More bankocracy

source: CADTM

translation  Cuba-Network in Defense of Humanity

Another lesson that left wing governments should apply radical measures regarding the illegal debt, the private banks, public services…to promote social justice and begin an ecological transition. Without this there is no way out of the crisis in favor of the people. 

What has been the evolution of the situation and what are the most important events in relation to the subjects covered in the book Bankocracy since its completion on March 31, 2014.

The private financial system has not applied any measure to prevent the outbreak of a new crisis. The governments and different authorities in charge of watching over the regulations and its improvement have delayed in time or enormously softened the small measures announced in 2008-2009. Banking concentration has continued and also the risk activities. About 15 to 20 of the large banks of Europe and the United States have continued to promote different scandals in relation to toxic loans, fraudulent mortgage credits, manipulation of exchange markets, manipulation of interest rates (particularly Libor), manipulation of energy markets, massive fiscal evasion, money laundering of organized crime, etc.

The authorities have been content to impose fines, generally very small in relation to the crimes committed and their negative impact on public finances without mentioning the deteriorations of the conditions of life of millions of persons around the world. Responsible organization such as Martin Wheatley that directed Financial Conduct Authority in London has been fired for trying to do his job and make too many criticisms of banking action .George Osborne, Chancellor of the Exchequer (Ministry of Economic and Financial Affairs) has decided to free himself from Martin Wheatley in July of 2015 nine months before completion of his five year contract

In spite of his evident responsibility, now banking executive in the United States or Europe (aside from Iceland) has been condemned with the traders are persecuted and jailed under prison sentences that go from 5 to 14 years.

Banks that have been nationalized with large costs to protect the interests of the many private shareholders are sold at balanced prices in the private sector such as the Royal Bank of Scotland in the United Kingdom in 2015. Saving the RBS has cost 45 billion pounds. Its re privatization probably caused a loss of around 14 billion pounds. That is also the case of SNS Reaal and ABN Amro in the Netherlands, and Allied Irish Banks in Ireland or the defunct Banco Espirito Santo of Portugal. The losses for public finances are enormous.

The policy of the BCE has evolved in form but not in depth. The institution based in Frankfort has launched early in 2015 an active quantitative policy of easing (quantitative expansion) buying shares of private European banks every month for 60 billion Euros. The BCE buys banks through structural measures that encourage them to produce. They also purchase bank obligations (covered bonds) and titles of sovereign debt of the countries that apply neo liberal policies. At the same time the BCE lends private banks at an rate of 0,05% (rate in force since September of 2014 .

The FED has put an end to the policy of quantitative easing in force between 2008 and 2014. It does not buy mortgage titles structured in the banks. It announced that from the beginning of 2014 it will proceed, for the first time since 2006, to a rise of interest rates. At first it should occur before the end of 2015. But the potential negative repercussions for the economy are dubious. In truth, the rise of interest rates attracts massively capital to the United States that will affect the dollar against the other currencies and reduce US exports due to the lethargy of the rest of the world economy. Also many private companies run the risk of encountering serious problems of re financing their debt.

The policies followed by the central banks by the governments have not re launched a productive investment. The large private companies sit on an amount of liquidity on the one hand, and in the other the Atlantic. For European companies that are not financial represents a billion Euros (1 000 000 000 000 €) that, instead of increasing investments and production lay in the vaults of the companies. The companies massively use their benefits to buy their own shares in the Stock Market while maintaining raised values (preventing their fall) on how to supply the shareholders with large incomes. At the same time, part of the benefits serve for the shareholders in a form of dividends that continue rising, strengthening, of course, the tendency of not investing.

It is completely clear that the policies of the governments and the central bank feed the speculative bubble in stock markets. This bubble can burst at any moment. It has begun in China in 2015 and at one time or other will occur in Europe and in the United States.

At the same time, prices of some raw materials are down (oil, solid minerals, etc…) The sudden fall of the price of oil has ended the boom of gas from the fracking in the United States and many companies of the sector are on the brink of bankruptcy. Large oil export countries such as Venezuela and Nigeria are very affected by the fall of prices.

One of the theories of the book, Bancocracia, is that central banks and government follow two large objectives:

1. Rescue the large private banks, their large number of shareholders and main executives while guaranteeing the continuance of their privileges. It can be said without any risk of error that without the action of the central banks some large banks would have gone bankrupt and would force the government to take actions against their executives and large shareholder through strong coercive measures.

2. Participate and support offensive forms of attack of Capital against Work to increase the large profits of the companies and make the large European companies more competitive in the world market against their concurrent foreigners… These two objectives are common in FED, in the Bank of England, in the BCE and the Bank of Japan.

Referring to the BCE are added two specific and complementary objectives:

1. To defend the Euro that is a straitjacket for the weaker economies of the Euro zone as well as for the European peoples. The Euro is a service instrument of the large private companies and the European dominant class (1% of the wealthiest). The countries that are part of the Euro zone cannot devaluate their currency since their adoption of the Euro. However, the weaker countries of the Euro zone would win by devaluating to reencounter competition against the giants of Germany, Franc, Benelux (Belgium, the Netherlands, Luxemburg) and Austria. Countries such as Greece, Portugal, Spain or Italy are trapped for belonging to the Euro zone. European authorities and the national government apply then what is called an internal devaluation: impose a reduction of salaries to only benefit the executives of the large private companies.

2. Strengthen the domination of the stronger European economies (Germany, France, Benelux…) in which are based the largest private European companies. This implies stronger asymmetries between the strongest economies and the weaker ones.

The victory of the left wing anti austerity coalition in Greece in 2015 has constituted a threat to the BCE, the European Commission, the large companies and all the other governments of the EU (not only those of the Euro zone). The BCE and all European executives have made of the defeat of the Syriza project the central objectives of their activities and have reached their goals by the end of July 2015. The BCE has literally asphyxiated the Greek financial system and put the government of Tsipras to its knees. To avoid capitalization the government of Tsipras has set up alternative solutions [5] that are dealt with in the final chapter of Bancocracia. It should have rested on the results of an audit done by the Commission for Truth about the Greek debt [6]. He preferred to maintain a moderate orientation that was condemned to failure.

However, in these past few years it is clear that, as a result of the 2007-2008 crisis and the strengthening of the neo liberal policies, the peoples are willing to chose radical solutions. Proof of this, is the echo found specifically for the most left wing proposals of Syriza in Greece, in Podemos in Spain and even Jeremy Corbyn in the United Kingdom and of Bernie Sanders in the United States. One of the central lessons of Greek capitulation in July of 2015 are the need for political forces that in truth intend to implant the measures integrated to a coherent program of rupture against the system. Another lesson is that a left wing government must apply radical measures concerning the illegal debt, the private banks, and the taxes, public services … to promote social justice and undertake an ecological transition. Without this there is no way out of the crisis in favor of the peoples.

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