By Michael Collins

The International Monetary Fund (IMF) and Standard and Poor's are highly placed guardians of the world economy. IMF is supposed to teach developing nations how to be just like us, i.e., onerously indebted to the big banks. Standard and Poor's is the keeper of the credit, ratings that ripple through the economy and impact hundreds of millions. Nobody elected these folks. They were begotten, not made.

After IMF finished helping Egypt, Tunisia, and Libya with privatization and free markets, those nations descended into chaos and they're now broke, all of them, with lower living standards to boot. (See IMF Rates Up Dictatorships Just Before Revolutions)

German Chancellor Angela Merkel is like a phlegmatic dominatrix. She enjoys delivering pain, lots of it, but she does so in a sluggish fashion, without any flair. She's had a free ride for too long. Now, her day has come. Merkel is the last impediment to throwing austerity overboard in Europe and the United States. Correction: the last impediment to appearing to throw austerity overboard.

Obama gave up the rhetoric of austerity before the kickoff of his 2012 campaign. His opening speech in Columbus, Ohio was so populist-infused; you might have thought he was campaigning against himself.

Newly elected President of France François Hollande arrived at the right time to lead the move away from austerity. Andrew Grice of The Independent noted, "The French leader said the EU had to consider all ways to increase growth. And eurobonds are part of the discussion."

The interview was conducted by Martin Hesse and Thomas Schulz | May 24

Speigel Online - In a SPIEGEL interview, Nobel Prize-winning economist Paul Krugman argues that this is not the time to worry about debt and inflation. To save the euro zone, he argues that the European Central Bank should loosen monetary policy and the German government should abandon austerity.

John O'Brennan cuts to the heart of the Eurozone crisis, outlining the political consequences of issuing aloof, one-size-fits-all austerity requirements from afar:

The European crisis is as much a crisis of politics as economics. The current paralysis of the Greek political system demonstrates the point very clearly. EU policy has actively contributed to this crisis by effectively sealing off discussion of the political problems thrown up by austerity.

Budgetary policy is at the core of traditional democratic politics in Europe but the management of the euro zone is increasingly being effected not through democratic institutions but via a centralised and depoliticised form of technocratic fiat. The “stability” narrative has triumphed over the need for legitimacy as the crisis in Europe has deepened.

Ivan Krastev, the eminent political scientist, argues that we have now arrived at a point where national governments have politics but are no longer in control of policy, including budgetary policy, which is moving via the fiscal treaty and other measures to the EU level.

On the other side of this divide the European Union has policies but no politics, since decisions are increasingly being made by technocratic managers rather than directly elected representatives of the European public. The euro zone crisis has thus amplified an existing problem – the absence of both a European citizenry and a transparent European level political process.

The whole thing. Read.

h/t RCW.

So, now it's an imperative to "promote growth."

The joint statement (full text after the jump) from the G-8 meeting near Washington, DC,documents the utter failure of the very leaders who issued it. Were they capable leaders with the least knowledge of economic downturns, the statement would not be necessary. Nevertheless, they deserve some credit for admitting their deficiencies. (Image Banksy)

The joint statement has some weasel words like "We commit to fiscal responsibility" to balance the urgent words about growth and jobs". That reflects the atavistic positions of the austerity faction, German Chancellor Angela Merkel and British Prime Minister David Cameron. Merkel suffered a huge set back in the Westphalia state elections with her Christian Democratic Party losing 25% to 50%. Corporate media maintains that her popularity as a leader is higher than ever.

Merkel's comrade, PM Cameron is also pushing austerity. Nobody can pretend that his polling is any better than his party. The Conservatives were wiped out in local elections and Cameron is going down without a life jacket.

The closing paragraph is the give away. The urgent need for growth needs to accommodate "the importance of intellectual property rights (IPR) to stimulating job and economic growth" We will regulate our way out of this crisis by taking the Yellow Brick Road to oppressive copyright laws. What a relief! They're serious.

The Guardian's Helena Smith talks to Greek leftist leader Alex Tsipras:

Tsipras, who turns 38 in July, wants me to know that the war is not personal. The enemy is not Berlin, until now the biggest provider of the monumental rescue funds keeping the debt-stricken economy afloat. "It is not between nations and peoples," he says. "On the one side there are workers and a majority of people and on the other are global capitalists, bankers, profiteers on stock exchanges, the big funds. It's a war between peoples and capitalism … and as in each war what happens on the frontline defines the battle. It will be decisive for the war elsewhere."

Greece, he says, has become a model for the rest of Europe because it was the first country to fall victim to the enforcement of hard-hitting "growth through austerity" policies pursued in the name of resolving the crisis.

"It was chosen as the experiment for the enforcement of neo-liberal shock [policies] and Greek people were the guinea pigs," he insists.

"If the experiment continues, it will be considered successful and the policies will be applied in other countries. That's why it is so important to stop the experiment. It will not just be a victory for Greece but for all of Europe."

Even the old capitalist robber-barons understood that the way to get wealthy was to create wealth for all while making sure you kept the lion's share. Neoliberal austerity policies are just asset stripping under a false banner.

Noam Chomsky writes that "The current US economy is built on 'growing worker insecurity' - people who are too busy and poor to make demands," and has a couple of new terms for us.

Plutonomy refers to the rich, those who buy luxury goods and so on, and that's where the action is. They claimed that their plutonomy index was way outperforming the stock market. As for the rest, we set them adrift. We don't really care about them. We don't really need them. They have to be around to provide a powerful state, which will protect us and bail us out when we get into trouble, but other than that they essentially have no function. These days they're sometimes called the "precariat" - people who live a precarious existence at the periphery of society. Only it's not the periphery anymore. It's becoming a very substantial part of society in the United States and indeed elsewhere. And this is considered a good thing.

Read the whole thing.

Not sure exactly when I said it, but I did predict that Greece would exit the Euro. I also said that it should leave the Euro sooner, rather than later and do so on its own terms. Now elite opinion has decided it's okay for Greece to exit. Mostly because the neoliberals have already raped the economy there. You heard it here first.

Howard Schneider & Anthony Faiola | May 14

WaPo - Political deadlock in Greece rattled world markets Monday, reviving fears that the fractious Mediterranean country could spurn an international bailout, abandon the common European currency and risk a fresh round of world economic turmoil.

European stock indexes fell, with Greece’s market now at a 20-year low, while the euro currency continued a recent decline against the dollar. U.S. stocks also fell.

From the Guardian's letters column:

The annual Sunday Times Rich List yields four very important conclusions for the governance of Britain (Report, Weekend, 28 April). It shows that the richest 1,000 persons, just 0.003% of the adult population, increased their wealth over the last three years by £155bn. That is enough for themselves alone to pay off the entire current UK budget deficit and still leave them with £30bn to spare.

Second, this mega-rich elite, containing many of the bankers and hedge fund and private equity operators who caused the financial crash in the first place, have not been made subject to any tax payback whatever commensurate to their gains. Some 77% of the budget deficit is being recouped by public expenditure cuts and benefit cuts, and only 23% is being repaid by tax increases. More than half of the tax increases is accounted for by the VAT rise which hits the poorest hardest. None of the tax increases is specifically aimed at the super-rich.

Third, despite the biggest slump for nearly a century, these 1,000 richest are now sitting on wealth greater even than at the height of the boom just before the crash. Their wealth now amounts to £414bn, equivalent to more than a third of Britain's entire GDP. They include 77 billionaires and 23 others, each possessing more than £750m.

The increase in wealth of this richest 1,000 has been £315bn over the last 15 years. If they were charged capital gains tax on this at the current 28% rate, it would yield £88bn, enough to pay off 70% of the entire deficit. It seems however that Osborne takes the notorious view of the New York heiress, Leonora Helmsley: "Only the little people pay taxes."
Michael Meacher MP
Labour, Oldham West and Royton

Things aren't very much different in the U.S. I wonder just how the collected wealth of the top 0.1%, say, compares to the national debt here.

Douwe Miedema & Sarah White | London | May 11

Reuters - Banks are quietly readying themselves to start trading a new Greek currency. Some banks never erased the drachma from their systems after Greece adopted the euro more than a decade ago and would be ready at the flick of a switch if its debt problems forced it to bring back national banknotes and coins.

From the end of the Soviet Union - which spawned currencies such as the Estonian Kroon and the Kazakh Tenge - to the introduction of the euro, they have had plenty of practice in preparing their systems to cope with change.

Planning behind the scenes has been underway since Europe's debt crisis erupted in Greece in 2009, said U.S.-based Hartmut Grossman of ICS Risk Advisors who works with Wall Street banks.

"A lot of the firms, particularly in Europe and also here, have been looking at that for a long time," said Grossman, who added that the latest Greek political crisis had brought matters "to a little bit of a head".

"But there really has been contingency planning at all of the financial institutions for that to happen ... Greece leaving the euro zone is not a new idea," he said.

If you are the CEO of a major global bank and you have to announce a $2.0 billion trading loss, you will no doubt feel that the shareholders, regulators, and reporters are all against you. But if you announce that the loss occurred in a portfolio that just six weeks earlier was the subject of criticism in the press, and which you described as nothing more than “a tempest in a teapot”, you are entitled to feel that the gods are against you.

The gods definitely have it in for Jaime Dimon, CEO of JP Morgan Chase, the legendary “fortress balance sheet” bank that prides itself on having avoided problems during the housing bust and credit crisis of 2007-2008. Someone inside the bank blew a large cannonball through the bank’s fortress walls, and it seems likely to have been “the Whale” of the credit derivatives market, JP Morgan’s Bruno Michel Iksil.

I alluded yesterday to the elections in Greece, in which the EU plan to bailout the nation in exchange for austerity measures to be put in place was symbolically rejected and a new government elected.

Well, it's more than symbolic now.

A Greek political party leader who has vowed to rip up the terms of Greece’s international bailout was handed the mandate to try and form a government after Antonis Samaras of New Democracy failed to forge an agreement.

Christopher S Rugaber | Washington | May 7

AP - The head of the International Monetary Fund is calling for indebted European countries to reduce spending only gradually to avoid further slowing their economies.

Christine Lagarde says in a speech in Zurich that countries should avoid cutting too steeply when their economies are contracting.

Governments "should not fight any fall in tax revenues ... caused solely because the economy weakens," she said.

Greece and other European countries have been trying to reduce their debt loads as a percentage of their economies. When they have cut deficits, their economies have shrunk. That makes it harder to reduce their deficits as a percentage of their economy, which some have agreed to as part of an international bailout.

Austerity should be "gradual and steady," Lagarde says.

Really, what changed her mind?

Francois Hollande scratched out a victory over Nikolas Sarkozy yesterday in the French elections.

I say "scratched out," because a three point victory over a wildly unpopular president is not exactly a drubbing, but it's also not exactly a close call.

Sarkozy showed himself to be a canny political card player. There was, for example, “l'ouverture” – Sarkozy's carefully-targeted effort to dismantle the Socialist Party by recruiting some of its brightest lights into Sarkozy's new right-wing government as ministers and senior officials. This cut the Socialist Party's leadership off at the knees, demoralized its membership, appropriated some of its best talent, reframed Sarkozy as a big-tent president who would govern for all the French – and left him perfectly free to pursue his policies exactly as he intended to do, validated by some of his most dangerous opponents. Demonstrating, as has occurred many times in politics in many countries before and since (in Britain, in the fate of the Liberal Democrats, for example), that weaving opponents into your team is an excellent way to defeat them.

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Michael Hudson asks: "In light of the enormous productivity gains since the end of World War II – and especially since 1980 – why isn’t everyone rich and enjoying the leisure economy that was promised?"

The answer (per Hudson) is painfully obvious, but bears repeating (ad infinitum):

What was applauded as a post-industrial economy has turned into a financialized economy. The reason you have to work so much harder than before, even when wages rise, is to carry your debt overhead. You’re unable to buy the goods you produce because you need to pay your bankers. And the only way that you can barely maintain your living standards is to borrow even more. This means having to pay back even more in years to come.

That is the Eurozone plan in a nutshell for its economic future. It is a financial plan that is replacing industrial capitalism – with finance capitalism.

Industrial capitalism was based on increasing production and expanding markets. Industrialists were supposed to use their profits to build more factories, buy more machinery and hire more labor. But this is not what happens under finance capitalism. Banks lend out their receipt of interest, fees and penalties (which now yield credit card companies as much as interest) in new loans.

The problem is that income used to pay debts cannot simultaneously be used to buy the goods and services that labor produces. So when wages and living standards do not rise, how are producers to sell – unless they find new markets abroad? The gains have been siphoned off by finance. And the financial dynamic ends up in austerity.

And to make matters worse, it is not the fat that is cut. The fat is the financial sector. What is cut is the bone: the industrial sector. So when writers refer to a post-industrial economy led by the banks, they imply deindustrialization. And for you it means unemployment and lower wages.

As they say, read the whole damn thing.

And weep.

h/t

Originally posted at bastard.logic

(Image: jesse.millan, Flickr)

Jim Rogers of Rogers Holdings said riots such as the ones witnessed in Greece and reported as widespread in China will hit the United States and again in Europe as the next leg down in the financial crisis takes shape.

“Mr. Bernanke has zero credibility as far as I’m concerned. The Federal Reserve has zero credibility,” Rogers said forcefully. “[] everything Mr. Bernanke has said in the last seven or eight years he’s been in Washington. He’s never been right about anything. The man has zero credibility for anyone who would take the time to look at his history.”

Helena Smith | Athens | Apr 19

The Guardian - thens' fondness for weaponry, and willingness of Germany and France to feed it, under fire as Greece struggles with debt crisis

Former defence minister Akis Tsochadzopoulos has been charged with accepting an €8m bribe from German company Ferrostaal. Photograph: Petros Giannakouris/AP
A few months before submarines became the talk of Athens, Yiannis Panagopoulos, who heads the Greek trade union confederation (GSEE), found himself sitting opposite Angela Merkel at a private meeting the German chancellor had called of European trade unionists in Berlin.

When it came to his turn to address the leader, he instinctively popped the question that many in Greece have wanted to ask. "After running through all the reasons why austerity wasn't working in my country I brought up the issue of defence expenditure. Was it right, I asked, that our government makes so many weapons purchases from Germany when it obviously couldn't afford such deals and was slashing wages and pensions?"

Merkel's reaction was instant. "She immediately said: 'But we never asked you to spend so much of your GDP on defence,'" Panagopoulos recalled. "And then she mentioned the issue of outstanding payments on submarines she said Germany had been owed for over a decade."

Greek profligacy may be blamed for triggering the debt crisis that now threatens to tear the eurozone apart, but if there is one area where Berlin is less excoriating of state largesse it is in Athens's extravagant taste for arms.

Behind the frequent exhortations that Greece rein in spending after living "beyond its means" – admonishments made most loudly by Merkel and her finance minister Wolfgang Schäuble – there is another reality that paints Germany in a less than flattering light, according to MPs, military experts, economists and scholars.

"If there is one country that has benefited from the huge amounts Greece spends on defence it is Germany," said Dimitris Papadimoulis, an MP with the Coalition of the Radical Left party.

We've all seen how...ugly...Mitt Romney is as a Presidential candidate, so it's no surprise this same EPIC FAIL! trope is to be found in a close examination of his career as a parasite capitalist:

In the midst of that 1994 campaign, one of Romney's companies, American Pad & Paper, bought a plant in Marion, Indiana. At the time, it was prosperous enough to be running three shifts.

Bain's first move was to fire all 258 workers, then invite them to reapply for their jobs at lower wages and a 50 percent cut in health care benefits.

It often amuses me what rationales people come up with when a market moves in one direction or another.

To-wit: an analyst in England makes a positive comment about the banking industry, and glory be! the FTSE jumps up.

The comments specifically addressed this broker's belief...a broker, mind you, not a government official...that central banks around the world will address the lagging economy with stimulus packages.

Gee, thanks for pointing that out, Captain Obvious! A central tenet to Keynesian economics gets reitertated in the national press and markets suddenly facepalm and go "Now why didn't I think of that?"

Frustrated by a lack of political power and fed up with blindly donating to politicians who consistently vote against the industry's interests, a handful of leaders are determined to shake things up.

American Banker, By Barbara A. Rehm, April 4

They have formed the industry's first SuperPAC — dubbed Friends of Traditional Banking — that is designed to target the industry's enemies and support its friends in Congress.

"It comes back to the old philosophy of walking softly and carrying a big stick," says Howard Headlee, the president and chief executive officer of the Utah Bankers Association. "But we've got no big stick. And we should. We have the capacity to have one, we just aren't organized."

Apostoli Fotiadis | Athens | Apr 9

IPS - The broken display cases at Greece’s Museum of Olympia, the site where the first Olympic Games were held thousand of years ago, have stunned members of the Archaeological Service who have been registering a stream of missing cultural artefacts.

Despina Koutsouba, president of the Association of Greek Archaeologists (SEA), says treasure dating back to the Classical, Hellenistic and Byzantine periods has disappeared from the museum, including "a golden ring stamp, copper sculptures from the eighth century BC, coins and clay vases".

The burglaries in the National and Municipal Galleries during February, as well as the armed robbery at the Museum in Olympia on Mar. 5, have exposed weaknesses in the protection of cultural heritage sites around the country, made worse by the so-called austerity programme that is slashing all national public service budgets.

To add insult to injury, the Greek Minister of Culture has decided to cut funding for museum security by 20 percent. According to a new law, the Greek government is also planning personnel cuts of 30-50 percent at the Ministry of Culture.

Athens | April 4

BBC - Protesters have clashed with riot police in Athens hours after a pensioner shot himself dead outside the Greek parliament.

The man, named in the Greek media as 77-year-old Dimitris Christoulas, killed himself in the city's busy Syntagma Square on Wednesday morning.

In a suicide note reported by Greek media, he accused the government of reducing his pension to nothing.

Hundreds of demonstrators gathered in the square outside parliament on Wednesday evening, the scene of many large protests in recent months. Violence erupted, with petrol bombs hurled at police, who fired tear gas in response.

I'm no economist. The jargon makes my head hurt and I've still not found anyone to explain in simple terms: if all the banks are broke and all the governments have deficits, where's the money coming from they're lending to each other, are they making it up out of thin air? But I like to think I know fiscally stupid when I see it.

Spain has just announced a round of austerity "until the pips squeak"; a budget cut of €27bn in a nation with a million angry, desperate people protesting on the streets, with an unemployment rate of 23% and climbing. The measure will keep international bankers mollified for now but will tip Spain into a double dip recession - at which point the investors will be unhappy again. The UK is following the same dumb downward spiral and has already re-entered recession. Ditto Portugal, Greece, Italy --and the U.S. if Republican asset-strippers get their way.

Now, I say this is dumb because I don't get economics but I do get balancing the household budget at the "squeaking pips" end of the scale. If the normal family has $500 income and a debt of $5,000 the rational thing to do is to buckle down, cut the family's overheads, but use $50 of that income to get to work - not just throw it all blindly at the debt. The paychecks earned will not only provide basic needs, but another $50 to get to work next month and, over time, a surplus to throw at a debt which the original entire $500 would hardly have scratched. You don't throw away the chance to create economic growth for your family just so the bank will be happy - it would be the dumbest kind of austerity.

What I'm seeing is that it's no different for entire nations. So why on earth are these governments spending their national bus fare on keeping bankers happy for a short time knowing there will, of necessity, come a time when the bankers won't be happy again, in the process driving their whole national families into the ground? Someone, please explain.

Andrés Cala | Madrid | March 29

CSM - Hundreds of thousands of Spaniards marched Thursday in the first general strike against strangling austerity, only the most recent challenge to the new conservative government of Prime Minister Mariano Rajoy fending off resistance from all sides.

“We can’t take this anymore,” says Eva Cañamares, a station manager in Madrid’s subway system. Her 11 and 9-year old children were passing out union flags beside her in the central Puerta del Sol plaza, where tens of thousands chanted against government economic policies.

“I’m here for my children. They are taking away all our rights and this also affects them,” Mrs. Cañamares says, echoing the strike’s slogans. “They want to do away with everything.… The government just wants to take away everything and not even negotiate."