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Posts Tagged ‘GOP’

Prophets of Gold – Part 6 – Economic fear mongering

Posted by Don McLenaghen on January 29, 2012

Okay, we have thrashed out all the arguments the prophets put forward to support their golden view…they seem lacking at best and fictional at worse; but what about the current economic meltdown?

There is a major problem with the world’s economy…the US economy. The US did not spend enough to get itself out of the recession. Most economists now think[1] if the US had doubled or more its stimulus spending, the economy would be back to a healthy state. You ask “what about the downgrade in the US’s credit rating?” Well that had NOTHING to do with the American debt; the US economy, dollar and treasury bill are still considered the safest investment on the planet (safer than gold?).  The downgrade occurred because of political manipulation of a political minority (the GOP)…S&P stated it was the political instability NOT economic that prompted it to downgrade. The prophets feed into this hysteria to capitalize on the public fear to promote their radical change (I would recommend reading “Shock Doctrine” by Naomi Klein). It has never been cheaper for the US to raise money that now.

Now, the debt is a long-term issue; I am not saying that it is not but I am also saying that it is not the time to worry about it. Reasonable and effective stimulus via spending is more important than debt reduction (and tax cuts do NOT effectively stimulate). Those who follow the prophets, SHOULD insist that when the economy has recovered the government must resist demand to cut taxes but should instead increase them and pay down the deficit when times are good and to place the nation in a position so as to be able to take on the next economic downturn.

“But what about THIS recession? Was it not caused by fiat money? By a high debt?” No!

The current troubles were not caused by government manipulation of the currency nor the debt. Almost every economist (left and right including the infamous Greenspan) blames lack of regulation for the current debacle. The prophets (when not praising gold) staunchly support the laissez faire approach to the economy… a completely free and unregulated market. They say this in spite of the fact that the current crash is directly the result of under-regulation…that in no point in history has unregulated markets led to stable economics. History has shown that deregulation always leads to short term instability and long term monopolistic markets (near absence of competition).

“What about Greece, Italy…they have fiat money and are about to default on their debt; explain that!”

Loss of options

None of the problems had anything to do with the type of (fiat) currency these countries had. In fact, the trouble they currently have is because they cannot just print money. The Euro is not in the control of Greece or Italy…it’s in the control of the European Central Bank. They do have a problem with ‘bonds’ and the need to secure new bonds to keep paying the bills and pay off old bonds that have come due. A countries credit rating is intended to provide lenders a guideline as to the likelihood a nation might default on its loans; this then determines the interest rate lenders can ask.

For a company, a lender would renegotiate the loan – better to take a small loss and let the company recover to repay then lose it all by forcing a bankruptcy. However, in the case of a nation…a nation with the backing of the Euro, there is no chance it will go bankrupt…or default (long term at least) on its debt; there is no incentive for the creditors to ‘work with Greece’ to help its economy recover. To make its bond payments, Greece is forced to reduce its spending because it cannot ‘print more money’…the Euro for Greece is like a fixed currency…the economy goes into recession leading to less tax income so less money to pay lenders and the cycle continues.

Huff and Puff!

The current holders of Greek debt are hedge funds which bought the Greek bonds from other less speculative lenders at a discount; they then turned around and purchased insurance on the debt. The speculators have no interest in helping Greece recover its economy but only to see how much money it can squeeze out of the Greeks. It is true Greece put itself into this bind but we are seeing that the interdependence of a fixed currency can cause financial repercussions over the whole global economy.  The speculators know eventually the European Central Bank or the International Monetary Fund will step in; make good on the loans and turn Greece into a third world country…they will then repeat the process in Spain, Portugal, Italy…if it takes the rest of

The dark side of finance.

Europe down, speculators can still invest in China. The main point in our context is none of this would have been avoided by the gold standard in fact because relative to Greece, the Euro is a fixed currency; it shows that the gold standard would have made no difference and caused the same economic crisis Greece et al are now experiencing in the Euro Zone. In fact it provided a counter-factual because if the Greek’s had their own fiat money, it may have provided Greece a way out of its bond crisis (although still at a price).

“Okay, but more than Greece has experienced a drop in its credit rating…admit it, it’s their debt that caused this problem!”

Now, Greece and more importantly France (among others) have experienced a downgrade in their borrowing grade NOT because they have too large a debt (although for Greece that is part of it) but because they are trying to reduce the debt through austerity measures. There has been a complete misstep that politicians around the globe (reflecting the neo-liberal/neo-conservative revolution that has occurred in the last couple of decades) have become obsessed with reducing the size of government, the deficit and a removal of government regulations on ‘the market’.  As mentioned earlier it was deregulation that was at the heart of the current financial crisis however those who have profited from this ‘unfettered capitalism’ do not want regulations to return so the blame for the economic debacle has been laid at the feet of the debt. The only way the pro-corporate right wing governments[2] see to reduce the debt is to reduce government size and government spending. So, countries like Britain and France have been imposing austerity measures in the false hope they will ‘stimulate the economy’ from the current recession. This is like inflicting deeper cuts on a person who is bleeding to death; it will only hasten death.

"It shall collapsing under the weight of its own contradictions" Marx

In one of those twists, the rating agencies are beginning to acknowledge that government spending in times of recession is good…that failure to do so will make an nation a greater credit risk; thus France is downgraded. I say twist because it is those very same credit rating agencies that graded the toxic Credit Default Swaps from bad housing loans as Grade A that started this current bust cycle. The problems the current nations are experiencing are not universally safer because some nations are willing to spend more to (at least) reduce the decline into recession or attempt to recover. If all nations were locked into the gold standard then the global economy would not be teetering on the edge for a couple of years, it very well have slammed head into a decade’s long depression like we experience a century ago…while on the gold standard!

[2] Sadly, in the ‘new left’ which has replaced the ‘socialist left’ are corporate ponds. The Labour of the UK is not pro-union but pro-business as its actions have shown. This is seen in the US with the difference between the Dems and the GOP being how much and how far they are willing to go in lowering taxes and cutting spending.

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Libya, the UN and what we have lost…

Posted by Don McLenaghen on October 24, 2011

I think it’s time.

He’s dead and in a tangential kind of way we, those of us on the show, asked for it to happen.

There are many adjectives that have been applied to Moammar Kaddafi…revolutionary, dictator, Pan-African federalist, opportunist, Arab nationalist, mad man, anti-American freedom fighter, killer of his own people…whatever label you may apply it seems true that he was unique, anti-colonial and absolute ruler of Libya. I think it’s not a stretch that at least for Libya itself, his death is believed to be a good thing. What follows may be better or worse…time will well. Egypt seems to show that removing the dictator does not guarantee a ‘western-style free democratic society’ (whatever that may mean). Recent hints from the elections in Tunisia and the Libyan leaders point to a more theocratic government based on sharia law with blasphemy laws, curtailed freedom for women and a stricter adherence to religious dogma (maybe as extreme as the ‘based on biblical law’ of the current GOP/Tea Party).

Although I do care what happens now, the focus of this blog is my personal sense of responsibility (as minor and ethereal as it may be) for what happened…what we as “the west” did at first for and then to Libya. As our loyal listeners may remember we did a segment a number of months ago about the intervention of the UN (via the NATO). In that segment we attempted to dissect the issue of intervention.


At the heart of the debate was, as we saw it – innocent citizens being ‘murdered’ by their own government. These ‘innocents’ were the spontaneous uprising hoping to liberate themselves from a ‘hated dictator’. The local flowering of the Arab spring that had seen the removal a despised dictator in Tunisia and Egypt…who were in no small way encouraged by those of us in the free nations hoping for the same in Libya. Unlike Tunisia or Egypt and more like Syria; Libyans were not able to achieve the overthrow in a (relatively) peaceful way.

Some (maybe most in Canada?) didn’t care (it’s their problem not mine), a few thought the west (and especially the USA) was spread too thin as it was with Afghanistan, Iraq, Kosovo, and Africa. There were some who thought we (the west, NATO, the USA…) should invade with troops and put in a ‘better’ (for the West) regime.  Most people (I would like to think) thought that intervention, for humanitarian reasons, was a valid option.

The humanitarian argument was that life should be protected…that just because one is a member of a state, that the state does not have a right to kill its own citizens…in fact if a state kills its own citizens it loses its legitimacy.

That said, it is one thing to say that an illegitimate government should be deposed by its people (as it has happened in Tunisia and apparently in Egypt) and an entirely different (?) thing to have external powers (i.e. NATO, UN, USA) to commit regime change.

As stated, the majority (?) of those in favor of humanitarian intervention do not support (external) regime change.

Racism against black Africans in Libya. Guest workers equated to 'Kaddafi Mercenaries'

In spite of the moral argument a number thought  it still wrong to intervene, not because the cause was just but that once the ‘west’ was involved, our ‘ennobled’ leaders could not resist the temptation to use the military power given them to go beyond humanitarian support and use it to remove a thorn (justifiable or not) in ‘the wests’ side; that once the UN authorized military intervention, the US and Europe (and Canada) would go beyond humanitarian support and act as a proxy air force for the ‘rebels’. Implicit in this is that in supporting the rebels, UN forces (via NATO) would kill numerous ‘innocent’ people in their drive to remove Kaddafi.  As we have seen, although NATO would claim it bombed discriminately, many innocent civilians died from bombing, ‘rebel’ attacks and revenge killing (by the rebels the NATO eventually explicitly supported).

The fear went beyond just the loss of innocent life or even the hypocrisy of the ‘west’. For those who believed in humanitarian intervention but feared regime change, the biggest danger was that the UN was the author of the intervention. That if ‘humanitarian intervention’ was seen to be secret code for ‘regime change’; any attempt by the UN to ACTUALLY promote human rights…to protect the innocent…to take meaningful and concrete actions for ‘good’ would be fatally harmed by this action. That it was for the greater good that we let Kaddafi do what he would to ensure that the UN only flex its muscle for genuine (?) humanitarian causes.

Well, as I said it’s done…regime change done…revolution complete…the chickens will soon come home to roost.

We did not save lives – arguably…did we promote human rights – no…did we remain above petty politics for the sake of grander moral principles – NO! NATO (via the UN) saw an opportunity to remove a thorn and Libya is (perhaps) free of a dictator.

The cost?

The UN…

One thing that is constantly, and justly, raised is why Libya and not Syria (or Bahrain)? IF the UN were to be the neutral protector of BASIC human rights, it should have done something not only in Libya but also in Syria. Libya was easy…it did not have a ‘military’ institution (something seen as a criticism in Libya and a hindrance in Egypt).

Who stands to gain.

Kaddafi was not reliable…there was a moment of opportunity for regime change to a more malleable leader. Keep an eye open in the coming months for talk about ‘rebuilding Libyan infrastructure’…code for western takeover of Libyan oil. Kaddafi was a bastard but he did nationalize most of the petroleum industry and use that money for (what HE saw as) Libyan interests.

Syrians die because they have a ‘real’ air force…Syria is politically ‘complex’…Syrian lives are not as important as Libyans…Kaddafi was more embarrassing to the west than Assade…Assade had support from Iran, Kaddafi only African nations…Bahrain has the base for the US Navy’s 6th Fleet…ultimately, the cost to profit ratio was not worth it…Bahrain’s Spring…Syrian’s Spring…postponed because it was not easy!

Kaddafi is dead. The dead is done. I am unsure if I would still support UN intervention in Libya. If my concern was simply Libya I think I would not hesitate with my support for intervention. IF my concern was the UN…human rights…the world…I am not sure I could remain as confident.

Kaddafi is dead and with him any chance the UN will ‘forcefully’ intervene JUST BECAUSE of human rights…human suffering is involved…just because it’s the moral and right thing to do. The UN is a great idea, sadly it doesn’t seem to work as well in practice.

I mourn today, not for Kaddafi but for humanity as a whole.

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