The deepening European Crisis

Quote

First posted Tuesday, 21 May 2013 at Socialist Economic Bulletin

THE DEEPENING EUROPEAN CRISIS

By Michael Burke
The economies of the European Union and the Euro Area both contracted in the 1st quarter of 2013.  The renewed contraction in GDP began in mid-2011 and has now run for 18 months on both cases.  But, as Chart 1 below shows, the recovery from the depths of the recession in both cases was short-lived and at no point was the previous peak in activity of the 1st quarter of 2008 recovered.
In reality, the European economy has been in a slump which stretches all the way back to the beginning of 2008 and is now entering its sixth consecutive year.
Chart 1

13 05 21 Chart 1

The cause of the crisis remains unaltered.  Full data for all the components of GDP in the EU and Euro Area are not yet available.  But comprehensive data is published up to the 4th quarter of 2012.  No substantial turn in events took place at the beginning of 2013, simply an extension of previous negative trends.

In that period from the 1st quarter of 2008 to the 4th quarter of 2012, GDP in the Euro Area has contracted by €288bn in real terms.  In the European Union, it has contracted by €310bn.  However, if the components of GDP are examined it is clear that the decline in investment more than accounts for the entire fall in GDP in both cases.

Investment (Gross Fixed Capital Formation) has fallen in the Euro Area over the same period by €362bn and fell by €461bn in the EU.  In both cases this is far in excess of the total decline in GDP, and is shown in Chart 2 below.

Chart 2

13 05 19 Chart 2

Since the slump in both the EU and the Euro Area is driven by the fall in investment, the slump itself and all its economic symptoms (unemployment, falling real incomes, strained government finances, and so on) cannot be resolved without increasing the level of investment.

This would be impossible if the mantra that ‘there is no money left’ were true.  But it is very far from being true.  The aim and purpose of capital in a capitalist economy is the accumulation of capital.

Where that cannot be achieved capital will simply remain idle as cash balances accumulating in banks.  In the latest monthly report from the ECB the currency and bank deposits of non-financial firms in the Euro Area banking system are €2,073bn and short-term bills are a further €83bn (p.143). They are considerably more when the EU cash deposits of firms in non-Euro Area are added.

The accumulation of these assets has been more or less equivalent to the slump in investment.  From the end of 2007 to December 2012 currency, bank deposits and bills held by non-financial financial firms has increased by €350bn in cash terms.  The refusal of firms to invest has led to a rise in their cash holdings.

Credit direction

These are assets which could be directed towards productive investment.  Firms refuse to do so because they are cannot be confident about returning sufficient  profit.  But the European governments could direct these assets into productive lending at both the national and supranational level.  Before the era of financial liberalisation credit direction, which is the central bank or other authority directing the commercial banks’ lending, was widespread in industrialised economies.

It cannot be seriously argued that this would interfere with market’s efficient allocation of resources, not after the crisis of 2008 and 2009.  The authorities also have numerous levers to ensure that credit is direct towards productive investment in infrastructure, de-carbonisation, transport, housing, education and so on).

The banks operating in Europe can only do so because their deposits are guaranteed by the state.  The state also issues banking licenses.  The ECB is effectively a state body and supplies all banks with needed liquidity.  The authorities could direct credit by altering capital rules to favour state-guaranteed investments.  Many banks are also now effectively owned by the state.  Only the political will to compel bank lending to the productive sector is lacking. 

EIB & EBRD

In addition, both the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB) have increased their net equity in the recent past, but cut their lending just when it would have most beneficial effect.  The EBRD’s equity has risen by €133bn since 2010 but its lending has fallen by €89bn (p.5).  In 2012 alone, the EIB’s lending fell by €8bn even though its own funds increased by €13bn (pp.7 &8).

Taken together a prudent rise in the level of lending to infrastructure and other projects in both Eastern and Western Europe based on previous lending/capital ratios could provide significant funds towards an investment-led recovery.

The question of the Euro

As the crisis in Europe is determined by a refusal of the private sector to invest, and which is compounded by cuts in government investment and the investment of entities like the EBRD and EIB, it follows that only a significant increase in state-related bodies can resolve the crisis.

The latest GDP data show that the crisis is reaching into the ‘core’ of Europe.  France and the Netherlands were among the countries whose economies contracted once more.  Austria, Belgium and Germany only avoided recession by the narrowest of margins.  This is a crisis that is engulfing the whole of Europe.

It is frequently suggested that leaving the Euro would provide a panacea for this crisis.  Yet it is self-evident that not all countries can devalue against one another.  Further, the argument that devaluation without increased investment will not produce a recovery requires only a one-word proof:  Britain.  Sterling devalued by approximately 30% in 2008 and 2009, without much of a rebound since.  Yet the current account deficit has widened from -0.2% of GDP to 3.6% of GDP over that period.

Returning to earlier data on GDP growth, investment (GFCF) in the Euro Area and EU, we can now add further points on the growth of government spending and net exports.  These are shown below for the Euro Area and for the EU economies outside the Euro Area as a separate group. The results are shown in Table 1. below.

Table 1. Key Economic Variable in Europe, Q1 2008 to Q4 2012, €bn

13 05 21 Table 1

The economies outside the Euro Area have contracted just like those inside the Euro Area.  Government current spending has risen in both.  But non-Euro countries have not had higher levels of investment.  They have, on a net basis, simply gained in terms of net exports.

In this sense, the question of in or out of the Euro is a secondary one, which would not resolve the crisis either way if the investment slump is not addressed.  Of course, there is a severe structural crisis in the Euro Area, which the crisis has exposed.  The US has built a continental scale economy and so too has China.  India appears to be heading in the same direction.  The European Union has the potential to create the same.

But the Euro is an attempt to graft a 21st century monetary unity onto a 19th century patchwork of small nation states.  What is required to supplement a monetary union is a fiscal union.  Since that must be democratically controlled that also requires political union.  In the United States, which is very far from the EU’s former attachment to the ‘social model’ fiscal transfers vary but generally comprise 12% to 15% of GDP.  In the European Union they amount to around one-tenth of that.  If the single currency is to be maintained then its principal beneficiaries will need to contribute to its maintenance, led by German capital.

The Ultimate Theft

How Britain’s Family Silver was Stolen Through Open Doors 

The Ultimate Theft

Growing up in the fifties it was customary to leave the back door open in many homes. Friends and neighbours would pop in and out, sharing resources and helping each other out. Material possessions were few.

Such practice is unusual today. Locks and alarms are fitted to houses, cars and even garden sheds. We live in a world of envy; we live in a materialist world where things matter, and it seems people don’t any more.  Advertisers feed on greed, along the lines of “Be the Envy of your Neighbourhood, Buy Me!”.

A mobile phone is safely tucked away. Insurance companies grow ever richer by our need for Things, our need to keep Things safe, and our mistrust of one another. Front doors are firmly locked against potential thieves – that’s everyone as no one trusts anyone any more. Meanwhile, through the back door, those assets we treasure most are stolen. Theft of our most basic needs, and of our right to access them is The Ultimate Theft. It is no accident that social housing, public utilities – Water (1) and Energy (2), transport (3), Elderly Care (4), The NHS (5), Hospitals (6), Schools (7), the Post Office (8), Fire Service (9), Prisons (10), Probation Service (11) – everything is being wrenched away from us, handed over to private Bankers, at home and abroad, in order that the rich elite can accumulate riches more than they can ever need. It’s real, it’s still happening now. We can ask why and how it has happened, and what we can do to stop it, for stop it we must.

What drives  the Ultimate Theft?

Why do the very rich who possess more than they can ever need crave more and more? Like a drug gives a false happiness, addiction is a replacement for some missing need.

????????????????????????????????????????

You may recall The Who’s lyrics from Tommy:

“The Who‘s lyrics proved so spot-on that a pleasurable dopamine hit convinced me to feature them in a second post about self-actualisation”

From: The Dopamine Project (12)

“I’m free, I’m free, and freedom tastes of reality
But you’ve been told many times before
Messiahs point you to the door
No one had the guts to leave the temple.” : The Who

The glitch that keeps us from reaching our true potential can be traced to primitive ancestors who cultivated natural cravings into addictions to food, sex, safety, power, acceptance, approval, attention, esteem, and status. To complicate matters, our more recent ancestors added unnatural addictions to dopamine-triggering substances, beliefs, and behaviors, e.g. money, religion, and drugs. Then they bequeathed their addictions to newborns who were indoctrinated by societies controlled by of out-of-control money, power, status, and/or religion addicts.

Since we’re talking about the same dopamine that junkies trigger with heroin, it’s no surprise that the symptoms are the same, i.e. self-deception, denial, and the dishonesty that allows addicts to continue doing the only thing addicts care about = vigilantly protecting dopamine flow.

Freedom tastes of reality = honesty = self-actualization.
Dopamine addiction tastes of delusion = dishonesty = denial of self-actualisation.

George Monbiot observes that “The politics of Envy is keenest among the very rich. (13)”   The means justifies the end. There is no pleasure in attainment and as drug addicts self control is minimal.

In order to grant the rich these pleasures, the social contract is reconfigured. The welfare state is dismantled. Essential public services are cut so that the rich may pay less tax. The public realm is privatised, the regulations restraining the ultra-wealthy and the companies they control are abandoned, and Edwardian levels of inequality are almost fetishised.

Think Left’s article “Increasing the sum of global well-being should be the ultimate and arching for every politician and party (14) ” emphasises that unregulated markets do not make people happy. Indeed, it seems very few people achieve happiness from unbridled capitalism. It is like a computer virus let loose, like a parasite which, while neglecting its host’s well-being is doomed. Parasites are what the very rich are. They make nothing. They do nothing. They just consume, and leave their toxic waste in their wake. In consuming their host which produces or modifies necessary resources, they cannot thrive. So, the driving factor of the ultimate theft is an obsession, a madness in pursuit of  unattainable happiness. Such a habit  has been proven to be a disaster to the world and its inhabitants which is totally out of control. Like the emperor who wears no clothes, we all know it is flawed, but no one dares say so.

How was the Ultimate Theft Achieved?  

The Ultimate Theft has been premeditated and manipulated. It has been meticulously planned since Thatcher and Reagan started their Neoliberalist Experiment. There is considerable evidence that the current government, whilst claiming to protect front line services had this intent. Think Left’s “Who said the NHS will be shown No  Mercy (15)”, and the Independent’s   recent “Secret Memo shows Michael Gove’s plan for Privatisation of Academies (7) ” refer to this, and there are countless other examples of evidence. Lack of clarity, and vagueness in plans is typical, and since election manifestos did not make such policies clear, the Coalition have no mandate.

Clause 39  of The  Magna Carta, in 1215. (16)

states: “We will sell to no man, we will not deny or defer to any man either Justice or Right”. The Guardian reports that some privatisation of the Courts System (17) has already been planned, and there is confusion as to what will be sold off.

The justice secretary is a huge fan of outsourcing, and has a talent for ignoring troublesome evidence, however compelling. He also regards anything which smacks of rights – constitutional or human – as an irritant, an outmoded obstacle to thrusting reform, and to be dispatched as swiftly as possible. Certainly an 800-year-old prohibition on the sale of “justice or right” is not going to stand in his way. Not when there is money to be made by big business.

  • One tactic  to achieve the Ultimate Theft was to divide the working class by brainwashing them into believing that it was in their interests to buy shares into something they already owned (18). Like Pyramid Selling, the politicians themselves are bought by lobbyists to adopt policies to which they themselves have a conflict of interests – and yet the reality is that everyone is doomed by the continuation of a capitalist system which cannot work.

George Monbiot: continues: Politicians justify these changes, when not reciting bogus arguments about the deficit, with the incentives for enterprise that they create.

Behind that lies the promise or the hint that we will all be happier and more satisfied as a result. But this mindless, meaningless accumulation cannot satisfy even its beneficiaries, except perhaps – and temporarily – the man wobbling on the very top of the pile.

  • The myth that the private sector is more efficient than the public sector is yet another myth which we are invited to believe. There is plenty of evidence to the contrary.  Indeed, the simple fact is that the first responsibility of private companies is to their shareholders, and so the quality of service is secondary (Think Left Public Service or Private Profit (19). The attempt to justify this is to frame the argument that a service is failing, and then seek to take it over.
  • Governments cite “research” by Right Wing ‘Think Tanks’ funded by the rich, such as this recent article which justifies prison privatisation (20). The Huffington Past articles contradicts the claim. “ Privatisation will not Rehabilitate our Prisons (10)”
  • The attempts to control the means of communication of the Press and the media is not new. The BBC is in itself owned by the people of Britain, yet did not and does not present a true picture of the plans to privatise public services such as the NHS.
  • Creating distractions in the “News” is a well-used tactic, populist ideas of relive unimportance, celebrities and TV shows grab the headlines, burying bad news and hiding the Truth.
  • Alarming and frightening the public is often a deliberate tactic. “The Shock Doctrine” (21) or disaster politics  (22) will have people running into line, like lemmings off a cliff. As Herman Goering  (23) observed “The people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked, and denounce the peace makers for lack of patriotism and exposing the country to danger. It works the same in any country”.
  • It is a natural instinct for a social animal such as mankind to feel pride in one’s family, in ones’s community. It may be 1.8 million years since some of us began to migrate out of Africa (24) , and we became  divided, but today, communication and travel has brought us together again. Politicians abuse the idea of patriotism for their own ends (Remember the Falklands?), and so divide the working people, so each blames the other. I have heard UKIP supporters claim that there are too many people in this country. There is plenty of land. The truth is that there are not enough jobs, because  the global capitalists just want the cheapest labour available. Oxfam  states (25) that the richest 100 billionaires could put an end to global poverty four times over.
  • Then there is the argument that we cannot afford public services because we cannot afford it, because of the Deficit. They say that Gordon Grown spent all the money. This is an argument based on lies, reinforced by the media (see Osborne and Cameron’s big deficit myth(26). It is the banks who are seen to have developed such a powerful system , a plutocracy that they can bring down an  entire country at will. (Gordon Brown didn’t spend all the money- the Banks did! (27)

The same applies to collective growth. Governments today have no vision but endless economic growth. They are judged not by the number of people in employment – let alone by the number of people in satisfying, pleasurable jobs – and not by the happiness of the population or the protection of the natural world. George Monbiot

One of the first actions of this parliament was to set up a fixed term parliament. Unable to achieve an overall majority, they knew it would be a one term parliament.

Nevertheless, their actions now are planning for further cuts beyond the next General Election.  Signing up to US/EU trade agreements would mean that the sell off of valued services such as our NHS would be lost forever. The warning from US officials is, if Britain leaves the EU, US trade agreements would be a risk. A Europe signing such agreements will surrender  But in return, Europe would have to give up existing protections on its agriculture, film industry and public services. (Guardian). (28)

Where is the democratic process? The  British people did not vote for this and do not want this. It must be openly discussed by our media. Is it?

 The Ultimate Solution: 

The madness is unsustainable. Money, by itself has no value, or meaning. It is just a token by which we can register exchange of labour, resources or skills. We can do the same by bartering  – see example (29)  If I grow some cabbages for your table, will you teach my child to read? These days, money is just a figure on a computer somewhere in the world. If all the computers in the world were to crash, would we then starve? It would depend on the labour of those of us who can grow food as to whether we can eat. Bankers would be redundant. They wouldn’t be missed!

The Labour Party must make a break with the madness of neoliberalism which Blair had continued , and be truthful about the deficit, and debt. Labour must pledge to reverse the privatisation of public utilities and services. Labour must work for tax justice, put an end to tax avoidance and support country-by-country-reporting, if not go it alone. Our elected representatives must work for the interests of people, not rich bankers. Britain does not need to accept control from global banks. This is not democracy. With our own currency, it would be possible to wipe out any debts by a Modern Jubilee as suggested by Steve Keen. (30)That is the way to put this at an end.

The modern “debt jubilee” is characterised as “quantitative easing for the public”. It has been boiled down to a procedure where the central bank does not create new money by buying the sovereign debt of the government. Instead, it takes an arbitrary number, writes a check for that number, and deposits it in the bank account of every individual in the nation. Debtors must use the newly-created money to pay down or pay off debt. Those who are not in debt can use it as a free windfall to spend or “invest” as they see fit.  

Modern Germany was built on a debt jubilee, this is the way to end the madness. In recovery, we should be planning for full employment, democratically owned and monitored public services, and building a just and more equal society, as Atlee’s government began in the Spirit of 1945. We need a new Spirit of 2015.

“We are not human beings having a spiritual experience; we are spiritual beings having a human experience.” – Pierre Teilhard de Chardin.

(Dopamine Project) “The self-deceptions, denials, and dishonesty we “re-lie” on to protect dopamine flow keep us from being here now, self-actualizing, experiencing true freedom, and fully comprehending what it means to be human beings sharing an impossible, incomprehensible, mystical, unfathomable, amazing, spiritual experience.”

References and Further Reading

  1. Watered Down Morality (Water Privatisation) Think Left 
  2. The Energy Trap: Think Left
  3.  Renationalise the Railways: Think Left
  4. Guardian: Privatising Care will inevitably lead to lower standards
  5. Left Futures: EU Health Regulations – improving patient’s rights pr more NHS privatisation?
  6. Weston Mercury: Hospital put up for sale sparks fight to protect it
  7. Independent: Secret Memo shows Michael Gove’s plan for privatisation of Academies.
  8. Huffington Post: Post Office Privatisation
  9. Daily Mirror: Fire Service  Privatisation
  10.  Huffington Post: Privatisation will not Rehabilitate our Prisons
  11. Guardian Ministers accused of dismantling Probation Service
  12. When, What, Why, and How the Who knew about Self Actualisation (Dopamine Project)
  13. George Monbiot: “Why the Politics of Envy are Keenest among the very rich.
  14. Increasing the sum of global well-being should be the ultimate and arching for every politician and party
  15. Who said the NHS will be shown No  Mercy
  16. Clause 39  of The  Magna Carta, in 1215.
  17. Guardian: Privatising the courts system: the public are not customers, they are citizens. 
  18. If you see Sid, Think Left
  19. Think Left Public Service or Private Profit
  20. BBC: Right Wing Think Tank  – Private firms better at running Prisons
  21. “The Shock Doctrine”
  22. Cameron and Co Demonstrate the Art of Disaster Politics
  23. Herman Goering: Quote
  24. Man’s Migration out of Africa: (Wikipedia Early Human Migrations)
  25.  Oxfam  states  that the richest 100 billionaires could put an end to global poverty four times over.  
  26. Osborne and Cameron’s big deficit myth
  27. Gordon Brown didn’t spend all the money- the Banks did!
  28. Guardian: EU Exit would put US trade deal at risk, Britain warned.
  29. Independent: Bartering: “Go swapping, it’s good for your wallet, and health
  30. Modern Jubilee as suggested by Steve Keen
  31. Pascale Bruckner: Happiness is a moment of Grace: Guardian
  32. Think Left: Academisation and the Demolition of our Education System
  33. Think Left The Penalities of Ostrich Politics and the Demolition of Welfare State and the NHS
  34. Web4Health: Causes of addiction and Eating disorders

On the Road to Recovery..

On The Road To Recovery

 by Trevor Bacon

I nearly stood there holding the paper up high to proclaim my utter contempt at the headline. My habit when entering a supermarket is to first, after getting the obligatory metal basket or trolley,  to stop at the square news-stand, reading the headlines as I proceed around. About two weeks ago I glanced the headline in the Murdoch  Sun that  said “Gazza is dying as we watch”; my god they are finally printing some real news for once, then I realised that they were not talking about the plight of the Palestinians in the occupied territories but the last chance saloon  for the legendary blubbering alcoholic Newcastle footballer. So much for real news!

Anyway, it is not the rights and wrongs of the Palestinian conflict that exercised me that particular day, no, it was the headline in the Daily Express. As I said, in my opening line, the headline was so egregious that just for a moment I got ‘that feeling’, that feeling where your almost hanging on the edge of doing something.  As if  balancing on a high wire  where even the thought of making an utter fool of myself or possibly being taken to the nearest mental health unit by the police was not a deterrent.  The headline that incensed me was something to the tune of  “Property Prices To Rise By 4.4%.”

express headline

House prices will rise by 4.4 per cent next year, according to an influential City organisation

In fact it wasn’t even headline that really got to me, other than the clear leading implication that this was a good thing. No, it was  the sub heading that went on to say that the value of houses was rising and leading the economy out of the great recession.  So there I was in the entrance to Tesco and about to say what I will say here instead.  No, it is not house values that are increasing it is the price that you the punter is expected to pay. House prices are increasing, that is true, at least in the South-east, but not the value. Value and price, particularly  with regard to property are clean different things. You may say with honesty that more banks are once again willing to lend but you can’t say that in such an economy that these properties  are actually worth any more than they were worth last week or last month or that it is a good thing.  No, again, strange as it may seem for a government  so ideologically opposed to Keynesian Stimulus and market manipulation, that they are doing exactly that; using the governments ‘Funding For Lending Scheme and quantitative easing to pour money into cheap loans for unaffordable properties.

bibble house

In Tesco 200 Grams of mushrooms have increased in price by nearly 100% since about 2008 but do we see headlines in the conservative ass licking Daily Express extolling the virtues of what is nothing more than fungal inflation? NO! No we don’t.  If I were to go around the shop and do a straw poll of people on what they thought about the rising price of mushrooms would they unanimously say that it was an indication as to the positive health of the economy? No!  No they would not.  They would say it were either a case of profiteering or inflationary forces but I bet a pound to a penny that they would not be cheering in the aisles shouting “Hurrah for good news, the great recession is finally at an end.   I’m paying double for mushrooms.”  

The difference between mushrooms and houses is that most people have little financial interest in the world of mushrooms whereas most people do have an interest in the world of mortgagees and houses. If you are a home owner, or more often, a mortgaged owner then at the moment you may feel reasonably pleased. Interest payments are at an all time low and, if the Daily Express is to be believed, the value of your home is rising.  This gives you a warm and comfortable feeling, maybe I ‘can’ draw out some equity, and maybe I ‘can’ afford those two weeks in the sun or ‘that’ new car. If you’re a saver, you may feel just be a little different, your interest has been at an all time low and even long term investments are hardly keeping up with inflation. Ditto with young people.  If you’re saving for your first property, things have not been a bag of laughs for you either.

During the first phase of the housing crash, it was almost impossible to get a mortgage without a large deposit.  This situation has got somewhat better as of late and I suspect that this is the real reason why house prices are moving upwards again.  The only problem is that in some respects we are back to the situation ‘pre crash’ where banks were lending on very small deposits for houses that were way beyond traditional price ratios compared with the general  economy.

Shelter, a national housing charity recently stated that if a chicken had risen in price at the same rate as houses since the nineteen eighties the cost of one would be about £55.

chicken-white

Given that Chickens are still within the range of about £5 to £15 suggests that any retraction we have in house prices so far is negligible and that in real terms houses are still in a huge bubble.

So what has caused this new-found faith in the house buying public that could not be found in the intervening years since the crash? The answer is ‘Quantitative Easing’ and funding for lending .  Quantitative Easing  is a fancy name for an economic strategy that pre WWII Germany found so unsuccessful and probably led to the rise of nationalism’s all over Europe and WWII itself.  Of course, you will hear from its advocates that this is nothing like the money printing of Viamar Germany and that we are not about to see old ladies with barrows full of Deutsch Mark trundling down the high street to buy a loaf of bread.  And those supporters would be right, for one thing most money is no longer printed.  Since the introduction of banking computers’ systems, most money is simply tapped from a keyboard into existence as strange and disquieting as that seems. No, they are right in as much as we haven’t seen anything like the hyper inflationary activity associated with such events but then, neither did Germany, until of course it happened. When it did, it happened with such speed that there was nothing to stop it but that’s another story.  No, the grand plan is this; money is being quantitatively eased into existence. This quantitatively eased money is then used to buy back government bonds (government debt) back from the banks. This leaves the banks with cash to invest and the government with debt that it has been bought back through the use of money that it invented. So far so good….. I think??? (Think Left, Quantitative Easing)

So, to sum things up we have banks heavily backstopped  by the government, lending  to allow first-time-customers to buy overpriced properties and mortgage payers to release equity on these very same over priced properties in order spend into the economy.  This apparently, is the secret to ending the great recession even though it  all sounds like an ever increasingly complex spirals of debt. They, the LibCons and their cheer leading media whores may like to think that this kind of behaviour is, like a vigorously agitated toilet brush, going clear the blockage, but in reality I fail to see how it helps in the longer term.  The simple fact is that as much as we Brits like to kick the crap out of the lazy, feckless Greeks and others it may come as some surprise to this audience that Great Britain has just about the same public debt and exponentially more private debt to deal with.

Max Keiser, or one of his guests described the British economy and this particular policy strategy as follows, it’s like a terminally ill cancer patient given morphine.  While the effects of the drug are still obvious the doctor declares that the patient is on the road to recovery. Finally, property forms great chunks of the British banks balance sheet. That.is to say that the loan is backed by the house that it bought. The house is the tangible asset.  When house prices fall so does value of collateral that the bank can hope to recover should the debtor default. When house prices fall less people are willing to borrow on the perceived value of their houses.  Since the economic crash began the UK and most other affected governments have done everything within their power to stem the house price collapse and promote yet more lending. To do this the government have not only sacrificed savers, by instituting the lowest interest rates possible (negative in real terms) but also Nationalised banks and provided vast sums of liquidity. The banks in turn used this money to build up capital reserves  and not  to lend. So through the Bank of England the government hit back by providing what can only be described as stimulus to  get the economic ball rolling.  This of course is something that they said would not do given their unfaltering belief  in Neo Liberal economics. The simple fact is that the banks were not lending into the economy because in their view the problem had been caused by such lending in the first place and that a good economic argument for doing so did not exist and in that argument the banks were not wrong.

(See Think Left, Max Keiser and the Carry Trade)

The simple and unpalatable argument is that it is a fallacy to think that a healthy economy is dependent on house price inflation. Again, if the price of potatoes were to double, would that induce economic activity? No, it may prompt farmers to turn over land to grow more potatoes and force the population into substituting another staple such as rice or pasta but it would not benefit the overall economy, it would merely distort it.

This reminds me of an observation of Stacy Hurbert about a tribe of South Sea Islanders who, during the war, came into contact with American military that set up base. When the military  left after the war the Islanders invented what was known as a Cargo Cult that manifested itself in Islanders playing the parts of airfield staff. They cleared parts of the island to make a crude runway and make a tower for one of the tribe to sit  with a pair of half coconuts positioned on each ear. Others ran around with bat shaped paddles as they had seen the servicemen do. They thought that if they did this that  the cargo planes would return. In some ways this is what our governments are doing by artificially trying to maintain house prices without attending to the rest of the economy. Distorting the economics of house prices is just as flawed thinking as that of the islanders.

Our governments are using vast resources to maintain what is in reality a superficial economic effect. This is an effect of what I consider to have been an already a very flawed system at the best of times.  It will provide nothing but a cosmetic makeover that sooner or later will be seen for what it is, a way to fool a few people for a few more years. Stimulating growth through stimulating lending is a disaster, even by their own warped and antisocial economic  perspectives.  God Help Us All!

Cameron and Co demonstrate the Art of Disaster Politics

Quote

 

Naomi Klein’s book ‘Disaster Capitalism – Shock doctrine’ describes how a ‘disaster’ is utilized, perpetuated and even manufactured, to get policy change or to reframe events – changes which would not be possible unless the population was in a shocked state, too devastated, distracted or worried to object.   The most obvious and current example is how the global banking crisis has been rewritten as Labour ‘overspending’ – which has, in turn, been used to justify dismantling the welfare state and privatizing the NHS/public services… the long-term ambition of the 0.003% since 1945.

“The people can always be brought to the bidding of the leaders.  That is easy.  All you have to do is tell them they are being attacked, and denounce the peace-makers for lack of patriotism and exposing the country to danger.  It works the same in any country” – Hermann Goering

The tragic death of Lee Rigby in Woolwich has provided just such a disaster and perfect opportunity….

In the words of Jo Moore, special adviser to Stephen Byers, and product of the Peter Mandelson school of spin doctors:

It was ‘’a good day to bury bad news’.

Before the twin towers had even collapsed Jo Moore was already suggesting to the head of communications in the department of transport, local government and the regions that they should use the atrocity in America to overshadow damaging announcements they had been wanting to release quietly. 

Doubtless, Tory spin meister Lynton Crosby and minions, had similar thoughts about how best to use the Woolwich atrocity to reverse Cameron’s fortunes after an appalling and farcical few weeks… the Tory backbenchers’ ‘EU referendum’ amendment to the Queen’s speech, the opposition to ‘gay marriage’, and the (in no way farcical) criticism and warnings from the IMF over Osborne’s economic strategy.

The result was that the killing was framed as a national emergency requiring Cameron to be recalled, poste haste from Paris.  Ludicrously, Cobra was convened and we were subjected to Cameron’s impersonation of Churchill:

‘… this country will be absolutely resolute in its stand against violent extremism and terror. We will never give in to terror – or terrorism – in any of its forms.’

This despite even the wildest of reports acknowledging that this was probably a ‘lone wolf’ attack by a few clearly dysfunctional individuals.  To put this in some sort of context, there have been 152 fatal stabbings of teenagers in London between 2005 and 2013.

Former Cobra staff officer, David Livingstone writes in the Guardian:

The UK government did not convene Cobra for single attacks during the mainland IRA campaign of the 1980s and 1990s. Convening Cobra (which is a decision made by ministers rather than civil servants or the emergency services)….

The Woolwich murder did not merit the Cobra treatment.

Steve Bell’s Guardian cartoon says it all… Cameron reflated with hot air and faux sentiment.

But whilst it clearly provided a good distraction away from the woes of Cameron/Osborne, and exciting copy for the MSM, we learn that there have been at least 140 hate crimes against Muslim people, or their Mosques, since Lee Rigby’s death.  Some of which must be ascribed to the ‘war on terror’ hype.

In David Livingstone’s opinion – ‘The government’s reaction ensured international recognition for the perpetrators and makes copycat attacks more likely.’ 

… the wrong signals are being sent; first, to the public, who might become increasingly frightened rather than reassured, and, secondly, to the plethora of wrongdoers in society who want to make their respective points at the highest levels possible. The two criminals this week probably achieved political level recognition of their crime well beyond their expectation.

Further evidence of the disingenuousness of Cameron’s expressed concerns for this ‘terror’ attack, was that it did not extend to his abandoning his week’s holiday in sunny Ibiza.

However, the next stage of the ‘disaster politics’ is now unfolding.

The death of poor Lee Rigby is being utilized to justify the Home Secretary’s plans to tighten up controls on the internet and extend banning of radical groups preaching hate.

The Blairite former Home secretaries, Reid and Johnson, have jumped in to add their voices in support (presumably to ‘force’ Ed Miliband’s hand) .. and Nick Clegg is being pressurized to remove his veto on the ‘snooper’s bill’.

Meanwhile, David Cameron is rushing out a new terror task force ‘to crack down on extremism in the wake of the horrific murder of Drummer Lee Rigby’….  Unless, of course, it is David Cameron rushing to try and pre-empt any proposal that leadership contender Theresa May might make?

Doubtless, there are other ramifications and manipulations in the pipeline that I cannot even begin to imagine.  As Chris Dillow writes:

Many groups have an incentive to exaggerate the significance of terrorism, and to reframe insane violence as “terrorism.” For the police, such attacks give them a chance to further inflate their sense of self-importance and to seize more powers. And politicians can use the image of grave danger and an evil foe to appear Churchillian.

It offends every sense of decency that this horrific crime should be cynically utilised to mask the IMFs dire report of the economy; the internal divisions of the tory party; and to facilitate the passage of more draconian, authoritarian legislation.

However, it is beyond irresponsible that through such political manoeuvres, a criminal incident has been whipped up to the benefit of violent extremists from both racist groups (EDL/BNP) and Muslim fanatics.  It is truly ‘disaster politics’ for their victims.

http://www.citizensreportuk.org/reports/teenage-murder-london.html

http://www.guardian.co.uk/commentisfree/2013/may/24/woolwich-murder-merit-cobra-treatment?INTCMP=SRCH

http://www.guardian.co.uk/commentisfree/cartoon/2013/may/23/woolwich-attack-david-cameron-cartoon

http://www.guardian.co.uk/politics/2013/may/26/theresa-may-measures-combat-terrorism

http://www.guardian.co.uk/politics/2013/may/26/david-cameron-anti-terror-task-force

http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2013/05/on-terrorist-probabilities.html