Category Archives: Finance and Economics

Is Capitalism about to crash?

Richard Wolff provides an insightful analysis and historical perspective on the present state of capitalism and democracy. Clearly, Franklin Roosevelt saved capitalism in the 1930s by yielding a bit to the masses’ demand for a share of the economic benefits. Will there be a repeat of that in the coming decade under the next President?

That is doubtful. Conditions today are much different than they were in the 1930s. Big government is no longer in vogue since governments have ceded most of their power to transnational corporations. People now are much more aware of the need for structural change in politics, economics and finance. The vogue today is decentralization of power and restoration of the commons.

I don’t know if Marx has any answers because I’ve never studied Marxist economics.

I am convinced of one thing however that no one else seems to recognize, that is the fundamental flaw in the global interest-based, debt-money, central banking regime. It is the “debt-growth imperative” that derives from the way banks create money by making loans that require the payment of interest. One need only look at the empirical evidence of global debt growth over time to see that it conforms to the exponential growth function of compound interest. Even the richest countries have exploding levels of sovereign debt because there are limits to how much debt the private sector can bear, so governments become the “borrower of last resort” to keep the money supply from collapsing. That’s the reason for bank bailouts and “quantitative easing.”

The fundamental need is for a deep restructuring of money, banking, and finance to decentralize control of credit and eliminate the “debt-growth imperative.” Such an idea may seem radical in the extreme and will not be welcomed by the powers that be, but alternative approaches are already in the works and will be ready to save the day when the capitalist train crashes off the rails.

Greece and the Global Debt Crisis

Greece and the Global Debt Crisis
Thomas H. Greco, Jr.

ABSTRACT

The Greek debt crisis is emblematic of a more general, decades-long pattern of economic exploitation and reactionary politics that threatens not only the European Union but the stability of the global financial infrastructure and Western democratic civilization. The situation calls for a different form of globalization, not one that is dominated by transnational banks and corporations, but one that is built upon local self-determination and self-reliance, and based on local and domestic control of money, credit, and finance. Greece (and other debtor countries) can recover a measure of sovereignty and rebuild its economy by combining “debt triage” with public and private actions for creating domestic liquidity.

            In the summer of 1977, I first ventured abroad from North America on a journey to explore ancient civilizations, cultures, and religions, and to experience contemporary life in Egypt, Israel, and Greece. During my six-week odyssey, I was able to visit the Pyramids, amble over the Holy Land, and visit the temple ruins of Athens and Delphi.

At one point while in Cairo I came upon a scene that greatly troubled me. There was a small burro hitched to an enormous cart that was laden to the hilt with onions. I felt nauseous as I watched the poor animal lying on its side being flogged by a man in a vain effort to rouse it to the task of moving what seemed to be an impossible load. As a stranger in a strange land, I felt helpless to intervene and quickly moved away. I often wonder what might have been the ultimate outcome, but in my imagination I see the man with the whip standing over the lifeless body of that animal lying in the street, and weeping in worry and frustration.

Now, when I contemplate Greece’s current predicament, that image comes to mind. I see Greece as that beaten and dying animal, overburdened with debt that is beyond its capacity to service, and being flogged by its creditors in a vain attempt to get it to pay up. In my mind’s eye I see a future in which the dead carcass of Greece is being carved up and distributed amongst the creditor institutions. In actuality, Greece will survive, but under new (foreign) management, as she is forced to sell off her assets at fire-sale prices.

In the eyes of the Germans and other creditors, represented by the so-called “troika” institutions (the European Commission, the European Central Bank, and the International Monetary Fund), the Greek people are lazy freeloaders who have been living “high on the hog” at their expense, and who now balk at repaying what they borrowed.

But there is another side to the story that paints a different picture, and even if there is a bit of truth in that characterization, what is there to be gained by creditors insisting upon their “pound of flesh”? As civilization has advanced, debtor prisons have been eliminated and bankruptcy laws have been instituted to protect people and companies from creditors who insist upon collecting more than debtors, for whatever reason, are able to pay. Why can’t nations be afforded the same considerations?

First of all, it was not the Greek people who did the borrowing, it was a series of Greek governments that were either corrupted, coerced, or seduced into taking on a series of debts that were increasingly burdensome. Greece was lured into the debt trap from which it seems impossible to escape. Ellen Brown has summarized in her article, The Greek Coup: Liquidity as a Weapon of Coercion, some of the many moves that were made to ensnare the Greek government, and by extension, the Greek people.  … more.

To read my prescriptions and the full article, click here. The article is excerpted from the book, Rebuilding after Collapse: Political Structures for Creative Response to the Ecological Crisis, edited by John Culp. –t.h.g.

I was right about “quantitative tightening”

I was right about “quantitative tightening”
by Thomas H. Greco, Jr.

Just about two years ago, someone sent me a link to an article titled, Why America’s Federal Reserve might make money disappear, that appeared in The Economist on April 17, 2017. The gist of the article was the predicted move by the Fed to unwind quantitative easing, that is, to sell off some of the securities that it bought in the wake of the 2008 financial crisis. The expansion of Fed holdings from the $850 billion it held just prior to the crisis, to the $4.5 trillion it held at the time the Economist article was written, was a desperate move that was taken to keep a flawed financial system from crashing down.

After I read that article, this is what I wrote to my correspondent on April 25, 2017:

Dear…,
Thanks for alerting me to that article in the Economist. Interesting.
The sub-head reads, “The Fed has signalled that it will soon reduce the size of its balance-sheet,” yet the article says nothing about how it signalled that move. It seems to be the author’s own speculation based on the Fed’s recent small interest rate increase. To wit, “Today, however, the Fed, now led by Janet Yellen (pictured), is raising short-term rates, as it tries to keep a lid on inflation. So—the logic goes—it should also shrink its balance-sheet, to push up long-term rates.”

You need to ask, why did the Fed load up on government bonds to begin with?

I am reminded of a story about a man who wanted to invest in the stock market. He opened an account with a broker who immediately steered him into some penny stock.

The dialog went something like this:
Broker: Welcome aboard. I can get you in on the ground floor of this new company. Their stock is really hot right now and it’s only four dollars a share.
Customer: Fine, buy me 1000 shares.

The next day the broker calls and says,
Broker: Hey, that stock is now up to eight dollars a share.
Customer: Wow, that’s great, buy me 2000 more shares.

A couple days later, the broker calls again and says,
Broker: Amazing, that stock is now up to 12 dollars a share.
Customer: Fantastic, sell all my shares.
Broker: To whom??

In other words, the Fed is locked in to their position, it’s a one way street and there’s no going back.

The answer is that there was not nearly enough available capital in private hands to fund the government budget deficits, at least not at interest rates that would not make the deficits even more gigantic than they have been.

As I’ve written in my books, there is a collusive arrangement between bankers and politicians that goes back more than 300 years. Governments get to spend more than their revenues, while banks get to lend money into circulation by making interest bearing loans. Yes, open market operations by the central banks do distort financial markets as QE critics claim, but that is the fundamental role of central banks, to manipulate financial markets. It’s the biggest scam in history. The central bank is the lender of last resort, and the government is the borrower of last resort to keep the money supply pumped up as bankers suck interest earnings into their capital account.

The Fed will be lucky to get away with small interest rate increases, but unloading their holdings of government bonds will not happen.

The entire article seems disingenuous, suggesting the possibility of actions that cannot be taken without severely unbalancing government budgets and contracting the money supply which will send the economy back into recession.

Real inflation rates are much greater than government figures indicate.  See the Chapwood index, http://www.chapwoodindex.com/, and Shadow Stats, http://www.shadowstats.com/alternate_data/inflation-charts.

Also, follow Chris Martenson, https://www.peakprosperity.com/.
This interview is particularly pertinent, Oil, Gold, & The Collapse of Central Banking ~ Interview with Chris Martenson.

Regards,
Thomas

Now, on March 20, 2019, this Bloomberg article, Powell Signals Prolonged Fed Pause as Inflation Lags, Risks Loom, acknowledged that the Fed has thrown in the towel on tightening, saying, “Federal Reserve Chairman Jerome Powell said interest rates could be on hold for “some time” as global risks weigh on the economic outlook and inflation remains muted. … Officials also decided to slow the drawdown of the U.S. central bank’s bond holdings starting in May, then end them in September. Together, the moves complete the Fed’s 2019 pivot away from policy tightening and toward a markedly cautious stance.”

Surprise, surprise!

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How to enable business where money is scarce

How to enable business where money is scarce

What poor people lack, more than intelligence, knowledge or skills, is money, i.e., a way to pay and be paid. Social entrepreneur Will Ruddick tells the story of how community currencies in Africa are enabling the poor to produce, sell, and buy.


Why Central Banks?

I have long argued that the interest-based, debt-money, central banking regime is both dysfunctional and destructive, and advocated for the decentralization of control over credit and the creation of exchange alternatives that use privately issued currencies and direct clearing of accounts among buyers and sellers.

There is a considerable body of literature that makes the case for free money and free banking, most of which has been ignored. These ideas have been overwhelmed by the economic and financial orthodoxy which stands in support of the political status quo which centralizes power and concentrates wealth.

For governments, central banks serve as “lenders of last resort,” enabling deficit spending through their purchase of government bonds and manipulation of interest rates, while for the banking cartel, government serves as “borrower of last resort,” sustaining their privilege of lending money into circulation and charging interest on it. Whenever this unsustainable system threatens to implode (as it did in the crisis of 2008), the government steps in to take bad (private) debts off the bankers’ hands and place them on the shoulders of the citizens (“bail-outs”). When the next bubble reaches its climax, we will likely see another round of “quantitative easing,” but when that proves to be inadequate, we will likely see some combination of inflation and outright asset confiscation known as “bail-ins” (partial seizure of bank balances).

In his recent review, Leonidas Zelmanovitz, highlights the main points in Vera Smith’s book, The Rationale of Central Banking and the Free Banking Alternative, which was published in 1936. Paraphrasing Smith, Zelmanovitz concludes that [Keynsian policies are] “not necessary to solve the problems they are purported to solve; most likely, they are part of the cause of the problem. Furthermore, there is an alternative, and that alternative is free banking,.” and, ” You can have good money without central banking and central banking does not guarantee good money.” You can read the entire review on the EconLib website.

Another classic source on free banking is Henry Meulen‘s, Free Banking (London: Macmillan, 1934). Free download available here. I will provide some excerpts from that source in a future post.


Free speech on the ropes

big-brother quotes

If liberty means anything at all, it means the right to tell people what they do not want to hear.     —George  Orwell

What the Arab world needs most is free expression.    —Jamal  Khashoggi

In his famous dystopian novel, 1984, George Orwell describes a world in which people’s actions and words are closely monitored in order to detect and punish thoughtcrime.  It is a world in which the ruling power structure has the means to preempt the expression of any idea or story that might challenge the official narrative of events and reality. Though a little late by Orwell’s reckoning, that world has all but arrived.

The development of the internet and the worldwide web brought, for a time, tremendous power to ordinary people to communicate and inform one another directly, bypassing the established news filters and centralized control of information. But in recent years, new corporate megaliths have emerged that have the power to shift control back in favor of “Big Brother.” We have become so dependent upon private corporate media platforms, like Facebook, Twitter, Google and YouTube, that they are able to manipulate our thoughts and behavior. To be banned from those channels means to effectively be banished from participation in political discourse. Corporate power on such a scale inevitably ends up being complicit with political oligarchies in controlling  public perceptions and defining “reality.” The hyped-up battle against “fake news” is really a battle against free speech.

Facebook teams up with the “Thought Police” to purge dissenting voices

Facebook’s purging of hundreds of pages and accounts in recent days has been widely reported. The purges have been done based on allegations of “spam,” and “inauthentic behavior,” or of providing  “Russian propaganda.” But there’s much more to it than that.

An article in the online journal, Global Research, describes the arrangement that Facebook made five months ago with the Atlantic Council to,  “prevent [their] service from being abused during elections.” And who is the Atlantic Council? According to the article, the Atlantic Council “is a think tank that is essentially funded by NATO, weapons manufacturers, Middle-Eastern oil-state monarchies, billionaires and different branches of the US military. In short, it has been described as being nothing less than NATO’s unofficial propaganda wing. The Atlantic Council doesn’t shy away from its political intents across the world, which can be seen solely by looking at who sits on its directors board – the crème de la crème when it comes to US neocons & war criminals: Henry Kissinger, Condoleezza Rice, Frank Carlucci, James A. Baker, R. George P. Shultz, James Woolsey, Leon Panetta, Colin Powell, Robert Gates, and many more.”

The article goes on to say that, “Many of the pages and accounts taken down have been political (often leftist), anti-war, independent journalists and media outlets that are known to go against the grain of mainstream media outlets.” You can read the complete article here.

So, what can we do? Let’s all dump Facebook, as well as Twitter, YouTube and all the other  massive, proprietary, data mining and propaganda platforms. I know that is not so easy to do, but alternatives do exist, and more of them are emerging every day. Here is a list of 6 Alternatives to Facebook. This article provides a list of 11 Facebook alternatives, and Fox News, surprisingly, provides a list of, Secure alternatives to Facebook, Instagram and Twitter. My search engine, DuckDuckGo, turns up several more.

One Facebook alternative that has gotten significant funding support of late is MeWe. A recent article reports that MeWe has thus far managed to raise $10 million to support its development. The article quotes MeWe founder and CEO, Mark Weinstein: “It is clear that the world wants a better social network that treats its member as customers to serve, not data to sell. We’ve built a social networking experience that has a remarkable suite of features people love and none of the BS. MeWe has no ads, no spyware, no content manipulation, no facial recognition, and no Russians (or anyone) paying to show you fake news.”

Well, that sounds promising, but time will tell how real it is.
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Jamal Khashoggi’s murder and the U.S./Saudi connection

The sensational case of the murder and dismemberment of Washington Post journalist, Jamal Khashoggi, inside the Saudi Consulate in Istanbul, underlines just how desperate the power elite is to control the narrative and manipulate our perceptions and beliefs. It would be a mistake to view this horrendous atrocity in isolation from the wider geopolitical propaganda campaign, much of it emanating from the U.S. government and their NATO and middle-eastern allies.

Two weeks after Khashoggi’s disappearance, The Washington Post published his last editorial, in which Khashoggi wrote:

“Arab governments have been given free rein to continue silencing the media at an increasing rate. There was a time when journalists believed the Internet would liberate information from the censorship and control associated with print media. But these governments, whose very existence relies on the control of information, have aggressively blocked the Internet. They have also arrested local reporters and pressured advertisers to harm the revenue of specific publications.”

The reaction of Donald Trump to this affair has been what we would expect. While paying lip service to justice and accountability, he immediately tried to provide cover for the Saudi regime by suggesting that the murder may have been the work of “rogue killers.” He also made it clear that he would not halt weapon sales to the Saudi government, a clear signal that money trumps “American values,” and belies the myth of the United States as champion of democracy and human rights.

But the cozy relationship between Saudi Arabia and the United States goes back way before Trump. Recall that, according to the official report on the 9/11 terror attacks on the World Trade Center and the Pentagon, 15 of the 19 terrorists were from Saudi Arabia. Why then did the United States attack Iraq and Afghanistan instead? It is also established fact that the Bush family and the bin Laden family were longtime business associates. Furthermore, according to this article by Cindy Rodríguez in the Denver Post, “While all flights were halted following the terrorist attacks, there was one exception made: The White House authorized planes to pick up 140 Saudi nationals, including 24 members of the bin Laden family, living in various cities in the U.S. to bring them back to Saudi Arabia, where they would be safe. They were never interrogated.”

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Who is interfering with whom?

Virginia State Senator Richard Black addressed the June 30, 2018 Schiller Institute conference via video. In his presentation titled, The True Interest of the United States, Senator Black, a combat veteran, argued that “U.S. foreign policy in Iraq, Libya, Syria and elsewhere in South-West Asia, …has spawned huge armies of terrorists,” and in no way benefits the interests of the American people.

And a vintage article by William Blum, recently republished by Global Research, highlights the hypocrisy of U.S. government officials and the media in blasting Russia for their alleged interference in the U.S. political process, while the U.S. government has a long and sordid history of extreme interference in other countries. I count 55 instances in William Blum’s list of “the United States overthrowing, or attempting to overthrow, a foreign government since the Second World War.” See it here:  Overthrowing Other People’s Governments: The Master List of U.S. “Regime Changes.” –t.h.g.

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