Tag Archives: Wall Street

Austerity ideologies, possible alternative scenarios, the Iceland model and the next financial crisis

Austerity is an ideological policy that many governments decided on when they got together when it was realised that the entire global financial system was at risk of collapsing in 2008. It is one reaction to the scenario that was hastily put together to stop the imminent collapse, originally from an emergency meeting in US with the President and Federal Reserve and with constant communications between investment banks.  This policy was then copied in Europe, with just one exception, Iceland. it is also the one that was calculated to cause the least damage to the very rich and powerful, to corporations, chief executives of large companies, governments senior executives and high pay hierarchical bureaucratic structures of civil servants, health administrators and even down to maintaining a high pay entertainment industry, with advertising and sports that pay some of the highest rates of pay, and of course banks and bankers, high pay with phenomenal bonuses. The people who made the decision were closely tied to this group of people, so they were interest parties.

 

The alternatives were not good, as that would have been an immediate collapse of the banking system, which would have been uncontrollable and wiped out banks along with corporations with heavy investments, the global economy would have ground to a halt, but would have still existed.  The fallout would have hit those with the most invested in the financial sector the worst. However like Iceland, the fundamental bases of economies, especially ones with larger public services not totally reliant on the financial sector could still have carried on with the support of governments enabling the general system to carry on, bearing in mind that the financial system of banks would have collapsed, so everyone would have been affected. But the hit would have been top down instead of bottom up, as is the way of the austerity policies. The nearest in effect would have been the way Iceland dealt with the crisis, but on a much bigger scale. There would have been a re-basing of wages for different jobs and careers, with lower paid jobs being largely unaffected, some may even have taken over current higher paying ones, due to necessity of social care jobs compared with the redundancy of bankers and lowering of pay attached to bank sponsorships, so very much the advertising industry

 

But many higher paying jobs would have taken big hits, at least in the short term until an alternative banking system had been re-established and a new leaner advertising and sponsorship industry had been rebuilt.

 

For instance the entertainment industry, movies, television, big theatre shows and concerts would not have been able to continue to pay mega salaries to many film and sports stars, advertising would have decimated, big sports sponsorships, especially baseball,  baseball, tennis, golf, cricket, motor racing and any big tournaments that rely heavily on advertising and bank sponsorships. This is because many, even most banks would have collapsed.

 

However with fairer policies people could have kept their homes and there could have been support for at least up to a certain level of savings, but would have been enough to support all poor to middle incomes, again like Iceland. Some banks would have survived and they could have expanded along with a vastly nationalised system of retail banking, but with investment banking largely collapsed under the mark to market real value, i.e. bankrupt.  Mortgages could have been underwritten by governments via nationalised mortgages and government borrowing, as happened after World War I and II.

 

Borrowing would have had to rise to secure homes and an economic base.  Some will say this would have been unaffordable as it would have been immense. This would have been immense and unaffordable, but what they do not recognise is the cost of saving the banks, due to black holes of debt, highly leveraged products such as credit default swaps and derivatives, mean the cost is actually far higher than saving the people’s savings and mortgages, as in effect government shave instead taken on board all the banks’ bad debts and gambling losses and still have had to prop up the mortgage system.

They have also tried to re-engineer the housing bubble and equity bubbles using vast sums of money through quantitative easing and record low interest rates. In desperation for the first time even going into experimental territory with negative interest rates for banks, although for borrowers this is not the case as banks charge steep interest rate premiums to add to profits from customers.

Counties have also seen the opportunity to follow through ideological policies of austerity using excuse that the deficit is caused by spending on public services, which Is not the case, as in many cases such spending is part of the fabric of society, its services, but also the engine of the economy. The financial sector has multiplied in size to become dominant in the economy. Countries with the heaviest weighting of financial services sector are at the greatest risk, which is why Iceland was hit hard quickly, but they let the banks fail. In all other countries they have propped them up, but with smaller countries having least alternatives from central banks through QE, so Cyprus had to confiscate peoples’ savings and be bailed out by IMF loans with deep austerity conditions as is the case with Greece. Not the fault of the people, but the people are paying the price.

 

Stacy Herbert at People’s Parliament explains how the derivatives bubble of $1 Quadrillion debt exploded and the reactions of governments with ideological austerity and the mass investment involving oil and arms trades as well as banking in what has been termed by’ Artist Taxi Driver’ The War Machine:

Stacy Herbert on People’s Parliament #WarMachine

‘Artist Taxi Driver’, Mark McGowan on People’s Parliament:

The derivatives bubble of $1 Quadrillion represented the largest sum in the world, as much as 20 x total world GDP at the time in 2008. Latest estimates are of a derivatives bubble exceeding $1.5 Quadrillion and record debt and investments tied up in equities to $2 Quadrillion :

New York Times: Central Bankers, Worried About Bubbles, Rebuke Markets

By some accounts, the most up to date estimations of global derivatives in 2013 were already over $2 Quadrillion and by 2014 are even higher:

World Federation of Exchanges – over $2 quadrillion of derivatives in 2013

Growth in derivatives was steady from 2009 following the world stock market falls in 2008 to 2009 and emergency central bank stimulus measures of multiple QE around the world, flooding the banks with liquidity, i.e. money to speculate with. From regaining former record levels they have soared since 2011, with latest estimates up to 20% per annum by 2014 to new record highs that could exceed $2 Trillion or double what it was at the start of the global economic collapse in 2008:

LaRouche: ‘It’s Wall Street or Mankind, Your Choice’: Global Speculative Bubble About to Break the $2 Quadrillion Barrier!

When the highly leveraged banking gambles collapsed, the existent high stock market value sand high property prices imploded and governments panicked with emergency measures, which they followed through by austerity measures which were designed to recapitalise the banks from masses of people, along with reflating the bubble.  Trouble is it was that being such a big bubble caused the original collapse in 2008, so reflating the bubble and now even exceeding it with new high son equity prices in stock markets and new highs in housing bubble sin many countries. This places the world at the same risk as then, but without the same tools to deal with it, in fact there are not any because counties would start the next collapse from a position of vast debts from the last collapse. She very concisely explains the position that the world now finds itself in.

Wall Street hitting new highs daily, the familiar tune

The masses largely do not anywhere near comprehend the sheer scale of the losses or amounts covered, which in fact dwarf the cost of entire welfare states, benefits, health care, education, even GDP for years of all countries following this plan. However the debt has exploded again because the problem was not resolved and no action was taken against the banks and bankers involved. They have merely partially recapitalised banks based on governments’ ballooning debts and austerity measures that have been largely symbolic and  ideological have already been imposed which are like a drop in the ocean, with the world again teetering on the brink of economic collapse.

World stock markets Irrational exuberance again but requiring a more dramatic description this time round in world equity markets, with many stock markets around the world registering record highs. The only exceptions being in countries such as Japan where the meltdown was so fierce it has never regained anywhere near former values in 25 years and once down its down, its start again so lie the rest of the world the new base was in 2009 as the world banks and governments tried to convince the masses they had resolved the crisis. This has been fuelled by this pretence but also by the largest amount of money printing, infusions of liquidity through quantitative easing (QE) that there has ever been and as an index ratio to world GDP and contributed to banks ploughing in astronomical sums and the biggest rise on global equities on record in many countries.

Of the three biggest bubbles in history, the one referred to in 1999 was a technology sector bubble that was on a comparable scale with stock market history major bubbles and it collapsed in  2000, although it has been re-inflated again along with everything else in the current super-bubble. But for the general stock market in all sectors combined the current bubble is closed to the 1920’s one that led to the Wall Street Crash of 1929, with further crashes in 1930 and every time it rose in the 1930 fell back again, until WWII changed global economics, along with a human tragedy for millions, acted to boost the economy with demand, quickly followed by new developments in technology following WWII, to become post-war an age of another kind of industrial revolution, a technological one and expansion of capitalism, all before corporatism took over and technology was used to suppress the masses, with lower incomes, longer hours and mass unemployment, as opposed to improve things for them. But as bubbles go the current one is either second the 1920’s one or as the sheer amounts gambled and levels of leverage in so-called investing or rather gambling, way exceeds even the precipitous bubble peak of 1929, this is therefore perhaps the biggest bubble in modern history and more comparable to Tulip Mania or South Sea bubbles of even earlier times. But again as amounts of money in the economic system are at record levels and with vast leverage and the kinds of derivative based investment products and use of high frequency trading, places it even possibly beyond those historic bubbles, making it the biggest bubble in history

Dow closes above 17,000, yet another new record high.

Another day, another new high on Wall Street

Cheerleading advice given on US mainstream TV media in America was now it has reached a new plateau its time to get in:

In 1929 Fisher stated “Stock prices have reached what looks like a permanently high plateau”

Wall Street has for a century been the barometer of world equities and the current position is most closely compared to that of 1929 at the height of the irrational exuberance then where markets were considered to have gone up above a new plateau before the Wall Street Crash and Great Depression.

The volume of trading is vastly larger in modern times compared to 1930’s, but if it goes wrong then so too is the absolute level of risk, with banks again involved in complex derivatives, betting using high frequency trading (HFT) . UK, US and European banks and hedge funds, but especially UK and US are heavily involved gambling and betting on the global markets. Last year on one day the Japanese Nikkei index plunged 10% possibly contributed by rapid responses of high frequency trading to perhaps even an error in the algorithmic programs dictating the trading.

A Serious Drop in Japan’s Stock Market Adds to Wall of Worry

As at the time of the Wall Street crash in 1929, again in 2014 investors in the stock market have also reached a record high level of margin debt:

NYSE margin debt rises in May; first increase since February

Happy Days Are Here Again, a song that is from a film called Chasing Rainbows made in 1929 and a hit in 1930 at the very start of the First Great Depression

Occupy, “Keep em kettled in”; time, employment, freedom to think, feel and express

Occupy, the movement that has grown up around the world.

A space with a purpose to protest austerity, inequality, injustice, greed, corruption, destruction of the environment, profiteering over people, violence, wars, plundering poor regions of resources, globalisation, corporate monoliths.

Occupation in terms of jobs can be rewarding in pay, but also in interests, in achievements, in contributing to a better society. It can also be negative in exploiting others, companies exploiting others in society.

Bosses treating staff like servants, bullies getting to the top, corporate psychopaths!

For unemployed, the aim is to get a job for monetary and personal rewards to enable disposable income to afford things they enjoy in spare time when not at work and if fortunate to have job that they enjoy also from the job. Problems arise when income is so low not to enable affordability to do other things, when it all goes on bills, leaving nothing and even worse when even after working, ends cannot be met. When that happens it is more like being unemployed without sufficient means to live, but working and still not having sufficient means to live, to properly be part of an exciting world.

A job becomes merely occupation of the mind, body and soul, lives of meaningless activity, drudgery, slavery.

Unemployment can be used productively personally for the individual as well as it being  a job itself trying to gain employment in  a world of immense competition, uneven opportunities, geographical and material limitations. It is not a level playing field, where connections and location can be even more important.

Unemployment can also free the mind that can be constrained in full time work doing menial repetitive tasks and the all too familiar out of work activities of watching TV or going to the pub, clubbing or hours of engagement in watching sport. Altogether leaving little time to think about anything else apart from carrying out menial tasks at work, drinking alcohol watching football and hours and hours of unreality reality TV.

“Attention spans”

Unemployment can mean a time to think, to experience existentialism, and relive “childhood dreams”

Rewind the Film, Manic Street Preachers:

To look at the world from a new position, not as cog in a meaningless wheel. Like when at university, between times of intense study when students learn and think, they have time to ponder to think about wider issues, existentialism, philosophy, art, literature, music, be creative and develop creativity and creative thought.

Menial work stifles creativity.

 

Governments can become afraid of people who think as they are not so easily led, coerced persuaded by propaganda. This is one reason extreme governments throughout history have cracked down on intellectuals and academics.

 

It could be argued that the fear of unemployed engaging in activities that may seek to protest at the inequalities of opportunities, lack of meaningful work with living wages, what through experience they know is injustice and an often unfair balance towards those lucky enough or having connections enabling them to get the better jobs, leaving others on the scrapheap. This could be part of the reasoning behind occupation in workfare unpaid or pushing into part time zero hour contracts that do not pay a living wage and are insufficient to live on type jobs.

Creativity:

John Cleese on needing time and space for creativity:

John Cleese on the 5 Factors to Make Your Life More Creative

“And those who were seen dancing were thought to be insane by those who could not hear the music.” — Friedrich Nietzsche

Creativity, Essence, Eureka and mental cognitive psycho-neurobiological struggles with social interactions in mental health states, poverty, freedom of opportunity to think, feel, understand and express.

Secrets of the Creative Brain by neuroscientist Nancy Andreasen

“When eureka moments occur, they tend to be precipitated by long periods of preparation and incubation, and to strike when the mind is relaxed.”

Artist Taxi Driver on creativity:

“We don’t want you to dream, we don’t want you to be free.. to be musicians, artists..but to guard self-service checkouts..everyone wants to be someone..why don’t you ask them what their dreams are…make a 100,000 guitars..were going to promote creativity..set-up occupy centres..real books, philosophy society the arts…political awareness, debate support people to think for themselves…finding their dreams…a better society…A future where dreams are possible to realise…without hope, without dreams..about low pay no pay zero hour contracts..about corporations,,this is their society…give out 100,000 guitars, build libraries, centres, filled to overflowing.. they would never do that because they would learn..would take politics by the scruff of the neck..children of the future would own their own lives…The government is about the Disneyfication of creativity, kings princes heroes, war, protectionism.. like robots, unthinking, uncaring, controlled.”

It is seen by authorities, governments that occupation as necessary to control the masses.

No matter how low paid it may be, even for free, anything but let people use the time available to think, to debate, to present alternatives, be creative, produce art, music, contribute with organised vocalised alternatives, reiterate to think or actively protest.

Further control the masses by media propaganda, workers versus workers, poor versus poor:

“blame the poor, praise the rich”

This is occupation of time, of minds, to restrict, constrain, physically in protests and mentally, to be occupied:

“keep em boxed in, keep em kettled in

Create a mistruth so bewildering”:

30 Year War,  by Manic Street Preachers

30-year War Lyrics (Official Manic Street preachers website)

Manic Street Preachers – Futurology website

More on occupation, work, time, labour

Utopian dream turned into a dystopian nightmare by false self-centred greed is good mantra of those in control around the world.

Occupations, working hours, weeks. Instead of technology and higher productivity meaning everyone can work fewer hours for sufficient income, the fear of the establishment, those with the most of freedom has reversed employment improvements since the terrible days for the poor and working classes, the enlightenment of expansion of education and opportunity to the ‘Gordon Gekko’ ‘Wall Street’ “greed is good” ideology of the right and far Right, post-Capitalism and post-Communism, age of the Corporation, record nouveau-riche and return of the old and new aristocracies and oligarchs, landed gentry and peasant workers. Simultaneous Age of Austerity, rather as foretold in Orwell’s future dystopia of Nineteen Eighty Four and Animal Farm.

Past decades and centuries of oppression of the poor, using technological change combined with reducing worker freedoms into widening the wealth divide, with lager numbers working harder for less. Masses not even able to get paid work suffering in poverty, even abject poverty, copying in unfairness in the developed world that has perpetuate din the Under-developed World. Generations of exploitation have resulted in such a system in the Third World, with terrible poverty consequences, disease, damage to life, malnutrition, starvation and masses losing life. All whilst the rich prosper materially and the people in effect put up with, do as they’re told metaphorically. Worn down, too poor and weak, starving, isolated by unaffordable transport, to stand up against a corrupt system. Even worse rather too close to comfort like science fiction dystopia mind -controlled, brainwashed by devious political corporate interest and media, controlled, divided with hate and prejudice, even with poor fighting other poor, whilst the rich carry on getting even richer.

Article by Thomas Frank in publication Salon:

David Graeber: “Spotlight on the financial sector did make apparent just how bizarrely skewed our economy is in terms of who gets rewarded”

In UK the reaction to austerity mantra and propaganda, rise of activist protest movements such as UK Uncut, People’s assembly and DPAC:

Radio interview with Chomsky over UK social media activist Mark McGowan, Artist Taxi Driver:

In the interview which took place at MIT in 2013, Professor Chomsky had only listened to a single Artist Taxi Driver social media video broadcast that was played during the audio interview. Based on the one broadcast, he made some interesting observations and gave credit to this type of activism. 

By watching more Artist Taxi Driver videos, it soon appears he too has a very wide grasp of things that are going on, expressed in a different colloquial language to Prof Chomsky, but as Chomsky iterates is just as valid. It is also a way to get across to a wider cross-section of society to academia, but it is academics and activists who expresses such thoughts and ideas, that the mainstream media often ignore or repress.

 

It would have also been interesting to get Prof Chomsky’s reaction to many of the excellent video interviews Artist Taxi Driver has done with a wide range of activists in UK, or to his movie editions of compilations strategically put together in movie length production. 

It is quite a humorous observation, but not critical as it is part of a communication vernacular, of Prof Chomsky regarding Artist Taxi Driver, saying it his way, the use of words and dialectics

Chomsky goes into more detail on the Occupy movement and about a post capitalist society that the world is now in. 

Tony Benn speaking at Occupy camp in London in 2011 before it was removed in 2012:

Our Streets to One world, Our world, worldwide protests:

Some interesting references and links provided in following article on youth protests in Europe:

Protesting Youth in an age of neoliberal savagery

Disabled people Against the Cuts (DPAC) and UK Uncut Protest (2012):

Francesca Martinez speech at Austerity rally in London to highlight UK disabled and poor suffering in Austerity Britain (June 2014):

Russell Brand speaks at the same Austerity protest rally in London (June 2014):

Green activist Caroline Lucas at the London protest rally, speaks about the poor being made to pay the price for the failure of the rich and calls to stop the attack on the poor through Austerity (June 2014):

Russell Brand says of the mainstream media lack of coverage “if people knew what was happening they wouldn’t tolerate it… Ignorance is a necessity ingredient for oppression”

Interviewer: Do you still want a revolution?

Russell Brand answer: ” Yes”

Book review

Book review

Noam Chomsky – Occupy

Review: Occupy by Noam Chomsky

Noam Chomsky: ‘The Occupy movement just lit a spark’ – video

Further References:
Clive Boddy (2011) Corporate Psychopaths: Organisational Destroyers .Palgrave Macmillan.

Nancy Andreasen (2005) The Creating Brain: The Neuroscience of Genius – Daba Press.

Nancy Andreasen website, Ctreativity