that's not what EU nor Spain are about.


Update: I just stumbled upon this analysis by Michael Hudson on the reappointment of Ben Shalom Bernanke as director of the US Federal Reserve. And, guess what?, he has exactly the same analysis for the USA than I was making here for Spain: that while housing prices don't fall, salaries will remain high and the economy won't be competitive. Sadly enough, in the USA as in Europe, this is not a policy that rulers are willing to consider.

Are "colonies" becoming more demanding?

I came through two different articles in a row... in two different media, on two different countries and continents, with very different situations... but what they say is more or less the same: more and more "third world" countries are demanding from foreign investors that they do not just sign a check but that they contribute to local development sharing their know-how.

They use the imperfect multipolarity of modern world as leverage to achieve their purposes.

That is what Kazakhstan has achieved from China, which has largely replaced the USA influence that way, and that is what Venezuela is demanding now to foreign car-makers with the same kind of threat: or you share or we will find out others who do.

It seems an interesting development, isn't it? Particularly because it is in immaterial forms the way that postmodern Capital is accumulated specially.

Scientifically proven: big earners are nothing but parasites

A study by the New Economics Foundation (NEF) finds out that the best paid professions destroy many times more wealth than their incomes, while low paid professions instead generate much more social wealth than their salaries and expectations would suggest.

For example, the so-much-hated bank managers earn from 500,000 British pounds up (yearly). Even the "worst" paid earn in 10 days what you or me may make in a whole year. Some make quite more than 5 million pounds. But they destroy 7 pounds of wealth by each pound they may create with their work.

But these are not the worst. Even if less well-paid (in a context of stratospheric salaries), advertising executives and tax accountants are even more destructive. The typical adverstising executive destroys 11 pounds per each one generated, but tax accountants create so little value that they have destroyed 46 pounds each time they create one.

In the really productive sector, the professions researched are all very lowly paid and have poor social status and virtually zero opportunities of promotion: child minders, waste recycling workers and hostpital cleaners all produce much more than they are paid. Hospital cleaners generate 10 pounds by each pound they get paid, child minders are close with 9.50 pounds generated per one paid and waste workers are the most productive of all, generating 11 pounds per each one paid.

The authors reconsider the concept of value, pondering its social dimension, which I find very much appropriate. They also chew on how the very rich manage to keep sucking the blood from the public without any logic other than their monopoly of certain structures or how in spite of chronic lack of certain worker classes (like nurses) their salaries get no rise.

Paper (PDF): A Bit Rich: Calculating the real value to society of different professions. Originally found via BBC.

Madoff affair: working notes 1

It seems that by the moment it is fairly impossible to get the whole picture of the Madoff scandal. And I do not mean just a whole list of his customers and the ammounts affected but all the posible ramifications, including very possibly the Zionist network and Israel.

So by the moment I'm just thinking loud and taking notes on what I find around there to see if I can come to some conclusions in due time. I'd thank that any readers with ideas or just interesting links would make me notice them (feel free to comment).

Some interesting stuff (though verifiable facts, unconfirmed allegations and opinions are all mixed) is the Blogosphere. The more or less interesting material comes from:

1. Jewish anti-Zionist blogs (they do exist and are most interesting):

• Joachim Martillo, at Ethnic Askenazim Against Zionist Israel, says that the Madoff scandal is nothing compared with the ammount scammed by Zionists to the US public to finance Israel. The same author also has a quite interesting history of Zionism (or as he call it: "Judonia"), worth a good read.
  
• Jews sans frontieres considers that the Madoff affair is a blessing because philantropy is reactionary and Jewish philantropy even more (one of the "charities" scammed by Madoff, the Lapin Fundation, that appears to have lost all its money in this affair, was basically dedicated to promote Jewish racism).

2. Palestinian blogs:

• Window into Palestine wonders if Madoff moved all the "lost" money into Israel. This is a very intriguing post but sadly the sources are vague and unclear. According to them anyhow the money is not gone but it's safe in Israel, and most or all investors have been privately notified. The whole confession affair would then be just a stratageme not to pay taxes in the USA, after Swiss bank leaks, and because "it was felt that this was a necessary measure in protecting certain high level clients in the face of a collapse of the USA". It adds that "the money needed to be taken out of the US on fear of collapsing US dollar and seizure of funds by IRS and courts for frauds committed during the sub prime bubble". They also suggest that the real ammount involved would be closer to $100 billion (double than what is official). - Note: traced the original source of this article is a post at Google-groups by Mark Graffis, post that appears to have been transcribed around the net. It remains intriguing but I'd like to know the alleged sources. [Note: most quoted source is Rense - but this informal news site links to Yahoo-groups. It's clearly a rumor but many seem to take it as very likely]
  

3. Spanish-language blogs:

• Diario Pampero Cordubensis translates from an English-language article by John Paterson (NSK News - still to locate online). The article says that the money is in Israel and that it's quite obvious why Madoff has been given such a generous bail: it's all a financial plot, not just this scandal but the whole financial crisis [that we know well: was caused by a chain of Ponzi schemes itself, as denounced by the 2008 Nobel Prize of Economics]

Madoff is not just any Jon Doe after all. He was the star guru of Wall Street, the presiden of NASDAQ (...), mecenas of Jewish organizations, friend of Israel, director of the Hebrew Yeshiva University (...) Zionist militant, he is one of the most renowed leaders of AIPAC (US pro-Israel lobby).

Obviously it's so crude that truth comes alone: Madoff is the consensuated visible face of something else. Can anybody believe that someone that was scamming for so many years (...) was never spotted by the SEC or FINRA or even the FBI? [I'd add also European and Japanese regulators]

(...) many already think that we are before a controlled demolition of the financial bubble. That is: the monster is being dismantled like in demolition works with explosive charges while the money is transfered from the naive to a few select hands. bankrupticy of the Zionist investment bank Lehman Brothers and the silence of the Zionist financial lobby, Robert Rubin, few doubts remain.

Money does not vanish: what many loose, a few gain. And they have decided to gather all in their hands without any need to give account. For this purpose the US taxpayers (...) will have to pay 700 billion already compromised for the "rescue" of Wall Street (...)

The money stolen by Bernard Madoff maybe is already safe in Israel, meanwhile it will be dissimulated with the song of the "scammed Jewish investors", like Steven Spielberg (...), who all keep a suggestive silence, possibly on request.

4. News sites:

• David B. Carusso (AP) at Yahoo news Spain analyzes some of the possible accomplices of Madoff. In the article it seems obvious that an elderly man alone, no matter how smart and well connected, could not do all that mega-scam alone. From other news it's just clear that the impact in Europe is growing by moments and that the same kind of criticisms against the regulators is being thrown around. At least one Basque public bank (Kutxa) is affected.
  
• NYT: list of losers, Dec. 14 (obsolete but it's something)

5. Forums (why not):

• In Gold is Money.info, a member (whaterbd), discussing the obscure allegations of Graffis, argues that it's just impossible that Madoff run a Ponzi scheme with such important customers, it should have not gone unnoticed to financial analysts nor to the employees. He argues that by confessing, all customers would be able to claim refund from the US administration (this normally would require the fraud to be proven but confession allows to skip that part). - lost the link but well... it's just a note.
  

6. Other blogs:

• InvestorCentric mentions that Madoff customers want a bailout too.
• Mondoweiss mentions his links with Ezra Merkin, who apparently invested all in Madoff's fund. Merkin nevertheless got a large privatized Israeli bank two years ago. A character to trace in this story, along with Sharon and Olmert, who appear in the same photo.

7. Wikipedia is always a reference but in Jewish-lobby and Israel related issues it's very much under the control Zionist ideology and fears of being labelled "anti-semitic" (wasted word). Anyhow it may give some figures if nothing else.
.

Fed gives money away...

It has broken all limits by pushing the interest rates to nearly zero, well below the inflation rate, what is losing money in itself.

Apparently the logi behind such ridiculously low rates is injecting so much money into the system that a good deal of it is passed onto households and businesses at a reasonably low interest rate.

But there is one big problem: the Fed doesn't loan to private people, not even to companies... only to banks. And banks worldwide are right now not conceding almost any loans to almost nobody. And it's not a problem of money availabality: it is a problem of panic, after being overly indiscriminate with credit for decades, they have suddenly panicked and do not want to give any credit that does not have absolutely all guarantees. It's not that they don't have money to loan, it's that they fear to lose it and prefer to keep it locked.

So the Fed would do much better changing its directives and directly giving credit to the people and business, who right now can't get it from the banks. They could even ask for a much higher rate. That would of course be a virtual equivalent to bank nationalization... but in the mid run it's something they will have to do anyhow, because if banks do not fulfill their role providing credit (not mad credit as they did before but certainly normalized reasonable credit), they will need to be scrapped or replaced by some effective economic mechanism, private or public.

Ecuador denounces its foreign debt

President Correa gave the order not to pay the interest of some of its $10 billion international debt, that he considers "immoral and illegitimate". It is the first Latin American country to do so in many decades (others have defaulted or put limits to interest payements but none had bluntly denounced the illegitimacy of the international debt so far). He says his cabinet will soon propose a system to renegotiate the debt in "reasonable" terms and denounced the international lenders as "monsters".

This is, I understand, a major yet expected step (I have been reading forecasts for scenarios like this since the 1980s) that will no doubt put more strain in the already weak global financial system. The BBC article suggests that this would put strain on Ecuador's finances but actually I guess that the economist that is Rafael Correa is probably thinking rather in alleviaing them.

As has been denounced once and again, most of the transnational debt held by poor countries has neven been of any help to them but rather has fed the pockets of some corrup leaders, while it is the taxpayer who is expected to put up with them.

In a more detailed account, Rebelión (in Spanish) informs that this is the outcome of the Public Credit Integral Auditing Comitee (CAIC) research, an organism created in 2007 precisely to evaluate the legitimacy of the foreign debt, chapter by chapter. The decision affects some $3.8 billion (roughly 38% of Ecuador's foreign debt) owed by the Global Bonds 2012 scheme.

The CAIC found "serious indications of illegality" in the contracts of foreign debt in general, what has brought President Correa to say that "what has been done with the debt is immoral: a treason to the fatherland, totally illegitimate". They are pondering legal action against the debt owners.

In this context, Ecuador has asked the UN for help in their effort to estabilish what parts of the foreign debt of poor nations are legiimate and which are not and to create a legal frame that regulates the debt morally. They are gathering support among the G-77 (the group of most impoverished countries) and also with China for that goal. If Correa is succesful in his international endeavours, it may mean very bad news for the international lenders, so used to impose their criteria to poor nations. It should also make corrupt loans less likely to happen, specially as they could be challenged legally.

Economist who denounced the bubble gains Nobel

Admittedly not known to me before today but it seems that Paul Krugman, the new Nobel Prize of Economics, was at least honest enough to denounce, already in 2002, the economic bubble as a mere Ponzi scheme (a type of scam, in which apparent profits are actually taken from new investments) and the epydemic of extreme dishonesty that was behind the apparent growth of the last years.

In his discourse he declared that this crisis may well be similar to the one of 1929.

To take a look at his thought check his index of cloumns at the New York Times and the Unofficial Paul Krugman Archive (for articles written before his NYT period).