[Marxism] Link between financial and enviromental crisis

ehrbar at greenhouse.economics.utah.edu ehrbar at greenhouse.economics.utah.edu
Sat Aug 13 09:57:27 MDT 2011

At the end of this email is a description of the present
financial crisis by a documentary film maker, David Malone,
author of the book "Debt Generation."  This is a very clear
picture, and as an economist I see nothing wrong with it as
far as it goes.  But it leaves unanswered the question why
the ruling class went from productive profit-making to
speculation and theft.  Marx said that they resort to
speculation when their profits in productive capital are
squeezed due to overproduction.  I think the reason is
deeper.  The ruling class is resorting to theft because the
prospects of productive growth are exhausted due to
pollution and resource exhaustion.  These two factors are
suffocating not only China's growth but the growth of the
entire planetary economy.

As Herman Daly says, the planet is full, there is no space
left for the economy to expand into.  In such a situation a
one-dimensional market system, which single-mindedly focuses
on efficiency, can no longer be a rational or even feasible
guide for the economy.  The binding constraint for the
economy is not efficiency but the limited planetary
resources.  This is not a situation a market-driven economy
can cope with.  In the past, whenever the economy ran into a
problem, more growth was the answer.  This is the market
answer which is no longer possible.  The turn from
productive capital to speculation and dispossession is one
phase in the spontaneous process of markets abolishing
themselves because they can no longer serve the economy.
Instead of waiting for the system to come tumbling down
around us, we should be consciously minimizing the roles of
markets by reversing the securitisation of everything,
re-introducing command and control regulation, carbon
RATIONING, abolishing the fractional reserve system,
introduction of minimum AND MAXIMUM incomes, etc.  Any
attempts at systemic variation, as in Cuba, Venezuela,
Bolivia should be welcomed instead of undermined.

Hans G Ehrbar


The New Normal 

There seem to be to be two broad narratives of our present
situation. The dominant, official narrative, is that there
was a technical crisis of money flow, precipitated by a
bolus of bad debts which then caused a collapse of
confidence in the value of several large asset classes. What
was required was to show that such assets would always
retain their ability to find a buyer and thus their value,
even if the buyer had to be, in the immediate term, the
public purse. The public purse was duly opened to steady
nerves and sales, and massive purchases of whatever could
not find any other buyer were duly made. The plan was and is
that the purchased assets would be sold by our governments,
back to the market once other buyers returned.

The dissident narrative is that this was never a technical
crisis of money flow - liquidity - but one of insolvency due
to the troubled asset classes being, in fact, vastly over
valued. The collapse in value and the lack of buyers was not
a temporary lack of confidence in an otherwise sound
financial system, but a rational shunning of paper assets
whose previous value was almost entirely due to the press of
gullible buyers who were keen to partake in the buy, flip
and buy some more ponzi scheme of speculation.

As long as the paper value was never questioned by all the
players then no one feared reality intruding. Even those
holding the worthless paper were happy as long as everybody
else was signed up to the same grand fiction. Banks held the
paper assets and used them as cheap 'capital assets' just so
long as the lies they were based on remained wholly
accepted. But of course as soon as someone defected from the
grand lie, then the rational thing for everyone to do was to
defect as quickly as possible. This is what every insider
tried to do as quickly as they could and why the collapse
was as fast as it was and was led by the banks themselves.

The end game of such a scenario would have been the
ruination of those left holding the worthless paper. And if
those holding the paper had been you and me then this is
what Wall Street and The City of London would have been
happy to see happen. But in this case the collapse was so
shockingly rapid and in the preceding euphoria of the bubble
so much of the paper had been retained by the banks and
super-wealthy that this was NOT going to be permitted to
happen. Instead actions were taken to ensure that the
worthless paper assets were transferred to the public
purse. Should they recover their value they would be
re-purchased, but if not then they would be left where the
loss would fall on people who were more accustomed to being
poor and whose prior poverty has often been seen by the
wealthy as an indication that they deserved to be poor.

The official narrative today is that the plan of recovery is
working. The narrative focuses on the rise of the stock
markets to almost pre-crash heights. The failure of housing
or commercial property markets to recover and the fact that
unemployment is hideously high is simply no longer part of
the recovery narrative. These things have been dropped. What
has been added has been the 'shocking' level of public,
national debt. In the new narrative the cause of the
ballooning of public debt has been steered away from facts
about the cost of the bail outs or how the disintegration of
the speculative bubble caused a subsequent collapse of real
economic activity. The new story is that the debts we have
now are nothing to do with the banks and their temporary
difficulties. They are due to a deeper incontinence in
public spending.

The narrative is being re-written so that the 'debt crisis'
is seen as something that is under control and being solved,
whereas the present and pressing problem in need of
controlling is the cost of public services and the
unreasonable expectations that underlie them. Public
expectation of a free lunch for their children at school or
a pension for their life's work or a health service paid for
through taxes - these socialist weapons of fiscal
destruction are to blame for the vast public debt. That is
the narrative we are being fed. The bankers are being air
brushed out of the story and certainly any mention of blame
being attached to them is being described as backward
looking if not downright suspect and dangerous. Not far, I
suspect, from being vaguely alluded to as financial
terrorism or a 'financial hate crime'.

What we are left with in the official narrative is that our
betters have one crisis under control - the cash
flow/liquidity crisis and are now taking equally heroic
steps to deal with the recently uncovered, deeper, systemic
crisis - the 'true' crisis - of out-of-control public
spending which is responsible for sovereign debt levels that
are injurious to the efficient workings of the
markets. Markets whose fearless leaders are trying, despite
pubic profligacy and obstinate stupidity, to help us out of
debt and back on to the true path of prosperity via
necessary austerity and more 'realisitic' expectations of
what we are worth and what we deserve.

The question for me is if the dissident narrative can hold
its ground and find something more say. Or have we been been
swept aside?

Certainly we are outgunned and alone. The press are supine
collaborators, the rule of law has been bought and whored,
and academia is either captured by the dominant ideology and
too dimwitted to escape or just too concerned with
grovelling for tenure and a city sinecure.

The dissident narrative I advance says that what we are told
are temporary and extraordinary measures are nothing of the
sort. The measures taken to 'deal' with the 'crisis' have in
fact created, whether by accident design, a new and very
much more reliable, system for ensuring that the super rich
stay that way. The new system horrifies me because it has
put finance above democracy, markets over governments, and
it appals free-marketeers because it sets up an untouchable
aristocracy within the markets who are not allowed to lose
and who can therefore take what they want, when they want,
from whomever they want and the law will not touch
them. Neither the law of the land nor the law of the
markets. Free marketeers and those on the left like me find
ourselves in the unlikely position of sharing an abhorrence
for what the super elite are doing.

What we have in place now is a system of permanent and
institutionalized acceptance that the largest accumulations
of wealth and those who own, manage and serve them can never
be imperilled or threatened either by democratic rule of law
nor even the workings of the markets themselves. Both perils
have been removed for the super rich and their banks because
it is now established that the purpose of government is to
make sure the system and the hierarchy of wealth and power
at its peak, remains untouchable and unchangeable.

With this accepted, the rules of sovereign democratic
government and global finance have mutated beyond
recognition. Today when banks need more of their assets
purchased by the public purse in order to relieve them of
possible losses, the public purse is opened without
discussion. What this means is that you and I are NO LONGER
simply buying up, as a temporary, emergency measure,
mistakes made in the bubble of three years ago. We are there
to buy up the results of any greedy speculations made in the
last two years. Government purchases and the QE which fund
them are no longer part of dealing with any 'crisis' at
all. They are now part of how the banks do business. They
are the new normal.

This isn't a crisis. This is the new business of profit
without risk. It isn't even really a 'bail out'. The new
normal is a no risk machine for expropriating public
wealth. The banks can now buy what ever they want, the
higher the risk the better, because the new system
guarantees that there is no risk for them. The banks can
speculate on sovereign debt, currencies and commodities
knowing that if they are in the elite, they will be bailed
out. Not in the spectacularly embarrassing fashion of 07-08
but in the low key ways dreamt up in the last two years. A
plethora of 'exceptional' funding measures, bond purchases
and abrogations of the rule of law in favour of bank profit,
which are all, in fact, bank bail outs at public expense.

Crisis? What crisis?

The only crisis for the elite and their banks will be if the
next round of QE in America and of ECB bail outs for German
and French Banks via Greece, Portugal and Ireland somehow do
not happen. If there is a minor miracle and our leaders
remember we exist - THEN there will be a crisis for the
banks and the financial elite and some small hope for us.

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