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Showing posts with label financial crisis. Show all posts
Showing posts with label financial crisis. Show all posts
Tuesday, 25 March 2014
The long term implications of last week’s budget
Many people have described last week’s budget as against the young and for the pensioners I think this miss's the glaring point that it was for me probably the most class based pro elite budget George Osborne has come to the house of commons with to date.
The long term implications for this budget and what it could do to the economy could be wide and quite stark.
I do think the grounds are being laid now for the next economic crisis around the globe and the UK will not be able to avoid this so much this time. China which has a huge shadow banking system worth an estimated 50% of GDP is very unstable and that isn’t starting to mention the USA with its huge debt overhang and the euro crisis which on the face of it seems like it has gone away although things are still not right across the single currency.
We have seen austerity budget after austerity budget since 20011 from the coalition government and even on George Osborne’s own omission he has failed to eliminate the deficit this parliament which he promised to do. The reason why our loyal opposition is not making more of this you ask?
Well they too are wedded to the same financial path of austerity as the Tories and the lib dems. They are all quite literally in this case all in it together.
Some may think the recent "recovery" if you can call it that is cause for optimism but I’d be far more cautious personally.
"The scars of 2008 remain and the UK economy is in big trouble with austerity and declining living standards here to stay. Below are five things about this year’s budget; a document which outlines a ‘recovery’ based on presumptions that, quite simply, aren’t going to happen
1. Low interest rates are setting the stage for another bubble just like the one that preceded the crisis of 2008.
Yesterday Mark Carney, the governor of the Bank of England, criticised the BoE and his predecessor, Mervyn King, when he said that its almost exclusive focus on low inflation meant it had failed to also keep an eye on financial stability. In other words the BoE had no problem stoking bubbles with low interest rates if that meant it also kept a lid on inflation. Interestingly enough Carney also pointed out that “It doesn’t take a genius to see that similar risks exist today”. He noted how risks were brewing because of the current period of of ultra-low interest rates – historically without precedent – saying that this could breed “potential complacency and excessive risk-taking” in financial markets. Sound familiar? Near 0% interest rates are necessary for any growth at all in the UK at the moment but they are also creating similar conditions which led to the last financial crisis.
2. The OBR is plucking numbers from the air on projected productivity gains (again).
The economy can grow for a while yet, especially if unemployment falls to 5-6%. Alongside big numbers entering work (and workfare) is however the unresolved (and often ignored) problem of falling productivity. If and when unemployment does fall as low as 5-6% productivity *will have* to increase for growth to continue. The Bank of England expects productivity (output per hour worked) to go up in the next quarter as does the Office for Budget Responsibility. Indeed the OBR is today saying that they anticipate 1.2% productivity growth in 2014 and 2.2% growth the following year. The only problem is that this’ is completely at odds with all the data since 2008 and all of the BoE’s predictions over the same period. Where do those numbers come from? My guess is that it’s a case of the OBR and the Bank of England collectively sitting on their hands and saying ‘productivity has to go up sooner or later, right?’
For more on why productivity matters for any prospective economic ‘growth’ check out the recent video we did for #NovaraTV
3. Its also making ridiculous claims on future wage growth.
Sooner or later the Bank of England is going to have to increase interest rates. That will probably happen later this year and if wages are still not keeping up with inflation by then (as has been the case for the last six years), consumer demand - and growth – is likely to take a hit. If wages don’t grow this year and rates go up, even by half a percent, that has huge consequences for the economy. As I recently wrote on the LRB blog:
“Late last year the bank reported that average outstanding mortgage debt remains high, at £87,000, and that any rate rise not accompanied by an increase in real wages would cause serious problems. The number of households ‘most at risk of financial distress’ would double to nearly one in six if their mortgage rates went up by 2.5 per cent and their incomes did not improve.”
Wages have been in decline for six years. If it stays that way and interest rates begin to inch back towards their historical average (even that of the recent past) the government has big problems. Wage growth is now crucial and without it any increase in interest rates might prove politically difficult. Furthermore the projected increases in household consumption - around 2.5% between 2014-18 – make little sense if interest rates are going to go up even a few percent.
4. … and on exports.
The OBR expects export growth of 2.6% in 2014, rising to 4.7% in 2015 and 5.0% in 2016. In 2012 exports of goods and services increased by 1.1% (with imports increasing by 3.1%), while in 2013 that figure was 0.8%. That was in the context of reasonable global growth with the US and the BRIC economies seeing more demand than they probably will after 2015. In spite of that the OBR is projecting increases in UK exports not seen in the last several decades. That is all within a context where one of the UK’s biggest exports - oil – is seeing falling output. The projected numbers on UK exports - averaging around 5% over the period 2014-18 – is utter nonsense and without precedent. Seen alongside falling North Sea output I would argue it is impossible.
While industry surveys have been pointing to increased export orders for a while, Samuel Tombs, an economist at Capital Economics, claimed these have been “misleadingly upbeat . . . we would not place too much weight on them”. The OBR is making claims for the next half a decade on the back of confidence surveys and figures for very short period – it’s a bit like when your mate shows you a video of a 12 year old wonder-kid on YouTube saying they are going to be better than Cristiano Ronaldo.
5. …and yeah, on fixed investment.
Business investment is still 26% lower than it was in 2008 and while there was a dramatic increase in business investment in the final quarter of 2013 – 8.5% – that was the outlier in the data, not the norm. The OBR is now confidently predicting that kind of growth in business investment not just for the next three months, or even the next year, but all the way through to 2018. Compare that to 0.7% growth in business investment in 2012 or, worse still, the 0.5% contraction in 2013. It’s a bit like saying that your best striker scored a hat-trick in the last match of the season and is therefore going to score 150 goals next year. Clutching at straws doesn’t do it justice.
The UK, in spite of a massive currency devaluation in 2008, still has a major trade deficit and if there is any truth in this year’s budget it is the realisation that the UK is not going to become a net exporter any time soon. Alongside that massive trade deficit – and exports of goods fell in the three months to November last year – is a budget deficit of over £100 billion. The Treasury is now saying that that deficit will be eliminated by 2019 with a small surplus being run that year – a ‘return to normal’. This is of course complete nonsense: the UK has only run five budget surpluses since 1980 and that was with the bonanza of North Sea oil and the cash garnered from privatisation of, well, pretty much everything. It doesn’t take a genius to work out that budget surpluses - without outlandish projections of growth, investment and productivity gains – are impossible.
Final point. This data states that by 2020 households will be as indebted as they were when the economy tanked it in 2007/08. Less ‘march of the makers’ more march of the mickey-takers."
5 things about this year’s budget came from the excellent
Aaron Bastani
Over at novara media on residence Fm every Friday afternoons. Always a top listen
http://wire.novaramedia.com/2014/03/front-bubble-and-bluff-5-things-about-budget2014/
Tuesday, 15 May 2012
How the financial crash of 2008 unfolded
The neo-liberal capitalist model which was embraced and glorified by the bourgeoisie and their supporters in parliaments and the capitalist media over the last twenty years in 2008 spectacularly collapsed. The very idea that governments should intervene to regulate, let alone nationalise, banks, financial institutions and industry was up to now ridiculed as being outdated, primitive and discredited.
After the collapse of the Stalinist dictatorships in Russia and Eastern Europe, one of the most outspoken exponents of neo-liberalism, Francis Fukuyama, argued that the progression of human history as a struggle between ideologies had come to an end. His conclusion, that the fall of Stalinism represented the end of history and that liberal "free" market economics was the final stage of economic evolution, was accepted by the political establishment across the world, including the tops of the former workers' parties, such as the Labour Party in Britain and Australia, and the Social Democrats in Germany. The propaganda which followed was used to attack genuine socialist ideas and used ideologically to justify to workers that neo-liberal policies of privatisation, de-regulation, and attacks on workers and public services were needed. Even the majority of trade union leaders went along with these reactionary ideas.
This opened the way for a massive offensive against workers internationally. Intensification of exploitation of workers, shifting production and industry from the advanced capitalist countries to low wage economies and removing barriers to exploit foreign markets, led to a huge shift in wealth from workers to the super-rich.
The ideological impact of the current collapse of the global financial sector and the expected world recession is only beginning to be felt. However, it is already leading to a questioning of capitalism and a revival in socialist ideas, including from some surprising quarters. Even the Archbishop of Canterbury, Dr. Rowan Williams has had to admit that Karl Marx, the founder of modern socialism was correct in his analysis of capitalism. Writing in the British right-wing journal, The Spectator, he says "Marx long ago observed the way in which unbridled capitalism became a kind of mythology, ascribing reality, power and agency to things that had no life in themselves; he was right about that, if about little else."
He was joined by the Archbishop of York, Dr. John Sentamu, who labeled those involved in "short-selling" as "bank robbers and asset strippers". It must have slipped the archbishop's mind that the Church of England itself was profiteering from their £5 billion investment portfolio though!
Even in the belly of the beast of US imperialism, socialism is once again being discussed, albeit by figures such as rightwing Republican Congressman Jeb Hensarling who voted against the original bail-out package claiming it would put the nation on "the slippery slope to socialism". It is a bitter pill to swallow for the neo-conservatives who have worshiped at the altar of the free market for so long. Announcing the $250 billion part nationalisation of the US banking sector, Bush was at pains to explain it was "not intended to take over the free market but to preserve it." US Treasury Secretary Henry Paulson added "We regret having to take these actions. Today's actions are not what we ever wanted to do – but today's actions are what we must do to restore confidence to our financial system" and "Government owning a stake in any private US company is objectionable to most Americans — me included, yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable." The howls of horror at "socialist" measures from the Hensarlings of the world are therefore unfounded. The moves to nationalise and part-nationalise the banks are not socialist, but a desperate attempt to save the system. It was necessary for the capitalist state to intervene to shore up capitalism and avoid a complete collapse of the economy, leading to a 1930s-type depression. This however does not mean they will be succeed in avoiding such a devastating slump.
Socialists do not support the bailing out of the banks. It does not represent genuine nationalisation as socialists stand for. It is a case of "socialism for the rich", where the risks and debt are socialised, but the profits and assets are privatised. These steps are also designed to be temporary. As soon as conditions permit, it is intended to hand back these financial institutions to the private sector. But the depth of the crisis means the state may be left with no choice in propping up the banks for far longer than expected. Even if they are forced to keep the banks partly or wholly in public hands for an extended period, they will continue to be run in the interests of the rich as they always have been. They will be not be used to maximise returns for the working class.
While different governments may bring their own representatives on to the executive boards of the banks, this will be to assist the transition back to private ownership and to steer the banking system towards boosting the profitability of big business. The financial wizards or "masters of the universe", who appeared to magically accumulate huge sums of money apparently from thin air will continue to live in luxury. Working class people (the actual creators of wealth) will be told they must pay the price.
A socialist government would bring all the banks and financial institutions fully into public ownership and co-ordinate a central plan to provide cheap credit and zero-interest loans to people struggling to buy a home. Any compensation would only be paid to individuals on the basis of proven need. Instead of the banks being run by completely unaccountable wealthy bankers, enriching themselves with huge bonuses and salaries, a socialist banking system would be run democratically by elected committees representing bank workers, trade unions, customers and government representatives, all living on a workers' wage and subject to recall.
This does not mean disposing of every economist and financial specialist. Their talents and expertise would be used to provide a banking service for the needs of all. The motivation to make as much profit as quickly as possible, regardless of the consequences, would be removed. Instead of paying dividends to private shareholders, revenue from a socialist banking system would be used to invest in quality public services to cater for people's needs.
As a result of the mass impoverishment and horrific conditions which neo-liberalism created in many countries, mass movements have developed against the excesses of capitalism. Across Latin America, movements of workers, youth and indigenous peoples have shaken the continent and the corrupt political elites who had opened the door for major multi-nationals to take over public services and rob countries of natural resources and wealth.
Companies such as Bechtel Corporation were allowed to take over the water service in Bolivia, leading to massive hikes in water charges. Hundreds of thousands of Bolivians were left with no water supply. A massive movement developed from below which eventually forced the Bolivian political elite to re-nationalise the water service.
However, even though there is mass support from the populations of these countries for the nationalisation of the major sectors of the economy, these regimes have refused to take such steps. They are still trapped in the belief that there is no alternative to capitalism. They wish to make compromises with their national capitalist class in the vain hope that they will accept reforms which benefit the working class and poor.
However, capitalism will do everything in its power to protect their profits and power. Any attempts to give a bigger slice of the cake to workers will be met with fierce opposition by big business, who will move to remove these regimes from power. Such measures have already been attempted in Venezuela. The right-wing has repeatedly tried to overthrow the government of Hugo Chavez in different ways, from attempted military coups to bosses' lock-outs and food shortages. In Bolivia, the right-wing with the involvement and support of US imperialism is attempting to split the country, threatening to drag it into civil war, in order to keep ownership of the country's valuable energy resources and topple Evo Morales from power.
In order to prevent such a scenario, it is urgent that the working class develop its own independent organisations which fight for the overthrow of capitalism and for the establishment of a workers' government which takes the commanding heights of the economy out of the hands of the multi-nationals and the super-rich minority and runs it democratically for the benefit of all. Such a step would receive huge support from workers and the poor across Latin America and the world. It is important for socialists to study developments in Latin America as the revolutionary processes underway on that continent are not down to people in Latin America having some exclusive socialist gene. The crisis which capitalism has caused in Latin America is now spreading worldwide and will result in a similar revolutionary process in the rest of the world.
The fact that capitalism has been forced to use the state to intervene into the finance sector and nationalise banks is a living example of the inability of private ownership and the market to develop an economy which can cater for people's needs. This is not exclusive to the finance sector. The same straitjacket of the market applies to all industry and every aspect of the capitalist economy.
The scandal of starvation and malnutrition across the world is another illustration of the inability of the profit-driven market to cater for the needs of all. According to the UN Food and Agriculture Organisation, more than 25,000 people died of starvation every day in 2003. As a result of the panic on stock markets, speculation on crops and foods saw an explosion in food prices. Between 2006 and 2008, the average global price for rice rose by 217%, wheat by 136%, maize by 125% and soybeans by 107%. For people living in the neo-colonial world, the increases were far higher. The numbers dying of starvation today are without doubt higher than 2003. Capitalist governments continue to ignore this reality. While trillions of dollars are being handed to the rich across the world in the form of "rescue packages" and bail-outs, the amount invested to prevent mass starvation is miniscule in comparison. The budget of the UN World Food Programme in 2008 was $2.9billion, a drop in the ocean! There is more than enough resources in the world to provide every single person with a decent standard of living. According to the Stockholm International Peace Research Institute, more than $1204 billion was spent on arms in 2006 alone. The problem is this wealth is concentrated in the hands of a tiny elite. The top 500 multinationals in the world account for 70% of world trade. These giant companies, which dominate the lives of billions, should be taken into public ownership and run democratically as part of an international plan to raise people out of poverty.
This would also enable all the talents of individuals to flourish and be put to use for socially productive causes, based on co-operation, not the laws of the capitalist jungle, where greed is promoted above solidarity. Planning is essential within the structure of any business. In every factory, production is fine-tuned and run according to a plan. But in the capitalist market, where there is no planning, chaos reigns. A socialist plan of production would be far more efficient in delivering goods and services, allowing people to work fewer hours and able to freely participate fully in the running of society.
It is widely acknowledged that there is no national solution to the world economic crisis. Yet each country has moved to defend the interests of its own ruling class before thinking about the "greater good" of the world economy. The decision of the Irish government to guarantee the savings of accounts in Irish banks led to panic as banks across Europe feared people would abandon their bank and open accounts in Irish banks. Soon other countries in the EU were forced to take similar measures. This episode of disunity is a warning of the coming major problems which will threaten the very institutions of the EU itself which we are now starting to see in Greecefor example. This crisis of global capitalism will also seriously test the euro. Some countries may be forced to break from the currency. The very existence of the euro altogether has been put into question as the different economic and political interests of each country run into conflict with each other.
While capitalism has internationalised trade, most companies still base themselves in a home country. In this respect, capitalism has proved incapable of moving beyond the confines of the nation state. Globally, tensions between countries, especially between US imperialism and the emerging super-powers of China and Russia, will lead to global instability and even the outbreak of regional wars, which can dwarf recent conflicts like that between Russia and Georgia.
Again, it will be working class people and the poor of all countries who will be made to pay. As more workers and youth in the US are discovering, the imperialist wars in Iraq and Afghanistan are not in their interests. They are being fought, ultimately, to defend the interests of US big business. Due to capitalist globalisation, the struggles of workers will tend to have a greater international aspect than ever before. The traditions of international solidarity, such as seen in the massive movement against the war on Iraq, will re-emerge in the struggles of workers, demonstrating the potential for a socialist world.
Writing in their joint work, The German Ideology, Marx and Engels stressed how the struggle for socialism has to be international, explaining "everyone will be freed from … particular local and national limitations, brought into a practical relationship with the products (including intellectual products) of the whole world, and enabled to gain the capacity to delight in all the fruits of world-wide human creativity."
The opportunities for building a mass socialist movement internationally will open up in the coming period. Capitalism will never collapse out of existence. After the 1929 Wall St. crash, economies collapsed but capitalism survived, resulting in the horror of the second World War. Throughout the 21st century in dozens of countries, there were many times when the working class was within a hair's breadth of taking power and transforming society along socialist lines. Tragically, despite great sacrifice and heroism, those opportunities were missed because of the betrayal of the leaders of the workers' movement. What was missing was a mass revolutionary party, soaked in a Marxist understanding and method and rooted in the working class, which could have provided essential leadership in the struggle for socialism. Today, capitalism promises only economic hardship, war and untold damage to our environment. The need to build a socialist alternative has never been greater.
After the collapse of the Stalinist dictatorships in Russia and Eastern Europe, one of the most outspoken exponents of neo-liberalism, Francis Fukuyama, argued that the progression of human history as a struggle between ideologies had come to an end. His conclusion, that the fall of Stalinism represented the end of history and that liberal "free" market economics was the final stage of economic evolution, was accepted by the political establishment across the world, including the tops of the former workers' parties, such as the Labour Party in Britain and Australia, and the Social Democrats in Germany. The propaganda which followed was used to attack genuine socialist ideas and used ideologically to justify to workers that neo-liberal policies of privatisation, de-regulation, and attacks on workers and public services were needed. Even the majority of trade union leaders went along with these reactionary ideas.
This opened the way for a massive offensive against workers internationally. Intensification of exploitation of workers, shifting production and industry from the advanced capitalist countries to low wage economies and removing barriers to exploit foreign markets, led to a huge shift in wealth from workers to the super-rich.
The ideological impact of the current collapse of the global financial sector and the expected world recession is only beginning to be felt. However, it is already leading to a questioning of capitalism and a revival in socialist ideas, including from some surprising quarters. Even the Archbishop of Canterbury, Dr. Rowan Williams has had to admit that Karl Marx, the founder of modern socialism was correct in his analysis of capitalism. Writing in the British right-wing journal, The Spectator, he says "Marx long ago observed the way in which unbridled capitalism became a kind of mythology, ascribing reality, power and agency to things that had no life in themselves; he was right about that, if about little else."
He was joined by the Archbishop of York, Dr. John Sentamu, who labeled those involved in "short-selling" as "bank robbers and asset strippers". It must have slipped the archbishop's mind that the Church of England itself was profiteering from their £5 billion investment portfolio though!
Even in the belly of the beast of US imperialism, socialism is once again being discussed, albeit by figures such as rightwing Republican Congressman Jeb Hensarling who voted against the original bail-out package claiming it would put the nation on "the slippery slope to socialism". It is a bitter pill to swallow for the neo-conservatives who have worshiped at the altar of the free market for so long. Announcing the $250 billion part nationalisation of the US banking sector, Bush was at pains to explain it was "not intended to take over the free market but to preserve it." US Treasury Secretary Henry Paulson added "We regret having to take these actions. Today's actions are not what we ever wanted to do – but today's actions are what we must do to restore confidence to our financial system" and "Government owning a stake in any private US company is objectionable to most Americans — me included, yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable." The howls of horror at "socialist" measures from the Hensarlings of the world are therefore unfounded. The moves to nationalise and part-nationalise the banks are not socialist, but a desperate attempt to save the system. It was necessary for the capitalist state to intervene to shore up capitalism and avoid a complete collapse of the economy, leading to a 1930s-type depression. This however does not mean they will be succeed in avoiding such a devastating slump.
Socialists do not support the bailing out of the banks. It does not represent genuine nationalisation as socialists stand for. It is a case of "socialism for the rich", where the risks and debt are socialised, but the profits and assets are privatised. These steps are also designed to be temporary. As soon as conditions permit, it is intended to hand back these financial institutions to the private sector. But the depth of the crisis means the state may be left with no choice in propping up the banks for far longer than expected. Even if they are forced to keep the banks partly or wholly in public hands for an extended period, they will continue to be run in the interests of the rich as they always have been. They will be not be used to maximise returns for the working class.
While different governments may bring their own representatives on to the executive boards of the banks, this will be to assist the transition back to private ownership and to steer the banking system towards boosting the profitability of big business. The financial wizards or "masters of the universe", who appeared to magically accumulate huge sums of money apparently from thin air will continue to live in luxury. Working class people (the actual creators of wealth) will be told they must pay the price.
A socialist government would bring all the banks and financial institutions fully into public ownership and co-ordinate a central plan to provide cheap credit and zero-interest loans to people struggling to buy a home. Any compensation would only be paid to individuals on the basis of proven need. Instead of the banks being run by completely unaccountable wealthy bankers, enriching themselves with huge bonuses and salaries, a socialist banking system would be run democratically by elected committees representing bank workers, trade unions, customers and government representatives, all living on a workers' wage and subject to recall.
This does not mean disposing of every economist and financial specialist. Their talents and expertise would be used to provide a banking service for the needs of all. The motivation to make as much profit as quickly as possible, regardless of the consequences, would be removed. Instead of paying dividends to private shareholders, revenue from a socialist banking system would be used to invest in quality public services to cater for people's needs.
As a result of the mass impoverishment and horrific conditions which neo-liberalism created in many countries, mass movements have developed against the excesses of capitalism. Across Latin America, movements of workers, youth and indigenous peoples have shaken the continent and the corrupt political elites who had opened the door for major multi-nationals to take over public services and rob countries of natural resources and wealth.
Companies such as Bechtel Corporation were allowed to take over the water service in Bolivia, leading to massive hikes in water charges. Hundreds of thousands of Bolivians were left with no water supply. A massive movement developed from below which eventually forced the Bolivian political elite to re-nationalise the water service.
However, even though there is mass support from the populations of these countries for the nationalisation of the major sectors of the economy, these regimes have refused to take such steps. They are still trapped in the belief that there is no alternative to capitalism. They wish to make compromises with their national capitalist class in the vain hope that they will accept reforms which benefit the working class and poor.
However, capitalism will do everything in its power to protect their profits and power. Any attempts to give a bigger slice of the cake to workers will be met with fierce opposition by big business, who will move to remove these regimes from power. Such measures have already been attempted in Venezuela. The right-wing has repeatedly tried to overthrow the government of Hugo Chavez in different ways, from attempted military coups to bosses' lock-outs and food shortages. In Bolivia, the right-wing with the involvement and support of US imperialism is attempting to split the country, threatening to drag it into civil war, in order to keep ownership of the country's valuable energy resources and topple Evo Morales from power.
In order to prevent such a scenario, it is urgent that the working class develop its own independent organisations which fight for the overthrow of capitalism and for the establishment of a workers' government which takes the commanding heights of the economy out of the hands of the multi-nationals and the super-rich minority and runs it democratically for the benefit of all. Such a step would receive huge support from workers and the poor across Latin America and the world. It is important for socialists to study developments in Latin America as the revolutionary processes underway on that continent are not down to people in Latin America having some exclusive socialist gene. The crisis which capitalism has caused in Latin America is now spreading worldwide and will result in a similar revolutionary process in the rest of the world.
The fact that capitalism has been forced to use the state to intervene into the finance sector and nationalise banks is a living example of the inability of private ownership and the market to develop an economy which can cater for people's needs. This is not exclusive to the finance sector. The same straitjacket of the market applies to all industry and every aspect of the capitalist economy.
The scandal of starvation and malnutrition across the world is another illustration of the inability of the profit-driven market to cater for the needs of all. According to the UN Food and Agriculture Organisation, more than 25,000 people died of starvation every day in 2003. As a result of the panic on stock markets, speculation on crops and foods saw an explosion in food prices. Between 2006 and 2008, the average global price for rice rose by 217%, wheat by 136%, maize by 125% and soybeans by 107%. For people living in the neo-colonial world, the increases were far higher. The numbers dying of starvation today are without doubt higher than 2003. Capitalist governments continue to ignore this reality. While trillions of dollars are being handed to the rich across the world in the form of "rescue packages" and bail-outs, the amount invested to prevent mass starvation is miniscule in comparison. The budget of the UN World Food Programme in 2008 was $2.9billion, a drop in the ocean! There is more than enough resources in the world to provide every single person with a decent standard of living. According to the Stockholm International Peace Research Institute, more than $1204 billion was spent on arms in 2006 alone. The problem is this wealth is concentrated in the hands of a tiny elite. The top 500 multinationals in the world account for 70% of world trade. These giant companies, which dominate the lives of billions, should be taken into public ownership and run democratically as part of an international plan to raise people out of poverty.
This would also enable all the talents of individuals to flourish and be put to use for socially productive causes, based on co-operation, not the laws of the capitalist jungle, where greed is promoted above solidarity. Planning is essential within the structure of any business. In every factory, production is fine-tuned and run according to a plan. But in the capitalist market, where there is no planning, chaos reigns. A socialist plan of production would be far more efficient in delivering goods and services, allowing people to work fewer hours and able to freely participate fully in the running of society.
It is widely acknowledged that there is no national solution to the world economic crisis. Yet each country has moved to defend the interests of its own ruling class before thinking about the "greater good" of the world economy. The decision of the Irish government to guarantee the savings of accounts in Irish banks led to panic as banks across Europe feared people would abandon their bank and open accounts in Irish banks. Soon other countries in the EU were forced to take similar measures. This episode of disunity is a warning of the coming major problems which will threaten the very institutions of the EU itself which we are now starting to see in Greecefor example. This crisis of global capitalism will also seriously test the euro. Some countries may be forced to break from the currency. The very existence of the euro altogether has been put into question as the different economic and political interests of each country run into conflict with each other.
While capitalism has internationalised trade, most companies still base themselves in a home country. In this respect, capitalism has proved incapable of moving beyond the confines of the nation state. Globally, tensions between countries, especially between US imperialism and the emerging super-powers of China and Russia, will lead to global instability and even the outbreak of regional wars, which can dwarf recent conflicts like that between Russia and Georgia.
Again, it will be working class people and the poor of all countries who will be made to pay. As more workers and youth in the US are discovering, the imperialist wars in Iraq and Afghanistan are not in their interests. They are being fought, ultimately, to defend the interests of US big business. Due to capitalist globalisation, the struggles of workers will tend to have a greater international aspect than ever before. The traditions of international solidarity, such as seen in the massive movement against the war on Iraq, will re-emerge in the struggles of workers, demonstrating the potential for a socialist world.
Writing in their joint work, The German Ideology, Marx and Engels stressed how the struggle for socialism has to be international, explaining "everyone will be freed from … particular local and national limitations, brought into a practical relationship with the products (including intellectual products) of the whole world, and enabled to gain the capacity to delight in all the fruits of world-wide human creativity."
The opportunities for building a mass socialist movement internationally will open up in the coming period. Capitalism will never collapse out of existence. After the 1929 Wall St. crash, economies collapsed but capitalism survived, resulting in the horror of the second World War. Throughout the 21st century in dozens of countries, there were many times when the working class was within a hair's breadth of taking power and transforming society along socialist lines. Tragically, despite great sacrifice and heroism, those opportunities were missed because of the betrayal of the leaders of the workers' movement. What was missing was a mass revolutionary party, soaked in a Marxist understanding and method and rooted in the working class, which could have provided essential leadership in the struggle for socialism. Today, capitalism promises only economic hardship, war and untold damage to our environment. The need to build a socialist alternative has never been greater.
Wednesday, 9 May 2012
Shattering of the status quo in Greece, capitalist crisis rumbles on
The Greek socialist organisation, Xekinima, affiliated to the CWI, has produced this statement in response to the Greek election results:
A political earthquake in Greece
Greek voters have sent out a message that has terrified the Troika, their craven political parties and the ruling class in Greece and Europe.
Two out of three Greeks voters said NO to the EU/IMF/ECB Troika’s austerity ‘Memorandum’ ! Compared to the 2009 election, PASOK lost 72.6% of its support – a loss of 2.19 million votes. The right-wing ‘New Democracy’ lost almost half of its support - over 1million votes! SYRIZA (the Coalition of the Radical Left) jumped from 4.6% to 16.8 % earning over 700 thousand new votes (from 315,000 in 2009 to over 1million today)!
The political landscape that existed in Greece for almost 4 decades has been shattered. The mass struggles of the last two years have led to this change in political outlook. In turn, this result can give new impetus to these mass movements.
Forming a "Government" through electoral fraud?
The parties of the Troika and the ruling class will still try to make sure they can form the Government through an electoral system that distorts the will of the people by giving 50 additional seats to the leading party – even though ND had only a small and declining vote ! [ND’s 18.9% translates into 108 seats, SYRIZA’s16.8% gives only 52 seats]. ‘Democracy’ was never, more hollow and hypocritical.
Despite this blatant electoral ‘fraud’, ND and PASOK are still short of the target of 151 MPs needed to form a majority ( they have respectively 108 and 41, totalling 149). So they have started trying to pull together a government of "national unity" with the supposed aim of renegotiating the ‘Memorandum’.
There is only one response that the movement can give to any such Government: strikes, occupations in workplaces, in squares, in schools and colleges - until it falls.
SYRIZA, the big winner
The big winner of the elections was SYRIZA. This is a great victory for all social movements and the Left in general, but more specifically for a series of political positions and proposals put forward by SYRIZA. Apart from their opposition to the Memorandum, the vote for SYRIZA translates into massive popular support for the policy of unity and co-operation across the Left, and clear support to the idea of a Government of the Left.
The danger of fascism returns
But there is also a very serious threat from the election of the neo-Nazi Golden Dawn, who finished in sixth place. The 434,000 who voted for them are not neo-Nazis but people who chose this way to condemn the ND and far-right LAOS MPs in parliament, by sending them "extremists." But Golden Dawn will try to exploit this effect to strengthen its base. This perspective is a huge risk for the entire labour and popular movement, and our democratic rights.
The Left has to wake-up to the danger of fascism, to see the need for a serious joint struggle against the rise of neo-fascism. This is a further reason for joint action and for cooperation of the Left.
The struggle for an alternative society
Today SYRIZA is the "vehicle" which the Greek people has chosen to take into the political arena. In truth, notwithstanding some of the weaknesses in SYRIZA’s policy, this result opens the way to a struggle for an alternative economic and social policy, namely the struggle for an alternative society.
SYRIZA must face-up to its historical responsibilities. The crisis has only one answer: bold socialist policies.
There is now a realistic prospect of forming a Government of the Left in the period ahead – even more so if New Democracy and PASOK fail to form a government of "national unity" and opt to go straight to new elections. If such a Left Government were to be formed, the reaction of capital in Greece and Europe would be ferocious. They will threaten, and very possibly will carry out such a threat, to throw Greece out of the euro. At the same time, they will try to strangle the economy and ultimately to overthrow the government by any means necessary.
In these circumstances there will be two roads, either the overthrow of the power of capital - or compromise and selling out of the movement.
Under the domination of big capital, there are no prospects and no hope. We must not forget that PASOK 31 years ago formed a "left" government. But its refusal to overthrow the power of capital has led to the current Memorandum under a PASOK Government.
The ruling class are panicking and talking about a major political crisis! The Troika can now see the frightening results of their labours! This is what the terror that they have inflicted on Greek people and Greek workers has produced! The Greek labour movement said, “Drive out the Troika”, “Down with their political parties”, “An end to the two-party system”, “for a socialist way out of the crisis”. To achieve these goals means fighting for an alternative socialist society. Anything else would mean an abandonment of the principles and declarations of the Left.
Full text (in Greek) on: http://www.xekinima.org/arthra/view/article/politikos-seismos-mnimonio-telos-o-syriza-oxima-an/
A political earthquake in Greece
Greek voters have sent out a message that has terrified the Troika, their craven political parties and the ruling class in Greece and Europe.
Two out of three Greeks voters said NO to the EU/IMF/ECB Troika’s austerity ‘Memorandum’ ! Compared to the 2009 election, PASOK lost 72.6% of its support – a loss of 2.19 million votes. The right-wing ‘New Democracy’ lost almost half of its support - over 1million votes! SYRIZA (the Coalition of the Radical Left) jumped from 4.6% to 16.8 % earning over 700 thousand new votes (from 315,000 in 2009 to over 1million today)!
The political landscape that existed in Greece for almost 4 decades has been shattered. The mass struggles of the last two years have led to this change in political outlook. In turn, this result can give new impetus to these mass movements.
Forming a "Government" through electoral fraud?
The parties of the Troika and the ruling class will still try to make sure they can form the Government through an electoral system that distorts the will of the people by giving 50 additional seats to the leading party – even though ND had only a small and declining vote ! [ND’s 18.9% translates into 108 seats, SYRIZA’s16.8% gives only 52 seats]. ‘Democracy’ was never, more hollow and hypocritical.
Despite this blatant electoral ‘fraud’, ND and PASOK are still short of the target of 151 MPs needed to form a majority ( they have respectively 108 and 41, totalling 149). So they have started trying to pull together a government of "national unity" with the supposed aim of renegotiating the ‘Memorandum’.
There is only one response that the movement can give to any such Government: strikes, occupations in workplaces, in squares, in schools and colleges - until it falls.
SYRIZA, the big winner
The big winner of the elections was SYRIZA. This is a great victory for all social movements and the Left in general, but more specifically for a series of political positions and proposals put forward by SYRIZA. Apart from their opposition to the Memorandum, the vote for SYRIZA translates into massive popular support for the policy of unity and co-operation across the Left, and clear support to the idea of a Government of the Left.
The danger of fascism returns
But there is also a very serious threat from the election of the neo-Nazi Golden Dawn, who finished in sixth place. The 434,000 who voted for them are not neo-Nazis but people who chose this way to condemn the ND and far-right LAOS MPs in parliament, by sending them "extremists." But Golden Dawn will try to exploit this effect to strengthen its base. This perspective is a huge risk for the entire labour and popular movement, and our democratic rights.
The Left has to wake-up to the danger of fascism, to see the need for a serious joint struggle against the rise of neo-fascism. This is a further reason for joint action and for cooperation of the Left.
The struggle for an alternative society
Today SYRIZA is the "vehicle" which the Greek people has chosen to take into the political arena. In truth, notwithstanding some of the weaknesses in SYRIZA’s policy, this result opens the way to a struggle for an alternative economic and social policy, namely the struggle for an alternative society.
SYRIZA must face-up to its historical responsibilities. The crisis has only one answer: bold socialist policies.
There is now a realistic prospect of forming a Government of the Left in the period ahead – even more so if New Democracy and PASOK fail to form a government of "national unity" and opt to go straight to new elections. If such a Left Government were to be formed, the reaction of capital in Greece and Europe would be ferocious. They will threaten, and very possibly will carry out such a threat, to throw Greece out of the euro. At the same time, they will try to strangle the economy and ultimately to overthrow the government by any means necessary.
In these circumstances there will be two roads, either the overthrow of the power of capital - or compromise and selling out of the movement.
Under the domination of big capital, there are no prospects and no hope. We must not forget that PASOK 31 years ago formed a "left" government. But its refusal to overthrow the power of capital has led to the current Memorandum under a PASOK Government.
The ruling class are panicking and talking about a major political crisis! The Troika can now see the frightening results of their labours! This is what the terror that they have inflicted on Greek people and Greek workers has produced! The Greek labour movement said, “Drive out the Troika”, “Down with their political parties”, “An end to the two-party system”, “for a socialist way out of the crisis”. To achieve these goals means fighting for an alternative socialist society. Anything else would mean an abandonment of the principles and declarations of the Left.
Full text (in Greek) on: http://www.xekinima.org/arthra/view/article/politikos-seismos-mnimonio-telos-o-syriza-oxima-an/
Sunday, 8 April 2012
Europe and capitalism still on very shakey ground as financial crisis continues
So as the financial crisis inside the EU intensifies I thought I’d look at a recent socialism today article
By Lynn Walsh, Editor, Socialism Today, monthly magazine of the Socialist Party (CWI England & Wales)
The European economies are in the throes of an austerity-induced recession, which is likely to be protracted.
The Greek bailout 2.0 has averted a default, for the moment. The new fiscal pact is a straitjacket that will aggravate Europe’s austerity-induced recession. Ireland’s referendum threatens to shake the EU and the eurozone. There is growing discord among EU leaders. Far from over, workers’ struggles against capitalist austerity will erupt on an even bigger scale. LYNN WALSH reports.
AFTER SEVEN months of wrangling, the troika, the Greek government and private bondholders have agreed to a second bail-out package. As a condition for the package, the Greek coalition, led by the technocrat Lucas Papademos and supported by Pasok and New Democracy, has agreed to further savage austerity measures. Leaders of the troika – the European Central Bank, European Commission and International Monetary Fund – claim that this package will stabilise the eurozone. But the savage austerity measures they have imposed on Greece will actually increase the burden of debt and ensure another default further down the line.
Greece will save around €100 billion through a managed default that has been agreed or imposed on the private bondholders. However, it is mainly a refinancing exercise rather than a wiping out of debt. Greece will receive bail-out funds of €130 billion or more – but these are loans from the European institutions and the IMF. The terms are less onerous than the previous bonds but, nevertheless, are new debt that will prove unsustainable. Most of the new bail-out funds will be used to recapitalise the private Greek banks (which have also suffered losses on the bond exchange) and to pay off previous debt and interest charges.
Official public holders of Greek bonds (the ECB, eurozone central banks, the IMF, etc) will not be suffering a haircut. While it may appear that the private sector is losing out, they are really “the lucky ones”, as commentator Nouriel Roubini says. They are getting €30 billion upfront as a sweetener (paid from the €130bn new bail-out funds). In 2008, all Greece’s debt was held by the private sector. Now, 77% of the debt is held by the institutions of the troika.
“The reality is that private creditors got a very sweet deal while most actual and future losses have been transferred to the official creditors”. “The reality is that most of the gains in good times – and until the PSI [public-sector involvement] – were privatised while most of the losses have been now socialised. Taxpayers of Greece’s official creditors, not private bondholders, will end up paying for most of the losses deriving from Greece’s past, current and future insolvency”. (Roubini, Financial Times, 7 March)
Moreover, eurozone private banks have received massive support from the ECB in the form of cheap (1% interest) three-year loans which, for the time being, will cushion the banks against their losses.
Greece’s Finance Minister Evangelos Venizelo (Pasok)
The second bail-out package will merely postpone the crunch for Greece. A report issued by the troika shows that, at best, Greece will still have a national debt of over 120% by 2020. This presages further drastic cuts in public spending, the sacking of 150,000 public-sector workers, and €45 billion privatisations by 2020. But if things go awry, the burden of debt (according to the troika) could peak at 170% in 2014 and still be 145% in 2020. “The new €130 billion that the official creditors have agreed to lend may not be enough even to cover Greece’s debt service [repayments to fund interest charges]”. (Financial Times editorial, 21 February)
“Greece is just not in a sustainable position on several counts”, commented Mats Persson, director of the think-tank Open Europe. “The extreme level of youth unemployment shows that the austerity cuts are fighting off any chance the country has of recovering. It will get worse; there’s no way Greece can get out of this”. (Daily Telegraph, 9 March) “‘It will happen’, said Stephane Deo, a UBS economist, referring to the next Greek crisis. ‘The market is already pricing in’ a second round of restructuring”.
From an economic point of view, the burden of debt in Greece is unsustainable. GDP fell nearly 7% in 2011, and is expected to fall by between 4% and 6% this year. Despite a series of general strikes and mass protests, the former Pasok government and, subsequently, the Pasok/New Democracy coalition appear to have got away with imposing devastating austerity measures. But, so far we have only seen act one. A recent comment in a Morgan Stanley bulletin recognises the likelihood of further social explosions: “Several episodes of social unrest have shown all too clearly that the extra-economic dimension of this tough adjustment programme is at times unpredictable”. (Greek Debt Restructuring, 24 February) In fact, the working class and middle class will be compelled to intensify the struggle against austerity measures that spell utter social-economic catastrophe.
Bundesbank president, Jens Weidman, has asked: What is the exit strategy? The ECB already has over €3 trillion of bonds and other collateral on its books (more than the US Federal Reserve). To reverse the liquidity injection it would have to sell a large part of these securities. But it is far from certain that this would be easily done, as many of the securities are considered too risky by private banks and finance houses.
The private banks are becoming more and more dependent on the supply of cheap credit from the central bank and from eurozone national banks. These public institutions have the first call on assets in the event of defaults. This in turn makes private investors wary of putting their capital into the private banks, as they would not get priority in the event of a default. In other words, they would bear the main losses of any banking collapse. This is giving rise to a situation where the ECB and the central banks are propping up zombie banks throughout the eurozone.
TWENTY-FIVE EU governments (with Britain and the Czech Republic opting out) have agreed a new fiscal pact. This is a legal straitjacket that aims to restrict governments’ budget deficits and national debt. However, it includes no measures that would concretely advance the eurozone towards a fiscal union. The pact limits ‘structural’ budget deficits to 0.5% of GDP (leaving room for arguments on the definition of ‘structural’). If the national debt of participating governments goes above 60% of GDP they will be compelled to take drastic, rapid measures to reduce the debt. In reality, these are completely unachievable targets for most EU countries. In so far as governments attempt to meet them, they will prolong or deepen the European recession. On the other hand, there are already indications – e.g. Spain – that governments will be forced to repudiate these unrealistic targets.
Jean Claude Juncker, head of the group of 17 euro zone finance ministers, with his Spanish counterpart.
Many national leaders believed that the pact was a necessary cover for German chancellor, Angela Merkel, to get political support for further bail-out measures in Europe. They assumed that the quid pro quo for agreeing to the pact would be an increase in the bail-out funds available to shore up the finances of EU/eurozone governments. The German government and Bundesbank, however, are still intransigently opposed to new measures to support governments with shaky finances.
WITHIN HOURS OF the agreement on the pact, the Spanish prime minister, Mariano Rajoy, unilaterally announced that Spain would not be committed to the 2012 target of reducing its budget deficit to 4.4% of GDP (which would involve €5bn additional cuts). He announced that Spain would aim at reducing the deficit to 5.8% of GDP (claiming Spain would still aim for the 3% target by 2013). Rajoy bluntly told EU leaders: “This is a sovereign decision by Spain”. He said that he had not consulted other European leaders: “I will inform them in April”.
Spain’s prime minister Mariano Rajoy with German chancellor Angela Merkel in January
Rajoy clearly fears the prospect of a volcanic social explosion if they cut as deeply as the eurogroup are demanding. Spanish GDP is expected to fall by at least 1% in 2012. Unemployment is already officially 24%, while youth unemployment is over 40%.
Other eurozone leaders are furious, but what can they do? The recent violent clashes between police and protesters in Valencia and Barcelona are an indication of the struggles which are coming. The eurosceptic Daily Telegraph commented: “At a stroke Rajoy has demonstrated breathtaking defiance, heart-warming patriotism and a different path to recovery. But even worse, he pointed out the elephant in the room: the eurozone is a monetary union, not a political one, and if members want to run their own affairs, neither Brussels nor Berlin can stop them”.
If the signs of growth in the US economy are sustained, it will possibly cushion the European economy, allowing a slight growth of exports to the US. However, the best scenario for Europe is likely to be a relatively mild recession, but with the prospect of prolonged stagnation. Unemployment is horrendous. Officially, over 24 million workers are jobless in the EU, while youth unemployment has soared above 50% in Spain.
THE SECOND GREEK bailout has temporarily stabilised the Greek government and defused the default time bomb ticking under the eurozone. But it is essentially a temporary fix which does nothing to resolve the underlying problems. It will not break the vicious spiral of repeated austerity packages, ever rising mass unemployment, falling tax revenues, and recession. Neither the eurozone leaders nor the G20 leaders have any policies to overcome this bleak situation.
It is clear that the EUrozone and beyond is on very shakey ground with littleprospect of this changing anytime soon. Capiatlism is bankrupt of ideas out of this crisis of its own making and is still looking to make us all pay for it.
Both the EU and the eurozone have already failed in their key objectives. The European Union was intended to overcome national differences, and particularly bury the historic antagonism between Germany and other European states. In the recent period, however, Germany has been seen as a dictatorial power, imposing harsh economic policies on the weaker European states. This has reinforced an upsurge of nationalism and xenophobia, with the growth of anti-immigrant, racist trends. At the same time, the eurozone was intended to accelerate the economic integration of EU countries. In practice, it has intensified the divergence between the stronger economies and the weaker countries, especially those of the Mediterranean ‘periphery’. The eurozone has become a time bomb under the whole world economy.
The idea that capitalist states could overcome their national limitations and achieve an integrated, harmonious Europe has been shown to be utopian. The unification of Europe is a task for the working class, which can only be achieved on the basis of workers’ democracy and socialist economic planning.
By Lynn Walsh, Editor, Socialism Today, monthly magazine of the Socialist Party (CWI England & Wales)
The European economies are in the throes of an austerity-induced recession, which is likely to be protracted.
The Greek bailout 2.0 has averted a default, for the moment. The new fiscal pact is a straitjacket that will aggravate Europe’s austerity-induced recession. Ireland’s referendum threatens to shake the EU and the eurozone. There is growing discord among EU leaders. Far from over, workers’ struggles against capitalist austerity will erupt on an even bigger scale. LYNN WALSH reports.
AFTER SEVEN months of wrangling, the troika, the Greek government and private bondholders have agreed to a second bail-out package. As a condition for the package, the Greek coalition, led by the technocrat Lucas Papademos and supported by Pasok and New Democracy, has agreed to further savage austerity measures. Leaders of the troika – the European Central Bank, European Commission and International Monetary Fund – claim that this package will stabilise the eurozone. But the savage austerity measures they have imposed on Greece will actually increase the burden of debt and ensure another default further down the line.
Greece will save around €100 billion through a managed default that has been agreed or imposed on the private bondholders. However, it is mainly a refinancing exercise rather than a wiping out of debt. Greece will receive bail-out funds of €130 billion or more – but these are loans from the European institutions and the IMF. The terms are less onerous than the previous bonds but, nevertheless, are new debt that will prove unsustainable. Most of the new bail-out funds will be used to recapitalise the private Greek banks (which have also suffered losses on the bond exchange) and to pay off previous debt and interest charges.
Official public holders of Greek bonds (the ECB, eurozone central banks, the IMF, etc) will not be suffering a haircut. While it may appear that the private sector is losing out, they are really “the lucky ones”, as commentator Nouriel Roubini says. They are getting €30 billion upfront as a sweetener (paid from the €130bn new bail-out funds). In 2008, all Greece’s debt was held by the private sector. Now, 77% of the debt is held by the institutions of the troika.
“The reality is that private creditors got a very sweet deal while most actual and future losses have been transferred to the official creditors”. “The reality is that most of the gains in good times – and until the PSI [public-sector involvement] – were privatised while most of the losses have been now socialised. Taxpayers of Greece’s official creditors, not private bondholders, will end up paying for most of the losses deriving from Greece’s past, current and future insolvency”. (Roubini, Financial Times, 7 March)
Moreover, eurozone private banks have received massive support from the ECB in the form of cheap (1% interest) three-year loans which, for the time being, will cushion the banks against their losses.
Greece’s Finance Minister Evangelos Venizelo (Pasok)
The second bail-out package will merely postpone the crunch for Greece. A report issued by the troika shows that, at best, Greece will still have a national debt of over 120% by 2020. This presages further drastic cuts in public spending, the sacking of 150,000 public-sector workers, and €45 billion privatisations by 2020. But if things go awry, the burden of debt (according to the troika) could peak at 170% in 2014 and still be 145% in 2020. “The new €130 billion that the official creditors have agreed to lend may not be enough even to cover Greece’s debt service [repayments to fund interest charges]”. (Financial Times editorial, 21 February)
“Greece is just not in a sustainable position on several counts”, commented Mats Persson, director of the think-tank Open Europe. “The extreme level of youth unemployment shows that the austerity cuts are fighting off any chance the country has of recovering. It will get worse; there’s no way Greece can get out of this”. (Daily Telegraph, 9 March) “‘It will happen’, said Stephane Deo, a UBS economist, referring to the next Greek crisis. ‘The market is already pricing in’ a second round of restructuring”.
From an economic point of view, the burden of debt in Greece is unsustainable. GDP fell nearly 7% in 2011, and is expected to fall by between 4% and 6% this year. Despite a series of general strikes and mass protests, the former Pasok government and, subsequently, the Pasok/New Democracy coalition appear to have got away with imposing devastating austerity measures. But, so far we have only seen act one. A recent comment in a Morgan Stanley bulletin recognises the likelihood of further social explosions: “Several episodes of social unrest have shown all too clearly that the extra-economic dimension of this tough adjustment programme is at times unpredictable”. (Greek Debt Restructuring, 24 February) In fact, the working class and middle class will be compelled to intensify the struggle against austerity measures that spell utter social-economic catastrophe.
Bundesbank president, Jens Weidman, has asked: What is the exit strategy? The ECB already has over €3 trillion of bonds and other collateral on its books (more than the US Federal Reserve). To reverse the liquidity injection it would have to sell a large part of these securities. But it is far from certain that this would be easily done, as many of the securities are considered too risky by private banks and finance houses.
The private banks are becoming more and more dependent on the supply of cheap credit from the central bank and from eurozone national banks. These public institutions have the first call on assets in the event of defaults. This in turn makes private investors wary of putting their capital into the private banks, as they would not get priority in the event of a default. In other words, they would bear the main losses of any banking collapse. This is giving rise to a situation where the ECB and the central banks are propping up zombie banks throughout the eurozone.
TWENTY-FIVE EU governments (with Britain and the Czech Republic opting out) have agreed a new fiscal pact. This is a legal straitjacket that aims to restrict governments’ budget deficits and national debt. However, it includes no measures that would concretely advance the eurozone towards a fiscal union. The pact limits ‘structural’ budget deficits to 0.5% of GDP (leaving room for arguments on the definition of ‘structural’). If the national debt of participating governments goes above 60% of GDP they will be compelled to take drastic, rapid measures to reduce the debt. In reality, these are completely unachievable targets for most EU countries. In so far as governments attempt to meet them, they will prolong or deepen the European recession. On the other hand, there are already indications – e.g. Spain – that governments will be forced to repudiate these unrealistic targets.
Jean Claude Juncker, head of the group of 17 euro zone finance ministers, with his Spanish counterpart.
Many national leaders believed that the pact was a necessary cover for German chancellor, Angela Merkel, to get political support for further bail-out measures in Europe. They assumed that the quid pro quo for agreeing to the pact would be an increase in the bail-out funds available to shore up the finances of EU/eurozone governments. The German government and Bundesbank, however, are still intransigently opposed to new measures to support governments with shaky finances.
WITHIN HOURS OF the agreement on the pact, the Spanish prime minister, Mariano Rajoy, unilaterally announced that Spain would not be committed to the 2012 target of reducing its budget deficit to 4.4% of GDP (which would involve €5bn additional cuts). He announced that Spain would aim at reducing the deficit to 5.8% of GDP (claiming Spain would still aim for the 3% target by 2013). Rajoy bluntly told EU leaders: “This is a sovereign decision by Spain”. He said that he had not consulted other European leaders: “I will inform them in April”.
Spain’s prime minister Mariano Rajoy with German chancellor Angela Merkel in January
Rajoy clearly fears the prospect of a volcanic social explosion if they cut as deeply as the eurogroup are demanding. Spanish GDP is expected to fall by at least 1% in 2012. Unemployment is already officially 24%, while youth unemployment is over 40%.
Other eurozone leaders are furious, but what can they do? The recent violent clashes between police and protesters in Valencia and Barcelona are an indication of the struggles which are coming. The eurosceptic Daily Telegraph commented: “At a stroke Rajoy has demonstrated breathtaking defiance, heart-warming patriotism and a different path to recovery. But even worse, he pointed out the elephant in the room: the eurozone is a monetary union, not a political one, and if members want to run their own affairs, neither Brussels nor Berlin can stop them”.
If the signs of growth in the US economy are sustained, it will possibly cushion the European economy, allowing a slight growth of exports to the US. However, the best scenario for Europe is likely to be a relatively mild recession, but with the prospect of prolonged stagnation. Unemployment is horrendous. Officially, over 24 million workers are jobless in the EU, while youth unemployment has soared above 50% in Spain.
THE SECOND GREEK bailout has temporarily stabilised the Greek government and defused the default time bomb ticking under the eurozone. But it is essentially a temporary fix which does nothing to resolve the underlying problems. It will not break the vicious spiral of repeated austerity packages, ever rising mass unemployment, falling tax revenues, and recession. Neither the eurozone leaders nor the G20 leaders have any policies to overcome this bleak situation.
It is clear that the EUrozone and beyond is on very shakey ground with littleprospect of this changing anytime soon. Capiatlism is bankrupt of ideas out of this crisis of its own making and is still looking to make us all pay for it.
Both the EU and the eurozone have already failed in their key objectives. The European Union was intended to overcome national differences, and particularly bury the historic antagonism between Germany and other European states. In the recent period, however, Germany has been seen as a dictatorial power, imposing harsh economic policies on the weaker European states. This has reinforced an upsurge of nationalism and xenophobia, with the growth of anti-immigrant, racist trends. At the same time, the eurozone was intended to accelerate the economic integration of EU countries. In practice, it has intensified the divergence between the stronger economies and the weaker countries, especially those of the Mediterranean ‘periphery’. The eurozone has become a time bomb under the whole world economy.
The idea that capitalist states could overcome their national limitations and achieve an integrated, harmonious Europe has been shown to be utopian. The unification of Europe is a task for the working class, which can only be achieved on the basis of workers’ democracy and socialist economic planning.
Thursday, 10 March 2011
You can run, you can hide, but we know waht you are
News today of Sir Fred Godwin to take out a super injunction to keep his name out of the public eye will not go unoticed as one of the culprits of teh banking crisis in the last few years. the guardians article below explains all:
Fred Goodwin, the former chief executive of the Royal Bank of Scotland, who became popularly know n as Fred the Shred.
The controversial former bank chief Sir Fred Goodwin is the latest high profile figure to obtain a superinjunction, it has emerged.
The existence of the measure – which bans the press from reporting that an injunction has been obtained – can be revealed after a backbench Liberal Democrat, John Hemming, raised the issue in the Commons.
"In a secret hearing this week Fred Goodwin has obtained a superinjunction preventing him being identified as a banker," said Hemming, the MP for Birmingham Yardley.
Hemming, who used parliamentary privilege to avoid the legal ban on reporting the use of superinjunctions, asked: "Will the government have a debate or a statement on freedom of speech and whether there's one rule for the rich like Fred Goodwin and one rule for the poor?"
Goodwin, who presided over the near collapse of the Royal Bank of Scotland, was reported to have been angered by press coverage after he became popularly known as "Fred the Shred".
He attracted widespread media attention after he was forced to step down in 2008 as a non-negotiable condition of the bank's £20bn bailout by the taxpayer. Goodwin initially left RBS with a pension of £700,000 a year and a lump sum of nearly £3m. He agreed to reduce the payout following public outcry.
News that Goodwin has obtained a superinjunction – over issues that cannot be reported – has raised further questions about the use of the measures.
Last year an outcry prompted the judiciary to establish a committee – chaired by the master of the rolls, Lord Neuberger – to investigate superinjunctions. The committee, which includes judges, lawyers and experts from the press, is expected to deliver its findings before Easter.
Hemming's decision to use parliamentary privilege follows increasing frustration amongst MPs at the willingness of the courts to continue granting superinjunctions.
I find this absolutely shameful that he cant even face up to his mistakes and has to take out a injunction to stop the press finding out what he really is. What a low life coward. I really hope people like this get their comupance one day when the revolution comes. Horrible people who have only their own interests at heart. Not other people who have been suffering due to his sectors failings.
If i was fred i'd hang my head in shame the shame he has brought on his industry and class. But waht gets me is how he is allowed to do this, how is this a transparant democractic country when people like him can do this ? its not on in myopinion and i for one wont be forgetting his mess and other bankers mess they created for us. Which the working class are now having to pay up for their mistakes.
Fred Goodwin, the former chief executive of the Royal Bank of Scotland, who became popularly know n as Fred the Shred.
The controversial former bank chief Sir Fred Goodwin is the latest high profile figure to obtain a superinjunction, it has emerged.
The existence of the measure – which bans the press from reporting that an injunction has been obtained – can be revealed after a backbench Liberal Democrat, John Hemming, raised the issue in the Commons.
"In a secret hearing this week Fred Goodwin has obtained a superinjunction preventing him being identified as a banker," said Hemming, the MP for Birmingham Yardley.
Hemming, who used parliamentary privilege to avoid the legal ban on reporting the use of superinjunctions, asked: "Will the government have a debate or a statement on freedom of speech and whether there's one rule for the rich like Fred Goodwin and one rule for the poor?"
Goodwin, who presided over the near collapse of the Royal Bank of Scotland, was reported to have been angered by press coverage after he became popularly known as "Fred the Shred".
He attracted widespread media attention after he was forced to step down in 2008 as a non-negotiable condition of the bank's £20bn bailout by the taxpayer. Goodwin initially left RBS with a pension of £700,000 a year and a lump sum of nearly £3m. He agreed to reduce the payout following public outcry.
News that Goodwin has obtained a superinjunction – over issues that cannot be reported – has raised further questions about the use of the measures.
Last year an outcry prompted the judiciary to establish a committee – chaired by the master of the rolls, Lord Neuberger – to investigate superinjunctions. The committee, which includes judges, lawyers and experts from the press, is expected to deliver its findings before Easter.
Hemming's decision to use parliamentary privilege follows increasing frustration amongst MPs at the willingness of the courts to continue granting superinjunctions.
I find this absolutely shameful that he cant even face up to his mistakes and has to take out a injunction to stop the press finding out what he really is. What a low life coward. I really hope people like this get their comupance one day when the revolution comes. Horrible people who have only their own interests at heart. Not other people who have been suffering due to his sectors failings.
If i was fred i'd hang my head in shame the shame he has brought on his industry and class. But waht gets me is how he is allowed to do this, how is this a transparant democractic country when people like him can do this ? its not on in myopinion and i for one wont be forgetting his mess and other bankers mess they created for us. Which the working class are now having to pay up for their mistakes.
Friday, 19 November 2010
why i feel the banks should suffer more
They are the people and the institutions throughout this financial crisis who have got off scot free. Anytime there is a bank that goes wrong the governemnt rush to put out its fire by throwing money at them.
The great capitilist institutions they are they should be able to look after themselves.
I say enough is enough we put up a banking levee to a good 40% i suggest and tax them through the hilt. After all we as the public deserve our money back for what we lent them when the banks needed bailing out time after time.
These are the real people who got us into the mess we are in now. Not labour not any polititian it was the banks. Their wreckless risk taking and lending of huge proportions to people who cant pay it back with huge interest rates on some mortages is just unacceptable too long now have the banks been taking the western world for a ride.
For something which started in America we must send the shockwave back the other way we wont stand for banks being wreckless with our money. Money must not be wasted on proping up banks if all they are going to do is pocket it and give themselves huge bonus' still. It is a insult to the ordinary worker in this country that their money has been spent on proping up the banking sector only for them to reward themselves bonus's.
To me bankers and stock brokers shuld get a wage which is fair to the job they do. If they do well for their job fine but no bonus's of silly nature. Any bonus's they do make the majority of it should be taxed and put back into the public coffers for reinvestment in our schools and hospitals.
I just think the banks have a nerve to hold us to ransom threatening us they will leave if we tax them too much. Sorry but if they want to leave i think we should let them. As long as we have our money back first. Then new fairer possibly even greener banks can be created with stricter rules on lending and less risk taking.
I would love to see the end of big bonus culture in this country it sends out totally the wrong message to the rest of us who are facing hard times right now.
I think capitalism is broken and the rich have no idea how to fix it so they just chuck even more money at it. This is not the answer. I do advise people to look at the New economics foundation. Please look them up they have some great ideas how to reform our banks and how to get better value for money.
right now our finances are broke and i think they will take a long long time to recover if we dont learn from our mistakes of the past.
The great capitilist institutions they are they should be able to look after themselves.
I say enough is enough we put up a banking levee to a good 40% i suggest and tax them through the hilt. After all we as the public deserve our money back for what we lent them when the banks needed bailing out time after time.
These are the real people who got us into the mess we are in now. Not labour not any polititian it was the banks. Their wreckless risk taking and lending of huge proportions to people who cant pay it back with huge interest rates on some mortages is just unacceptable too long now have the banks been taking the western world for a ride.
For something which started in America we must send the shockwave back the other way we wont stand for banks being wreckless with our money. Money must not be wasted on proping up banks if all they are going to do is pocket it and give themselves huge bonus' still. It is a insult to the ordinary worker in this country that their money has been spent on proping up the banking sector only for them to reward themselves bonus's.
To me bankers and stock brokers shuld get a wage which is fair to the job they do. If they do well for their job fine but no bonus's of silly nature. Any bonus's they do make the majority of it should be taxed and put back into the public coffers for reinvestment in our schools and hospitals.
I just think the banks have a nerve to hold us to ransom threatening us they will leave if we tax them too much. Sorry but if they want to leave i think we should let them. As long as we have our money back first. Then new fairer possibly even greener banks can be created with stricter rules on lending and less risk taking.
I would love to see the end of big bonus culture in this country it sends out totally the wrong message to the rest of us who are facing hard times right now.
I think capitalism is broken and the rich have no idea how to fix it so they just chuck even more money at it. This is not the answer. I do advise people to look at the New economics foundation. Please look them up they have some great ideas how to reform our banks and how to get better value for money.
right now our finances are broke and i think they will take a long long time to recover if we dont learn from our mistakes of the past.
Wednesday, 17 November 2010
So Mr osbourne how do we afford a irish bailout ?
We are and have repatably been told this country is on its knees, we have a the biggest deficit in the EU, we are just like Greece we must act now to avoid financial melt down.
ALl things we were told and have been told to us by the tories since before the general election.
Well then how can George Osbourne claim today we will be there to help bail out Ireland ? if our finances are in such a mess isnt this plain irresponsible of him ?
Have we not got a mess of our own to sort out, or to make worse depending which side of the political fence you sit. I myself feel we are heading down the same route as irealnd by cutting too fast and too deep.
But my question is to you all how can George Osbourne and those financially estute tories say we will be able to bail outIreland, yes they are our neighbours but if we really are broke like the tories like to make out surely we cannot afford this ?
or unless we have been sold a huge set of lies that our finances were no where near as bad as the tories led us to believe ?
where is this money coming from to help out ireland ay ?
I'm not trying to suggest our finances werent in a mess of course we could have done with scaling back a few things, notably bankers bonus's for one example but huge scale public sector cuts more than ever seems very idealogical to me. I feel it is the tories seeing a golden chance to rip into the welfare state which they ahve never liked and take apart the public sector. All in the name of selling off these services to their private sector friends to make loads of money out of.
Really worrying i feel...
ALl things we were told and have been told to us by the tories since before the general election.
Well then how can George Osbourne claim today we will be there to help bail out Ireland ? if our finances are in such a mess isnt this plain irresponsible of him ?
Have we not got a mess of our own to sort out, or to make worse depending which side of the political fence you sit. I myself feel we are heading down the same route as irealnd by cutting too fast and too deep.
But my question is to you all how can George Osbourne and those financially estute tories say we will be able to bail outIreland, yes they are our neighbours but if we really are broke like the tories like to make out surely we cannot afford this ?
or unless we have been sold a huge set of lies that our finances were no where near as bad as the tories led us to believe ?
where is this money coming from to help out ireland ay ?
I'm not trying to suggest our finances werent in a mess of course we could have done with scaling back a few things, notably bankers bonus's for one example but huge scale public sector cuts more than ever seems very idealogical to me. I feel it is the tories seeing a golden chance to rip into the welfare state which they ahve never liked and take apart the public sector. All in the name of selling off these services to their private sector friends to make loads of money out of.
Really worrying i feel...
Is Ireland still a example to follow ?
Today The EU tried to downplay bailout talks with the Irish government of nothing to worry about
http://www.bbc.co.uk/news/business-11771574
With Ireland joining the growing list of EU countries facing hard times joining Greece, Spain, Portugal and Italy this is worrying times for the European Union.
What was set up on a wave of optimism with alot of the founding members doing well to start with since the economic down turn alot of these countries who cant independantly control their own currency or devalue it in any way are left in some rather difficult situations.
Ireland for example of which the posted link refers to has under gone round after round of deficit cuts. Something which our own Chancellor of the United Kingdom George Osbourne admired and priased lavishly a few years back now.
He saw them as a beacon and a example to follow. Well now Mr Osbourne lets look where Ireland stand now. On the brink of defaulting on their repayments and crippling debt. Ireland seem to be on the slide rather than picking up. With high unemployment in the Republic and little prospect for new job creation their economy seems to be stalling.
With the Uk looking like we'll step in and help with a big bailout of ireland is this really the route George Osbourne really wants to be taking the Uk down ?
With huge cuts cuts mass unemployment. As ireland have found out cuts dont create growth and growth leads back to recession.
George Osbourne has gone ratehr quiet on ireland and matters of this since these news stories ahve been coming out. Perhaps he is turning a blind eye to it and hoping our cuts over here will be alright. Well let me tell you they wont. They are the biggest peace time public sector cuts since the 30's back when you guessed it we cut too harda nd far too deep and found oursleves trapped in a depression for many years.
I do hope ireland pull through this but it is nothing new and i can only see things getting worse there before better.
http://www.bbc.co.uk/news/business-11771574
With Ireland joining the growing list of EU countries facing hard times joining Greece, Spain, Portugal and Italy this is worrying times for the European Union.
What was set up on a wave of optimism with alot of the founding members doing well to start with since the economic down turn alot of these countries who cant independantly control their own currency or devalue it in any way are left in some rather difficult situations.
Ireland for example of which the posted link refers to has under gone round after round of deficit cuts. Something which our own Chancellor of the United Kingdom George Osbourne admired and priased lavishly a few years back now.
He saw them as a beacon and a example to follow. Well now Mr Osbourne lets look where Ireland stand now. On the brink of defaulting on their repayments and crippling debt. Ireland seem to be on the slide rather than picking up. With high unemployment in the Republic and little prospect for new job creation their economy seems to be stalling.
With the Uk looking like we'll step in and help with a big bailout of ireland is this really the route George Osbourne really wants to be taking the Uk down ?
With huge cuts cuts mass unemployment. As ireland have found out cuts dont create growth and growth leads back to recession.
George Osbourne has gone ratehr quiet on ireland and matters of this since these news stories ahve been coming out. Perhaps he is turning a blind eye to it and hoping our cuts over here will be alright. Well let me tell you they wont. They are the biggest peace time public sector cuts since the 30's back when you guessed it we cut too harda nd far too deep and found oursleves trapped in a depression for many years.
I do hope ireland pull through this but it is nothing new and i can only see things getting worse there before better.
Tuesday, 9 November 2010
The fair society
So we all know about David Camerons "big society"
He has been banging on about this idea since before the general election which let me tell you is nothing new really
The big society let me describe quickly is the idea of giving power back to the people, allowing people to volunteer and work and unpaid wage and do more for others. I do however feel this is a huge smokescreen to the biggest attack on the welfare state since well ... ever i think.
While people are loosing jobs left right and centre we are being asked by David cameron who has probably never volunteered in his life for us to do more in our communities and volunteer more, for less.
In this modern day Britain we are very time poor and have little time to even stop and think let alone stop and help out by putting something back into your community.
Let me state the idea in principle is not a bad idea but the back drop to how he is implimenting his ideas is all wrong. Sure it would be nice if we all acted more of a community and helped out others more. This is a very good thing but the way Cameron is going about the cuts to public services which would in my view do a very similar job is a big smokescreen in my eyes.
So i propose a fair society, my idea stems from a similar logic, but has one main difference, it is and will be fair for all.
Firstly i would reign in the banks hold them to account for the mess they have brought us. I would consider nationalising them to gain back our money which we lent them to save them. Once we would be in control of the banks in public ownership they would have no choice but to start lending and lending money back to the people who helped them out in the first place.
This would be my first plan. I would then offer fair alternatives to the savage spending cuts going on in the public sector right now. They are wrong and are not nessesary or unavoidable according to the prime minister. The public sector did not create the financial crisis, the disabled didnt create the financial crisis the young and elderly didnt create the financial crisis eitehr.
So why should they be the ones to suffer the most. I should mention a lot more other groups of people including women and low income families will also suffer too.
I believe the big society is not a bad idea in principle and i'm not just opposing its creation just because a tory came up with it. But the way it is being implimented is all wrong and badly orchestrated. Perhaps the timing is wrong, perhaps if we were not in a big financial mess the idea would sit better with people, But when people are loosing jobs the last thing they want to hear is they can do some work for nothing when they have a mortgage to pay and children to feed.
I think we need to look for a more fairer society where the rich wealthy tax dodgers are clamped down on and the banks are not allowed to get away with almost anything. We must stop this ridiculous big bonus culture that has not stopped even through the recession i might add. How a banker and a broker can be worth giving that sort of bonus to on top of a salary for essentially risking huge amounts of our money is incomprehendable to me.
Its like rewarding risk taking, yes its ok if it comes off but what if it doesnt, its our money they are playing with and we should hold them accountable.
People in the media and teh tory party warn us if we regulate the banks and tax them too much they will just up sticks and leave. Well to me, even though i bank with a bank i dont feel this threat is worth worrying about. This may sound nieve but there will always be other banks ready to take the ones who want to leave. Who knows they might be a lot more fairer and a lot better at their jobof holding our money and not taking risks.
I suggest we take a look at cooperative banks and institutions and having part public part private ownership of the banks to always keep them in check.
This is my first part of the fair society idea and outlines some of my feelings on the financial crisis we face right now.
He has been banging on about this idea since before the general election which let me tell you is nothing new really
The big society let me describe quickly is the idea of giving power back to the people, allowing people to volunteer and work and unpaid wage and do more for others. I do however feel this is a huge smokescreen to the biggest attack on the welfare state since well ... ever i think.
While people are loosing jobs left right and centre we are being asked by David cameron who has probably never volunteered in his life for us to do more in our communities and volunteer more, for less.
In this modern day Britain we are very time poor and have little time to even stop and think let alone stop and help out by putting something back into your community.
Let me state the idea in principle is not a bad idea but the back drop to how he is implimenting his ideas is all wrong. Sure it would be nice if we all acted more of a community and helped out others more. This is a very good thing but the way Cameron is going about the cuts to public services which would in my view do a very similar job is a big smokescreen in my eyes.
So i propose a fair society, my idea stems from a similar logic, but has one main difference, it is and will be fair for all.
Firstly i would reign in the banks hold them to account for the mess they have brought us. I would consider nationalising them to gain back our money which we lent them to save them. Once we would be in control of the banks in public ownership they would have no choice but to start lending and lending money back to the people who helped them out in the first place.
This would be my first plan. I would then offer fair alternatives to the savage spending cuts going on in the public sector right now. They are wrong and are not nessesary or unavoidable according to the prime minister. The public sector did not create the financial crisis, the disabled didnt create the financial crisis the young and elderly didnt create the financial crisis eitehr.
So why should they be the ones to suffer the most. I should mention a lot more other groups of people including women and low income families will also suffer too.
I believe the big society is not a bad idea in principle and i'm not just opposing its creation just because a tory came up with it. But the way it is being implimented is all wrong and badly orchestrated. Perhaps the timing is wrong, perhaps if we were not in a big financial mess the idea would sit better with people, But when people are loosing jobs the last thing they want to hear is they can do some work for nothing when they have a mortgage to pay and children to feed.
I think we need to look for a more fairer society where the rich wealthy tax dodgers are clamped down on and the banks are not allowed to get away with almost anything. We must stop this ridiculous big bonus culture that has not stopped even through the recession i might add. How a banker and a broker can be worth giving that sort of bonus to on top of a salary for essentially risking huge amounts of our money is incomprehendable to me.
Its like rewarding risk taking, yes its ok if it comes off but what if it doesnt, its our money they are playing with and we should hold them accountable.
People in the media and teh tory party warn us if we regulate the banks and tax them too much they will just up sticks and leave. Well to me, even though i bank with a bank i dont feel this threat is worth worrying about. This may sound nieve but there will always be other banks ready to take the ones who want to leave. Who knows they might be a lot more fairer and a lot better at their jobof holding our money and not taking risks.
I suggest we take a look at cooperative banks and institutions and having part public part private ownership of the banks to always keep them in check.
This is my first part of the fair society idea and outlines some of my feelings on the financial crisis we face right now.
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