Rotten system

[Thinking Man's Idiot]

Rotten system

(Monday 29 September 2008)

JOHN WIGHT charts the rise and fall of an economic system based on superexploitation and military might.


ECONOMISTS and commentators have been clogging our TV screens and newspapers to share their analysis of the global economic crisis.

The words "credit crunch," "subprime lending," "inflation," "deflation" and "currency devaluation" have fallen from their mouths like snowflakes on a winter's day as they attempt to explain the current fiasco, which is predicted to get significantly worse before it gets better.

It is all put down to bad lending, poor investments, overinflated financial markets, the insidious practices of international speculators and the fear gripping investors, leading to a sharp drop in share prices and taking us to the brink of global recession.

Not one mainstream commentator has attributed the cause of the present economic downturn to the economic system itself.

No-one drew the logical conclusion that an economic system predicated on the relentless pursuit of profit is doomed to lapse into crisis when its inbuilt requirement for constant growth outstrips markets, leading to desperate activity by lenders to maintain market share, profits and shareholder dividends.

It is a mechanism of madness which, when manufacturing constituted the base of Western economies, led to the overproduction, inflation and mass unemployment of the 20th century.

These periodic crises were marked by regional and global conflicts when rival powers fought over access to colonies and, with them, new sources of raw materials and new markets in which to offload surplus commodities, including capital, once their domestic markets had been satiated.

Beginning with Margaret Thatcher, successive British governments have embraced the US economic model, which is defined by a commitment to spread the free market to every corner of the globe and the use of military power to smash open the door wherever this economic penetration is resisted.

With the removal of Britain's manufacturing base to the developing world, the country became ever more and dangerously reliant on the economic activity of the City of London and the money generated in new and more sophisticated packaging of securities and bonds.

In many cases, these merely repackaged and sold on existing debts, which propped up a virtual economy of inflated property prices, consumer credit and a service sector to satisfy the demands of consumers.

It was a train crash waiting to happen.

Banks and financial institutions began lending money that they couldn't guarantee, relying on the liquidity provided by the large lending banks to see them through.

Northern Rock was a case in point. Traditionally, building societies and banks would only lend what they held in deposits. Northern Rock, which was desperate to compete on the international stage and break into the top tier of mortgage lenders, decided to adopt an aggressive policy of borrowing to lend, which enabled it to grow exponentially year on year regardless of the deposits held in its accounts.

An investigation last year revealed that £53bn of Northern Rock mortgages, amounting to 70 per cent of the bank's entire mortgage portfolio, was not even owned by the bank but by a separate offshore company. This frightening statistic calls into question the government's assurances that taxpayers' money is safe. It also reveals the precarious nature of an economy largely reliant on a property market underpinned by the ability to borrow and lend.

But what sets this global crisis apart is that it is unfolding at a time when energy prices are at the highest they've been in real terms since the end of the second world war, caused by increased demand on existing reserves by the emerging economies of China, India and Brazil.

It is this pressure on the world's oil reserves that lay at the root of the invasions and ongoing occupations of Iraq and Afghanistan.

The US is determined to assert control over the huge, untapped reserves located in Iraq with the objective of breaking the stranglehold exerted by OPEC over oil production and prices.

This objective also requires secure pipelines in order to pump this oil to friendly ports.

This is the real reason for the invasion of Afghanistan. It also goes some way to explaining the break-up of Yugoslavia and its absorption into the US sphere of interest, along with US attempts to absorb former Baltic states such as Georgia into the same sphere.

Both occupy strategic locations in proximity to the oil and gas reserves of the Caspian Sea, with the recent conflict between Russia and Georgia ultimately a result of US pressure to secure its economic interests in the region.

The global economic distortion created by the unfettered greed of the US economy, a nation which constitutes just 5 per cent of the world's population but which uses up 25 per cent of the world's available resources each year, has led to an increasingly polarised world.

If it is allowed to continue, this distortion will inevitably lead to conflict, as the emerging economies of China, India and Russia pose an increasing threat to US economic hegemony and the need to maintain the exorbitant consumer lifestyles of a US population grown fat on excess.

This is why the present economic crisis runs deeper and contains within it graver implications than so far described by mainstream commentators.

It is worth recalling the prescient words of Rosa Luxemburg in 1915, written while she languished in prison for her opposition to the first world war. "The choice facing the world is one of socialism or barbarism."

Luxemburg continued: "We stand today ... before the awful proposition - either the triumph of imperialism and the destruction of all culture and, as in ancient Rome, depopulation, desolation, degeneration, a vast cemetery, or the victory of socialism."

Bailing out failed banks and financial institutions is clearly not the solution to the current economic crisis. Replacing capitalism is.

I believe your title is correct....the only part that isn't is the thinking part.Replace capitalism with what? The financial crisis in America had nothing to do with the "Free Market". It was the intervention of the government which prevented the free market from weeding out financial institutions that made poor decisions (think CRI and ACORN)!

[Thinking Man's Idiot]

Originally Posted by Unregistered

I believe your title is correct....the only part that isn't is the thinking part.Replace capitalism with what? The financial crisis in America had nothing to do with the "Free Market". It was the intervention of the government which prevented the free market from weeding out financial institutions that made poor decisions (think CRI and ACORN)!

Sorry for being so idiotic. I truly thought it was the capitalist theft, exploitation, greed and war that caused our suffering. What do you replace the Dictatorship of Capital with? The Dictatorship of the People. Wall Street with Main Street I've heard it put your way. Bring capital itself into the sphere of democracy, and not a few hundred pigs. Co-operation, not competition.

[Thinking Man's Idiot]

Workers shoulder yet more bad debt

(Monday 29 September 2008)

by PAUL HASTE

UNION leaders demanded that the government act to avert a depression on Monday after the failing Bradford & Bingley bank was nationalised, offloading yet more wealthy bankers' bad debts onto the backs of Britain's workers.


Prime Minister Gordon Brown ordered the takeover of the mortgage lender as banks from Iceland to Belgium teetered on the edge of collapse, causing shares to slump by 4 per cent for the third time in as many weeks.

At the recent Labour conference, Mr Brown boasted that his government "is and always will be pro-enterprise and pro-business."

And he proved it on Monday by allowing Spanish financial giant Santander to grab Bradford & Bingley's still profitable savings deposit division.

The bank's £41 billion in home loan debt, however, will be added to the £87 billion cost of the bail-out of Northern Rock earlier this year and the £285 billion loaned by the Bank of England to other banks, taking the total debt shouldered by the taxpayer to almost £1 trillion.

The jobs of 3,000 finance workers are now at risk in a former industrial heartland already reeling from the near collapse of HBOS earlier this month.

Just last week, even before the latest crisis, Bradford & Bingley's bosses announced 350 job cuts and said that more redundancies were expected to follow.

Bradford & Bingley workers' union UBAC leader David Matthews said: "People here are in a daze. We are not talking about fat cats but ordinary working people earning far less than the average wage."

"There should have been stronger regulation in the City to stop this from happening in the first place. Let's be clear - the people who are paying for this crisis and who will continue to pay for it are the workers," said Mr Matthews.

Unite union joint general secretary Derek Simpson demanded that the government make the rich pay for the mess.

"The financial crisis shows that the era of Thatcher and Blair is over," he said.

"Workers need a progressive tax system to ensure that the greatest burden of paying for it falls on the widest shoulders."

And left Labour MP John McDonnell commented: "The government is reeling from collapse after collapse.

"When it should be leading, it is just following catastrophe, but decisive action is needed to avert an even deeper crisis.

"At the moment, the government is just nationalising bad debt and allowing private financiers to cream off the most profitable parts of failing banks and keep them for themselves."

He called for the nationalisation of all mortgage lending and demanded that the government "cut interest rates as rapidly and deeply as possible to avoid a depression before it's too late."

[Thinking Man's Idiot]

Tories profit from credit crunch misery

(Monday 29 September 2008)

by PAUL HASTE




FINANCE workers' leader Derek Simpson tore into the "spivs" funding the Tories on Monday after revelations that City gamblers had handed the party their hedge-fund "winnings."


Stock-market speculator Michael Hintze, whose CQS hedge fund profited from the collapse of Bradford & Bingley shares last week, was exposed stuffing £662,500 into Conservative Party bank accounts.

And Paul Ruddock and David Craigen, whose Landsowne investment firm recently raked in millions from "short-selling" shares in the failing HBOS bank, gave the Tories a £260,000 cut.

The Unite union's joint general secretary Mr Simpson said that the revelations proved that David Cameron's party was more than ever on the side of the rich.

"This exposes the Tories for what they really are. They are funding their party and maybe even their election campaign on the misery of thousands of British families who could lose their homes and jobs because of the spivs and speculators," he stormed.

"Thousands of staff at banks like HBOS and Bradford & Bingley fear for their jobs, but the Tories seem more interested in taking money from the culprits of the credit crunch than helping the victims."

A spokeswoman for Mr Cameron said that the Tories were "very careful who we accept donations from."

She claimed that the party had done nothing "illegal" in taking a cut of the speculators' profits.

"As in every profession, there are people who are good at what they do and others who are less good," she said.

Mr Cameron added that he would not respond to the financial crisis by "bashing bankers."

Lib Dem Treasury spokesman Lord Oakeshott stormed: "The same hedge-fund wolf pack who brought HBOS to its knees are bankrolling the Tory party.

"No wonder David Cameron doesn't condemn short-selling or hedge fund managers' disgraceful behaviour."

Finance workers organised in Unite are to protest at noon on Wednesday outside the Tory conference at Birmingham's ICC.

Mr Simpson said that there had been a "deafening silence" from the Tories over how to combat the crisis "when almost everybody else in the country are calling for City excesses to be reigned in.

"Now the country knows why - they are the same old Tories who cannot be allowed to win the next election."

[Thinking Man's Idiot]

Moral high ground

(Monday 29 September 2008)






DAVID Cameron can always be relied upon to defend the poor against the rich and the weak against the strong, or so the Tory leader's spin machine would have us all believe.


So it was good to hear him on TV at the weekend standing up bravely for an embattled group of defenceless speculators.

"What you won't hear from me this week is the sort of easy cheap lines beating up on the market system, bashing financiers," he told Andrew Marr.
"It might get you some easy headlines, but it is not going to pay a single mortgage, it is not going to save a single job."

Well, what a surprise! The Tory leader, whose party is once again the main recipient of ill-gotten gains from City excesses, is not prepared to bite the hand that feeds him.

So far so unsensational. There has always been general appreciation that the City would have preferred to fund its traditional political ally rather than the new Labour boys on the block who proved just as adept at doing the financiers' dirty work for them and who were happy to sell peerages, knighthoods and positions of influence.

But what were the boardroom mafia supposed to do? For a long time after 1997, too many people remembered the stench of corruption that imbued the Tory corpse.

And their party's predilection for electing a succession of far-right numpties as leader ensured that Labour, notwithstanding increasing working-class discontent, continued to win elections.

But, now that the Blair-Brown new Labour curse has alienated huge swathes of Labour's core vote and the Tories have taken a page out of the Mandelson manual of passing off a grinning, smarmy nonentity as a serious and compassionate leader, all previous bets are off.

The spivs, speculators and short-sellers of shares have decided to come home now that the Augean stables have reputedly been swept clean.
And the Tory leader's pockets are wedged open to welcome a flood of City money designed to carry victory at the next general election.

And his fellow multimillionaire old Etonian and shadow cabinet colleague George Osborne has even tried to take the moral high ground by insisting that Tory donations are cleaner than Labour's.

"No Tory Party donor buys influence with the Conservative Party in the same way trade unions do with the Labour Party," he claimed.

That must be news to trade unionists, most of whom would probably comment: "We wish," since, if the unions have exerted any influence on Gordon Brown's government, it has passed unnoticed.

Indeed, most trade unionists would rather that their unions had told new Labour that the price of continued donations was a change of political direction, especially on privatisation, imperialist wars, workers' rights, a decent state pension, fair public-service pay and defence of manufacturing.

Recent events also make the case for an end to "Labour means business" sloganeering and minimum regulation of financial markets and workplace conditions.

Trade union donations to Labour are transparent and democratically accountable, unlike boardroom decisions to use wealth created by workers' surplus labour to finance a political programme designed to do them down in the interests of the rich and powerful.

[Thinking Man's Idiot]

'Millions' of UK young in poverty





Map of child poverty hotspots

Millions of children in the UK are living in, or on the brink of, poverty, a report claims.

The Campaign to End Child Poverty says 5.5 million children are in families that are classed as "struggling" - 98% of children in some areas.


The campaign classes households as being in poverty if they are living on under £10 per person per day.

Continue reading here...

[Thinking Man's Idiot]

Short-sellers bankroll Conservatives

Hedge-fund bosses accused of profiting from the financial crisis have given the Tories a small fortune

Marie Woolf and David Leppard

DAVID CAMERON faces a new row over Tory funding after it emerged that the Conservatives have taken large donations from hedge-fund managers whose firms placed bets short-selling shares in some of Britain’s crisis-hit banks.



Continue reading here....