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2016 Theme #5: The Systemic Failure of High Finance

January 8, 2016

2016 Theme #5: The Systemic Failure of High Finance

This week I am addressing themes I see playing out in 2016.

A number of systemic, structural forces are intersecting in 2016. One is the failure of high finance to fix the global economy’s systemic problems.

The operative conceit of the past 7 years has been that high finance can fix whatever’s broken in the world’s economies. According to this narrative, all the world needed to boost “growth,” employment and profits was lower interest rates, more liquidity, reverse repos and some other fancy financial footwork.

Once all this high finance generated more borrowing by debt-serfs, property developers, students, corporations buying back their shares and financiers skimming billions from asset bubbles, systemic problems would be dissolved or mitigated.

Cheap credit, asset bubbles and immense profiteering by financiers would heal all wounds and make everything better for everyone, even those at the bottom layer of the economy.

Unfortunately, this isn’t true. High finance and cheap credit have intensified structural problems such as rising inequality, not resolved them.

The implicit promise of the neoliberal project is that liberalizing private-sector markets and credit will magically grease the processes of growth and widespread prosperity.

When economies have the right systems in place–decentralized, somewhat free markets, an entrepreneurial spirit, many unmet needs, idle productive capacity and a credit-starved real economy–freeing up static markets and credit can unleash the productive capacity of the bottom level of the economy.

But in economies dominated by state/private monopolies and cartels, neoliberalism simply funnels the profits of financialization to the few at the expense of the many, and at the cost of heightened instability and insecurity.

…click on the above link to read the rest of the article…

2016 Theme #3: The Rise of Independent (non-state) Crypto-Currencies

January 6, 2016

2016 Theme #3: The Rise of Independent (non-state) Crypto-Currencies

This week I am addressing themes I see playing out in 2016.

A number of systemic, structural forces are intersecting in 2016. One is the rise of non-state, non-central-bank-issued crypto-currencies.

We all know money is created and distributed by governments and central banks. The reason is simple: control the money and you control everything.

The invention of the blockchain and crypto-currencies such as Bitcoin have opened the door to non-state, non-central-bank currencies–money that is global and independent of any state or central bank, or indeed, any bank, as crypto-currencies are structurally peer-to-peer, meaning they don’t require a bank to function: people can exchange crypto-currencies to pay for goods and services without a bank acting as a clearinghouse for all these transactions.

This doesn’t just open the possibility of escaping the debt-serfdom of central and private banks–it opens the door to an entire global economy that’s free of the inequality and concentration of wealth and power that is the only possible output of central bank created and distributed money.

Max Keiser and Stacy Herbert and I discuss these possibilities in The Keiser Report: Radically Beneficial World (25:43).

Recall that central bank money is borrowed into existence, which means interest must be paid until the money is extinguished by the payment of debt.

In effect, today’s wars, bread and circuses, etc. will be paid for in perpetuity by our kids, grandkids and their kids. This is debt-serfdom. The only possible output of borrowing money into existence is debt-serfdom.

Debt jubilees, no matter how well-intended, simply maintain the system of bank-issued money and debt-serfdom: dialing back the debt load from impossible to bearable does nothing but continue financial feudalism.

…click on the above link to read the rest of the article…

Voluntary Enslavement

December 28, 2015

Voluntary Enslavement

Voluntary Enslavement

In recent years, I’ve been predicting that the governments, particularly those of the EU and US, will seek to eliminate paper currency. The objective will be to make monetary transactions between private parties as difficult as they can, by requiring that all transactions take place through financial institutions. If they can do this, they will effectively make a run on banks impossible in the future as the banks will simply shut off the money tap, as the Greek banks did. This power will additionally make negative interest rates and confiscations more possible.

A few years ago, this forecast was seen by most as poppycock, but the prelude has now begun, with most of the world’s banks disallowing large transfers and some lowering these amounts over time. Many governments are aiding the effort, requiring reporting on some transfers.

At some point, governments and banks will seek to eliminate paper currency, completing the encirclement of private party monetary transfer. From that point on, it would be illegal for any transfer of money to be undertaken except through a financial institution (most probably through the use of a plastic card or smartphone).

At about the same time as I began predicting the above, I also began forecasting what I considered to be a companion campaign against virtual currencies, such as Bitcoin. Such currencies will prove to be a threat to a bank-only transfer system as they would provide an alternate method of payment between private parties – one that does not come under the control of any government. Governments and financial institutions will therefore seek to eliminate virtual currencies, or make them too difficult to use.

The greatest weakness inherent in virtual currencies, in my view, is that they’re intangible. Unlike precious metals which, once physically possessed, exist forever, virtual currencies exist only as an idea. Like all fiat currencies, they have value only as long as two parties continue to have faith in their value.

…click on the above link to read the rest of the article…

The Re-enserfment of Western Peoples

November 9, 2015

The Re-enserfment of Western Peoples

The re-enserfment of Western peoples is taking place on several levels. One about which I have been writing for more than a decade comes from the offshoring of jobs. Americans, for example, have a shrinking participation in the production of the goods and services that are marketed to them.

On another level we are experiencing the financialization of the Western economy about which Michael Hudson is the leading expert (Killing The Host). Financialization is the process of removing any public presence in the economy and converting the economic surplus into interest payments to the financial sector.

These two developments deprive people of economic prospects. A third development deprives them of political rights. The Trans-Pacific and Trans-Atlantic Partnerships eliminate political sovereignty and turn governance over to global corporations.

These so called “trade partnerships” have nothing to do with trade. These agreements negotiated in secrecy grant immunity to corporations from the laws of the countries in which they do business. This is achieved by declaring any interference by existing and prospective laws and regulations on corporate profits as restraints on trade for which corporations can sue and fine “sovereign” governments. For example, the ban in France and other counries on GMO products would be negated by the Trans-Atlantic Partnership. Democracy is simply replaced by corporate rule.

I have been meaning to write about this at length. However, others, such as Chris Hedges, are doing a good job of explaining the power grab that eliminates representative government.
http://www.opednews.com/articles/1/The-Most-Brazen-Corporate-by-Chris-Hedges-American-Hypocrisy_Americans-For-Prosperity_Corporate-Citizenship_Corporate-Crime-151107-882.html 

The corporations are buying power cheaply. They bought the entire US House of Representatives for just under $200 million. This is what the corporations paid Congress to go along with “Fast Track,” which permits the corporations’ agent, the US Trade Representative, to negotiate in secret without congressional input or oversight.  http://www.opednews.com/articles/Almost-200-Million-Donate-by-Paola-Casale-Banking_Congress_Control_Corporations-150620-523.html

…click on the above link to read the rest of the article…

The Lesson of Greece: Only Collapse Makes Real Change Possible

February 5, 2015

The Lesson of Greece: Only Collapse Makes Real Change Possible

When the illusion that the Status Quo can fulfill all its promises to everybody dies, the Status Quo starts the terminal slide to effective collapse.

Of the many lessons we can learn from Greece’s difficult path to rejection of debt-serfdom, the most important is perhaps the most obvious: no real change is possible until the Status Quo can no longer fulfill its promises, i.e. it effectively collapses.

 

The collapse of the Status Quo has two distinct features: the process is highly variable, and the process affects the social classes in different ways.

The process of collapse is neither sudden nor smooth. Things do not necessarily cease to function overnight; rather, the decline to effective collapseoperates much like energy states in physics: systems decay and then drop to a lower energy level, where they are stable until further decay causes the next drop to an even lower level.

Pension payments provide a ready example. The pension payment is reduced, and the recipient tightens his/her belt and gets by. The next reduction (either outright or via inflation) forces drastic changes in consumption, and subsequent reductions reduce the pension to a supplement that cannot possibly support a retiree, much less their family.

 

…click on the above link to read the rest of the article…

 

Asset Ownership and Our System of Deepening Debt-Serfdom

January 21, 2015

Asset Ownership and Our System of Deepening Debt-Serfdom

Debt-serfs who make the difficult and risky transition to small-scale business owners find they have simply moved to another class of serfdom.

The core dynamic of debt-serfdom is that debt-serfs must borrow money to buy essentials while the wealthy borrow to invest in productive assets.

This is not merely a random result of free-market capitalism; it is the structure of cartel-capitalism in which highly profitable goods and services must be paid for with highly profitable debt.

This need to borrow to pay for essentials is already evident in student loans, vehicles and housing.

The cost of these essentials is so high that few debt-serfs can borrow enough to pay for these essentials and then have enough borrowing power left to buy productive assets.

Those few who do attempt to buy productive assets face regulatory hurdles and costs that limit their ability to own or launch small-scale profitable enterprises.

The net result is a system in which the vast majority of productive assets are owned by the few who then have the means to exploit the many.

…click on the above link to read the rest of the article…

 

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