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Vampire finance sucks the lifeblood out of the economy

Vampire finance sucks the lifeblood out of the economy

We need democratic control of the financial sector. An interview with Saskia Sassen

The World Economic Forum. Photo by Studio Roosegaarde (Flickr)

Every year to coincide with the World Economic Forum, the Transnational Institute based in Amsterdam launches a State of Power report to expose and deepen our understanding of the mechanisms that elites use to maintain power and concentrate wealth. For its eighth edition, the report has focused on the financial sector, asking why it has grown more powerful despite causing the financial crisis of 2008. The report features this interview with renowned sociologist Saskia Sassen who has written extensively on how finance has changed the nature of cities today and how its logic of extraction has fuelled new forms of expulsions and dispossession. The interview concludes with a discussion of fractures in the power of ‘high finance’ and how citizens’ movements might take advantage to advance a democratic control of money. 

How powerful is finance today and from where does it derive its power?

First, finance shouldn’t be confused with traditional banking. We need banks – they sell money – whereas finance is a mode of extraction, just like mining: once value has been extracted they don’t care what is done with it. A traditional bank wants its customers’ children to be future clients, so it cares about relationships, but finance doesn’t care at this personal level, except if they are very, very rich.

Second, finance is a dangerous sector because financiers have learnt how to financialise just about everything. And they do this not through traditional banking practices, but through algorithms and highly speculative manipulations. They have invented instruments to serve themselves rather than whoever they are advising. Which means they often don’t lose even when their clients do.  

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U.S. cybersecurity experts scrambling to thwart major attacks on power, water, gas infrastructure by “bolting on” fixes to old vulnerable systems

Image: U.S. cybersecurity experts scrambling to thwart major attacks on power, water, gas infrastructure by “bolting on” fixes to old vulnerable systems
(Natural News) Crammed into a small building in Idaho Falls, Idaho, a group of about 50 cyber security experts and researchers are working around the clock to protect American infrastructure from debilitating attacks.

As The Associated Press reports, much of what goes on at the Idaho National Laboratory, once known as the country’s primary nuclear research facility, isn’t discussed. But what is known is that those who fill the dimmed rooms full of wires, cables, computers, and detection gear are diligently trying to guard against the unthinkable: Attacks on power grids, water treatment facilities, financial institutions, and even traffic lights that could bring large sections of the country to a standstill.

Followed by chaos.

The lab’s director of cybersecurity, Scott Cramer, admits that the task at hand is a difficult one and that the United States is playing catch-up, of sorts. He describes the cybersecurity work as “bolting on” protections for infrastructure control systems that are decades old with the belief that many of them have already been infiltrated by malicious actors — nation-states and non-state actors alike — who are waiting for the time to launch attacks.

“This is no joke — there are vulnerabilities out there,” Cramer told the AP. “We’re pretty much in reaction mode right now.”

That’s not hyperbole. A recently released report from the President’s National Infrastructure Advisory Council lays out a similarly dire warning. After interviewing “dozens of senior leaders and experts” as well as conducting an in-depth review of existing studies and statues, the NIAC “found that existing national plans, response resources, and coordination strategies would be outmatched by a catastrophic power outage,” the report noted.

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What’s Holding Back the World Economy?

What’s Holding Back the World Economy?

NEW YORK – Seven years after the global financial crisis erupted in 2008, the world economy continued to stumble in 2015. According to the United Nations’ report World Economic Situation and Prospects 2016, the average growth rate in developed economies has declined by more than 54% since the crisis. An estimated 44 million people are unemployed in developed countries, about 12 million more than in 2007, while inflation has reached its lowest level since the crisis.

More worryingly, advanced countries’ growth rates have also become more volatile. This is surprising, because, as developed economies with fully open capital accounts, they should have benefited from the free flow of capital and international risk sharing – and thus experienced little macroeconomic volatility. Furthermore, social transfers, including unemployment benefits, should have allowed households to stabilize their consumption.

But the dominant policies during the post-crisis period – fiscal retrenchment and quantitative easing (QE) by major central banks – have offered little support to stimulate household consumption, investment, and growth. On the contrary, they have tended to make matters worse.

In the US, quantitative easing did not boost consumption and investment partly because most of the additional liquidity returned to central banks’ coffers in the form of excess reserves. The Financial Services Regulatory Relief Act of 2006, which authorized the Federal Reserve to pay interest on required and excess reserves, thus undermined the key objective of QE.

Indeed, with the US financial sector on the brink of collapse, the Emergency Economic Stabilization Act of 2008 moved up the effective date for offering interest on reserves by three years, to October 1, 2008. As a result, excess reserves held at the Fed soared, from an average of $200 billion during 2000-2008 to $1.6 trillion during 2009-2015. Financial institutions chose to keep their money with the Fed instead of lending to the real economy, earning nearly $30 billion – completely risk-free – during the last five years.

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Asian Financial Sector Hit Hard By Low Oil Prices

Asian Financial Sector Hit Hard By Low Oil Prices

Cheap oil can often be a double edged sword. On the one hand, it has been beneficial for the emerging global economies of India and China, who seized the opportunity to expand their strategic petroleum reserves (SPR), while on the other hand, it has created an economic crisis for energy dependent nations like Russia, Venezuela and Libya.

Gone are the days when oil majors would freely invest billions of dollars in mega projects, as shrinking revenues have created significant cost pressure that needs to be reduced first and foremost. So, at a time when most of the major oil and gas players are shying away from new investments, it was expected that mergers and acquisitions would be the best alternative to increase the market value, reduce operational costs and increase service portfolio. However, much to the dismay of industry experts and market watchdogs, 2015 has been pretty lackluster for mergers and acquisitions.

Related: Do Or Die For Mexico’s Neglected Oil Sector

According to reports from PWC, the total number of M&A deals in the U.S.-oil and gas industry for the first quarter of 2015 was lower (both in terms of deal value and volume) than the last quarter of 2014. There were 39 oil and gas deals (with each deal worth more than $50 million) worth a combined total of $34.5 billion in first quarter of 2015.

Out of this, there were only four mega-deals whose values were greater than $1 billion. Shell and Statoil were some of the few global energy players who showed any real inclination towards acquiring new assets. Shell is already in process of acquiring BG group and Statoil is rumored to be targeting US-based driller EOG. Apart from a handful of big deals, the mergers and acquisition market at present looks pretty dull.

 

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