Busted: Bankers and The Global Economy

June 21, 2011

A Chronicle of the Euro Crisis

Filed under: banking, economy, government, money — Tags: , , , , , — digitaleconomy @ 5:43 am

euroWhen the euro crisis started in Greece in October 2009, nobody had any idea how quickly or broadly it would spread — or how difficult it would be to solve. Below, some key dates in this still-unfolding saga.

October 2009 Greece revised its 2009 budget deficit to 12.5 percent of GDP from 3.7 percent. The dramatic news sparked a raft of downgrades by credit-rating agencies. By November, Greece’s budget deficit had ballooned to 15.4 percent of GDP.

February 2010 Greece is forced to put its budget under EU monitoring. Dramatic austerity measures are implemented in a bid to clean up the country’s finances in the coming years.

March 2010 The first Greek austerity package is passed: Value-added tax is raised by 2 percentage points, and salaries for civil servants are frozen. The size of annual savings is estimated to be roughly €4.8 billion ($6.8 billion).

May 2010 Euro-zone finance ministers and the International Monetary Fund (IMF) agree on an aid package for Greece worth €110 billion over three years. Officials plan to monitor Greece’s efforts to trim costs every three months.

A second austerity package is passed by the Greek parliament. Emergency measures aim to save €30 billion by 2013. Value-added tax is once again lifted by two percentage points, bringing it to 23 percent. Spending on defense, health and pensions is slashed.

May 2010 In a bid to prop up other financially ailing member states, the EU finance ministers and the IMF agree on a provisional safety net worth €750 billion to be in effect until 2013.

November 2010 Ireland asks for EU assistance. Under the safety net, the EU finance ministers agree on a bailout package with the IMF worth more than €85 billion over three years.

January 2011 The Irish parliament agrees to a drastic austerity plan.

March 2011 The European Council gives the green light to a permanent stability mechanism (ESM). Designed to take effect as of mid-2013, the fund will be worth €700 billion.

April 2011 Portugal asks the EU for financial assistance.

May 2011 The EU and the IMF sign off a bailout package for Portugal worth €78 billion. In return, Portugal pledges to enforce a program of cost-cutting measures and economic reforms.

June 2011 Greece plans a further raft of austerity and privatization measures. Meanwhile, the euro-zone countries, the ECB and the IMF argue about the structure and amount of future financial aid.

June 15, 2011

US economist predicts economic storm in 2013

devalued dollarA “perfect storm” of fiscal woes in the United States, a slowdown in China, the debt crisis in Europe and stagnation in Japan has a decent chance of damaging the global economy by 2013, Roubini told reporters late last week. Even so, he is being quite conservative about it. A 33% chance doesn’t seem like news to me. All this by New York University professor Nouriel Roubini, who correctly predicted the global economic crisis in 2008.

According to Mr. Roubini, the world economy expansion may slow in the second half of this year as “the deleveraging process continues, fiscal stimulus is withdrawn and confidence ebbs.”  To me, this seems obvious. This process is really part of what is already happening. It’s not news. The job market stinks in the U.S. and other modern nations. Money isn’t being made abundantly in the real economy. It’s all on Wall Street and in the investment world, based on heavy borrowing and debt restructuring of nations based on fiat money. Washington has been unwilling to deal with a one-trillion-plus budget deficit and a distinct bond market revolt is in the wings. Investors are waking up to the danger to their investment as US bonds are in danger of becoming junk. This will create higher interest rates and possible hyperinflation, which will remove any possibility of a recovery, even resulting the destruction of the dollar for an international medium of exchange. The bankers aren’t truly bothered by this. Based on inside information, the bankers already have a plan in the wings that I have touched on previously. It’s all about marketing, presentation to them.

Already, we have riots in Greece, as they face the music regarding the bad debt that the nation and bankers have created. They claim that officials need to restructure the debt of Greece, Ireland and Portugal. Waiting too long will ultimately result in the disintegration of the euro zone stability, experts say. Roubini agrees. The ridiculous aspect to the entire scenario is that all banking debt in the current system that is created will never be paid back. Further, much of this debt has been cleverly folded into Wall Street investments with the idea of making money, either through long or short selling. But this does not solve the problem of any debt unless the nations involved have the ability to make money by having control. They don’t. Only the bankers make money on any debt. In the meantime, these nations are paying on interest, not on principal. It’s stupid. The spiral never ends. Roubini and most economists remain silent on this aspect of the system.

Many other analysts, like myself,  have repeatedly warned of a “possible” repeat of the 2008 global economic meltdown in the immediate future. Others, like Moscow financial expert Alexander Osin expresses hope that the international community will be able to find the way out. Russian economist Konstantin Sonin  warns against overdramatizing the situation since people like Roubini are full of it, false prophets, in essence. The solution?

“The world economy faced such a problem in the 1930s,” Osin says, adding that Adolf Hitler’s ascent to power and the beginning of World War Two helped to resolve the problem. “At present, it should be solved by peaceful means, which the global community is almost certain to find.” Certainly, the Russians and Arabs are doing quite well since they are sitting on oil profits. That will only last as long as the current monetary gaming system does. That is the problem behind the whole matter. An eternal debt-based banking system destroys the nations that depend on it unless they are sitting on huge cash cow. Rest assured, that is temporary. If they are doing business with the bankers, the banking system will drain that wealth too. That is the nature of the system in place, as well as the nature of the future system.

So, to solve the problem we need a global war and preferably another Hitler. In the meantime, resolving the monetary system crisis is all about “hope,” and now we are listening to Russians for economic advice. The global economy really is in trouble. There won’t be any gain without plenty of pain. Never mind the pain that so many are in now.

E. Manning

May 28, 2011

Goldman Sachs Continues to Take Down Nations

Filed under: banking, corporatism, economy, government, recession, video — Tags: , , , , , , , , , , — digitaleconomy @ 9:39 am

February 4, 2011

Bernanke: Catastrophic Implications for U.S. Economy

Filed under: banking, business, corporatism, economy, federal reserve, government, money, recession — Tags: , , , , , , , , , — digitaleconomy @ 6:09 am

 

USA facing debt crisis

Ben Bernanke of U.S. Federal Reserve has warned that the failure to promptly raise the national debt ceiling would catastrophic.  This catastrophe would clearly have a negative impact on paper assets denominated in dollars and other fiat currencies.

Bernanke was blunt about the threats by some congressional Republicans to use the upcoming debt-ceiling vote as sledgehammer to force harsh spending cuts:

“I would very much urge Congress not to focus on the debt limit as being the bargaining chip in this discussion, but rather to address directly the spending and tax issues that we have to deal with in order to make progress on this fiscal situation,”

“Beyond a certain point … the United States would be forced into a position of defaulting on its debt. And the implications of that on our financial system, our fiscal policy and our economy would be catastrophic.”

It’s important to realize that Bernanke did not use his typical conservative language regarding the necessity of addressing U.S. fiscal challenges. To the contrary, he painted a bleak picture of the possible consequences of failing to act:

“… if government debt and deficits were actually to grow at the pace envisioned, the economic and financial effects would be severe. Sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long-run effects on U.S. output, incomes, and standards of living. Moreover, diminishing investor confidence that deficits will be brought under control would ultimately lead to sharply rising interest rates on government debt and, potentially, to broader financial turmoil. In a vicious circle, high and rising interest rates would cause debt-service payments on the federal debt to grow even faster, causing further increases in the debt-to-GDP ratio and making fiscal adjustment all the more difficult.”

January 27, 2011

U.S. Mortgage Crisis Tensions Build

A commission was appointed to look into misconduct regarding the national mortgage and banking crisis, signed into being by President Obama on May 20, 2009. The 10-member panel is after any person that may have violated the laws of the United States in relation to the crisis. The scuttlebutt is that a number of financial industry figures and corporations have been found lacking and are being referred for prosecution. All of this portends to make quite a bit of news in the near future.

The media has been working hard at divining any sources of information. The New York Times claims to have obtained a copy of a 576-page report, concluding that the financial disaster was avoidable while laying blame on federal regulators for the failure to act on knowledge of shoddy mortgage lending and reckless risk taking. Keep in mind that at least some of these shoddy practices continue behind the scenes, building on a proliferating number of foreclosures in the United States.

The idea that politicians hope to project is that the financial crisis is being resolved. The truth is that the national financial crisis is just getting underway.

October 12, 2010

U.S. on the Way to the Third World?

Everyone is talking about unemployment, but nobody is talking about the long-term reality of the U.S. economy. Wall Street is playing investment games with agricultural commodities to make money, which is now impacting prices apart from traditional supply and demand. This translates to higher prices despite a poverty-stricken economy. Food processors and manufacturers are cutting products sizes and raising prices, which means that Americans continue to get the short shrift on all sides.

Then there are the jobs. This month the U-6 category from the Bureau of Labor Statistics (a measure of unemployment that includes those who have stopped looking for work)  jumped to 17.1%, yet another red flag.

Also, consider the U.S. trade deficit that sends billions of dollars overseas to foreign countries, never to return, evaporating into the global economy. The deficit means that the Fed will print more money to add to an already robust global dollar supply.

The nation has another banking crisis, where it has been revealed that fraudulent foreclosure documents were signed without evaluation. This could plunge both the the mortgage industry and the banking industry into another “too big to fail” bailout. Who are we kidding? Messy lawsuits could be the order of the day as buyers and investors seek redress for damages, either real or imaginary. All this financial pressure will undoubtedly influence exporting more jobs outside of America to cut corporate costs. That is why you are hearing all the media hype about Americans not being trained enough for sophisticated jobs that they no longer qualify for. They are preparing you for the ugly truth, even if the reasons are really fiction.

Many Americans struggle to pay for necessities now as those prices continue to rise. Food basics are once again on the rise. Food processors are likely to pass that on American consumers. To counter all the bad news, the Fed is considering creating inflation with the hope of boosting the economy. Printing more dollars to send overseas is hardly a solution. Printing dollars to keep those dollars here is the only viable solution, but hardly an option since most corporate shareholders only care about the bottom line as they send the bulk of their work to cheaper labor markets. Whether that bottom line rests on foreign factories or in American ones doesn’t matter to them.

This short-sided thinking is unsustainable at best, even as corporations seek government funding because they are unwilling to take risks in the U.S. marketplace. They seek that money only because the U.S. government is stupid enough to offer incentives to those that don’t really need the cash. It just pads the bottom line for larger corporations, as that money evaporates forever with little reward for Americans. Meanwhile, the media continues to boast that small business is responsible for a robust economy, even as the U.S. government penalizes small business. Enjoy the new American third world and the decline of the nation in favor of funding multinational corporations.

September 24, 2010

U.N. Says World is at the Brink of Food Crisis through Speculation

Environmental disasters and speculative investors are to blame for volatile food commodities markets, says UN’s special adviser

The United Nations warned that the world is likely on the brink of a major new food crisis caused by environmental disasters and rampant market speculators today at an emergency meeting on food price inflation.

The U.N.’s Food and Agriculture Organization (FAO meeting in Rome, Italy, on September 24 was called last month after a heatwave and wildfires in Russia led to a draconian wheat export ban while food riots broke out in Mozambique, killing 13 people. U.N. experts heard that pension and hedge funds, sovereign wealth funds and large banks who speculate on commodity markets are likely to be responsible for inflation in food prices being seen across all continents.

In a new paper released this week, Olivier De Schutter, the U.N.’s special rapporteur on food, says that the increases in price and the volatility of food commodities can only be explained by the emergence of a “speculative bubble” which he traces back to early this decade.

“[Beginning in] 2001, food commodities derivatives markets, and commodities indexes began to see an influx of non-traditional investors,” De Schutter writes. “The reason for this was because other markets dried up one by one: the dotcoms vanished at the end of 2001, the stock market soon after, and the U.S. housing market in August 2007. As each bubble burst, these large institutional investors moved into other markets, each traditionally considered more stable than the last. Strong similarities can be seen between the price behavior of food commodities and other refuge values, such as gold.”

He continues: “A significant contributory cause of the price spike [has been] speculation by institutional investors who did not have any expertise or interest in agricultural commodities, and who invested in commodities index funds or in order to hedge speculative bets.”

A near doubling of many staple food prices in 2007 and 2008 led to riots in more than 30 countries and an estimated 150 million extra people going hungry. While some commodity prices have since reduced, the majority are well over 50% higher than pre-2007 figures – and are now rising quickly upwards again.

“Once again we find ourselves in a situation where basic food commodities are undergoing supply shocks. World wheat futures and spot prices climbed steadily until the beginning of August 2010, when Russia – faced with massive wildfires that destroyed its wheat harvest – imposed an export ban on that commodity. In addition, other markets such as sugar and oilseeds are witnessing significant price increases,” said De Schutter, who spoke today at The U.K. Food Group’s conference in London.

Gregory Barrow, of the U.N. World Food Program said: “What we have seen over the past few weeks is a period of volatility driven partly by the announcement from Russia of an export ban on grain food until next year, and this has driven prices up. They have fallen back again, but this has had an impact.”

Sergei Sukhov, from Russia’s agriculture ministry, told the Associated Press during a break in the meeting in Rome that the market for grains “should be stable and predictable for all participants.” He said no efforts should be spared “to the effect that the production of food be sufficient.”

“The emergency U.N. meeting in Rome is a clear warning sign that we could be on the brink of another food price crisis unless swift action is taken. Already, nearly a billion people go to bed hungry every night – another food crisis would be catastrophic for millions of poor people,” said Alex Wijeratna, ActionAid’s hunger campaigner.

An ActionAid report released last week revealed that hunger could be costing poor nations $450 billion a year – more than 10 times the amount needed to halve hunger by 2015 and meet Millennium Development Goal One.

Food prices are rising around 15% a year in India and Nepal, and similarly in Latin America and China. U.S.  maize prices this week broke through the $5-a-bushel level for the first time since September 2008, fueled by reports from U.S. farmers of disappointing yields in the early stages of their harvests. The surge in the corn price also pushed up European wheat prices to a two-year high of €238 a ton.

Elsewhere, the threat of civil unrest led Egypt this week to announce measures to increase food self-sufficiency to 70%. Partly as a result of food price rises, many middle eastern and other water-scarce countries have begun to invest heavily in farmland in Africa and elsewhere to guarantee supplies.

Although the FAO has rejected the notion of a food crisis on the scale of 2007-2008, it this week warned of greater volatility in food commodities markets in the years ahead.

At the meeting in London today, De Schutter said the only long term way to resolve the crisis would be to shift to “agro-ecological” ways of growing food. This farming, which does not depend on fossil fuels, pesticides or heavy machinery has been shown to protect soils and use less water.

“A growing number of experts are calling for a major shift in food security policies, and support the development of agroecology approaches, which have shown very promising results where implemented,” he said.

Green Party Parliament Member Caroline Lucas called for tighter regulation of the food trade. “Food has become a commodity to be traded. The only thing that matters under the current system is profit. Trading in food must not be treated as simply another form of business as usual: for many people it is a matter of life and death. We must insist on the complete removal of agriculture from the remit of the World Trade Organization,” she said.

You can read this article by Guardian environmental editor John Vidal, with reporting by various news agencies, in context here: http://www.guardian.co.uk/environment/2010/sep/24/food-crisis-un-emergency-meeting-rome

Older Posts »

Create a free website or blog at WordPress.com.