Parliament: the mother of all deceptions By William Bowles

30 June 2012

wm-morris“There — it sickens one to have to wade through this grimy sea of opportunism. What a spectacle of shuffling, lies, vacillation and imbecility does this Game Political offer to us? I cannot conclude without an earnest appeal to those Socialists, of whatever section, who may be drawn towards the vortex of Parliamentarism, to think better of it while there is yet time.

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Labouring under an illusion By William Bowles

30 September 2011

Note: This is in the way of a continuation of my last essay ‘In the belly of the beast‘.

Nothing could illustrate the paradox better than the Labour Party, ‘the party of labour’, financially supported largely by Britain’s biggest trade unions (representing around five million public employees) bankrolling the party which has led the way in attacking what’s left of the gains made since 1945. In a word, a traitorous political party that once again, faces the task of reinventing itself.

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In the belly of the beast By William Bowles

28 September 2011

beast.jpgIn case you hadn’t noticed, especially if you get your news from the MSM, there is the mother of all capitalist crises unfolding around us. A crisis that appears to be far deeper even than the Crash of ’29 and given the global nature of corporate capitalism, nobody (except the rich) can escape its awful destructive power, short of revolution of course.

So deep in fact, that the imperial elites are incapable of resolving it and appear to be frozen to the spot like a deer caught in the headlights, attempting to apply ‘solutions’ that only compound the contradictions. It points once and again to the chaotic nature of capitalism that hides its ignorance behind glib phrases that mean nothing.

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Video review of ‘Plunder – the crime of our time’ By William Bowles

23 September, 2010

Review of Plunder – the crime of our time directed by Danny Schecter

The spirit of graft and lawlessness is the American Spirit. – Lincoln Steffens, The Shame of the Cities, 1902[1]

Capitalism – it’s a racket, literally:

“I’d like a fair shake at the American Dream” – foreclosure victim

This quote comes from near the beginning of Plunder – the crime of our time and illustrates one of the problems of dealing with the capitalist nightmare: everybody wants a piece of the action, even those who have lost everything they own believe incorrectly that everyone can share in the ‘American Dream’ if only they work hard enough. Worse, one victim of the sub-prime crisis even believes that it was his own fault!

Hedging your bets

Selling short, credit default swaps, credit derivatives, collateralized debt obligations (CDOs), mortgage backed securities…the same companies who created these exotic financial ‘instruments’ are also the same companies that profited from selling these worthless products to unsuspecting investors worldwide.

Even worse, these same companies, knowing that their ‘products’ were in fact worthless, actually bet on them being worthless! This is called hedging your bets, so they made money, trillions of dollars in fact out of betting against their own worthless bits of paper (actually nothing more than electrons).

“trading the paper…essentially creating liquid cash from nothing”

Plunder paints—after a couple of viewings—a very accurate picture of how the financialization of capitalism actually works. And this is part of the problem of getting the message across, it’s fiendishly complex, and this is also the problem with Plunder as I hope to show, crime though it may be, the criminal activities of the speculators are symptoms, not causes of a much deeper malaise that affects capitalism.

All those university trained whizzkids, the brightest of the bright, eager and hungry to succeed, were given free rein by their masters to dream up these complicated investment packages. So complicated in fact that even the bosses of companies such as Bear Stearns, Learmann Brothers, AIG, and the like, didn’t understand them either. But then they didn’t need to as long they worked, as long as they made a profit.

I have very mixed feelings about Plunder as Danny Schecter has decided to present the crisis of capital as a crime and Wall Street as the crime scene and investment brokers and hedge fund scam artists as the criminals. It’s a clever analogy but is it actually true? Is the crisis all down to a bunch of criminal fraudsters? Has there ever been a ‘free market’? Is not capitalism fraudulent by definition?

In 1929 the same scene unfolded, albeit using different ‘instruments’ (the computer didn’t exist in 1929, nor was the global circuit of capital up-to-speed). The crash resulted in the US government instituting some controls over how capitalism worked (largely because of the fear of a socialist revolution occurring).

And then, just as now, it was the banks that were at the centre of the crisis. One of the main reforms was to split off investment banking from retail banking as it was the banks, using depositors money, invested in all kinds of speculative schemes, that triggered the crisis. The deregulation that took place in the 1980-90s, reversed this, setting up the system for a fall all over again. Or is this really true? Is it lack of regulation or something systemic to capitalism itself, with or without regulation that is bound to happen? Crashes such as the current one have been occurring for hundreds of years with the same awful results.

It’s always happened this way and eventually it always pops” – Jim Rogers, George Soros’ hedge fund partner, talking about how financial speculation works.

“gambles on the market versus gambles in the market”

Jim Rogers knows of what he speaks. Rogers and Soros founded the very first hedge fund company, knowing full well that betting on the future ‘value’ of a share or securities package created money out of nothing. This is what hedge funds are all about. The creation of value is not predicated on the production of goods and services but on what a piece of paper will be worth in the future.

“$140 trillion of nothing”

There is no doubt in the minds of many who have actually tried to untangle the complex processes employed, that fraud has been and still is, being committed. Some, like Bernie Madoff whose multi-billion dollar Ponzi scheme finally unraveled, ended up in the slammer, but as Plunder points out, the federal oversight body charged with ‘regulating’ the financial sector (SEC), knew about Madoff’s fraud for at least ten years and did squat about it. And as one of the people in Schecter’s video points out, he only got thrown in jail because he’d ripped off the rich! The offending corporations that did get busted, got let off with fines, not even admitting to their criminal culpability. The ruling class looks after its own.

“$596 trillion, AIG’s total loan guarantees”

“$54 trillion, the world’s total gross national product”

The AIG figure needs some explaining: AIG was using investors’ money to guarantee loans made to all those fraudulent hedge funds on the basis that the investments were solid. Money would be made, and for a while money was made until the banks, pension funds etc who had bought the fraudulent financial ‘instruments’ realized they’d bought trillions of dollars of toxic debt, at which point the bottom fell out of the market and AIG was broke.

Insider trading and betting on ‘shorts’ (that a share price will fall) are intrinsic to the way the stock market works and insider trading especially, is impossible to stop no matter what regulations are in place as it’s extremely difficult to prove that an individual had inside information on a company’s activities except in rare cases.

“Criminal prosecutions over insider dealing have had an unhappy history in the UK. The Serious Fraud Office and the Department of Trade and Industry were involved in a series of flawed cases until the responsibility for prosecuting was handed to the FSA in 2001. But the City regulator has fared little better, mounting just one case in almost eight years. That ended earlier this month in the first conviction for Ms Cole and her team.” — ‘Net tightens on insider trading‘, The Independent, 6 April, 2010

And this is the one problem I have with Plunder. It accurately explains what triggered the current crisis and documents the awful consequences for millions of people around the world but ultimately it implies that had capitalism been properly regulated, the crisis would not have occurred.

However, buried in the movie are inklings of what really happened and the causes and herein lies the one, crucial weakness of the movie namely, unpacking why exactly, capital instead of investing in real products and services ‘chose’ instead to bank on financial speculation in all its weird and wonderful forms in order to maintain the level of profit.

Financialization of capitalism

Capital needs to keep on reproducing itself either through finding new markets or through keeping down the cost of wages (or both), hence the relocation of manufacturing to cheap labour areas such as China.

By the time Reagan had been elected at the beginning of the 1980s, the ‘neo-liberal’ agenda was well underway and the process of deindustrializing the economy was established.

“suction”

Accompanying this was the (fortuitous?) arrival of the IT revolution that enabled the true, real-time globalization of the financial sector, that along with its deregulation created exactly the right conditions for the invention of the above-mentioned financial ‘instruments’, all of which are based on the invention of wealth but without adding any real value to the economy. Trillions sucked out of the real economy and transferred to hedge funds, private equity companies and the results are all around us: massive unemployment, collapse of entire sectors of the real economy.

The paradox is surely obvious: as capital fled into the fantasy world of speculation, the entire basis of the economy that produced the capital in the first place, collapsed. Without consumption, fueled not only by credit but by the incomes from (the now non-existent) jobs, the real economy collapses. It’s so obvious that it’s inconceivable that the ‘experts’ were not aware of the consequences and undoubtedly they were aware as the comments by Jim Rogers above illustrates.

The question to ask of Plunder is: without recognizing the fundamental contradictions of capitalism, that regardless of whatever ‘safeguards’ are put in place, or removed for that matter, does Plunder convince viewers that capitalism is a broke-down system that needs to be replaced?

Watch the trailer for the movie here.

Note

1. For an historical overview of capitalism as organized crime see my review, ‘Gangster Capitalism – The United States and the Global rise of Organized Crime‘ by Michael Woodiwiss.

Danny Schecter, Editor, Mediachannel.org
Director PLUNDER THE CRIME OF OUR TIME
Author, The Crime of Our Time
http//plunderthecrimeorourtime.com
Globalvision PO Box 677 NY NY 10035

Keynes with a neo-liberal twist? By William Bowles

10 November 2008

dollars“Just imagine saying, “production for use leads to stagnation; production for death leads to exchange value and profits.” Now don’t jump on me! Wait, I have to go into capital expansion and its being “the breath of capitalism” and, as yet, no forseeable future opportunities for capital reproduction to the magnitude needed for its expansion.”

The above excerpt from a short note from my compadre Patricia in the am triggered a thought about how the state, at least in the UK and in much of the EU, has reacted to the latest, and undoubtedly the worst crisis capital has yet faced. For unlike earlier crises, especially those of the 1970s which presaged the so-called neo-liberal revolution, the nature of Britain’s working class has undergone a profound transformation (along with other ‘advanced’ economies). And, at the risk of repeating myself, or anyway repeating the quote I’ve used before, I think it speaks reams about the real fear the ruling political class feels about the current situation.

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Economics 101 – Interesting times By William Bowles

24 October 2008

‘May you live in interesting times’, traditional Chinese curse

Being raised in a family of Reds has its pluses and its minuses, one of the minuses being a decidedly unworldly approach to economics. It was as if we already lived in a socialist world but of course nobody else did. The upshot of this was a total incomprehension as to the value of money, and not merely the value but its importance.

This must sound strange coming from someone who professes to know the ‘answers’ to what ails us but then life is complicated, people are contradictory and we don’t always do what’s in our own best interests, besieged as we are by the forces of capital. For alongside this there is always the question of fear and insecurity about the future, about who we are and what we should be.

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Deep in the capitalist doo-doo By William Bowles

18 July 2008

“The current market jitters are centred on disturbances in the world’s credit markets. Worries about the viability of sub-prime mortgage lending have spread around the financial system, and the central banks have been forced to pump in billions of dollars to oil the wheels of lending.” Financial crises: Lessons from history‘, Analysis By Steve Schifferes Economics reporter, BBC News[1]

Thus runs the opening para from the BBC’s missive (written in September 2007) on the ‘credit crisis’. The piece purports to explain a series of economic meltdowns going back to the 1860s, but explanations of why these periodic collapses occur there are none. One has to read very carefully between the lines to gain some inkling of what links the crises together: in a word, speculation, but the word gets mentioned only once in the entire piece, in relation to the Crash of ’29.

“After a huge speculative rise in the late 1920s, based partly on the rise of new industries such as radio broadcasting and carmaking, shares fell by 13% on Thursday, 24 October.” (ibid)

“Speculative rise” ? “Partly” ? What’s the other part? Conveniently, we are not told.

Contrast this with the huge investment in Internet companies toward the end of the 1990s, which too was caused by speculation in what investors then thought was a license to print money (note the parallel with the 1920s, one that is not made by the BBC nor it must be noted, with the latest and most severe of crises):

“During the late 1990s, stock markets became beguiled by the rise of internet companies such as Amazon and AOL, which seemed to be ushering in a new era for the economy.

“But in March 2000, the [Internet] bubble burst, and the technology-weighted Nasdaq index fell by 78% by October 2002.” (ibid)

78%, that is to say, over three-quarters of the value of hi-tech stocks was wiped out almost literally overnight. “Beguiled” ? What kind of an explanation is this? The key sentence in the BBC’s “˜explanation’ is:

“But the Federal Reserve, the US central bank, cut interest rates throughout 2001, gradually lowering rates from 6.25% to 1% to stimulate economic growth.” (ibid)

But making money cheaper by lowering the interest rate only fuels inflation. ‘Growth’ may well occur but it was achieved by increasing the credit debt and devaluing the money supply which sooner or later would bite the hand that fed it.

In fact, aside from the ’29 Crash, the piece, which uses six examples scrupulously avoids any mention of the central role not only of gambling (or speculation) but of the crucial role of government in propping up a bankrupt capitalist system. Instead, state intervention in the market is described as the “central banks” that is to say, ‘socialism’ for the capitalist class.

Speculation played an enormous role in the latest crisis but was not the underlying cause, rather it is a symptom of the system brought about by the falling rates of profit which could only be solved (in the short term) by the complete deregulation of the financial sector, a process initiated in the 1970s which enabled retail banks to operate like commercial investment companies (using ordinary depositors money rather than investors).

Deregulation opened the floodgates of speculation that started with the Savings & Loans companies which were the first to go belly-up back in the 1980s. Billions were stolen and a vast bailout by central government followed. (See ‘Bush Family Connections: Silverado Savings & Loan Scandal‘ and ‘Bush Family Connections: The Family That Preys Together‘)

Words like “jitters” “worries” , and “central banks” pepper the piece, innocuous descriptions of fundamental contradictions that underly the latest “disturbance” . Thus the BBC would have us believe that the fundamental problem is caused essentially by what the marketeers call ‘sentiment’, that is to say, individuals who fear losing money. But come on folks, is this any way to run an economy, on the subjective feelings of a bunch of parasites?

According to the BBC, the following are the ‘lessons’ to be learned from past financial crises:

  • Globalisation has increased the frequency and spread of financial crises, but not necessarily their severity

  • Early intervention by central banks is more effective in limiting their spread than later moves

  • It is difficult to tell at the time whether a financial crisis will have broader economic consequences

  • Regulators often cannot keep up with the pace of financial innovation that may trigger a crisis. (ibid)

It’s not only a brilliant piece of double-speak but it also tells us nothing about the underlying causes of periodic crises. Take the first ‘lesson’:

“Globalisation has increased the frequency and spread of financial crises, but not necessarily their severity”.

Oh really? The million-plus people who have lost their homes in the US or the food riots in over forty-seven countries and the rising unemployment are not severe enough for the BBC?

“About 8.5 million Americans actively seeking work are unemployed, an increase of about 21.4 percent over one year ago, according to the Bureau of Labor Statistics (BLS). The unemployment rate of 5.5 percent is up from 4.6 percent a year ago. More important, about 1.5 million of the 8.5 million unemployed have been unemployed at least six months, a 37 percent increase over the past year, according to the BLS. Not included in the numbers are the “1.6 million people who are ‘marginally attached’ to the workforce, who had looked for work in the previous 12 months, but not in the last month,” according to Andre Damon of Global Research. Damon also reports that the BLS data does not include about 420,000 ‘discouraged workers’, who had given up looking for work because they think that there is no work available.”  ‘US: It’s Still the Economy, Stupid‘, By Walter Brasch

‘Early intervention’?
What, like Northern Wreck or Fanny Mae and Freddy Mack in the US? The sheer irrationality of the BBC piece is revealed when it tells us that a “It is difficult to tell at the time whether a financial crisis will have broader economic consequences” . A crisis by its very definition is something that is far-reaching in its effects but obviously the BBC has a different definition of the word.

And just in case we still don’t get it, the final ‘reason’ that, “Regulators often cannot keep up with the pace of financial innovation that may trigger a crisis” is pure dissembling. After all, in theory the entire point of ‘deregulation’ was to get government off the backs of the financial sector and let the ‘market’ do its thing.

“Innovation” is BBC-speak for deregulation which led to speculation, thus avoiding the fact that the financial sector has been “˜deregulated’ for almost thirty years, during which period there have been four major financial crises each with disastrous consequences for millions of people, so to say that the regulators can’t keep pace with innovation is simply a lie of grand proportions (see Silverado above).

What emerges is the fact that the BBC’s ‘analysis’ is nothing more than a clever coverup that masks the fundamental contradiction of an economic system that operates to make a tiny handful of people disgustingly wealthy by stealing from working people. It ignores the fact that such periodic crises are intrinsic to capitalism and the result of nothing more than the pursuit of private profit regardless of the consequences.

Note

1. Also of interest is why this article, which is getting on for a year old, is listed as an important link to its piece ‘Banking rally boosts US markets‘, dated 16 July, 2008, especially so given the current reality which bears no resemblance to the “˜analysis’ (any more than it did when it was written) but then the BBC hedges its bets by telling us that “It is difficult to tell at the time whether a financial crisis will have broader economic consequences” , a finer piece of double-speak is difficult to find.

The BBC only gets away with this kind of rubbish by completely ignoring any analysis that proposes an alternative cause for the periodic crises of capital, over-production/under-consumption, falling rates of profit, competition, loss of markets and so forth.

Economics 10000001 or the revenge of the Ninjas By William Bowles

12 September 2007

Explaining economics is probably the most difficult thing for any writer to undertake, especially if one’s take on things is not in the mainstream, that is to say, not what they call classical economics, which is another way of saying that capitalism is the only possible system, so it’s interesting to see how the mainstream media deal with the current ‘credit crisis’ or perhaps a better way of putting it is to say we have a crisis because the credit’s run out. Just too many bad debts which wouldn’t be so bad except nobody knows who owns the debts or even where the hell they are!

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No need to panic, let the market decide By William Bowles

14 August 2007

“We’ve got blind panic… and obviously a complete lack of confidence [in the market]” – Tony Craze, Dawntrader.co.uk

It should be obvious to all and sundry by now that capitalism is in dire straights. Last week’s meltdown of the world’s major capital markets was only ‘rescued’ by the injection of literally hundreds of billions of dollars from by the European Central Bank, the Bank of Japan and the US Federal Reserve. So much for the magic of the ‘market’ which we are continuously told, solves all problems. And in fact, last week’s injection by the European Central bank of something like $100 billion dollars didn’t do the trick! More had to be ‘injected’ in order to stave off a total collapse of the world’s stock markets. The ‘injection’ is in reality a bail-out of the commercial banks.

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