by Stephen Lendman

 

Europe and America perhaps face their gravest ever economic crisis. Growing millions are impoverished, unemployed, and out of luck.

Hunger and homelessness are increasing. So is unaddressed anger over handouts to bankers, not people facing crushing hardships.

Economist Michael Hudson calls finance a new mode of warfare. Generalissimo bankers run everything. Co-opted politicians serve them. In return, they’re rewarded handsomely.

Ordinary people lose out entirely. So do economies being strip-mined for profit. Hudson asks what’s to stop major Western banks from creating any amount of money they wish?

With it they can “buy up all the bonds and stocks in the world, along with all the land and other assets for sale, in the hope of making capital gains and pocketing the arbitrage spreads by debt leveraging at less than 1% interest cost?”

What’s to stop them from bankrupting nations to buy valued assets cheap? Who’ll stop them when governments play ball? Bankers, in fact, run countries like Greece, Italy, America and Britain. Washington is Wall Street occupied territory. So is London.

Scottish political commentator Ian MacWhirter calls bankers “an untouchable elite, beyond any civil constraint.” Once upon a time, governments ran countries. Today it’s bankers, at least in America and Europe.

They care nothing about legal standards or public need, just profits, limitless amounts to make more of them.

“Are we perhaps moving to a kind of financial feudalism,” asked MacWhirter, “in which immensely wealthy robber barons command a disproportionate share of society’s wealth and subject the people to a kind of debt peonage?”

Indeed so! Waging financial war lets banker bandits create credit in any amount for speculation and whatever assets they want globally.

“Who needs an army,” asked Hudson, “when you can obtain monetary wealth and asset appropriation simply by financial means?” Economies able to create most credit profit most – using computer keyboards, not guns and bombs.

Today, America, Japan, and Eurozone countries face crushing debt burdens. Solutions require adding more, they claim. Imagine the folly of using fuel to extinguish fires. Imagine trying to lose weight by eating more.

Imagine reducing debt burdens with more of it. Imagine hypocritical politicians selling this snake to unwitting populations. Imagine angry people saying no more.

Austrian economist Ludwig von Mises (1881 – 1973) once said:

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Washington and Eurozone chose the later route. Hudson explained that America reached its debt limit and entered its insolvency phase. The end of an era, he calls it. Debt pyramiding scams will end. It’s not if, but when.

Economist Hyman Minsky (1919 – 1996) once described “Ponzi finance” during prolonged expansions and booms. Speculative excesses create bubbles. They, in turn, trigger instability, then asset valuation collapse that turns euphoria to revulsion and market crashes.

Cyclical shorter-term crashes are bad enough. Secular Great Depression ones create enormous protracted hardships and human suffering. Catastrophic conditions result when people are harmed to save bankers.

They also follow more debt on top of already insurmountable burdens. Worse still is adding greater amounts for speculation, not economic growth. Today it’s rewarded, not prevented by regulatory constraints.

Before Nixon closed the gold window in 1971, Hudson said “nations settled their balance of payments in gold or silver.” Dollars were backed by 25% gold at $35 an ounce.

Countries got more gold through trade surpluses. In 1950, America had 80% of the world’s gold. “This made the dollar a virtual proxy for” it. Post-WW II militarism changed things. Once begun, military spending takes on a life of its own. Combined with banker bailouts it’s bankrupting America.

US Treasuries substitute for gold. So do stocks and bonds. Transformed global finance became debt-based in exponential amounts. Unsustainable levels have accumulated. They’re exacerbated by adding more. Debts that can’t be paid, won’t be, explains Hudson.

Restructuring and orderly defaults are needed. Let bankers pay, not people or economies hammered to save them. Eurozone countries are especially entrapped in the euro straightjacket. Former bank regulator/financial fraud expert Bill Black explained their plight, saying:

“A nation that gives up its sovereign currency by joining the euro gives up the three most effective means of responding to a recession.”

“It cannot devalue its currency to make its exports more competitive. It cannot undertake an expansive monetary policy. It does not have any monetary policy, and the EU periphery nations have no meaningful influence on the ECB’s monetary policies.”

“It cannot mount an appropriately expansive fiscal policy because of the restrictions of the EU’s growth and stability pact. The pact is a double oxymoron – preventing effective counter-cyclical fiscal policies harms growth and stability throughout the Eurozone.”

In other words, 17 Eurozone nations surrendered their monetary and fiscal sovereignty to central bank authority in charge of controlling their economic and financial policies, not themselves. It works in good times, not bad.

Today, it’s crushing debt-burdened Greece, Ireland, Portugal, Belgium, Spain and Italy. Expect the Netherlands, Austria, France, and perhaps Germany to follow if they keep throwing good money after bad.

Nothing’s more counterproductive than pursuing wrongheaded policies and expecting one day they’ll work. Economies become subordinate to financial oligarchs. Debt slavery and insolvency follow. Nations become fiefdoms. People face neoserfdom. Freedom heads for extinction. Can revolutions be far behind?

New York Times in Denial

Pursuing its familiar supportive wealth and power role, a November 29 Times editorial headlined, “Germany’s Denial, Europe’s Disaster,” saying:

Facing “economic meltdown,” Germany’s Merkel “is still blocking what is needed: a real bailout of Europe’s weakest economies by their richer neighbors or the European Central Bank.”

Fact check

Times editors know nothing about economics and finance. In addition, their support for wealth, power and bankers at the expense of people is palpable. The above analysis explains their wrongheaded position. What’s needed, of course, is mirror opposite.

Moreover, imagine asking Germany’s $3.5 trillion economy to rescue other Eurozone ones with a combined $9 trillion GDP. Might as well ask a minnow to swallow a whale.

“The markets have clearly figured out that a meltdown of the euro would impose enormous costs on Europe’s most solid economy, too. But German officials are still insisting that their profligate neighbors need to pay for their sinful ways….”

Fact check

Troubled Eurozone countries must opt out of crushing straightjacket policies. Economic recovery depends on reclaiming monetary and fiscal sovereignty. They never should have surrendered it in the first place. Nothing deters regaining it, just enough political will to act.

“What makes this even more absurd is that Europe has the resources – if Germany would drop its objections.”

Fact check

Times editors expect more debt will solve today’s burdens. Instead it will turn Europe’s blaze into a firestorm. Strong countries will be consumed with weak ones. An economics 101 refresher might help change their misguided notions of reality.

Continuing bad policies makes them worse. “The system has to be purged,” says Progressive Radio News Hour regular Bob Chapman.

There’s no other way. It’s that simple, no matter the pain because the alternative’s much worse.