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A Slot Machine Ate My Say Not What If The Small Business Master Self-Publishing The Great Singapore Penis Super Life Secret Codes Pain Pill Addiction: A The Employee Rights Bouncing Back From Loss Mockery A Pointed Death Everything I Never Enough for Us All Frozen in Time Journey to Terra Incognita Goodnight, Brian The Mine The Friday Night Club The Entrepreneur Guide Golden's Rule A World Away: The The Harrowing Escape: Winter Soul's Infarct A Worthy Legacy Dangerous Liaisons Shroud of Beckoning Shadows and Not America's Suicidal Statecraft The Handkerchief The End of the 19th Century Up Close: A Mother's View
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Financial Black Holes and By Rodrigue Tremblay "Financial markets are driving the world towards another Great Depression with incalculable political consequences. The authorities, particularly in Europe, have lost control of the situation. They need to regain control and they need to do so now."
"There is no cause to worry. The high tide of prosperity will continue."
Presently, one has the net impression that today's governments, both in Europe and in the United States, have their fingers plugging the holes in the financial dike, but fear that that the entire dam could collapse in the not too distant future with dire economic consequences. Let's see if we can make sense of it all. Let's say to begin that most financial crises are the direct result of unsustainable debt levels relative to income that need to be wrung out of the economic system. It has happened in the past (notably in 1873, in 1907 and in 1931, for example), and numerous times in developing countries, and it will undoubtedly happen again in the future. The process is more often than not always the same: some large banks, corporations, consumers or governments take on too much risky debt that becomes unsustainable when economic conditions change, thus launching the entire economy into a devastating process of debt deflation. Sometimes, it may take decades to overcome such a debt deflation and it usually creates an environment of economic stagnation when aggregate demand collapses. What makes the current financial crisis so troublesome is not only that debt levels are historically high for some countries, but also because the usual instruments and procedures to reduce the debt burden, while doing the least damage to the real economy, have been rendered inoperative, due to a large extent, to the poisonous so-called financial "innovations" that have taken place since 1999 in the general climate of wholesale financial deregulation. As a consequence, financial debt in many countries creates a sort of financial black hole that siphons off money income and prevents it from being re-circulated back into the economy. This creates a serious deficiency of demand (when consumers spend less, when corporations postpone investments and when governments adopt austerity programs) that translates into low output growth, economic stagnation and high unemployment. In this short article, I will try to identify some of these financial "black holes" that starve the economy of the necessary funds to prosper. I will also attempt to explain why this financial crisis may turn out to be much more serious than previous ones and why governments should take drastic measures to avoid a devastating economic depression. -I have done this in the past, again, in 2006, and again, in 2007, and again and again in 2010, but obviously some politicians, both in Europe and in North America, don't seem to get. Instead, they seem to think that fiscal austerity and lower taxes is all that takes to stimulate the economy and lower unemployment. They cannot be more wrong in the current context. Such policies in an open economy are going to make things worse, much worse if they are applied over time. Here is why. Many governments had the imprudence of piling up debt upon debt over the last thirty years, but especially over the last ten years. There are four main causes for such a public binge of debt in many countries. -First, in Europe, the creation of the Euro zone in 1999 induced some imprudent member countries to go deep into debt by taking advantage of the credibility of the euro and by issuing bonds in euros at favorable interest rates. There was, indeed, a widely held belief on the part of lenders and borrowers alike that the new monetary union provided an implicit guarantee of stability to the safety of the loans. -Second, lenders were induced to lend large sums at low interest rates because borrowers could avail themselves of a newly created financial instrument, the Credit Default Swaps (CDS) that allowed them to take a low cost insurance against an eventual default on their bonds. (By the way, the financial crises on both sides of the Atlantic are closely linked due to the fact that some large U.S. banks are heavily exposed to the European sovereign debt crisis as sellers of credit default swaps.) -Third, the persistent large trade imbalances in the world meant that some countries, such as mainland China (which joined the World Trade Organization in December 2001), piled up tremendous external trade surpluses and their excess funds became available to foreign borrowers. Indeed, large international banks found it most profitable to channel these newly created funds to willing sovereign borrowers around the world. -Fourth, some central banks, especially the American Greenspan Fed, thought they were obliged to provide an environment of easy money after the events of September 11, 2001 in the U.S., and they kept interest rates unduly low for too long, thus providing an additional inducement to eager borrowers to go deeper into debt. Indeed, the housing bubble in the United States that led to the subprime mortgage crisis was a creation of the Greenspan Fed with the encouragement of the Bush-Cheney administration. Read More Occupy America By Michael Parenti Beginning with Occupy Wall Street in September 2011, a protest movement spread across the United States to 70 major cities and hundreds of other communities. Similar actions emerged in scores of other nations. For the first two weeks, the corporate-owned mainstream media along with NPR did what they usually do with progressive protests: they ignored them. These were the same media that had given the Tea Party supporters saturation coverage for weeks on end, ordaining them "a major political force." The most common and effective mode of news repression is omission. By saying nothing or next to nothing about dissenting events, movements, candidates, or incidents, the media consign them to oblivion. When the Occupy movement spread across the country and could no longer be ignored, the media moved to the second manipulative method: trivialization and marginalization. So we heard that the protestors were unclear about what they were protesting and they were "far removed from the mainstream." Media cameras focused on the clown who danced on Wall Street in full-blown circus costume, and the youths who pounded bongo drums: "a carnival atmosphere" "youngsters out on a spree," with "no connection to the millions of middle Americans" who supposedly watched with puzzlement and alarm. Such coverage, again, was in sharp contrast to the respectful reportage accorded the Tea Party. House Majority Leader, the reactionary Republican Eric Cantor, described the Occupy movement as "growing mobs." This is the same Cantor who hailed the Tea Party as an unexcelled affirmation of democracy. The big November 2 demonstration in Oakland that succeeded in closing the port was reported by many media outlets, almost all of whom focused on the violence against property committed by a few small groups. Many of those perpetrators were appearing for the first time at the Oakland site. Some were suspected of being undercover police provocateurs. Their actions seemed timed to overshadow the successful shutdown of the nation's fourth largest port. Time and again, the media made the protestors the issue rather than the things they were protesting. The occupiers were falsely described as hippie holdovers and mindless youthful activists. In fact, there was a wide range of ages, socio-ethnic backgrounds, and lifestyles, from homeless to well-paid professionals, along with substantial numbers of labor union members. Far from being a jumble of confused loudmouths prone to violence, they held general assemblies, organized themselves into committees, and systematically took care of encampment questions, food, security, and sanitation. One unnoticed community protest was Occupy Walnut Creek. For those who don't know, Walnut Creek is a comfortable conservative suburb in northern California (with no known record of revolutionary insurrections). Only one local TV station gave Occupy Walnut Creek brief attention, noting that about 400 people were participating, average age between 40 and 50, no clowns, no bongos. Participants admitted that they lived fairly prosperous lives but still felt a kinship with the millions of Americans who were enduring an economic battering. Here was a contingent of affluent but rebellious "middle Americans," yet Walnut Creek never got mentioned in the national media, as far as I know. The Occupy movement has promulgated a variety of messages. With a daring plunge into class realities, the occupiers talk of the 1% who are exploiting the 99%, a brilliant propaganda formula, simple to use, yet saying so much, now widely embraced even by some media commentators. The protestors carried signs condemning the republic's terrible underemployment and the empire's endless wars, the environmental abuses perpetrated by giant corporations, the tax loopholes enjoyed by oil companies, the growing inequality of incomes, and the banksters and other gangsters who feed so lavishly from the public trough. Some occupiers even denounced capitalism as a system and hailed socialism as a humane alternative. In all, the Occupy movement revealed an awareness of systemic politico-economic injustices not usually seen in U.S. protests. Remember, the initial and prime target was Wall Street, finance capital's home base. The mainstream news outlets not only control opinions but even more so opinion visibility, which in turn allows them to limit the parameters of public discourse. This makes it all the more imperative for ordinary people to join together in demonstrations, hoping thereby to maximize the visibility and impact of their opinions. The goal is to break through the near monopoly of conservative orthodoxy maintained by the "liberal" media. So demonstrations are important. They have an energizing effect on would-be protestors, bringing together many who previously had thought themselves alone and voiceless. Demonstrations bring democracy into the streets. They highlight issues that have too long been buried. They mobilize numbers, giving a show of strength, reminding the plutocracy perched at the apex that the pyramid is rumbling. Read More |
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