Archive for the ‘Capitalism’ Category
…because that is what all bubbles do!
At the risk of adding insult to injury (in the wake of Hurricane Sandy), I think the worst is yet to come – and I am not talking about the weather (unprecedented or otherwise).
It is already over a year since I first watched – and then blogged about – the revelatory movie Inside Job. In this movie, Hollywood megastar Matt Damon narrates the story of the 2008 financial meltdown. Since then, I have learnt a great deal from a variety of very knowledgeable bloggers – including Per Kurowski and Patrice Ayme – to whom I remain extremely grateful for their patience in teaching such a minnow in the sphere of economics.
I am afraid I do not really enjoy reading; I think I am a visual learner. I find it much easier to assimilate information from video presentations rather than reading blogs, articles, papers, and books. Thus it is that I find I have learnt more in watching a 45-minute documentary than I have learnt in an entire year of reading the above. Or, perhaps, it may be more accurate to say that the 45-minute video has just pulled it all together.
The video in question is based on the 2009 book Financial Fiasco by historian, Johan Norberg, who is (according to Wikipedia) “devoted to promoting economic globalization and liberal positions [and since 2007] has been a senior fellow at the Cato Institute.” The video, Overdose: The Next Financial Crisis, is – in the words of Norberg himself - “the story of the greatest financial crisis of our time; the one that is on its way.” I first watched the video without knowing who Norberg is and, once I found out, it seemed almost inconceivable that a fellow of the CATO Institute could produce such a devastating critique of his own ideology. For this reason alone, I think it is well worth watching.
With my thanks to the Asia Singapore blog for providing a source of quotations from the video, these are some of the best (in case you missed them and/or are unsure whether to watch it):
“After they did the dot-com bubble and that burst, they re-inflated it with real estate bubble and when that burst, they have created the bubble of all bubbles. It is not only the United States now. This is a global bubble. They are all into it. It is called the bail-out bubble. Hey the economy is going down, recession is setting in, sales don’t look good, exports soft, need more money. How about we call it stimulus package!” (Gerald Celente, Trend Analyst Trends Research Institute)
Low interest rates caused the housing bubble. Cheap loans caused the people to buy more and bigger homes. House prices began to rise 10 percent a year. So many took out a second mortgage to fund consumption… Why do you need a decent income to buy a home if you can get rich by just living in it? The market even coined a term NINA loans. No Income, No Assets. No Problem! You will get a loan anyway… (Norberg)
“There was a huge moral hazard created by the government in the mortgage market. When the government started to guarantee the mortgages, then the lenders stopped worrying about getting their money back, because the government said we guarantee it… The housing bubble that they inflated blew up with all the carnage and all the bankruptcies. And now what is their solution: We’ll just do the same thing we did before… Let’s print money and buy mortgages, let’s buy credit card debts, buy student loans… to get to the same excessive risk taking and gambling on the Wall Street. Let’s try to convince American’s already loaded with huge debt to go and buy new stuff and go into deeper to debt. The banks do not wanna lend them money, let’s make them lend more money. This is economic suicide.” (Peter Schiff, Euro Pacific Capital)
Forewarned is forearmed, as they say, so I would recommend all who are in any doubt to watch the video.
(Please note the absence of a question mark)
Last Wednesday, I eventually called a halt to an online discussion, which was threatening to get off-topic, by promising to dedicate a separate post to the subject today.
I think the problem is that we need altruistically-motivated public servants who enter politics to try and make the World a better place. Unfortunately, most of us get ideologically-driven career politicians who seek power in the World because they think they know best.
However, with my thanks to Christine, blogging at 350orbust.com, for bringing him to my attention, the President of Uruguay may well be a rare exception. I cannot put it better than Christine does at the start of her own post about a speech he gave at the Rio+20 Earth Summit in June this year:
President José Mujica of Uruguay [is] so unusual because here we see a political leader speaking the truth about our current situation…
The contemporaneous subtitling (i.e. simultaneous translation) is not very good and makes it harder than it need to be to fully appreciate what he says. However, his passion and his intent are clear; and make it well worth watching despite this. Nevertheless, thanks to the wonders of Google, I have tracked down a transcript of the speech made by a blogger in Uruguay (who was also appalled by the on-screen translation); but…
I really do think you should watch it. Therefore, even though I am sure the translator would not mind me reproducing the text in full here, I have not done so.
For an opposing view, by someone who considers president Mujica to be a dangerous misanthopic Communist, please visit ExPatBob’s blog. I am most certainly not a Communist sympathiser, but I find it very hard to fault President Mujica, when he says stuff like this:
I ask this question: what would happen to this planet if the people of India had the same number of cars per family as the Germans?… Does the world today have the material elements to enable 7 or 8 billion people to enjoy the same level of consumption and squandering as the most affluent Western societies?… Are we ruling over globalization or is globalization ruling over us?… Today, man does not govern the forces he has unleashed, but rather, it is these forces that govern man… And no material belonging is worth as much as life… I’m not talking about returning to the days of the caveman, or erecting a “monument to backwardness”. But we cannot continue like this, indefinitely, being ruled by the market, on the contrary, we have to rule over the market.
This week, I was very pleased to discover that some of my recent output has been listed on a Weekly round-up of blogosphere posts related to anthropogenic climate disruption (ACD) on the Science blogs website. However, I was even more grateful when I saw mention, within that round-up, of a very significant event in British politics last week.
Over recent months, I have posted quite a lot of stuff about hydraulic fracturing (fracking) and carbon capture and storage (CCS); culminating in the items I posted last week (discussed below). It is therefore ironic that I did not notice the row that erupted last week as a result of a public letter to the Secretary of State for the Energy and Climate Change (Ed Davey) from the Chairman of the government’s relevant independent advisory body (the Committee on Climate Change [CCC]) – former Conservative Environment Minister John Selwyn Gummer (now Lord Deben) – as publicised in The Guardian last Thursday.
The UK government published a draft Energy Bill in May this year, on which I commented at the time – in ‘A very unsustainable Energy Bill’. At that time, I was concerned about the stated aim of the UK government to become less reliant upon imported gas. More specifically, I was (and am) concerned that it is planning to replace this with oil shale gas (from fracking); rather than encouraging people to get off the grid altogether by investing in micro-generation (such as solar panels).
It seems, therefore, that anticipation had been growing that an announcement would soon be made that the UK is likely to remain reliant upon new gas-fired power generation (without CCS) well beyond 2030. If the UK pursues this strategy it will do so despite the following:
– 1. The widespread international agreement – of organisations such as the International Energy Agency (IEA); numerous scientists such as James Hansen; and even influential (and formerly sceptical) economists such as William Nordhaus – that humanity can no longer afford to delay decarbonising its energy generation systems.
– 2. The agreement reached at the G20 Summit in Pittsburgh in 2009 that – in energy generation a least – fossil fuel subsidies and fossil fuel use both need to be phased out.
– 3. The fact that the Earth has five times more conventional fossil fuel than is now considered safe to burn; and therefore now is not the time to be finding a whole load more unconventional fossil fuels to burn as well.
This all makes me wonder if George Osborne has been paying too much attention to what libertarian ideologues like Richard Lindzen are probably telling him. Wherever this transparently intellectually incoherent policy is coming from, it was clearly this refusal to phase out fossil fuel use (now that we know it is causing ACD) that drove Lord Deben to publish the CCC’s letter last Thursday. In it, he began by stating:
Extensive use of unabated gas-fired capacity (i.e. without [CCS] in 2030 and beyond would be incompatible with meeting legislated carbon budgets. These are, of course, designed to balance the costs and risks of meeting long-term objectives and they require significant investment in low-carbon power generation over the next two decades…
What is even more surprising is that the Chancellor of the Exchequer decided to respond so promptly – quite possibly due to the CCC’s suggestion that pursuing gas (from fracking) instead of equivalent investment in renewable energy could be illegal because (as the CCC letter continues):
Unabated gas-fired generation could therefore not form the basis for Government policy, given the need under the Climate Change Act to set policies to meet carbon budgets and the 2050 [emissions reduction] target.
As I made clear on my blog last week, having benefited from an exchange of emails with Professor Robert Mair (on fracking) and with Dr Bryan Lovell (on CCS), I remain convinced that pursuing fracking as a panacea to all our energy problems is insane; but have reluctantly come to accept that we may have to rely upon CCS if we are to avoid significant ACD. However, this is no excuse for doing as George Osborne has done – effectively telling his own independent advisors that, once again, the non-scientist knows what the best course of action is.
Indeed, apart from putting your hands over your ears and shouting “La la la, I can’t hear you!”, there can only one possible reasons for doing as George Osborne has done – he must believe we can continue to burn fossil fuels with impunity and/or doubt the reality of catastrophic ACD if we do not use CCS to prevent it.
I therefore think it is crunch time for the UK’s Coalition government. Prime Minister David Cameron, whom I support on many issues, famously said he wanted to make it “the greenest government ever”. Sadly, it seems to be failing significantly in many ways: In addition to crippling the green revolution at birth – by removing most of the incentives to get individual households to invest in Solar PV panels on their roofs (etc) – it now seems set to pursue energy independence in the form of fracking. As The Guardian concludes:
The argument over the [decarbonisation] target is now likely to reach the top of the government with pressure mounting on Cameron to face down critics of the government’s green policies and adopt the CCC recommendations in full.
… By succeeding in getting the EU’s new Transparency Laws enacted?
With my thanks to all my old friends at Tearfund, I have already emailed my MP about the corruption in Africa that, along with all the evils of the EU’s Common Agricultural Policy, ensures that Africa stays poor.
If you live in the UK, please consider taking action. Tearfund may be a Christian charity but, faith in God is not a pre-requisite for fighting corruption (wherever it may be found). However, if using Tearfund as a vehicle to make your voice heard bothers you, I am quite sure many other charities have campaigns running to promote the cause of getting these Transparency Laws in place. What could be more important than eliminating corruption? OK, I know; saving the planet is but – lets face it – they are two sides of the same coin…
This month Cyprus takes the baton as president of the European Union – with responsibility for steering finance negotiations on these new transparency laws. European leaders finally have the opportunity to agree new transparency laws. They need to know that Christians across Europe want to tackle corruption and release poor communities to benefit from the wealth beneath their feet.
However, the World’s biggest multi-national companies (with some secrets to hide?) are using their power to try and water down these transparency laws. If they succeed this will make it significantly harder for poor communities to hold their governments to account. But we also have power, and together we can call on Cyprus to ensure new transparency laws do truly help poor communities.
Thank you so much for your support.
The Campaigns Team.
P.S. Once you’ve taken action, why not share this video with your friends?
This may have little to do with the environment but – I’m sorry – I simply cannot remain silent any longer about the revelation that the financial services industry in London is almost unbelievably corrupt. We are watching history being made here; this is bigger than the Olympics – and I think it will take the City of London decades to recover its reputation (if it ever can). It may be the CEO of Barclays, Bob Diamond, that has hit the headlines, but this scandal is set to envelop at least 20 banks; and I think there will be very few that will not eventually be tainted by it.
I stayed up late last night to watch two weekly current affairs programmes on the BBC, Question Time and This Week. The first question on the former set the tone for the evening: “Is there any integrity left in British Banking?”… The panel – including the CEO of brokering firm Tullett Prebon – were unanimous in their condemnation of Barclays; and every single one of them called for Bob Diamond to resign.
However, despite the unanimous view that he should resign (or be fired), a view clearly shared by the UK’s Prime Minister David Cameron, most people seem to think he will not go, simply because so many other banks are being investigated for the same thing; manipulation of the LIBOR – the interest rate banks use to lend each other money and/or make huge bets on future performance of equities. The fractions of a percentage involved are miniscule; but the sums of money involved are huge. This is indicative of the way in which the financial services sector is completely detached from reality; some of the trades involved sums of money in excess of the annual economic output of the entire planet.
Put simply, this money does not exist; and yet it has corrupted many of those involved. I therefore think the award for the soundbite of the evening must go to Michael Portillo, a former Conservative Minister in the Thatcher government, who said on This Week last night that (I paraphrase):
“If Pakistani cricketers can get sent to jail for match fixing, surely these traders should be sent to jail for what they have done…?”
Like I said at the start of this rant, I think it will take the City of London decades to recover its reputation (if it ever can); and I am very worried that no-one will ever be sent to jail for what they have done. However, I really hope action will be taken; and I hope that our politicians will stop trying to score political points against each other. This is no time for the present Coalition government to blame the previous Labour administration for light touch regulation. This kind of hypocrisy is almost as contemptible as the amoral behaviour of the bankers involved. How does the analogy go… “Before you try to take a splinter out of the eye of your fellow-man, remove the plank from your own!” The main reason we are in this financial mess is due to the action of another coalition – that between Reagan and Thatcher in the 1980s – which allowed the ‘Big Bang’ de-regulation of the financial services sector in London in 1986. This was the message of the movie Inside Job.
Barclays shares lost 16% of their value yesterday; but this is much bigger than Barclays. This scandal exposes the fact that our entire banking system is utterly corrupted; and rotten to the core. As many of the contributors to last night’s programme suggested, the high-street banks should now be separated from the investment banks. However, I do not think the Augean Stables can ever be cleaned-up; it needs to raised to the ground and completely re-built.
So, what, if anything, has this to do with the environment? A great deal, I suspect, because a very large proportion of humanity has very clearly taken its collective eye off the ball… I will close with the wise words of a Native American leader and poet:
When all the trees have been cut down, when all the animals have been hunted, when all the waters are polluted…
only then will you discover you cannot eat money.
Amongst other things, I explained why I am not a Socialist yesterday. Therefore, it seems only fair that I should also explain why I am not a Capitalist either. Actually, since anyone with money invested in a pension scheme is an inadvertent capitalist, it would be more accurate for me to say I have lost my faith in Capitalism. In fact, this and yesterday’s posts would have been better entitled “Why I don’t believe in Socialism” and “Why I don’t believe in Capitalism” respectively.
Whether wise or not, in a recent job application to an environmental NGO, I wrote: “It may have taken me 20-25 years to work out that my concern regarding climate change was the reason for my persistent unease about working for clients whose focus is commercial rather than environmental; but I believe that it is fundamentally important for me to have done so.”
Friends and relatives have recently characterised me as having been foolish; and/or for having poor judgement; for being too honest in job interviews; for being too idealistic and evangelistic in promoting my belief in the value of our environment; and for not placing sufficient value upon the attainment of a (supposedly) decent job. I guess that, having challenged much of the modus operandi of our modern world, I should not have been surprised by the boldness of this criticism (from a well-educated successful person) but I was, nonetheless, disappointed by it. The question still remains as to exactly who is being foolish here? Is it those who appear to be up on deck in the Orchestra – determined to keep on playing while the ship sinks; or those who appear to be locked beneath decks in Steerage – insisting that the ship might not have hit the iceberg if we had been in charge? One thing seems clear – whether you apply it to the fate of the EU or the whole planet – the myth of the unsinkable Titanic seems to be a very apt analogy for humanity’s current predicament. See: From Titanic to Avatar and back again (14 April 2012).
Former British Prime Minister Tony Blair has been trekking round the TV and Radio Studios in the UK recently and, in between fending off questions over his handling of the Iraq War (yet again) – and admitting that he would have much preferred the job of EU President than Middle East Peace Envoy – he made the astonishing claim that Gordon Brown was “always right about economics”. Wherever ‘Blairland’ is, it sounds like an idyllic place where fantasy and fiction are indistinguishable. However, the reason I mention this is not to have a go at Labour’s economic mismanagement of the last decade but because Blair made it clear that he sees a Federalised European superstate – bankrolled by Germany – as the only way that Europe can have influence in our new global village. He even admitted that the purpose of the European Union was no longer to guarantee peace; it was to guarantee power! And for power, I think we should read ‘money’. This is because Blair was never really a Socialist; indeed he still insists in the need for a Third Way. Unfortunately, he is still worshipping at the temple of Growth and – therefore – his Third Way is still a road paved with economic denial of basic physics that can lead to nowhere but the annihilation of humanity (and most if not all life on Earth). It may take 200 years but, unless we recant from the foolishness of Growthmania and the fetishization of Money itself, I am now certain we will eventually make this planet uninhabitable. That is to say, the rapid and accelerating depletion of all its natural resources will cease to be the issue; the crunch point will come – and scientists say it is not now far off – when human activity triggers the failure of the ecosystem services that nature provides (and which make our existence possible).
Given the looming financial and economic catastrophe that collective hypnosis at Rio+20 has just made inevitable, our best option is localism not federalism: Just look at what happens when the British banking system stops processing payments for one night – it causes chaos and takes a week to sort it out. Imagine what will happen when this is repeated across the EU…
We should all be worried by this: self-sufficient communities would appear to be the only plausible means to escape the approaching twin tsunamis of environmental and socio-economic collapse… And remember, it will not happen because anyone wishes it to happen; it will now happen because our leaders chose to ignore the scientists that told them they needed to act to prevent it happening. Imagine what will happen when the failure in our banking systems is replicated in nature itself…
So, to conclude: Yesterday, I implied that I do not believe in Socialism because it is a utopian project. However, as quoted back in April, John Gray has (rightly in my view) described Capitalism as a utopian project also. Therefore, my disillusionment with both should not be surprising. But, if Tony Blair has not found it, what is the Third Way? I believe that nature itself needs a New Deal: The “go forth and multiply” project has failed; so has the “have dominion over the Earth and subdue it” project. What humanity needs to do now is to re-learn how to live in harmony with nature. If we do not, I fear that we will be exterminated because:
“Perpetual growth is the creed of the cancer cell” – Paul Ehrlich.
Yesterday, on Learning from Dogs, Paul Handover published his thoughts on the 6-minute video of a presentation by a remarkably altruistic venture Capitalist, Nick Hanauer, which you can now view here (below). However, firstly, here are some words of introduction to provide necessary context:
Paul has published his thoughts under the title Inequality, a rich man speaks and, in doing so, has provided an excellent summary of Hanauer’s spectacularly-successful business career (e.g. being one of the first to invest in a new fledgling Internet-based sales idea called Amazon in 1995).
The core of Hanauer’s message is this: Venture Capitalists do not create jobs. Jobs are created in response to demand for a product; and demand for a product (i.e. sales) requires people to have a disposable income. That being the case (and ignoring for a moment that all growth in sales is perpetuated by the manufactured discontent peddled by advertisers), Hanauer argues that lowering taxes on the rich does not promote job creation; it perpetuates and exacerbates social inequality.
History is on Hanauer’s side so, I hope you will watch the brief video and see what you think but, for the record, my thoughts are appended below it.
Mr Hanauer needs to have a quiet word with George Osborne and David Cameron in the UK; because one of the few things that the Liberal Democrats are not challenging the Conservative-led coalition government on is their well-publicised and enacted policy of lowering Corporation Tax to the lowest level of any country in Europe – if not the World. They have also lowered personal tax on the wealthy – on advice from those trying to collect the taxes who say so much money is spent on tax avoidance that it is not economic to try and collect it all… Next stop for the UK may be Greece – where so little tax is collected from anybody that it is only good for cheap summer holidays, fine-sounding literature and philosophy, and ancient monuments.
Mr Hanauer’s appeal for the wealthy to shoulder more of the tax burden (not less) is welcome evidence of altruism sadly absent from the pronouncements and behaviours exhibited by most of the super-rich. It is somewhat reminiscent of the refreshing demand of the owner of a peat-extraction business calling for carbon to be taxed or even banned… in order to encourage demand for – and investment in – alternatives.
With people like Mr. Hanauer around, there may yet be hope for humanity to avert the catastrophe awaiting us all if we choose to ignore science, history and economics.
In The Road to Hell (1989), Chris Rea questioned where our growth-obsessed country – with its often over-congested and gridlocked road network was headed. If he were writing this song today, I feel confident he would incorporate into it questions regarding the unsustainable way in which humanity is currently using the Earth’s non-renewable resources – including minerals and energy – and the inequitous distribution of access to all resources (renewable and non-renewable alike); particularly clean fresh water (undervalued and wasted in developed countries – and highly-prized if not yet fought over in the rest of the World).
We have had globalised Capitalism for a few decades now and, one thing seems certain, the “trickle down effect” so beloved of messrs Reagan and Thatcher was a cruel myth; just as was the “arbeit macht frei”-style Utopia espoused by Marx, Lenin and Stalin and Co.. Furthermore, while engaging in a bit of anti-Marxist rhetoric, let’s clear up one thing: Karl Marx may have denounced Capitalism for being money fetishism but:
Marxism = Growthmania minus Capitalism. End of story.
I will leave the rest to Chris. Enjoy.
Rick Santorum recently suggested that climate scientists are like Pharisees but, as many others have pointed out – as they always were and will be – the real Pharisees today are ultra Conservative politicians! As such, by uttering such an absurdity/insanity/obscenity [delete any that do not apply], Santorum has plumbed new depths of reality inversion.
I appreciate that fools like Santorum make an easy target but, please, can we attack the psuedo science without attacking the misguided Churchianity that people like Santorum hide their anti-intellectualism behind? I think all such denialism is not actually driven by any real faith in God that these people may have (apart from an almost subconscious ascent to the idea that we humans have a right to dominate nature rather than a responsibility to be good stewards of it). For the vast majority, their denial of reality is driven by adherence to libertarian ideology and free market economics. However, because this would be immediately seen as them not acting in the public interest, a bit like members of the KKK, they hide behind a veil of pure white religiousity instead.
So then, here is why I think Rick Santorum needs to study his Bible a bit more closely (it is taken from the 23rd Chapter of the Gospel according to St Matthew):
Seven Woes on the Teachers of the Law and the Pharisees
Woe to you, teachers of the law and Pharisees, you hypocrites! You shut the kingdom of heaven in men’s faces. You yourselves do not enter, nor will you let those enter who are trying to.
Woe to you, teachers of the law and Pharisees, you hypocrites! You travel over land and sea to win a single convert, and when he becomes one, you make him twice as much a son of hell as you are.
Woe to you, blind guides! You say, ‘If anyone swears by the temple, it means nothing; but if anyone swears by the gold of the temple, he is bound by his oath.’ You blind fools! Which is greater: the gold, or the temple that makes the gold sacred?…
Woe to you, teachers of the law and Pharisees, you hypocrites! You give a tenth of your spices— mint, dill and cummin. But you have neglected the more important matters of the law— justice, mercy and faithfulness. You should have practised the latter, without neglecting the former. You blind guides! You strain out a gnat but swallow a camel.
Woe to you, teachers of the law and Pharisees, you hypocrites! You clean the outside of the cup and dish, but inside they are full of greed and self-indulgence. Blind Pharisee! First clean the inside of the cup and dish, and then the outside also will be clean.
Woe to you, teachers of the law and Pharisees, you hypocrites! You are like whitewashed tombs, which look beautiful on the outside but on the inside are full of dead men’s bones and everything unclean. In the same way, on the outside you appear to people as righteous but on the inside you are full of hypocrisy and wickedness.
Woe to you, teachers of the law and Pharisees, you hypocrites! You build tombs for the prophets and decorate the graves of the righteous. And you say, ‘If we had lived in the days of our forefathers, we would not have taken part with them in shedding the blood of the prophets.’ So you testify against yourselves that you are the descendants of those who murdered the prophets. Fill up, then, the measure of the sin of your forefathers!
(Matthew 23:13-32 NIV)
Those who know their Bible well, may ask why I stopped there. This is because Jesus went on to rebuke these Pharisees as follows: “You snakes! You brood of vipers! How will you escape being condemned to hell? Therefore I am sending you prophets and wise men and teachers. Some of them you will kill and crucify; others you will flog in your synagogues and pursue from town to town. And so upon you will come all the righteous blood that has been shed on earth…”
Is this not exactly what the Tea Party is doing? These ultra-Conservative prisoners of libertarian ideology and fanatical adherents to free market economics are determined to sacrifice the future habitability of planet Earth on an altar of worship to their God of short-term self-interest… My advice to all who are tempted to join them is this: When we know we’re in a hole, we should stop digging!
Update: With my thanks to the Mashed Potato Bulletin for the hat-tip, Michael Tomasky very eloquently summarised all that is wrong with the Republican Party today in this (17 January 2012) piece: What Mitt’s Father Got Right (and Mitt Gets Wrong)… As Tomasky says, “Romney… is appallingly wrong about ‘envy’ [because] he assumes that everyone wants to get rich but isn’t ‘good’ enough.”