Happy (Global-Debt-Jubilee) New Year to All

The world’s leaders and top economists failed to see the 07/08 banking debt crisis coming but now a two-decade long EU Great Depression threatens and the choice may be between a bank-punishing private debt global write-off or authoritarian regimes — which is “where Hitler came from”

Global Financial Crisis Year 6 and while politicians and economists continue to argue about what to do, millions of Europeans and Americans are shafted every day by out-of-control bankers … but perhaps not for much longer?

A documentary made by Sveriges Television (SVT), the Swedish public service television company reports on just such dangers — raised in the course of interviews below —  sets out to establish why global leaders were blindsided and discusses the underlying causes of what it calls “the greatest financial crisis since the 1930s”.

It traces the euphorical follies of the financial services sector and asks how we get out from under the bankers’ giant Ponzi bubble especially as US and UK regulators favour negotiating vast, no-admission-of-guilt fines (seen by recipients as a cost of “doing business”), rather than jailing suspected white-collar fraudsters.

Readers contemplating the New Year ahead might care to make a start by viewing the SVT documentary below. It was uploaded to YouTube on December 9, 2012, just days before the start of Year Six of what some now brutally label the ‘new normal’ — by which they mean an unending Great Global Financial Crisis, decades of massive unemployment, middle class meltdown, wage earner misery, bankster profit and the rape and pillage of democracy.

The video maintains that just 100 companies control 80% of the corporate world and the spiral of debt that lubricates its now-rusted wheels  ….  to the ever-growing benefit of redolent names identified in the video as banks and financial institutions —  many of which were bailed out without taxpayer consent by unborn future generations of taxpayers —  including: Barclays, Goldman Sachs, Bank of America, Deutsche Bank, Credit Agricole, BNP-Paribas, Lloyds, Morgan Stanley, Merrill Lynch etc. (For more detail see an interview with complexity researcher Stefano Battiston after minute 31:15 in the video below).

At one point the documentary’s reporter Jens Ergon quotes IMF banker Michael Kumhof who says the world is beginning to realise that the finance sector must be slashed by 50% if we are to bring the crisis to an end and prevent banks and the finance industry —  (now transmogrified from a role as intermediaries into a vast money-farming sector of their own)  — from doing any further harm.

This is hardly the sort of news captured EU politicians will welcome and certainly, some analysts suggest, would be fought tooth and nail by powerful bank lobbies. Yet in the video Professor Steve Keen of the University of Western Sydney, one of very few global economists to have warned well ahead of time that the 2007 bust was coming, calls for a  “resetting of the system”.

By this he means huge write-downs of the private debt the financial sector has ‘invested’ in households worldwide! (See our earlier report on the repudiation of Odious Debt).

Steve Keen (Credit: Neerav Bhatt)

In this document of July 22, 2012, Steve Keen sets out the background that justifies the call for a debt jubilee: “Here is my effort at explaining the crisis:  ‘The Crisis in 1000 words—or Less’  as a PDF download”.

See his nutshell explanation of how we got there and where he believes the world is headed, in this Zero Hedge report: The ‘Euphoric’ Economy And Why ‘They’ Didn’t See It Coming.

Here then is the Sveriges Television (SVT) documentary (one we suggest is well worth a 51-minute-investment ahead of starting the New Year in earnest):

(To switch on English subtitles first start playing the clip, find the CC button on the bottom right hand side of the video player [5th button from the right, hover over it with your mouse it reads ‘Captions’, left-click on this CC button and English subtitles will appear] ). Should the clip run too slowly (it is nearly an hour long) watch it on YouTube here.

The documentary includes interviews with the following economists, Nobel Prize winners and bankers:
– Joseph Stiglitz (Columbia University)
– Steve Keen (University of Western Sydney)
– Dirk Bezemer (University of Groningen)
– Michael Kumhof (a banker with the IMF)
– Robert Lucas (University of Chicago)
– Stefan Ingves (Swedish Central Bank)
– Jörg Asmussen (European Central Bank)

Apart from focusing on the well publicised agitation the crisis is provoking in Spain, the world’s 9th largest economy where youth unemployment now exceeds 50%, the video highlights problems now emerging in the Netherlands, reportedly even worse off in terms of personal over-indebtedness than Spain, and Sweden itself, usually held up as a paragon but also a victim of bankster Ponzi schemes.

The partial transcript below of Professor Keen’s remarks on the debt crisis are provided with thanks to a commenter on the Slog Blog:
At minute: 37.40 “Austerity sounds sensible because if you think about your own situation as a household, if you had debt you couldn’t sustain then the only way you can cope with that is by reducing your consumption. But if you live in a complex social system, an entire economy, and the entire economy imposes austerity upon itself what that means is that the rate of turnover of money in the economy (Ed note: known technically as the velocity of money) slows down. The rate of economic activity slows down and therefore the income will fall. Austerity is self-defeating.”

At minute:38.45 “You can barely manage Greece which is one of the smallest economies in Europe. Now Spain… getting bigger and bigger countries that are going to continue falling over. And therefore in all these cases what you’re saying is we have to create more money at the Central Bank, ”give” it to these countries and tell them to pay the banks back. Debts that can’t be repaid won’t be repaid. All you have to do is work out how you’re not going to repay them. And instead if you continue to pretend that you are going to repay them, then all you do is accumulate more debt because you have to service the additional debt that you’ve created…”

“So long as this austerity is forced upon the public, they’re the ones who are going to have to feel the pain. And they’re going to be told by the elites who actually benefited from the bubble in the first place that they need to suffer to overcome the mistakes the elites made. That is a recipe for demagoguery. This is where Hitler came from.

“‘Multiple evidence of mis-selling, the Libor scandal and the anecdotal evidence that large investment banks such as Goldman Sachs exist primarily to maximise the salaries, bonuses and share options of their staff rather than to deliver the best possible service to their customers  are all signs that the culture of finance has changed for the worse,” the IPPR-Institute for Public Policy Research said.- UK’s Daily Mail

Steve Keen, a professor of economics and finance at the University of Western Sydney and author of ‘Debunking Economics’ is a disciple of the US economist Hyman Philip Minsky (described in a 2008 New Yorker article as a maverick. “Twenty-five years ago, when most economists were extolling the virtues of financial deregulation and innovation, a maverick named Hyman P. Minsky maintained a more negative view of Wall Street; in fact, he noted that bankers, traders, and other financiers periodically played the role of arsonists, setting the entire economy ablaze”).

Prof Keen argues that the current global economic crisis is the result of too much debt. …. so watch Max Kaiser of the Max Kaiser Report interview him on his economic theories below (dated Aug 25, 2012 the fifth anniversary of the start of the crisis) : “It has been five years since the global debt crisis began. The debt is now so great that it can no longer be hidden. Steve comments on the latest developments in the global debt crisis and the banker’s role in the current situation:”

In the interview Keen notes that the GFC- Global Financial Crisis is the longest and deepest economic crisis since the Great Depression. He says it began on August 9 2007 when France’s BNP Paribas, (the largest bank in the world by assets and which had filled its vaults with toxic securitised subprime mortgage garbage sold by US fraudsters), shut down two US-based funds because it said it was unable to provide a proper market valuation of the junk it had bought. “… in Europe we are now seeing a Depression as deep and bad as anything that happened in the previous Great Depression of the 1920s-30s,”  he adds.

In the videoclip below published on YouTube on Aug 27, 2012 he provides a useful summary of where the GFC came from and why it won’t go away anytime soon using currently applied policies.

In the next two video clips Keen was interviwed for the RT’s US Capital Account programme about his call for a debt jubilee — the  private debt write-down or haircut of “irresponsible bank loans”. “If we don’t have a debt jubilee it will take at least two decades i.e. to around 2025 before we have cleared the debt out and ended the depression” he says citing Japan’s two lost decades which are attributed to cold feet about letting banks fail when that country’s debt crisis blew up. He is critical of the euphoric economy — summed up in the no-more-boom-and-bust ignorance punted by a brigade of dumb leftist politicians in Britain and elsewhere — and …. the neo classical Chicago School ‘lunatics’ who he says won Nobel Prizes and took over global economic theorising before driving the world to its current bust.

Turning to a solution for the sovereign debt debacle in the EU, he says the euro is almost identical to a Special Drawing Right. He suggests introducing parallel currencies across the eurozone letting the euro be used for international transactions and euromarks, eurodrachmas, eurofrancs, europesatas printed by Eurozone nations used for internal transactions. This would overcome the current inflexibility of one sized currency for all in an imbalanced EU and reduce the threat of  possible military takeovers in some of the more depressed peripheral states.

Dr. Steve Keen says Forgive the Debt! Calls for a Debt Jubilee! (Part 1):

He goes on in the second part to point out that the current situation is one where politics are dominated by interests of creditors and lenders in the aftermath of a crisis where these same lenders “acted irresponsibly”. This he says “is the main reason why they must now take massive haircuts and governments must stop keeping zombie banks alive — advice that Ben Bernanke, current chairman of the US Federal Reserve or central bank, was happy to give the Japanese  in 1989 … In a capitalist system the too-big-to-fail banks need to go into receivership, be restructured and then be taken-over by other entrepreneurs.”

Dr. Steve Keen says Forgive the Debt! Calls for a Debt Jubilee! (Part 2):

 The NBER study validates what Steve Keen has been saying for years: excess private sector debt is the main driver of deep recessions and depressions.  And yet Ben Bernanke and all other mainstream economists literally believe that the amount of private debt doesn’t matter and isn’t even important to quantify.

Meanwhile Michael Hudson, professor of Economics at University of Missouri, Kansas City a long time critic of how the EU is handling the crisis,  weighed in over the Christmas Season with this contribution on the Naked Capitalism website:

Michael Hudson: America’s Deceptive 2012 Fiscal Cliff, Part II – The Financial War Against the Economy at Large

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is “The Bubble and Beyond.”

“Today’s economic warfare is not the kind waged a century ago between labor and its industrial employers. Finance has moved to capture the economy at large, industry and mining, public infrastructure (via privatization) and now even the educational system. (At over $1 trillion, U.S. student loan debt came to exceed credit-card debt in 2012.) The weapon in this financial warfare is no larger military force. The tactic is to load economies (governments, companies and families) with debt, siphon off their income as debt service and then foreclose when debtors lack the means to pay. Indebting government gives creditors a lever to pry away land, public infrastructure and other property in the public domain. Indebting companies enables creditors to seize employee pension savings. And indebting labor means that it no longer is necessary to hire strikebreakers to attack union organizers and strikers … “. Read more here.

SIDEBAR: What is a Debt Jubilee?

  • Here is a research paper by Michael Hudson, PhD (downloadable as a pdf) tracing the history of debt jubilees which date back to Mesopotamian times: “THE once-glowing core body of law within the Judeo-Christian Bible has become all but ignored – indeed, rejected – by the colder temper of our times. This core provided for periodic restoration of economic order by rituals of social renewal based on freedom from debt-servitude and from the loss of one’s access to self-support on the land. So central to Israelite moral values was this tradition that it framed the composition of both the Old and New Testaments. Radical as the idea of cancelling debts and restoring the population’s means of subsistence seems to modern eyes, it had been a conservative tradition in Bronze Age Mesopotamia for some two millennia… “
  • This link offers an Interview on the subject of debt jubilee with Dr. David Graeber a respected anthropology lecturer at Goldsmiths University of London and author of a new book about the history of the last 5000 years of debt.
  • Could a Debt Jubilee Help Kickstart the American Economy? the US business publication Forbes asked recently?
  • The Modern Debt Jubilee  Tyler Durden's picture by Tyler Durden of the Zero Hedge website published on 08/19/2012  —  a reprint of a piece by Bill Buckler, author of The Privateer

Forget the pump-priming and PR in the media its 
a Gloomy Outlook for 2013 

James Howard Kunstler (Credit: his website)

Extracted from a look ahead in 2013 by American author, widely published journalist and former Rolling Stone reporter James Howard Kunstler. Read it all on his blog:

We’re now entering the seventh year of a smoke-and-mirrors, extend-and-pretend, can-kicking phase of history in which everything possible is being done to conceal the true condition of the economy, with the vain hope of somehow holding things together until a miracle rescue remedy — some new kind of cheap or even free energy — comes on the scene to save all our complex arrangements from implosion. The chief device to delay the reckoning has been accounting fraud in banking and government, essentially misreporting everything on all balance sheets and in statistical reports to give the appearance of well-being where there is actually grave illness…

“Macro-economic Issues
Major fissures began to show in the Ponzified global financial system in 2012 and it is hard to imagine them not yawning open dangerously in 2013. All the Eurozone countries are in trouble. Its collective economy has been tanking faster than the US economy because the member nations can’t print their own money and it is harder to conceal the financial tensions between debt accumulation and government expenditures. These tensions end up expressed as “austerity” — meaning fewer and fewer people get paid, which makes people angry and makes governments unstable. Bailout procedures are transparently laughable under the European Central Bank and the other bank-like “facilities,” giving money to governments so that they can give it to insolvent banks, so the banks can buy government bonds, which only stuff the banks with more bad paper, and take the national debts higher. Several Euro member countries are contenders for default this coming year: Greece, Spain, possibly Italy, and perhaps even France, which is now a basket-case dressed in Hollandaise sauce.

“A perfect storm in the global bond market has formed with Europe crippled, Canada and Australia entering their own (long-delayed and spectacular) housing bubble busts, the USA sharply losing credibility as it fails to politically address its balance sheet problems — or even continue to pretend that it might — and Japan utterly floundering under a new lack of commitment to nuclear power, the need to import virtually all the fossil fuels it needs for its industrial economy, a consequent negative balance of trade (for the first time in decades), and a deadly debt-to-GDP ratio around 240 percent. Many observers see the new Japanese government under Shinzo Abe as determined to inflate his own currency away to nothing in an effort to unload exports and erase debt, and nobody understands how that strategy turns out well. My own view, expressed here before, is that Japan is on a fast track to become the first advanced nation to opt out of industrialism and go medieval. It might sound like a joke, but its not. And it would be consistent with Japan’s historic cultural personality of making stark choices, even if it was not clearly articulated in the political theater. The journey to that destination could include a war with China, which also would be consistent with Japan’s suicidal inclinations, so clearly displayed in its last major war with the US.

“The global bond market is held together with baling wire and hose clamps. Since money is loaned into existence (in the words of Chris Martenson) the global financial system is underwritten by its bonds, and the bonds are underwritten only by the faith that issuers can pay the interest due to bondholders. Risk rises in an exact ratio as that faith wanes. And interest rates must rise hand-in-hand with that rising risk — unless the ruling authorities (central banks and governments) conspire to repress them. These “unnatural” interventions will only cause the trouble to be expressed elsewhere in collapsing currencies and economies. It is already happening under the various ZIRP regimes, setting up a feedback loop in which it becomes even less likely that bond-holders will be paid and more faith erodes until nobody wants any bonds and the market for them seizes up and all that paper becomes worthless.

“These days, the only sovereign nation in the Eurozone with real financial credibility (i.e. tangible surplus wealth) is Germany. The European Central Bank has only a printing press and the European Financial Stability Facility only pretends to have access to pretend money. At some point, the Germans will have to decide whether they truly want to pick up the tab for all the unpaid bills of the Eurozone. Either they pay for life support for their customers or they let them go under and either way, they end up in the black hole of a contracting export economy, which is to say depression. Now, imagine Germany having to bail out France. Wouldn’t that be a moment of plangent historical symmetry? I’m not the only one to propose that Germany may shock the world in 2013 by pulling out of the Euro on short notice and taking shelter behind the Deutschmark. It may limit the damage, but otherwise they are stuck where they are geographically and as the other nations in Europe ride their economies down, Germany’s will contract, too.

“One idea behind the Eurozone was to get its members so economically interdependent that war would be an unthinkable option. The period following the Napoleonic Wars (1815 – 1914) was exceptionally peaceful in Europe, too. Then, the 20th century rolled onstage with the unspeakable horror of two consecutive “world wars.” They occurred amid a phenomenal uptrend of increasing industrial wealth and burgeoning technology. Note that the defeat of the French army at Waterloo in 1815 was accomplished by a coalition of British and German (Prussian) forces. (The teams change through history.) Note also that the end of the long peace of the 19th century, the First World War, was a trauma the real cause of which continues to mystify the historians — did England, France, Germany care that much about Serbia to destroy their economies? The Second World War was an extension of the unresolved business of the first, especially the question of who owed what to whom for all the damage. One thing we do know: the world was not prepared for the consequences of industrial-strength warfare with high tech weapons: the massacres of the trenches, aerial bombing of cities full of civilians, and the assembly-line style crematorium.

“The atom bomb finally sobered folks up in 1945. The ensuing period has been another age of peace and plenty in Europe. The next act there will be played out against the backdrop of declining wealth and unraveling techno-industrial complexity. It may be a set of low-grade grinding struggles rather than an operatic debacle like the two world wars, and it will surely include internal civil strife in this-or-that country, which could turn outward and become contagious. The next time Europe finds itself a smoldering ruin, the capital will not be there to rebuild it. I’m not sure whether it matters all that much whether the single currency Euro survives or not. Everything economic is hitting the skids in Europe now led by plunging car sales. Record high youth unemployment is epidemic, including now in France. The debt problems there can only be solved by deleveraging and/or default. The chance of coordinated cooperative fiscal discipline among the Euro member nations is nil. I see Europe poised to follow Japan into a re-run of the medieval period, though much less willingly. The quandary is: how do you have a wonderful and peaceful modern culture without an economy to support it.

“The United Kingdom stands outside the Euro currency club (though it is in the European Union of trade agreements) but London remains the financial hub of the continent, if not the money-laundering center of the universe. The financial mischief there is allowed to go on because washing and rinsing money is the only major industry left in Old Blighty. Its own finances are in terrible disarray, the people have been subject to painful “austerity” for some time before the PIIGS started squealing, and its energy resources are dwindling away to nothing … With the LIBOR scandal entering the adjudication phase, monkey business in the London gold and silver bullion market, and half the world’s daily churn of interest rate derivatives, “the City” (London’s Wall Street) is one black swan away from provoking a world-scale financial accident that could daisy-chain through all the world’s big banks and create a “nuclear winter” of capital … It is nicely positioned to be the whipping boy for the rest of Europe as everybody’s fortunes turn down, but it has enough military hardware to strike back and cause a whole lot more trouble. Imagine England becoming the Bad Boy of Europe in the 21st century, having to be disciplined now by the Germans.”

French News Online wishes ALL readers a Happy (Global-Debt-Jubilee) New Year.
But just before we go here is some news hot off the presses: A US online petition is calling for the Federal Government to mint a Trillion-Dollar Platinum Coin which would be used to wipe out US debt  — desperate measures for desperate times?

Descent Into Lawlessness by Washington’s Blog

“The central banks’ central bank – the Bank for International Settlements- warned in 2008 that bailouts of the big banks would create sovereign debt crises … which could bankrupt nations. That is exactly what has happened. The big banks went bust, and so did the debtors. But the government chose to save the big banks instead of the little guy, thus allowing the banks to continue to try to wring every penny of debt out of debtors. Treasury Secretary Paulson shoved bailouts down (the US) Congress’ throat by threatening martial law if the bailouts weren’t passed. And the bailouts are now perpetual …

Foreign Policy magazine ran an article entitled “The Next Big Thing: Neomedievalism“, arguing that the power of nations is declining, and being replaced by corporations, wealthy individuals, the sovereign wealth funds of monarchs, and city-regions.

Indeed, this isn’t the “Great Recession”, it’s the Great Bank Robbery. The big banks have pillagedand looted the rest of the world. A lawless justice system is ruining the economy… ” Read the full blog here.
Story: Ken Pottinger


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