france: le systeme centralise, clienteliste et corporatiste a vecu

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http://www.lefigaro.fr/vox/politique/2014/06/20/31001-20140620ARTFIG00224-france-les-scenarios-de-la-catastrophe.php#auteur

France : les scénarios de la catastrophe

FIGAROVOX/GRAND ENTRETIEN - La France est-elle une cocotte-minute sur le point d'exploser. C'est ce que pense l'essayiste Serge Federbusch. Dans Français, prêts pour votre prochaine révolution ?, il décrit les trois scénarios de notre avenir proche. Deux sont catastrophiques. Le pire, c'est que c'est crédible!

20/06/2014
Propos recueillis par Guillaume Perrault

Ancien élève de l'Ecole nationale d'administration, Serge Federbusch est magistrat administratif. Il a travaillé pour le ministère des finances, le quai d'Orsay et la ville de Paris. Président du Parti des Libertés, ancien élu du Xe arrondissement de Paris, Serge Federbusch anime Delanopolis, site d'information satirique consacrée à la vie politique dans la capitale.
Français, prêts pour votre prochaine révolution? , est publié chez Ixelles éditions (271 p., 17,90€).

LE FIGARO: en quoi la France de 2014 vous paraît présenter des analogies avec les cas d'effondrement par désagrégation interne que la France a connus?

 

Les analogies sont nombreuses. Le déficit et la dette publics représentent à peu près les mêmes masses financières, par rapport à la richesse du pays, qu'en 1788. La crise budgétaire est ouverte et rien ne semble pouvoir l'enrayer. Le gouvernement a perdu sa souveraineté, son autonomie, en matière de politique monétaire et financière. En 1788, on subissait encore la conséquence de la banqueroute de Law, près de 70 ans plus tôt. Calonne, qui s'était essayé à manipuler le titrage en or des louis et ducats, avait été accusé de fraude, presque de crime contre le bien public. De nos jours, l'Etat est dépendant des décisions de Bruxelles et de la Banque centrale européenne. Hier comme aujourd'hui, la perte de crédit et de prestige du souverain et de son gouvernement sont considérables. L'affaire du collier de la reine avait beaucoup miné l'autorité royale. Quantité de libellistes écrivaient sous le manteau des textes d'une hostilité farouche au roi et à la reine. De même, aujourd'hui, nombre de blogueurs critiquent le pouvoir. Les journalistes ne sont plus ni écoutés ni respectés, mais au contraire pris à partie. La frustration générale de l'opinion, la montée du chômage, la stagnation du pouvoir d'achat par habitant depuis bientôt dix ans se constatent aux deux époques. Comme en 1788, le pouvoir n'est plus obéi ni respecté. La paralysie de l'Etat s'aggrave de mois en mois. Il n'est même plus capable de régler une question aussi secondaire que celle des portiques écotaxe. Le système centralisé, clientéliste et corporatiste a vécu, en 2014 comme en 1788. Reste à savoir d'où viendra l'étincelle. Je pense que ce sera la crise de l'euro ou une dissolution ratée, ou encore les deux à la fois, qui rendront le pays ingouvernable.

La France, écrivez-vous, a «cherché à tirer parti des avantages de la 3e révolution industrielle (…) sans en payer le prix»: en quoi?

 

Depuis plus de trente ans, les Français sont atteints de schizophrénie. Comme consommateurs, ils bénéficient de la baisse du prix de nombreux biens et services grâce à ce qu'on nomme «mondialisation». Comme producteurs, nombre d'entre eux ont vu leurs emplois disparaître ou leurs salaires stagner du fait de la concurrence internationale. Jusqu'à présent, la France a plus ou moins réussi à avoir le beurre et l'argent du beurre. Le développement de l'emploi public et de la dette a permis à une large majorité de la population de bénéficier de cette situation davantage qu'elle n'en souffrait. Mais aujourd'hui, il faudrait commencer à rembourser. Et le système ne tient que parce que les prêteurs pensent que, derrière la France, il y a la discipline germanique qui nous protège. Mais c'est un baril de poudre près d'un brasier.

Vous n'êtes pas tendre pour la haute fonction publique, vous qui avez fait l'Ena…

 

La France souffre d'une boursouflure du système politico-administratif français dans ses rapports avec les corporations. Le noyau du système dirigeant est une sorte de duopole qui comprend élus à vie et hauts fonctionnaires. Ils s'appuient sur une administration dilatée et gouvernent par des accords avec les corporations et les cadres des grandes entreprises. Mais les dirigeants de ces deux dernières sont plus solidement installés que les politiciens, ce qui finit par fragiliser l'Etat. On retrouve ici un trait commun à tous les régimes français depuis plus de deux siècles: il est difficile de concilier gouvernement centralisé, régime économique libéral et parlementarisme de circonscriptions. S'y substitue donc un dialogue direct entre pouvoir exécutif et corporations qui finit par être paralysant car il n'existe pas d'arbitre légitime à leurs inévitables désaccords. C'est ce qui explique, au fond, les déboires actuels de Hollande qui affronte le stade terminal de cette évolution délétère.

Bruxelles: bouc émissaire de nos difficultés ou vrai coupable?

 

Les deux, forcément! L'Etat s'est servi du prétexte européen pour tenter de résister à certaines pressions corporatistes et a trouvé des subventions allemandes repeintes aux couleurs de l'Europe pour faciliter les délicates mutations du monde rural français. Par la suite, le marché financier européen a permis d'obtenir des financements plus abondants et de s'endetter à moindre coût. Mais le prix à payer était la monnaie unique. Sinon les marchés auraient continué à attaquer le franc, la peseta et le lire en faisant monter le mark. Aujourd'hui, l'euro agit comme un noeud coulant autour de l'économie française. Toute réforme de structure «vertueuse» est rendue vaine par la montée du taux de change de l'euro qu'elle entraîne. En effet, les marchés en espèrent un redressement budgétaire dans la zone euro, qui contraste avec la situation américaine, anglaise ou japonaise. Nous sommes entrés dans l'euro avec un taux de change du franc surévalué. Les Allemands, qui d'ailleurs jouent des délocalisations en Europe de l'Est pour améliorer leur compétitivité, ont pu dès le départ accroître la productivité de leur industrie. Depuis plus de dix ans, ils progressent surtout aux dépens des économies sud européennes, notamment celle de la France. Cette situation est perverse et sans issue.

Vous imaginez trois scénarios pour l'avenir proche. Le premier: Hollande est un nouveau Louis XVI. Que pourrait-il se passer?

 

C'est un scénario tout à fait plausible. Face à l'échec quasi assuré des mesures de redressement budgétaire, entre autre en raison de la persistance d'un euro surévalué qui déprime l'activité, Hollande, tôt ou tard, sera sommé de mettre en oeuvre de vraies mesures d'austérité. Il ne le voudra ni ne le pourra car un nombre croissant de députés socialistes préfèreront «tomber à gauche», comme on disait sous la Quatrième République. Du reste, Hollande se dira que sa seule chance d'être réélu est une cohabitation. Comme le niveau atteint par le Front national conduira à de nombreuses triangulaires, la victoire de l'UMP sera étriquée. Si la droite est maligne d'ailleurs, elle refusera de constituer un gouvernement tant qu'Hollande n'aura pas démissionné. Bref, on sera en pleine crise de régime avec un budget en capilotade. Rien ne s'opposera plus à une remontée des taux d'intérêt et une spirale de troubles politiques, économiques et sociaux. Les prétextes à une explosion ne manqueront pas: regardez déjà du côté de la SNCF, des banlieues ou des intermittents.

Rêvons un peu: un de Gaulle se présente. Quelle feuille de route lui donnez-vous?

 

Terminer ce qui a été commencé en 1958 et 1962 avec les moyens nouveaux dont dispose la démocratie. S'appuyer sur un recours régulier au référendum, diminuer drastiquement le nombre d'élus et surtout empêcher que quelqu'un vive toute sa vie de politique. Réformer la chose publique pour réduire le poids de l'Etat, libéraliser au maximum le fonctionnement de l'économie et, dans l'immédiat, taper du poing sur la table pour que l'euro se déprécie d'au moins 40 % faute de quoi tout ceci ne sera pas possible. Si nos partenaires refusent, il faudra quitter l'euro, quelle qu'en soit la difficulté. C'est une question de survie. Ou alors, préparez-vous à la guerre civile: je ne pense pas que Marine Le Pen soit en mesure de faire face à cette situation avec un programme inspiré de celui du parti communiste des années 1970 et alors qu'une part très importante de la population est prête à l'affronter durement.

Le scénario catastrophe: un régime autoritaire, fût-il éclairé, à savoir un nouveau Napoléon III. En quoi cette hypothèse n'est pas à exclure?

 

La nature politique a horreur du vide. Il faut bien que la société fonctionne et les esprits me semblent d'ailleurs, aujourd'hui, étrangement en attente d'une reprise en main ferme par le pouvoir. Ce n'est pas étranger au succès qu'avait connu Sarkozy en 2007. La France est restée frustrée de ce candidat dont le mandat semble avoir bifurqué, un quart d'heure et cinquante mètres de marche après son élection, d'une procession gaullienne sur les Champs Elysées à un pot entre amis au Fouquet's.

giulietto chiesa: si deve vendere l'italia

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http://www.ilsussidiario.net/News/Politica/2014/3/5/RETROSCENA-Giulietto-Chiesa-Renzi-lo-hanno-voluto-gli-Usa-per-vendere-l-Italia/475958/

RETROSCENA/ Giulietto Chiesa: Renzi lo hanno voluto gli Usa per vendere l'Italia  

5 marzo 2014

Intervista a Giulietto Chiesa

"È tutto spettacolo". Così Giulietto Chiesa, giornalista e politico storicamente di sinistra, commenta l'operazione Renzi, spinto a Palazzo Chigi dalla mano degli States per rispondere agli interessi di Wall Street e per amicarsi Italia, preziosa pedina, nello scacchiere che vede contrapposti gli Usa alla Germania della Merkel. "Io credo che Renzi sia la persona più adatta per fare una politica filoamericana. D’altronde lo ha rivelato lui stesso quando si è paragonato a Tony Blair, che è stato un servo degli Stati Uniti" continua Chiesa.

Dietro l’ascesa di Matteo Renzi a Palazzo Chigi non c’è solo De Benedetti. Pare che una spinta importante sia arrivata anche dagli States, direttamente dalla Casa Bianca…

Io credo che Renzi sia la persona più adatta per fare una politica filoamericana. D’altronde lo ha rivelato lui stesso, senza esitazioni, quando si è paragonato a Tony Blair, che è stato un servo degli Stati Uniti: se lo vuole imitare vuol dire che ha questa intenzione. Del resto il personaggio, per come si presenta, punta molto in alto e siccome i padroni universali stanno là, dalle parti di Wall Street, immagino che voglia puntare proprio verso quella direzione. È dunque facile capire perché Obama è ben felice che Renzi sia al potere (e che possibilmente vi rimanga).

Prima c’era Letta che è sempre stato etichettato come l’uomo delle banche; a un certo punto non è più andato bene. Perché?

Enrico Letta era un uomo della vecchia guardia. Bisogna fare attenzione ai particolari: Letta, a differenza di Obama, è andato a Sochi. Queste cose, per chi ha il comando, sono molto interessanti; si misurano tra di loro con i dettagli. Letta ha fatto un errore a partecipare alle Olimpiadi invernali in Russia: ma come? Cosa ci è andato a fare? Non si devono fare queste cose... Renzi non ci sarebbe mai andato, ecco la differenza. Da queste piccole cose si possono capire le preferenze dei padroni del vapore, che un tempo erano più duttili e civili e adesso, invece, stanno diventando sempre più prepotenti, pretendendo servitori molto più fedeli.

Renzi, come uomo "scelto" dagli Stati Uniti, va collocato nel puzzle dello scontro politico economico Germania-Usa? Obama, più volte, ha criticato la linea Merkel…

Io penso che lo scontro Germania-Stati Uniti sia in corso da tempo ed entrambi i Paesi fanno i propri rispettivi interessi. Siccome la Germania è molto forte in Europa, se io fossi al posto di Obama cercherei di accerchiarla, togliendole ogni aiutante di campo, isolandola. È un’operazione, ripeto, in corso da tempo. Per esempio...

Prego.

La guerra di Libia è stato un episodio in cui i grandi alleati americani, Francia e Gran Bretagna, si sono messi in campo, mentre la Merkel non è andata in Libia a combattere al fianco degli Usa e della Nato. Il terzo protagonista europeo – di un certo peso economico e storico – è l'Italia. Conquistare pienamente l'Italia in una visione esclusivamente atlantica è una mossa che può avere un grande significato per il futuro. E io credo che a Washington stiano pensando proprio a questo.

Dunque Renzi come pedina fondamentale in questo scacchiere di rapporti di forza?

Io non ho un solo documento a sostegno di questa tesi – sono cose che rimangono all’interno di colloqui segretissimi –, ma la mia impressione generale è che se Enrico Letta fosse uguale a Renzi non lo avrebbero certo cambiato; lo hanno fatto perché Renzi è molto più filo-americano.

Dovrà dare qualcosa in cambio?

È al potere con tutti i vantaggi del caso. Lo scambio è: "tu stai al potere e noi facciamo quello che vogliamo fare". In questi casi non è mai questione di gratitudine: quanto dai, tanto avrai…

Qualche settimana fa il Financial Times e il Wall Street Journal hanno speso belle parole per Renzi. Ultimamente il fondo (americano) Blackstone ha acquistato partecipazioni in Versace e Intesa San Paolo e il magnate (americano) George Soros il 5% di Immobiliare grande distribuzione. È un caso?

Mi sembra che, appunto, siano tutti elementi che vadano in questa direzione. I grandi proprietari universali – come li chiama Luciano Gallino – si consultano, si parlano e si danno segnali. Ecco, questi sono tutti segnali in questo senso: maggiore simpatia e sicurezza verso un governo (meno tedesco e più americano) che dà garanzie più precise e complete.

Quello degli Stati Uniti potrebbe essere una sorta di nuovo "Piano Marshall"?

Ma qui non c'è alcuna politica di investimenti a difesa della libertà. Adesso si devono fare le privatizzazioni, a questo starà pensando il nostro premier. Si deve vendere l'Italia: questo è il progetto. I grossi pescecani della finanza aspettano proprio questo. A dire il vero, lo aveva detto anche Letta, ma siamo al discorso di prima: ci sono quelli che eseguono gli ordini senza tirare le briglie e chi – poco gradito – le tira. Semmai...

Dica.

L’unico Piano Marshall possibile in questo momento sarebbe cambiare le regole della finanza internazionale: mettere fuori legge gli off-shore, congelare per i prossimi 50 anni un'ingente massa di derivati e così via. Insomma, tutta una serie di medicine – inevitabili e inesorabili – che naturalmente modificherebbero il quadro degli equilibri finanziari a svantaggio di Wall Street, motivo per il quale non si faranno mai.

Cosa si farà invece?

All’ordine del giorno, ribadisco, ci sono le immediate privatizzazioni di quasi tutto il patrimonio industriale (e anche immobiliare e artistico-culturale) italiano: è questo che ci dobbiamo aspettare secondo la strategia dei 50 miliardi del Fiscal Compact. Gli orizzonti sono questi. Renzi è qui per eseguire i compiti che furono assegnati a Mario Monti.

È un bene o un male per l’Italia?

Se ci si riferisce alla finanza internazionale è un bene, ma se ci si riferisce alla condizione umana e materiale del popolo italiano è un male. Non può essere un fatto positivo, la gente si aspetta tutt'altro. Naturalmente molti non hanno ancora capito, perché le dinamiche mediatiche con le quali si promuovono queste operazioni convincono milioni di persone che questo sia un uomo nuovo, giovane e affascinante che mette otto donne del governo. Figuriamoci...

Il suo giudizio è dunque negativo.

È tutto uno spettacolo, e la gente, che non ne conosce le regole, ci casca. Poi piange, a danno fatto. Nell'immediato Renzi prenderà un sacco di voti, tutti dovuti alla speranza disperata della gente di cavarsela. Una volta per svelare gli altarini ci volevano 5 o 6 anni, oggi in molto meno tempo: fra un anno saremo già lì a fare i conti. L’accelerazione della crisi rende il tutto molto trasparente...

Fabio Franchini

imf revolutionary paper: 100% reserve backing

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http://www.telegraph.co.uk/finance/comment/9623863/IMFs-epic-plan-to-conjure-away-debt-and-dethrone-bankers.html

IMF's epic plan to conjure away debt and dethrone bankers 

So there is a magic wand after all. A revolutionary paper by the International Monetary Fund claims that one could eliminate the net public debt of the US at a stroke, and by implication do the same for Britain, Germany, Italy, or Japan.

Ambrose Evans-Pritchard
21 Oct 2012

One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined.

The conjuring trick is to replace our system of private bank-created money -- roughly 97pc of the money supply -- with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.

Specifically, it means an assault on "fractional reserve banking". If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.

The nation regains sovereign control over the money supply. There are no more banks runs, and fewer boom-bust credit cycles. Accounting legerdemain will do the rest. That at least is the argument.

Some readers may already have seen the IMF study, by Jaromir Benes and Michael Kumhof, which came out in August and has begun to acquire a cult following around the world. 

Entitled "The Chicago Plan Revisited", it revives the scheme first put forward by professors Henry Simons and Irving Fisher in 1936 during the ferment of creative thinking in the late Depression.

Irving Fisher thought credit cycles led to an unhealthy concentration of wealth. He saw it with his own eyes in the early 1930s as creditors foreclosed on destitute farmers, seizing their land or buying it for a pittance at the bottom of the cycle.

The farmers found a way of defending themselves in the end. They muscled together at "one dollar auctions", buying each other's property back for almost nothing. Any carpet-bagger who tried to bid higher was beaten to a pulp.

Benes and Kumhof argue that credit-cycle trauma - caused by private money creation - dates deep into history and lies at the root of debt jubilees in the ancient religions of Mesopotian and the Middle East.

Harvest cycles led to systemic defaults thousands of years ago, with forfeiture of collateral, and concentration of wealth in the hands of lenders. These episodes were not just caused by weather, as long thought. They were amplified by the effects of credit.

The Athenian leader Solon implemented the first known Chicago Plan/New Deal in 599 BC to relieve farmers in hock to oligarchs enjoying private coinage. He cancelled debts, restituted lands seized by creditors, set floor-prices for commodities (much like Franklin Roosevelt), and consciously flooded the money supply with state-issued "debt-free" coinage.

The Romans sent a delegation to study Solon's reforms 150 years later and copied the ideas, setting up their own fiat money system under Lex Aternia in 454 BC.

It is a myth - innocently propagated by the great Adam Smith - that money developed as a commodity-based or gold-linked means of exchange. Gold was always highly valued, but that is another story. Metal-lovers often conflate the two issues.

Anthropological studies show that social fiat currencies began with the dawn of time. The Spartans banned gold coins, replacing them with iron disks of little intrinsic value. The early Romans used bronze tablets. Their worth was entirely determined by law - a doctrine made explicit by Aristotle in his Ethics - like the dollar, the euro, or sterling today.

Some argue that Rome began to lose its solidarity spirit when it allowed an oligarchy to develop a private silver-based coinage during the Punic Wars. Money slipped control of the Senate. You could call it Rome's shadow banking system. Evidence suggests that it became a machine for elite wealth accumulation.

Unchallenged sovereign or Papal control over currencies persisted through the Middle Ages until England broke the mould in 1666. Benes and Kumhof say this was the start of the boom-bust era.

One might equally say that this opened the way to England's agricultural revolution in the early 18th Century, the industrial revolution soon after, and the greatest economic and technological leap ever seen. But let us not quibble.

The original authors of the Chicago Plan were responding to the Great Depression. They believed it was possible to prevent the social havoc caused by wild swings from boom to bust, and to do so without crimping economic dynamism.

The benign side-effect of their proposals would be a switch from national debt to national surplus, as if by magic. "Because under the Chicago Plan banks have to borrow reserves from the treasury to fully back liabilities, the government acquires a very large asset vis-à-vis banks. Our analysis finds that the government is left with a much lower, in fact negative, net debt burden."

The IMF paper says total liabilities of the US financial system - including shadow banking - are about 200pc of GDP. The new reserve rule would create a windfall [a large amount of money that is won or received unexpectedly]. This would be used for a "potentially a very large, buy-back of private debt", perhaps 100pc of GDP.

While Washington would issue much more fiat money, this would not be redeemable. It would be an equity of the commonwealth, not debt.

The key of the Chicago Plan was to separate the "monetary and credit functions" of the banking system. "The quantity of money and the quantity of credit would become completely independent of each other."

Private lenders would no longer be able to create new deposits "ex nihilo". New bank credit would have to be financed by retained earnings.

"The control of credit growth would become much more straightforward because banks would no longer be able, as they are today, to generate their own funding, deposits, in the act of lending, an extraordinary privilege that is not enjoyed by any other type of business," says the IMF paper.

"Rather, banks would become what many erroneously believe them to be today, pure intermediaries that depend on obtaining outside funding before being able to lend."

The US Federal Reserve would take real control over the money supply for the first time, making it easier to manage inflation. It was precisely for this reason that Milton Friedman called for 100pc reserve backing in 1967. Even the great free marketeer implicitly favoured a clamp-down on private money.

The switch would engender a 10pc boost to long-arm economic output. "None of these benefits come at the expense of diminishing the core useful functions of a private financial system."

Simons and Fisher were flying blind in the 1930s. They lacked the modern instruments needed to crunch the numbers, so the IMF team has now done it for them -- using the `DSGE' stochastic model now de rigueur in high economics, loved and hated in equal measure.

The finding is startling. Simons and Fisher understated their claims. It is perhaps possible to confront the banking plutocracy head without endangering the economy.

Benes and Kumhof make large claims. They leave me baffled, to be honest. Readers who want the technical details can make their own judgement by studying the text here.

The IMF duo have supporters. Professor Richard Werner from Southampton University - who coined the term quantitative easing (QE) in the 1990s -- testified to Britain's Vickers Commission that a switch to state-money would have major welfare gains. He was backed by the campaign group Positive Money and the New Economics Foundation.

The theory also has strong critics. Tim Congdon from International Monetary Research says banks are in a sense already being forced to increase reserves by EU rules, Basel III rules, and gold-plated variants in the UK. The effect has been to choke lending to the private sector.

He argues that is the chief reason why the world economy remains stuck in near-slump, and why central banks are having to cushion the shock with QE.

"If you enacted this plan, it would devastate bank profits and cause a massive deflationary disaster. There would have to do `QE squared' to offset it," he said.

The result would be a huge shift in bank balance sheets from private lending to government securities. This happened during World War Two, but that was the anomalous cost of defeating Fascism.

To do this on a permanent basis in peace-time would be to change in the nature of western capitalism. "People wouldn't be able to get money from banks. There would be huge damage to the efficiency of the economy," he said.

Arguably, it would smother freedom and enthrone a Leviathan state. It might be even more irksome in the long run than rule by bankers.

Personally, I am a long way from reaching an conclusion in this extraordinary debate. Let it run, and let us all fight until we flush out the arguments.

One thing is sure. The City of London will have great trouble earning its keep if any variant of the Chicago Plan ever gains wide support. 

latouche: il debito italiano sara mai ripagato

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http://www.lettera43.it/economia/macro/italia-serve-la-bancarotta_4367557970.htm

«Italia, serve la bancarotta»

Per Latouche, guru della decrescita, il debito non sarà mai ripagato: meglio ripartire da zero.

 GIOVANNA FAGGIONATO

Intervista a Serge Latouche

A sinistra c'è il cafè Le metro, a destra il Ronsard. Uno di fronte all'altro, con la stessa veranda affacciata sul viale e lo spazio interno percorso dalla luce dei paralumi e dai riflessi degli specchi. In mezzo scorre Boulevard Saint Germain: 30 metri di asfalto antracite, bollente e polveroso, la colonna vertebrale della rive gauche parigina.
«Una volta, i giornalisti li ricevevo dall'altra parte: il proprietario del caffè abita al primo piano, proprio sotto il mio appartamento, peccato che mia moglie ci abbia litigato». Il teorico della decrescita, Serge Latouche, si presenta al tavolino del Ronsard con un affare di condominio e la fatica di attraversare la strada.


A dispetto delle lunghe gambe e dello sguardo da marinaio, l'economista 72enne sembra desideroso di restringere il mondo. Anche quello che lo circonda, fatto di caffé dove si dibatte di politica e flilosofia, da cui sono passati sia Adam Smith sia Karl Marx.

LA NECESSITÀ DI UNA DECRESCITA. Latouche ha cominciato a parlare di globalizzazione quando la parola non era nemmeno nei dizionari, ma da poco era stato pubblicato il rapporto dell'associazione non governativa Club di Roma sui limiti dello sviluppo e la fine del petrolio.
Ha riletto i liberali classici e il padre del comunismo e ne ha concluso che né il capitalismo concorrenziale teorizzato dai primi, né l'economicismo statalista di Marx sarebbero stati capaci di dar vita a una società in equilibrio con l'ecosistema.
Entrambi, anzi, avrebbero portato al collasso. Così ha messo in discussione il concetto di sviluppo come progresso, teorizzando la necessità di un dopo-sviluppo, della decrescita: l'uscita dal dominio dell'economia e una rifondazione culturale, fondata sulla limitazione dei bisogni.

CONTROCULTURA GLOBALE. Le sue idee si sono diffuse attraverso il mondo globalizzato, diventando la critica radicale del nostro tempo, la controcultura del mondialismo.
Oggi che è docente di Scienze economiche all'Università di Parigi Sud, i giornali aperti sul bancone del locale sembrano dargli ragione: parlano di rifiuti nucleari e licenziamenti, di nazioni indebitate e speculazione internazionale.

«Sappiamo già che l'attuale sistema crollerà tra il 2030 e il 2070», spiega a Lettera43.it, «il vero esercizio di fantascienza è prevedere che cosa succederà tra cinque anni».

DOMANDA. Lei ha un'idea?

RISPOSTA. L'Europa nata nel Dopoguerra farà la fine del Sacro romano impero di Carlo Magno che cercò di restaurare un regno crollato, durò per 50 anni e fu travolto dai barbari.

D. Che cosa c'entra l'impero romano?
Crollò alla fine del V secolo, ma non morì: continuò a sopravvivere per centinaia di anni con Carlo Magno, l'impero d'Oriente e poi quello germanico. Un declino proseguito nel tempo, con disastri in successione. Come succederà a noi.

D. È la fine della globalizzazione?
R. Io la considero una crisi di civiltà, della civiltà occidentale. Solo che, visto che l'Occidente è mondializzato, si tratta di crisi globale. Ecologica, culturale e sociale insieme.

D. Più di un crollo finanziario...
R. Se vogliamo andare oltre è la crisi dell'Antropocene: l'era in cui l'uomo ha cominciato a modificare e perturbare l'ecosistema.

D. E il sogno degli Stati Uniti europei?
R. È un'illusione. Perché è solo un prodotto della globalizzazione: non hanno costruito un'Unione, ma un mercato liberista.

D. Che fine farà il Vecchio continente?
R. L'Europa è schiacciata tra due movimenti. Uno politico e centrifugo che si è sviluppato anche in Italia con la stessa Padania. E uno economico e centripeto, la globalizzazione.

D. Per ora l'economia batte la politica...
R. Sì, il movimento centripeto ha il sopravvento. Ma è anche quello che nel lungo periodo andrà a crollare. Non può funzionare senza il petrolio e il blocco delle risorse materiali. Alla fine, con tutta probabilità l'Europa si dividerà in macro regioni autonome.

D. Come ci arriveremo?
R. La barca affonda e andremo giù tutti insieme. Ma non è detto che questo avverrà senza violenza e dolore.

D. Parla del conflitto sociale in Grecia e Spagna?
R. Ecco, putroppo siamo già dentro il capitalismo catastrofico. È solo l'inizio del processo, ma vediamo già gli effetti del mix di austerità e crescita voluto dai leader europei.

D. È comunque meglio della sola austerità...
R. Crede che l'imperativo della crescita funzioni? Basta guardare alla Francia: questo governo socialista vuole allo stesso tempo la prosperità e l'austerità. Ma non riuscirà a ottenere la crescita. O, se avverrà, sarà per pochi. Mentre l'austerità è sicura per molti.

D. Perché?
R. Perché non hanno scelta.

D. In che senso?
R. Sono chiusi dentro questo paradigma del produttivismo, del Prodotto interno lordo (Pil). È per questo che la decrescita è una rivoluzione. Perché prima di tutto è un cambiamento di paradigma.

D. Facile dirlo. Ma lei che cosa farebbe se fosse il premier italiano?
R. L'Italia dovrebbe andare in bancarotta.

«Il debito italiano? Non sarà mai ripagato»

D. Che cosa intende?
R. Pensi al debito.

D. Secondo l'Fmi quello italiano è quasi al 140% del Pil.
R. Appunto: non sarà ripagato, lo sanno tutti. Ne è consapevole anche Mario Monti. Il problema, per l'attuale classe dirigente, non è ripagare il debito. Ma è fingere di poter continuare il gioco: cioè ottenere prestiti e rilanciare un'economia che è solo speculativa.
 

D. Quali sono le prime cinque misure che adotterebbe al posto di Monti?
R. Innanzitutto, cancellerei il debito. Parlo come teorico, so che ci sono cose che Monti non potrebbe fare comunque, neppure se fosse di sinistra o un decrescente. Ma sto parlando di bancarotta dello Stato.

D. La bancarotta è la soluzione?
R. È più che altro la condizione per trovare le soluzioni.

D. In che senso?
R. Non porta necessariamente alla soluzione, anzi in un primo momento le cose possono peggiorare. Ma non c'è altro modo, perché non esiste via d'uscita dentro la gabbia di ferro del sistema attuale.
L'Italia non sarebbe la prima né l'ultima. Tutti quelli che l'hanno fatto si sono sentiti meglio, da Carlo V all'Argentina.

D. Ma l'Argentina non era dentro una moneta unica.
R. Questo significherebbe uscire dall'euro, ovviamente, dentro non si può fare niente. Per questo dico che parlo come teorico: nemmeno i greci hanno avuto il coraggio di abbandonare l'Unione.

D. Siamo al terzo punto allora: uscire dall'euro, cancellare il debito e poi?
R. Rilocalizzare l'attività. C'è tutto un sistema di piccole imprese, di saper fare diffuso, che è stato distrutto dalla concorrenza globale.

D. Sì, ma come si fa?
R. Devo usare una parola che in Italia fa sempre paura: serve una politica risolutamente protezionista.

D. Su questo, il dibattito è annoso...
R. Esiste un cattivo protezionismo, è vero. Ma c'è anche un cattivissimo libero scambio. Mentre esiste un buon protezionismo, ma non un buon libero scambio.

D. Perché no?
R. Perché la concorrenza leale sempre invocata non esiste. E non esisterà mai. Semplicemente perché tutti i Paesi sono diversi. Come si può competere con la Cina? È una barzelletta.

D. Parla come se facesse parte della Lega Nord.
R. Lo so, lo so. E anche come uno del Front National. Sa perché ha successo l'estrema destra?

D. Me lo dica lei...
R. Perché non tutto quel che dicono è stupido. C'è una parte insopportabile, ma se sono popolari - e lo saranno sempre di più - è perché hanno capito alcune cose, hanno ragione. È questo che fa paura.

D. Quindi qual è la ricetta della decrescita?
R. Il protezionismo ci permette di non essere competitivi per forza. Se lo siamo in alcuni settori, bene. Ma possiamo anche sviluppare produzioni non concorrenziali. Stimoliamo la concorrenza all'interno, ma con Paesi che hanno altri sistemi sociali, altre norme ambientali, altri livelli salariali, questo non è possibile. D'altra parte, è stata l'eccessiva specializzazione a renderci così fragili.

D. Siamo alla quarta misura, quindi.
R. La tragedia attuale, per me, è soprattutto la disoccupazione.

D. E come pensa di risolverla?
R. Lavorando meno, ma lavorando tutti.

D. Una formula già sentita...
R. Sì, ma ci dicevano anche che la concorrenza attuale ci avrebbe fatto lavorare di più per guadagnare di più, come ha dichiarato quello sciagurato di Nicolas Sarkozy. E invece ci fa lavorare di più e guadagnare sempre meno: questo è sotto gli occhi di tutti.

D. Ma è una questione di denaro?
R. No, si tratta di vivere. Dobbiamo ritrovare il tempo per dedicarci al resto, alla vita. Questa è un'utopia, ma l'utopia concreta della decrescita: superare il lavoro.

«La decrescita: ripartire dalla terra, eliminando le attività nocive»

D. Sì, ma come?
R. Partendo dalla riconversione ecologica. Tornando a un'agricoltura contadina, senza pesticidi e concimi chimici. In questo modo, la produttività per l'uomo sarà più bassa, ma si creeranno milioni di posti di lavoro nel settore agricolo. E questa è la quinta misura.

D. Basta l'agricoltura?
R. Dobbiamo affrontare la fine degli idrocarburi, sviluppare le energie rinnovabili e rinconvertire le attività parassitarie che danneggiano l'ambiente.

D. Per esempio?
R. Le fabbriche di automobili, che oggi sono in crisi.

D. Peugeot ha annunciato 8 mila licenziamenti...
R. Bisognava aspettarselo da anni. Si sa che l'industria dell'auto non ha futuro: con lo stesso know how potrebbero essere trasformati in stabilimenti che producono sistemi di cogenerazione.

D. Parla di una globale ristrutturazione del mercato del lavoro?
R. La quota di occupati in agricoltura potrebbe arrivare al 10%. Ci sono industrie nocive come l'automobile, il nucleare, la grande distribuzione che vanno ripensate. E c'è la necessità di una rinconversione energetica. In Germania, con le energie rinnovabili hanno creato decine di migliaia di posti di lavoro.

D. Ma sono dati contestati...
R. Il dibattito è aperto: si dice che chiudere le centrali nucleari francesi cancellerà 30 mila posti di lavoro ma, allo stesso tempo, prima bisogna smantellare. E nessuno lo sa fare. Quanti posti di lavoro si potrebbero creare allora?

D. E la grande distribuzione?
R. Sicuramente ha effetti distruttivi per l'ambiente e alimenta un alto tasso di spreco alimentare, pari a circa il 40% della produzione.

D. E allora?
R. Cancellarla significa essere pronti a ripensare tutto il sistema della città e soprattutto delle periferie.

D. Come?
R. La gente ha bisogno di piccoli negozi. Di fare la spesa più spesso, con più tempo a disposizione. Quando si comincia a cambiare un anello, come in una catena cambia tutto.

D. E i trasporti?
R. Dobbiamo pensare che il 99% dell'umanità ha passato la propria vita senza allontanarsi più di 30 chilometri dal proprio luogo di nascita. Quelli che si sono spostati di più, cioè noi, sono solo l'1%. Anche questo è un fenomeno molto recente e la maggioranza delle persone non ne soffrirà, poi ci saranno sempre i grandi viaggiatori alla Marco Polo.

D. Ne è certo?
R. È stata la pubblicità a creare il turismo di massa. In ogni modo, con la fine del petrolio, non ci sarà il traffico aereo di oggi, i trasporti costeranno sempre di più, andranno meno veloce. Muoversi sarà sempre più difficile.

D. E a livello fiscale?
R. Bisognerebbe introdurre una tassazione diretta e progressiva. Che può arrivare anche al 100%, se i redditi superano un certo livello. E poi una tassazione sul sovraconsumo dei beni comuni. A partire dall'acqua.

«Bisogna limitare i bisogni per soddisfarli davvero»

D. Quindi meno lavoro e più agricoltura. Per ottenere cosa?
R. Un mondo di abbondanza frugale.

D. Cioè?
R. Una società capace di non creare bisogni inutili, ma di soddisfarli. E per soddisfarli, bisogna limitarli.

D. Le sembra possibile, quando gli operai cinesi si suicidano per un iPad?
R. In una società sana non esiste questa forma di patologia dell'insoddisfazione. Ci può essere una forma di seduzione, ma non un'insoddisfazione permanente. Questo fenomeno è esacerbato dalla pubblicità.

D. Cioè?
R. Ci convince che siamo insoddisfatti di ciò che abbiamo, per farci desiderare ciò che non abbiamo.

D. Vorrebbe spazzare via il marketing?
R. Una delle prime misure della società della decrescita riguarda la pubblicità: non si tratta di cancellarla - perché non siamo terroristi - ma di tassarla fortemente, questo sì.

D. Con che motivazione?
R. È lo strumento di una gigantesca manipolazione, il veicolo della colonizzazione dell'immaginario.

D. E la finanza che rappresenta il 10% del Pil britannico?
R. Penso che questa crollerà da sola. Sarebbe già successo se questi sciagurati di governi non avessero salvato le banche. 

D. Che cosa intende?
R. È colossale quello che è stato fatto per le banche negli Usa: secondo l'Ocse, 11.400 miliardi di dollari di fondi pubblici sono stati destinati agli istituti di credito.

D. Se facciamo crollare le banche si affossa il sistema...
R. Sì, meglio così. Abbiamo bisogno che il sistema crolli. 

D. E i cittadini?
R. Dobbiamo pensare a come riorganizzare il funzionamento della società. Ma bisogna ricordarsi che questo sistema così come lo conosciamo è piuttosto recente.

D. Quanto?
R. Non ha più di 30-40 anni, prima era un sistema capitalista, ma non funzionava su queste basi finanziarie.

D. Che misure bisognerebbe adottare?
R. Il primo passo, prima di rimettere in discussione l'intero sistema bancario, è cancellare il mercato dei futures: pura speculazione. Un economista francese, Friederic Lordon, ha anche proposto di chiudere le Borse. E non sarebbe un'idea stupida.

D. Che cosa succede alle società che ci lavorano? E ai dipendenti?
R. La situazione attuale è talmente tragica che possiamo affrontare con serenità anche un cambiamento difficile.

D. Nella società della decrescita circola denaro?
R. La moneta è un bene comune che favorisce lo scambio tra i cittadini. Ma se è un bene comune non deve essere privatizzata. Le banche sono degli enti privati. E allora dico sempre che noi vogliamo riappropriarci della moneta.

D. Come?
R. Magari partendo dai sistemi di scambio locali che utilizzano monete regionali. Come ha funzionato per due o tre anni in Argentina, dopo il crollo del peso.

D. E chi governa il commercio?
R. Diciamo che sarà necessario trovare un coordinamento tra le varie autonomie.

D. Ma nel suo modello ogni regione fa da sé?
R. Ogni Paese deve trovare la sua strada. Una volta che siamo riusciti a uscire dal mondo del pensiero unico, dell'homo oeconomicus, a una sola dimensione, allora ritroviamo la diversità. Ogni cultura ha il suo modo di concepire e realizzare la felicità.

D. Esistono già esperienze in questa direzione?
R. In Sud America sono sulla strada giusta. In Ecuador e Bolivia, ispirandosi alla cultura india, hanno inserito nella Costituzione il principio del bien vivìr: del buon vivere. Ma, con la crisi, la decrescita ha avuto un successo incredibile anche in Giappone

D. Come mai?
R. I giapponesi stanno riscoprendo i valori del buddismo zen che si basa sul principio di autolimitazione. E sono convinto che la stessa cosa potrebbe succedere in Cina nei prossimi anni, anche attraverso il confucianesimo.

D. La Cina però è anche la più grande fabbrica del mondo...
R. Lì la crisi è già arrivata. La situazione cinese è bifronte: 200 milioni di abitanti hanno un livello di vita quasi occidentale e altri 700 milioni sono stati proletarizzati. Cacciati dalla terra, si accumulano nelle periferie delle metropoli, dove c'è un tasso di suicidi altissimo.
 

D. Ma l'economia continua comunque a crescere.
R. Anche il ministro dell'Ambiente cinese ha riconosciuto che se si dovesse sottrarre dal Pil di Pechino la quota di distruzione dell'ambiente questo calerebbe del 12%.

«La democrazia è un'utopia: il bene comune è più importante»

D. Come immagina la transizione?
R. Può avvenire spontaneamente, dolcemente. Ma anche in un modo violento.

D. Lei sogna la democrazia diretta?
R. Se si deve prendere la parola sul serio, ha senso solo la democrazia diretta. Ma direi che su questo punto, recentemente, le mie idee sono cambiate.

D. In che direzione?
R. Prima immaginavo un'organizzazione piramidale con alla base piccole democrazie locali e delegati al livello superiore.

D. E ora?
R. Oggi penso che la democrazia sia un'utopia che ha senso come direzione. Ma la cosa importante è che il potere, quale che sia, porti avanti una politica che corrisponde al bene comune, alla volontà popolare, anche se si tratta di una dittatura o di un dispotismo illuminato.

D. Si spieghi meglio.
R. Norberto Bobbio si chiedeva quale è la differenza tra un buono e un cattivo governo. Il primo lavora per il bene comune. Il secondo lo fa per se stesso. Questa è la vera differenza.

D. Va bene, ma come si ottiene un buon governo?
R. Con un contropotere forte. Un sistema è democratico - non è la democrazia, attenzione, ma è democratico - quando il popolo ha la possibilità di fare pressione sul governo, qualunque esso sia, in modo da far pesare le proprie esigenze e idee.

D. Ma non sta rinnegando la democrazia?
R. L'ideale sarebbe naturalmente l'autogoverno del popolo, ma questo è un sogno che forse non arriverà mai.

D. Non pensa alla presa del potere?
R. Gandhi l'aveva spiegato a proposito del suo Paese: «Al limite gli inglesi possono restare a governare, ma allora devono fare una politica che corrisponde alla volontà dell'India. Meglio avere degli inglesi piuttosto che degli indiani corrotti». Mi sembrano parole di saggezza.

D. Sa che Silvio Berlusconi vuole tornare in politica?
R. Ah, lo so, ma lui è pazzo.

us like 1932/gs and hunger/economics isn't science

.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7871421/With-the-US-trapped-in-depression-this-really-is-starting-to-feel-like-1932.html

With the US trapped in depression, this really is starting to feel like 1932

The US workforce shrank by 652,000 in June, one of the sharpest contractions ever. The rate of hourly earnings fell 0.1pc. Wages are flirting with deflation.

Ambrose Evans-Pritchard
04 Jul 2010

People queue for a job fair in New York. The share of the US working-age population with jobs in June fell from 58.7pc to 58.5pc. The ratio was 63pc three years ago. Photo: EPA

"The economy is still in the gravitational pull of the Great Recession," said Robert Reich, former US labour secretary. "All the booster rockets for getting us beyond it are failing."

"Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year. So what are we doing about it? Less than nothing," he said.

California is tightening faster than Greece. State workers have seen a 14pc fall in earnings this year due to forced furloughs. Governor Arnold Schwarzenegger is cutting pay for 200,000 state workers to the minimum wage of $7.25 an hour to cover his $19bn (£15bn) deficit.

Can Illinois be far behind? The state has a deficit of $12bn and is $5bn in arrears to schools, nursing homes, child care centres, and prisons. "It is getting worse every single day," said state comptroller Daniel Hynes. "We are not paying bills for absolutely essential services. That is obscene."

Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high.

Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.

The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost.

The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war era. Jeff Weniger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s.

"Legions of individuals have been left with stale skills, and little prospect of finding meaningful work, and benefits that are being exhausted. By our math the crop of people who are unemployed but not receiving a check amounts to 9.2m."

Republicans on Capitol Hill are filibustering a bill to extend the dole for up to 1.2m jobless facing an imminent cut-off. Dean Heller from Nevada called them "hobos". This really is starting to feel like 1932.

Washington's fiscal stimulus is draining away. It peaked in the first quarter, yet even then the economy eked out a growth rate of just 2.7pc. This compares with 5.1pc, 9.3pc, 8.1pc and 8.5pc in the four quarters coming off recession in the early 1980s.

The housing market is already crumbling as government props are pulled away. The expiry of homebuyers' tax credit led to a 30pc fall in the number of buyers signing contracts in May. "It is cataclysmic," said David Bloom from HSBC.

Federal tax rises are automatically baked into the pie. The Congressional Budget Office said fiscal policy will swing from
a net +2pc of GDP to -2pc by late 2011. The states and counties may have to cut as much as $180bn.

Investors are starting to chew over the awful possibility that America's recovery will stall just as Asia hits the buffers. China's manufacturing index has been falling since January, with a downward lurch in June to 50.4, just above the break-even line of 50. Momentum seems to be flagging everywhere, whether in Australian building permits, Turkish exports, or Japanese industrial output.

On Friday, Jacques Cailloux from RBS put out a "double-dip alert" for Europe. "The risk is rising fast. Absent an effective policy intervention to tackle the debt crisis on the periphery over coming months, the European economy will double dip in 2011," he said.

It is obvious what that policy should be for Europe, America, and Japan. If budgets are to shrink in an orderly fashion over several years – as they must, to avoid sovereign debt spirals – then central banks will have to cushion the blow keeping monetary policy ultra-loose for as long it takes.

The Fed is already eyeing the printing press again. "It's appropriate to think about what we would do under a deflationary scenario," said Dennis Lockhart for the Atlanta Fed. His colleague Kevin Warsh said the pros and cons of purchasing more bonds should be subject to "strict scrutiny", a comment I took as confirmation that the Fed Board is arguing internally about QE2.

Perhaps naively, I still think central banks have the tools to head off disaster. The question is whether they will do so fast enough, or even whether they wish to resist the chorus of 1930s liquidation taking charge of the debate. Last week the Bank for International Settlements called for combined fiscal and monetary tightening, lending its great authority to the forces of debt-deflation and mass unemployment. If even the BIS has lost the plot, God help us.

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http://www.independent.co.uk/opinion/commentators/johann-hari/johann-hari-how-goldman-gambled-on-starvation-2016088.html

How Goldman gambled on starvation

Speculators set up a casino where the chips were the stomachs of millions. What does it say about our system that we can so casually inflict so much pain?

Johann Hari
2 July 2010

By now, you probably think your opinion of Goldman Sachs and its swarm of Wall Street allies has rock-bottomed at raw loathing. You're wrong. There's more. It turns out that the most destructive of all their recent acts has barely been discussed at all. Here's the rest. This is the story of how some of the richest people in the world – Goldman, Deutsche Bank, the traders at Merrill Lynch, and more – have caused the starvation of some of the poorest people in the world.

It starts with an apparent mystery. At the end of 2006, food prices across the world started to rise, suddenly and stratospherically. Within a year, the price of wheat had shot up by 80 per cent, maize by 90 per cent, rice by 320 per cent. In a global jolt of hunger, 200 million people – mostly children – couldn't afford to get food any more, and sank into malnutrition or starvation. There were riots in more than 30 countries, and at least one government was violently overthrown. Then, in spring 2008, prices just as mysteriously fell back to their previous level. Jean Ziegler, the UN Special Rapporteur on the Right to Food, calls it "a silent mass murder", entirely due to "man-made actions."

see: jean ziegler: un nuremberg pour les speculateurs

Earlier this year I was in Ethiopia, one of the worst-hit countries, and people there remember the food crisis as if they had been struck by a tsunami. "My children stopped growing," a woman my age called Abiba Getaneh, told me. "I felt like battery acid had been poured into my stomach as I starved. I took my two daughters out of school and got into debt. If it had gone on much longer, I think my baby would have died."

Most of the explanations we were given at the time have turned out to be false. It didn't happen because supply fell: the International Grain Council says global production of wheat actually increased during that period, for example. It isn't because demand grew either: as Professor Jayati Ghosh of the Centre for Economic Studies in New Delhi has shown, demand actually fell by 3 per cent. Other factors – like the rise of biofuels, and the spike in the oil price – made a contribution, but they aren't enough on their own to explain such a violent shift.

To understand the biggest cause, you have to plough through some concepts that will make your head ache – but not half as much as they made the poor world's stomachs ache.

For over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer, he'll lose some cash, but if there's a lousy summer or the global price collapses, he'll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked.

Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into "derivatives" that could be bought and sold among traders who had nothing to do with agriculture. A market in "food speculation" was born.

So Farmer Giles still agrees to sell his crop in advance to a trader for £10,000. But now, that contract can be sold on to speculators, who treat the contract itself as an object of potential wealth. Goldman Sachs can buy it and sell it on for £20,000 to Deutsche Bank, who sell it on for £30,000 to Merrill Lynch – and on and on until it seems to bear almost no relationship to Farmer Giles's crop at all.

If this seems mystifying, it is. John Lanchester, in his superb guide to the world of finance, Whoops! Why Everybody Owes Everyone and No One Can Pay, explains: "Finance, like other forms of human behaviour, underwent a change in the 20th century, a shift equivalent to the emergence of modernism in the arts – a break with common sense, a turn towards self-referentiality and abstraction and notions that couldn't be explained in workaday English." Poetry found its break with realism when T S Eliot wrote "The Wasteland". Finance found its Wasteland moment in the 1970s, when it began to be dominated by complex financial instruments that even the people selling them didn't fully understand.

So what has this got to do with the bread on Abiba's plate? Until deregulation, the price for food was set by the forces of supply and demand for food itself. (This was already deeply imperfect: it left a billion people hungry.) But after deregulation, it was no longer just a market in food. It became, at the same time, a market in food contracts based on theoretical future crops – and the speculators drove the price through the roof.

Here's how it happened. In 2006, financial speculators like Goldmans pulled out of the collapsing US real estate market. They reckoned food prices would stay steady or rise while the rest of the economy tanked, so they switched their funds there. Suddenly, the world's frightened investors stampeded on to this ground.

So while the supply and demand of food stayed pretty much the same, the supply and demand for derivatives based on food massively rose – which meant the all-rolled-into-one price shot up, and the starvation began. The bubble only burst in March 2008 when the situation got so bad in the US that the speculators had to slash their spending to cover their losses back home.

When I asked Merrill Lynch's spokesman to comment on the charge of causing mass hunger, he said: "Huh. I didn't know about that." He later emailed to say: "I am going to decline comment." Deutsche Bank also refused to comment. Goldman Sachs were more detailed, saying they sold their index in early 2007 and pointing out that "serious analyses ... have concluded index funds did not cause a bubble in commodity futures prices", offering as evidence a statement by the OECD.

How do we know this is wrong? As Professor Ghosh points out, some vital crops are not traded on the futures markets, including millet, cassava, and potatoes. Their price rose a little during this period – but only a fraction as much as the ones affected by speculation. Her research shows that speculation was "the main cause" of the rise.

So it has come to this. The world's wealthiest speculators set up a casino where the chips were the stomachs of hundreds of millions of innocent people. They gambled on increasing starvation, and won. Their Wasteland moment created a real wasteland. What does it say about our political and economic system that we can so casually inflict so much pain?

If we don't re-regulate, it is only a matter of time before this all happens again. How many people would it kill next time? The moves to restore the pre-1990s rules on commodities trading have been stunningly sluggish. In the US, the House has passed some regulation, but there are fears that the Senate – drenched in speculator-donations – may dilute it into meaninglessness. The EU is lagging far behind even this, while in Britain, where most of this "trade" takes place, advocacy groups are worried that David Cameron's government will block reform entirely to please his own friends and donors in the City.

Only one force can stop another speculation-starvation-bubble. The decent people in developed countries need to shout louder than the lobbyists from Goldman Sachs. The World Development Movement is launching a week of pressure this summer as crucial decisions on this are taken: text WDM to 82055 to find out what you can do.

The last time I spoke to her, Abiba said: "We can't go through that another time. Please – make sure they never, never do that to us again."

j.hari@independent.co.uk

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http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100006729/time-to-shut-down-the-us-federal-reserve/

Time to shut down the US Federal Reserve?

Ambrose Evans-Pritchard
June 29th, 2010

Like a mad aunt, the Fed is slowly losing its marbles.

Kartik Athreya, senior economist for the Richmond Fed, has written a paper condemning economic bloggers as chronically stupid and a threat to public order.

Matters of economic policy should be reserved to a priesthood with the correct post-doctoral credentials, which would of course have excluded David Hume, Adam Smith, and arguably John Maynard Keynes (a mathematics graduate, with a tripos foray in moral sciences).

Adam Smith didn't have an economics PhD

“Writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy.”

Don’t you just love that throw-away line “decent”? Dr Athreya hails from the University of Iowa.

“The response of the untrained to the crisis has been startling. The real issue is that there is an extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading.”

You couldn’t make it up, could you?

“Economics is hard. Really hard. You just won’t believe how vastly hugely mind-boggingly hard it is. I mean you may think doing the Sunday Times crossword is difficult, but that’s just peanuts to economics. And because it is so hard, people shouldn’t blithely go shooting their mouths off about it, and pretending like it’s so easy. In fact, we would all be better off if we just ignored these clowns.”

I hold my hand up Dr Athreya and plead guilty. I am grateful to Bruce Krasting’s blog for bringing this stinging rebuke to my attention.

However, Dr Athreya’s assertions cannot be allowed to pass. The current generation of economists have led the world into a catastrophic cul de sac. And if they think we are safely on the road to recovery, they still fail to understand what they did.

Central banks were the ultimate authors of the credit crisis since it is they who set the price of credit too low, throwing the whole incentive structure of the capitalist system out of kilter, and more or less forcing banks to chase yield and engage in destructive behaviour.

They ran ever-lower real interests with each cycle, allowed asset bubbles to run unchecked (Ben Bernanke was the cheerleader of that particular folly), blamed Anglo-Saxon over-consumption on excess Asian savings (half true, but still the silliest cop-out of all time), and believed in the neanderthal doctrine of “inflation targeting”. Have they all forgotten Keynes’s cautionary words on the “tyranny of the general price level” in the early 1930s? Yes they have.

They allowed the M3 money supply to surge at double-digit rates (16pc in the US and 11pc in euroland), and are now allowing it to collapse (minus 5.5pc in the US over the last year). Have they all forgotten the Friedman-Schwartz lessons on the quantity theory of money? Yes, they have. Have they forgotten Irving Fisher’s “Debt Deflation causes of Great Depressions”? Yes, most of them have. And of course, they completely failed to see the 2007-2009 crisis coming, or to respond to it fast enough when it occurred.

The Fed has since made a hash of quantitative easing, largely due to Bernanke’s ideological infatuation with “creditism”. QE has been large enough to horrify everybody (especially the Chinese) by its sheer size – lifting the balance sheet to $2.4 trillion – but it has been carried out in such a way that it does not gain full traction. This is the worst of both worlds. So much geo-political capital wasted to such modest and distorting effect.

The error was for the Fed to buy the bonds from the banking system (and we all hate the banks, don’t we) rather than going straight to the non-bank private sector. How about purchasing a herd of Texas Longhorn cattle? That would do it. The inevitable result of this is a collapse of money velocity as banks allow their useless reserves to swell.

And now the Fed tells us all to shut up. Fie to you sir.

The 20th Century was a horrible litany of absurd experiments and atrocities committed by intellectuals, or by elite groupings that claimed a higher knowledge. Simple folk usually have enough common sense to avoid the worst errors. Sometimes they need to take very stern action to stop intellectuals leading us to ruin.

The root error of the modern academy is to pretend (and perhaps believe, which is even less forgiveable), that economics is a science and answers to Newtonian laws.

In any case, Newton was wrong. He neglected the fourth dimension of time, as Einstein called it, and that is exactly what the new classical school of economics has done by failing to take into account the intertemporal effects of debt – now 360pc of GDP across the OECD bloc, if properly counted.

There has been a cosy self-delusion that rising debt is largely benign because it is merely money that society owes to itself. This is a bad error of judgement, one that the intuitive man in the street can see through immediately.

Debt draws forward prosperity, which leads to powerful overhang effects that are not properly incorporated into Fed models. That is the key reason why Ben Bernanke’s Fed was caught flat-footed when the crisis hit, and kept misjudging it until the events started to spin out of control.

Economics should never be treated as a science. Its claims are not falsifiable, which is why economists can disagree so violently among themselves: a rarer spectacle in science, where disputes are usually resolved one way or another by hard data.

It is a branch of anthropology and psychology, a moral discipline if you like. Anybody who loses sight of this is a public nuisance, starting with Dr Athreya.

As for the Fed, I venture to say that a common jury of 12 American men and women placed on the Federal Open Market Committee would have done a better job of setting monetary policy over the last 20 years than Doctors Bernanke and Greenspan.

Actually, Greenspan never got a Phd. His honourary doctorate was awarded later for political reasons. (He had been a Nixon speech-writer). But never mind.

Ambrose Evans-Pritchard has covered world politics and economics for 25 years, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels. He is now International Business Editor in London.

gs vs fcic/bis risky call/debt as drug/euro mutiny/decrescita/terror profit soc gen

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http://www.bloomberg.com/news/2010-07-01/goldman-sachs-pressed-by-u-s-financial-crisis-panel-for-derivatives-data.html

Goldman Sachs Pressed for Derivatives Data

Matthew Leising and Shannon D. Harrington
Jul 1, 2010

Goldman Sachs Group Inc. refused a request from the Financial Crisis Inquiry Commission to reveal how much it makes trading derivatives, saying the bank doesn’t separate the figure from other businesses.

“Some other firms have provided us with that data when we’ve asked for it and Goldman Sachs hasn’t,” Commissioner Brooksley Born said today in Washington on the second day of a hearing investigating the role of derivatives in the 2008 credit crisis, which sparked the worst recession since the 1930s. “It makes one wonder why Goldman has the incentive or impetus to not release this information.”

Banks including JPMorgan Chase & Co., the biggest derivatives dealer, have provided estimates to investors. The top five U.S. commercial banks, including Goldman Sachs, generated an estimated $28 billion in revenue from privately negotiated derivatives in 2009, according to company reports collected by the Federal Reserve and people familiar with banks’ income sources.

Goldman Sachs, the most profitable Wall Street firm in history, is being questioned about credit-default swap trades with American International Group Inc., the insurer bailed out by the U.S. government after AIG was unable to meet collateral demands from trading partners on the contracts. The swaps, used by Goldman Sachs and other banks to hedge against declines in the value of mortgage-linked debt, caused losses at AIG as housing prices collapsed.

‘It’s Integrated’

Goldman Sachs Chief Financial Officer David Viniar testified today that the firm has no way of separating out its derivatives data from trading in cash securities.

“We don’t have a separate derivatives business,” Viniar told the panel. “It’s integrated into the rest of our business.”

Commissioner Byron Georgiou said he doubted Goldman Sachs was unable to provide the information.

“When you tell us that you don’t know how much you make in your derivatives business, nobody here really believes it,” Georgiou told Viniar. “Nobody here believes that you don’t know how much money you’re making on the various aspects of your business, it doesn’t make any sense.”

$49.1 Trillion

Goldman Sachs held a gross amount of $49.1 trillion of derivatives contracts as of March 31, according to an Office of the Comptroller of the Currency report last month. The bank reported total trading revenue of $7.65 billion during the first quarter. That follows total trading revenue of $23.2 billion in 2009, according to a filing with the Federal Reserve.

“It’s kind of dangerous, don’t you think, to claim to the FCIC that you don’t know the profitability of a major line of business,” said Craig Pirrong, a finance professor at the University of Houston. “How can you rationally allocate capital, for instance, if you don’t know the return to that capital?”

Under a March 2008 amendment to derivatives accounting standards, companies are exempt from breaking out gains or losses on derivatives used as part of a trading book that also includes cash securities, if other information on the trading activities is provided, according to the Financial Accounting Standards Board’s Statement No. 161.

Goldman Sachs is “definitely capable of providing the data that was asked for, but I can understand their fear of doing so,” said Brian Yelvington, head of fixed-income strategy at broker-dealer Knight Libertas LLC in Greenwich, Connecticut, and a former credit swaps trader.

Derivatives Revenue

“There is a potential for such a number to vastly overstate the amount of profit or loss captured by a particular business because much of that business may be symbiotic with another,” Yelvington said. “They may have made money on the derivatives leg of a trade, for example, and lost it on the cash leg.”

JPMorgan said in February 2009 that about 8 percent of its total revenue from 2006 to 2008 came from derivatives in its investment-banking unit, according to a presentation made to investors.

That breakdown and revenue figures from regulatory filings imply that half of JPMorgan’s $31.2 billion in trading revenue those years came from derivatives, according to Alexander Yavorsky, a senior analyst at Moody’s Investors Service in New York.

‘Highly Imprecise’

“Reporting a revenue number, just the profit on derivatives without looking at cash positions associated with hedging those, is going to be a highly imprecise exercise,” Yavorsky said in an interview today.

Goldman Sachs was subpoenaed by the commission last month after the New York-based firm sent more than a billion pages of documents to the panel, a shipment so sizable that panel members called it an attempt to hinder their probe.

“We did not ask them to pull up a dump truck to our offices and dump a bunch of rubbish,” Chairman Phil Angelides, who previously served as California’s treasurer, said June 7. “This has been a very deliberate effort over time to run out the clock.”

The commission, which will report its findings to Congress and President Barack Obama by December, said June 29 that the bank had been more responsive to information requests since being subpoenaed. Separately, Goldman Sachs faces a U.S. Securities and Exchange Commission fraud suit over sales of a mortgage-linked security. The bank has said the SEC suit is unfounded.

Born’s Warning

Born had warned in 1998, as chairman of the Commodity Futures Trading Commission, that the unregulated over-the- counter derivatives market posed a danger to the global financial system. She moved to address changes in how swaps based on interest rates, commodities or currencies were traded and was stopped by then-Federal Reserve Chairman Alan Greenspan, SEC Chairman Arthur Levitt and Treasury Secretary Robert Rubin, who all argued the market could regulate itself.

Born said last year that the banks that caused the crisis were trying to stop the congressional overhaul of the market.

“Special interests in the financial-services industry are beginning to advocate a return to business as usual,” Born said in May 2009 as she accepted a Profile in Courage award from the John F. Kennedy Library Foundation.

To contact the reporters on this story: Matthew Leising in New York at mleising@bloomberg.net; Shannon D. Harrington in New York at sharrington6@bloomberg.net

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http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7859800/BIS-plays-with-fire-demands-double-barrelled-monetary-and-fiscal-tightening.html

BIS plays with fire, demands double-barrelled monetary and fiscal tightening

The Bank for International Settlements has warned authorities across the developed world that they cannot rely on ultra-low interest rates to cushion the blow of austerity measures.

Ambrose Evans-Pritchard
28 Jun 2010

Both fiscal and monetary policy may have to be tightened at the same time and ­before recovery is entrenched, a chilling possibility for asset markets. "Macroeconomic support has its limits," said the bank's annual report.

The Swiss-based "bank for central bankers" said ultra-low rates and massive fiscal stimulus saved the world from an economic meltdown during the credit crisis, but the balance of advantage has since shifted.

"Such powerful measures have strong side-effects, and their dangers are becoming apparent. The time has come to ask how they can be phased out," it said.

"There are limits to how long monetary policy can remain expansionary. Keeping interest rates near zero for too long, with abundant liquidity, leads to distortions and creates risks for financial stability. We cannot wait for the resumption of strong growth to begin the process of policy correction."

The clarion call for higher rates and an end to quantitative easing is controversial and pits the BIS against the International Monetary Fund in an epochal policy battle. If wrong, the BIS strategy risks pushing the global economy into depression.

Dominique Strauss-Kahn, the IMF chief, warned against zealous self-flagellation at the G20 summit. "It could be a catastrophe if all the countries were tightening, it could totally destroy the recovery."

Gabriel Stein, of Lombard Street Research, said the BIS is playing with fire. "Fiscal and monetary tightening were tried in tandem in the early 1930s and it didn't work then. The BIS ought to know better," he said.

The bank said the US and Europe made the fatal error of holding rates too low after the dotcom bust, fearing a slide towards deflation. The effect was to fuel asset bubbles and depress credit yields, pressuring lenders to chase risk. "Our recent experience with exactly these consequences a mere five years ago should make us extremely wary this time around," it said.

The BIS warned that central banks are luring banks into a fresh trap by shoring up lenders with cheap access to short-term funding, which is then used to buy long-dated bonds at higher yield – the so-called sovereign "carry trade". Some have already been caught out badly in Greek debt.

"Financial institutions may underestimate the risk associated with this maturity exposure. They might face difficulty rolling over their short-term debt. An unexpected tightening of monetary policy might cause serious repercussions," it said.

The parallel with post dotcom errors is likely to rile critics. Housing markets and banks were robust at the time, whereas the damage now is deeply structural in the US, Britain and Europe. Yet the BIS has clearly concluded that it is better for indebted economies to take their punishment early rather than dragging out the ordeal as in Japan.

On the spending side, the bank called for "immediate front-loaded fiscal consolidation" in key industrial states. "Public debt-to-GDP ratios are on unsustainable trajectories," rising from 76pc of GDP in 2007 to 100pc in 2011. The picture is worse than it looks since the crisis has "permanently" reduced output, and aging costs are soaring.

Yet fiscal austerity may be less of a drag on recovery than presumed. Denmark slashed its primary deficit by 13.4pc of GDP from 1983-1986, yet eked out growth of 3.9pc a year. Sweden grew by 3.7pc during its hair-shirt episode in the 1990s, Canada by 2.8pc, and Belgium by 2.3pc.

These cases do not tell us what would happen if half the world tightens at the same time, feeding on each other. Even so, the BIS data challenges Keynesian claims about fiscal stimulus. State spending merely "crowds out" private activity.

Besides, governments have no choice. They must retrench to appease the bond vigilantes in the new era of sovereign frailty. "A sudden loss in market confidence would be far worse," said the BIS.

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http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7857595/RBS-tells-clients-to-prepare-for-monster-money-printing-by-the-Federal-Reserve.html

RBS tells clients to prepare for 'monster' money-printing by the Federal Reserve

As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve.

Ambrose Evans-Pritchard
27 Jun 2010

Entitled "Deflation: Making Sure It Doesn’t Happen Here", it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

The speech is best known for its irreverent one-liner: "The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost."

Bernanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE).

Investors basking in Wall Street's V-shaped rally had assumed that this bizarre episode was over. So did the Fed, which has been shutting liquidity spigots one by one. But the latest batch of data is disturbing.

The ECRI leading indicator produced by the Economic Cycle Research Institute plummeted yet again last week to -6.9, pointing to contraction in the US by the end of the year. It is dropping faster that at any time in the post-War era.

The latest data from the CPB Netherlands Bureau shows that world trade slid 1.7pc in May, with the biggest fall in Asia. The Baltic Dry Index measuring freight rates on bulk goods has dropped 40pc in a month. This is a volatile index that can be distorted by the supply of new ships, but those who watch it as an early warning signal for China and commodities are nervous.

Andrew Roberts, credit chief at RBS, is advising clients to read the Bernanke text very closely because the Fed is soon going to have to the pull the lever on "monster" quantitative easing (QE)".

"We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable," he said in a note to investors.

Roberts said the Fed will shift tack, resorting to the 1940s strategy of capping bond yields around 2pc by force majeure said this is the option "which I personally prefer".

A recent paper by the San Francisco Fed argues that interest rates should now be minus 5pc under the bank's "rule of thumb" measure of capacity use and unemployment. The rate is currently minus 2pc when QE is factored in. You could conclude, very crudely, that the Fed must therefore buy another $2 trillion of bonds, and even more if Europe's EMU debacle goes from bad to worse. I suspect that this hints at the Bernanke view, but it is anathema to hardliners at the Kansas, Richmond, Philadephia, and Dallas Feds.

Societe Generale's uber-bear Albert Edwards said the Fed and other central banks will be forced to print more money whatever they now say, given the "stinking fiscal mess" across the developed world. "The response to the coming deflationary maelstrom will be additional money printing that will make the recent QE seem insignificant," he said.

Despite the apparent rift with Europe, the US is arguably tightening fiscal policy just as hard. Congress has cut off benefits for those unemployed beyond six months, leaving 1.3m without support. California has to slash $19bn in spending this year, as much as Greece, Portugal, Ireland, Hungary, and Romania combined. The states together must cut $112bn to comply with state laws.

The Congressional Budget Office said federal stimulus from the Obama package peaked in the first quarter. The effect will turn sharply negative by next year as tax rises automatically kick in, a net swing of 4pc of GDP. This is happening as the US housing market tips into a double-dip. New homes sales crashed 33pc to a record low of 300,000 in May after subsidies expired.

It is sobering that zero rates, QE a l'outrance, and an $800bn fiscal blitz should should have delivered so little. Just as it is sobering that Club Med bond purchases by the European Central Bank and the creation of the EU's €750bn rescue "shield" have failed to stabilize Europe's debt markets. Greek default contracts reached an all-time high of 1,125 on Friday even though the €110bn EU-IMF rescue is up and running. Are investors questioning EU solvency itself, or making a judgment on German willingness to back pledges with real money?

Clearly we are nearing the end of the "Phoney War", that phase of the global crisis when it seemed as if governments could conjure away the Great Debt. The trauma has merely been displaced from banks, auto makers, and homeowners onto the taxpayer, lifting public debt in the OECD bloc from 70pc of GDP to 100pc by next year. As the Bank for International Settlements warns, sovereign debt crises are nearing "boiling point" in half the world economy.

Fiscal largesse had its place last year. It arrested the downward spiral at a crucial moment, but that moment has passed. There is a time to love and a time to hate, a time for war and a time for peace. The Krugman doctrine of perma-deficits is ruinous - and has in fact ruined Japan. The only plausible escape route for the West is a decade of fiscal austerity offset by helicopter drops of printed money, for as long as it takes.

Some say that the Fed's QE policies have failed. I profoundly disagree. The US property market - and therefore the banks - would have imploded if the Fed had not pulled down mortgage rates so aggressively, but you can never prove a counter-factual.

The case for fresh QE is not to inflate away the debt or default on Chinese creditors by stealth devaluation. It is to prevent deflation.

Bernanke warned in that speech eight years ago that "sustained deflation can be highly destructive to a modern economy" because it leads to slow death from a rising real burden of debt.

At the time, the broad money supply war growing at 6pc and the Dallas Fed's `trimmed mean' index of core inflation was 2.2pc.

We are much nearer the tipping today. The M3 money supply has contracted by 5.5pc over the last year, and the pace is accelerating: the 'trimmed mean' index is now 0.6pc on a six-month basis, the lowest ever. America is one twist shy of a debt-deflation trap.

There is no doubt that the Fed has the tools to stop this. "Sufficient injections of money will ultimately always reverse a deflation," said Bernanke. The question is whether he can muster support for such action in the face of massive popular disgust, a Republican Fronde in Congress, and resistance from the liquidationsists at the Kansas, Philadelphia, and Richmond Feds. If he cannot, we are in grave trouble.

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http://www.economist.com/node/16426084?story_id=16426084&source=hptextfeature

The age of easy credit and its aftermath Is there life after debt?

Rich countries borrowed from the future.

Paying the bill will be difficult, and so will living in a thriftier world

The Economist
Jun 24th 2010

DEBT is as powerful a drug as alcohol and nicotine. In boom times Western consumers used it to enhance their lifestyles, companies borrowed to expand their businesses and investors employed debt to enhance their returns. For as long as the boom lasted, Mr Micawber’s famous injunction appeared to be wrong: when annual expenditure exceeded income, the result was happiness, not misery.

For a long time debt in the rich world has grown faster than incomes. As our special report this week spells out, it is not just government deficits that have swelled. In America private-sector debt alone rose from around 50% of GDP in 1950 to nearly 300% at its recent peak. The origins of the boom go even further back, reflecting huge changes in social attitudes. In the 19th century defaulting borrowers were sent to prison. The generation that lived through the Great Depression learned to scrimp and save. But the wider take-up of credit cards in the 1960s created a “buy now, pay later” society. Default became just a lifestyle choice. The reckless lender, rather than the imprudent debtor, was likely to get the blame.

As consumers leveraged up, so did companies. The average bond rating fell from A in 1981 to BBB- today, just one notch above junk status. Firms that held cash on their balance-sheets were criticised for their timidity, while bankruptcy laws, such as America’s Chapter 11, prevented creditors from foreclosing on companies. That forgiving regime encouraged entrepreneurs (in Silicon Valley a bankruptcy is like a duelling scar in a Prussian officers’ mess) but also allowed too many zombie companies to survive (look at the airlines). And no industry was more addicted to leverage than finance. Banks ran balance-sheets with ever lower levels of equity capital; private equity and hedge funds, which use debt aggressively, churned out billionaires. The road to riches was simple: buy an asset with borrowed money, then sit back and watch its price rise.

All this was encouraged by the authorities. Any time a debt crisis threatened the economy, central banks slashed interest rates. The prospect of such rescues reduced the risk of taking on more debt. Bubbles were created, first in equities, then in housing. It was a monetary ratchet, in which each cycle ended with much higher debt and much lower interest rates. The end-game was reached in 2007-08 when investors realised a lot of this debt would not be repaid. As the credit crunch tightened, central banks had to cut short-term rates to 1% or below.

And now the reckoning

Rich-world countries now face two sets of problems. The most pressing is how to pay off their debts. Many people who have cut back their credit-card spending and firms which have seen their credit lines slashed would be horrified to see how little the rich world’s overall burden has fallen. Much of the debt has merely moved from the private to the public sector as governments have correctly stepped in to support banks and save the economy from falling into depression. And in the future, even more money will have to be raised, because of governments’ lavish promises of pensions and health care for the retiring baby-boom generation.

All this debt will have to be regularly refinanced and rolled over. Crises of confidence are likely, given that the rich world’s trend rate of growth (and thus the ability of debtors to service their loans) looks set to slow. Worse, much private debt is secured against assets; while the value of the debt is fixed, the value of the assets can fall. This can cause a vicious circle as debtors are forced to sell assets, driving prices down.

Piling up more debt does not seem an option. There is little appetite on behalf of borrowers or creditors. All governments face the tricky balance of appeasing the markets without damaging growth: Britain’s new government had a go this week (see article). But living with less debt will present a second set of longer-term challenges.

The road to purgatory

A rich world with less debt would look very different. Banks are already facing demands for higher capital ratios (and thus safer balance-sheets). Western consumers, facing higher taxes and lower benefits, will no longer have the freedom to spend; indeed, they will want to save more as they face long retirements. Sarah Jessica Parker and her Manolo Blahniks will be out; Grandma Walton and her sensible apron will be in. Houses will once again be somewhere to live, not vehicles for speculation. Some business models, notably private equity, will find it tougher to thrive. Life will be harder for entrepreneurs: more than half of all new firms rely on debt finance.

For policymakers, the priorities are clear. First, they need to focus on generating growth. America, with its relatively young, rising population, will find that comparatively easy. Continental Europe, by contrast, runs the risk of ending up like Japan, which has spent two decades struggling to grow in the face of its debt burden and ageing population. The best and the brightest young Europeans may emigrate to countries without such burdens; and if the economy stagnates, those that remain may eventually decide either to default on their debts, or to cut benefits to the elderly. Faced with those dangers, Europe needs to embrace the structural reforms necessary to make its economies as fast-growing and flexible as possible.

Second, policymakers need to begin the long task of rebalancing the world economy. It makes sense for Western countries, like workers in their 50s, to save for retirement rather than run up their credit-card bills. But if one lot of people saves, another must borrow. At the moment the developing world is unwilling to run current-account deficits; even getting China to save less is a huge task (see article). All the same, a shift is in everybody’s long-term interest—and the younger parts of the world should be the borrowers.

Weaning rich countries off their debt addiction will cause withdrawal symptoms. Austerity does not appeal to voters, who may work off their frustrations on politicians and (worse) foreigners. Mr Micawber’s phrase may be turned on its head again. When annual income is forced to exceed annual expenditure, the result may well be misery.

An interactive chart allows you to compare how the debt burden varies across 14 countries and to examine different types of borrowing

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http://www.telegraph.co.uk/news/worldnews/europe/7837874/Germany-and-France-examine-two-tier-euro.html

Germany and France examine 'two-tier' euro

Germany and France are examining ways of creating a "two-tier" euro system to separate stronger northern European countries from weaker southern states.

Alex Spillius in Washington and Bruno Waterfield in Brussels
19 Jun 2010

A European official has told The Daily Telegraph the dramatic option was being examined at cabinet level.

Senior politicians believe their economies need to be better protected as they could not cope with another crisis on a par the one in Greece.

The creation of a "super-euro" zone would initially include France, Germany, Holland, Austria and Finland.

The likes of Greece, Spain, Italy, Portugal and even Ireland would be left in a larger rump mostly Mediterranean grouping.

The official said French and German officials had first spent months examining how to exclude poor-performing states from the euro but decided it was not feasible.

A two-tier monetary system in the 16-member euro zone is being examined as a "plan B".

"The philosophy is the stronger countries might need to move away from countries they can't afford to bail-out," said the official. "As a way of containing the damage, they may have to do something dramatic, though obviously in the short term implementation is difficult.

"It's an act of desperation. They are not talking about ideal solutions but the lesser of evils. Helping Greece could be done relatively cheaply but Spain they can't afford to let fail or bail-out.

"And putting more pressure on the people of France and Germany to save other countries is politically unfeasible."

One option, to protect the wealthier northern European countries and to help indebted southern Europeans, would be for Germany to lead a group of countries out of the existing euro into a new single currency alongside the old.

The old euro would decline sharply against the new German and French dominated currency but both north and southern Europeans would be protected.

Northern economies would be protected from debt contagion and southern countries would be spared the horrors of being thrown out and forced to go it alone.

Angela Merkel, the German Chancellor, has already paid a political price for forcing the rescue plan on a reluctant public, losing her majority in the upper house of parliament in a recent election.

The official pointed out that France held lent £500 billion to Spain and the Germans had lent £335 billion.

Nicolas Sarkozy, the French president, is understood to have been initially cool on the idea but has grown so frustrated with Greece and now Spain that he has allowed officials to explore proposals.

"He would prefer to keep the euro in place but if Spain, Italy and Greece are dragging him down he accepts he may have to cut them loose," said the official. "They are trying to contain the contagious effect but they don't have a solution yet."

The crunch time will come in September, when Spain has to refinance £67 billion of its foreign debt.

"If the markets don't buy that will trigger a response by Germany and France," said the official.

Expelling a country from the euro could push the whole region into a slump because European banks are so exposed to debt in southern Europe. The consequences for the exiting country would be even more catastrophic.

"The euro zone debt crisis has a long way to run," said one senior EU negotiator. "No one knows where it is going to end up. Only one thing is sure, the euro zone will change."

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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7834051/Italian-economists-slam-austerity-measures.html

Italian economists slam austerity measures

A group of 100 Italian economists has written an open letter warning that the EU austerity policies being imposed on Southern Europe may tip the region into a downward spiral, risking the disintegration of the monetary union.

Ambrose Evans-Pritchard
17 Jun 2010

"The `politics of sacrifice' in Italy and in Europe run the risk of accentuating the crisis in the end, causing a faster rise in unemployment and company failures, and could at a certain point compel some countries to leave monetary union. We must have an immediate debate on the extremely grave errors in economic policies now being committed," the economists said.

"The fundamental point is that the current instability of monetary union is not just the result of accounting fraud and over-spending. In reality, it stems from a profound interweaving of the global economic crisis and imbalances within the eurozone."

The letter, which has echoes of a famous letter to The Times by 360 economists denouncing the Thatcher cuts in the early 1980s, was drafted by a network of Left-leaning Keynesian economists and published by Il Sole.

The letter accused the EU authorities and leading governments of being out of step with modern economic thinking, marking the first clear revolt by parts of the eurozone's intellectual elite against EMU orthodoxies and especially against the "deflationary economic policies" being imposed by Germany.

The group said states might choose to leave EMU in order to end job destruction.

"Some countries will be pushed out of the eurozone, others will break away to free themselves from a deflationary spiral."

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http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100006271/the-euro-mutiny-begins/

The euro mutiny begins

Ambrose Evans-Pritchard
June 16th, 2010

The rebellion against the 1930s fiscal and monetary policies of the Euro-complex is gathering pace.

Il Sole has published a letter by 100 Italian economists warning that the austerity strategy imposed by Brussels/Frankfurt risks tipping Europe into a self-feeding downward spiral. Far from holding the eurozone together, it will cause weaker countries to be catapulted out of EMU. Others will leave in order to restore sovereign control over their central banks and unemployment policies.

At worst it will blow the EU apart, leading to the very acrimony that the European Project was supposed to prevent.

For readers of Italian, it’s here.

While I don’t share the big-state Left-Keynesian perspective of these professors — nor their implicit hostility to the free market — I do agree with much of their overall analysis.

My rough translation:

“The grave economic global crisis, and its links to the eurozone crisis, will not be resolved by cutting salaries, pensions, the welfare state, education, research …….. More likely, the `politics of sacrifice’ in Italy and in Europe runs the risk of accentuating the crisis in the end, causing a faster rise in unemployment, of insolvencies and company failures, and could at a certain point compel some countries to leave monetary union.

“The fundamental point to understand is that the current instability of monetary union is not just the result of accounting fraud and over-spending. In reality, it stems from a profound interweaving of the global economic crisis and imbalances within the eurozone …..

It blames the crisis on the “deflationary economic policies” of the richer states. “Especially Germany, geared for a long time to holding down salaries in relation to productivity, and to the penetration of foreign markets, gaining European market share for German companies…

They say the policy has led to growing surpluses in Germany, offset by growing debts in Southern Europe. The adjustment mechanism has not only failed. Matters have got worse, and worse.

“This is the deeper reason why market traders are betting on a collapse of the eurozone. They can see that as the crisis drags on this will cause tax revenues to fall, making it ever harder to repay debts, whether public or private. Some countries will progressively be pushed out of the eurozone, others will decide to break away to free themselves from a deflationary spiral… It is the risk of widespread defaults and the reconversion of debts into national currencies that is really motivating bets by speculators.

The economists denounced the “obstinacy” with which the EU authorities and governments are pursuing “depressionary policies”, and called on the European Central Bank to abandon its policy of “sterilizing” purchases of Greek, Portuguese, and Spanish bonds, and move to fully-fledged quantitative easing to boost the money supply.

“We must have an immediate debate on the extremely grave errors in economic policies now being committed..

Si, Signori .. Bravissimi.

Just to be clear, I do not share their Krugmanite view that huge fiscal deficits are benign. In my view, it is imperative that the whole western world reduces debt in a orderly fashion over 10 to 15 years. Pacing is crucial. Too fast can be self-defeating. Too slow is not an option.

My objection with the EU’s mix of policies is that extreme fiscal austerity is being imposed on a string of countries without offsetting monetary stimulus. (Yes, I know, some will say that I am mixing apples and oranges).

Ireland, Spain, and Portugal have already tipped into outright deflation. Ireland’s nominal GDP has contracted 18.6pc since the peak. They are falling deeper into an Irving Fisher debt-deflation trap.

This is reactionary folly. The College of European Commission should be taken out and horse-whipped outside the Breydel Building for demanding yet further cuts from Spain — which is already cutting wages 5pc this year, in an economy where total public /private debt is 280pc of GDP or more. Can nobody think of a more coherent way out of this?

As for Germany, frankly it is hard to know what to say. It is astonishing that Chancellor Merkel should unveil an €80bn package of fiscal retrenchment without consulting with the rest of Europe. This has raised the bar for everybody else, forcing them into yet further contractionary policies to keep up. Mrs Merkel does not begin to understand the nature of commitment made by Germany when it launched monetary union.

EMU has become an infernal machine. This will not be the last letter by angry economists.

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http://ricerca.repubblica.it/repubblica/archivio/repubblica/2010/06/05/io-economista-finalmente-felice-vi-racconto-la.html

Io, economista finalmente felice vi racconto la mia vita a impatto zero

Repubblica
05 giugno 2010
pagina 39 sezione: CULTURA

Da molto tempo ormai non uso più l' automobile, mi muovo soltanto in bicicletta. Quando vengo in Italia, cosa che mi capita spesso, non prendo mai l' aereo, solo il treno. Anche se sono stato a lungo un amante della carne, ora ne mangio pochissima, mi diverto a scoprire altri sapori, perché gli allevamenti intensivi di bestiame sono tra le prime cause dell' inquinamento atmosferico. Un chilo di carne equivale a sei litri di petrolio. Preferisco comprare quel che mi serve nelle piccole botteghe e cerco di usare ogni cosa sino a consumarla del tutto. Piuttosto che buttare, riparo, anche se oggigiorno costa meno comprare un oggetto nuovo fabbricato in Cina. Ma preferisco appunto allungare la vita delle cose, o riciclare, combattendo così la filosofia dell' usa-e-getta, l' obsolescenza programmata dei beni. Non possiedo un cellulare, e sto bene così. Pratico quello che il mio maestro Ivan Illich chiamava "tecnodigiuno". Non guardo mai la televisione e ho soltanto un computer che mi permette di consultare ogni tanto le email. Non mi collego ogni giorno alla posta elettronica, faccio delle lunghe pause anche in questo. Spesso scrivo lettere a mano perché è un modo di dimostrare a me stesso che non ho bisogno di una protesi elettronica per comunicare con gli altri. L' importante è resistere alla "tecno-dipendenza". Si può usare la tecnologia ma bisogna evitare di esserne schiavi. Benché faccia tutte queste rinunce rispetto allo stile di vita moderno, non sono da compatire. Invertire la corsa all' eccesso è la cosa più allegra che ci sia. La mia unica regola è la gioia di vivere. E' possibile immaginare una società ecologica felice, dove ognuno di noi riesce a porsi dei limiti, senza soffrirne perché non si sono create delle dipendenze. E' ormai riconosciuto che il perseguimento indefinito della crescita è incompatibile con un pianeta finito. Se non vi sarà un' inversione di rotta, ci attende una catastrofe ecologica e umana. Siamo ancora in tempo per immaginare, serenamente, un sistema basato su un' altra logica: quella di una "società di decrescita". Io parlo di decrescita felice, perché sono convinto che si tratta di piccoli aggiustamenti che ognuno di noi può fare senza soffrirne. Da giovane ero un economista esperto di sviluppo. Negli anni Sessanta sono stato in Congo e poi nel Laos per attuare programmi di sviluppo economico. E' così che è incominciata la mia riflessione critica su questo modello di crescita continua. Pensavo essere al servizio di una scienza, in realtà si trattava di una religione. Gli economisti come me allora sono dei missionari che vogliono convertire e distruggere popoli che vivevano diversamente. Quando ho iniziato a non seguire più questa dottrina assoluta, in vigore ormai da decenni, ero molto isolato. In Occidente nessuno ha avuto il coraggio di parlare di decrescita fino al 1989, dopo il crollo del Muro. Quando siamo entrati in un mondo globale, senza più differenze tra primo, secondo o terzo mondo, lentamente c' è stata una presa di coscienza. Oggi non si tratta di trovare un nuovo modello economico ma di uscire dal governo dell' economia per riscoprire i valori sociali e dare la priorità alla politica. Ognuno di noi può fare qualcosa intorno a quelle che io chiamo le otto ' R' . Ovvero rivalutare, riconcettualizzare, ristrutturare, ridistribuire, rilocalizzare, ridurre, riutilizzare, riciclare. Rivalutare significa per esempio creare un diverso immaginario collettivo, fatto dell' amore per la verità, di un senso della giustizia e della responsabilità, del dovere di solidarietà. Rilocalizzare vuol dire produrre a livello locale i prodotti necessari a soddisfare i bisogni della popolazione. Riutilizzare e riciclare è anche l' unico modo di evitare di essere sommersi dai rifiuti infiniti che stanno distruggendo la Terra. Le otto ' R' sono cambiamenti interdipendenti, che insieme possono far nascere una nuova società ecologica. Una società nella quale ci sentiremo di nuovo cittadini, e non più solo semplici consumatori. (testo raccolto da Anais Ginori) - SERGE LATOUCHE

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http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5568518.ece

SocGen rogue trader Jerome Kerviel 'hit the jackpot' on 7/7

Adam Sage in Paris
January 23, 2009

It was a day of carnage that left 56 people dead and a dark shadow for ever cast over the history of London. But for Jérôme Kerviel, the French rogue trader, 7/7 was the jackpot.

Mr Kerviel, whose wild bets on the stock market ended with record losses, celebrated as Britain’s worst terror attack helped him to register a €500,000 profit and to continue a winning streak that brought him “orgasmic pleasure”.

The trader made the confession as he told the newspaper Le Parisien how he had lost touch with reality in the pursuit of money-making at Société Générale, the bank that employed him. It is alleged that his rogue dealings resulted in record losses of almost €5 billion and plunged the 144-year-old French financial institution into crisis.

Mr Kerviel, who was questioned by magistrates yesterday, is under investigation on suspicion of breach of trust, fabricating documents and accessing computers illegally. He faces a maximum sentence of five years in prison if found guilty.

The trader, 32, claimed that his colleagues and superiors had been aware of his actions, which brought him the nickname of le cash machine. He painted a damning picture of the bank’s trading room as earnings soared in the years before the financial crisis.

“The best trading day in the history of Société Générale was September 11, 2001,” he said. “At least, that’s what one of my managers told me. It seems that profits were colossal that day.

“I had a similar experience during the London attacks in July 2005.”

A few days earlier he had bet on a fall in the share price of Allianz, the German insurance giant, he told Le Parisien. Everyone was losing money when the 7/7 bombings sent the insurance sector into a downward spiral “except for me”, he said. “Thanks to the positions I had, I earned €500,000 in a few minutes. It was the jackpot. I was jubilant.”

After the celebrations Mr Kerviel said he paused for thought. “I understood that I was having fun when people had just been hit by the bombs. I ran to the toilet and I was sick. But the moment of weakness did not last long. I went back into the trading room and I returned to work.”

Mr Kerviel also spoke of his financial triumphs in the months leading up to the discovery of his unauthorised trades in January last year. “From August to December 2007, I win every day,” he said. “That creates a sort of addiction. A good day for a normal trader is a profit of €30,000 to €40,000. For me, a €1 million day is rubbish. I take crazy risks. And I make astronomic profits which sometimes give me an orgasmic pleasure.”

He denounced his former colleagues as hypocrites for claiming that they had no idea of his deals after he ran up a profit of €1.4 billion in 2007. “I covered the losses of several of my colleagues,” he said.

Mr Kerviel sought to distance himself from his comments after their publication in Le Parisien, saying that they stemmed from a private conversation and were taken out of context. The newspaper said that he met its journalist six times for on-the-record interviews at the request of his lawyers.

Losing bet

2000 Jérôme Kerviel joins Société Générale

January 18, 2008 Bank investigates after transactions raise red flags

January 19 Kerviel begins to admit to unauthorised trading activity

January 20 Total exposure to trades is pinned at €5 billion

January 24 SocGen asks for its shares to be suspended

January 25 Kerviel named as “rogue trader”

Source: Times archives