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Friday, July 10, 2009

Bread for today, hunger for tomorrow

I just love the economic opinion section of Samah El-Shahat at Al Jazeera. She has such a clear and sharp mind... and pen that I can't but agree with most of what she writes.

Yesterday's article again nails it. Shahat explains that, if before the financial crisis, the banking sector was already very concentrated and protected, now, after the new laws and loads of gratis taxpayer money because they are "too big to fail", it is even more concentrated and also more protected by law. But not better regulated at all.

So we went from having 15 banks to having around six. And these remaining banks have more power as their importance is now set in regulatory stone - and they know it.

The IMF, the guardian of economic neoliberalism, has also been strenghened.

So, all in all, our leaders multilateral solutions to the crisis have been about entrenching the existing world economic order rather than changing it.

But where does this leave us? You know, us in the real economy.

Well, the banks haven't yet started lending. All the money, as you will see from my previous posts, remains constipated within the new banking behemoths.

The level of toxic debt on their balance sheets is still unknown and, because of that, we will never get a recovery.

She argues that the contrast of recent financial "good news" and employment "very bad news" does not mean as some pretend that employment is lagging behind the overall recovery but that there is no recovery at all in fact.

So, in brief, we are living in a delusion of recovery: the bad news are set to ome back soon enough because nothing has been done to make the banks less all-powerful, but exactly the opposite.

It's probably a matter of months, a few years in the "best" case, before the bad financial news begin accumulating again, specially as the demand is unable to recover without a people-oriented (and not super-rich-oriented) stimulus package. We're used to think that the workers depend on the capitalists but, in most aspects, it's the other way around: because capitalists need to sell and for that they need demand, which can only be sustained by workers with decent salaries and healthy credit lines.


Auntie Ziona said...

hi Luis! G.A. is telling porkies again... have a look at this link:

Maju said...

What can I do? He's free to speak while his own totalitarian ideas do not suceed.

But well... that secularism is a product of Christianity... ahem! We had to cut many priestly heads and I'm still waiting for the Middle Easterners to do the same.

But it's only them who can do that revolution, not me.