Tag Archives: Regulation

Banks & IMF Are Out of Control

As a species we are fallible and we recognise this in our attempts to construct laws and regulations which address human weaknesses and flaws. They are by no means complete and human fallibility continues to wreak havoc, more so when those same laws and regulations are removed or neutered by vested interest.

My regular readers will know that one of my hobby horses is the continued abuse of Greece by the Troika, something that is killing innocent Greek people through deprivation and despair. At the heart of this destruction is the IMF and its policy of ‘austerity’ that obligates countries indebted to it to cut social support programmes and hand over sovereign assets at discounted values.

“The organization’s objectives stated in the Articles of Agreement are to promote international monetary cooperation, international trade, high employment, exchange-rate stability, sustainable economic growth, and making resources available to member countries in financial difficulty.”

Further on from this, the frightening scope of its powers are clearly laid out.

Whilst the Fund can “make contracts, acquire and dispose of immovable and movable property and institute legal proceedings” from which nobody is immune, the Fund and its employees “are immune from every form of judicial process” and its assets “free from restrictions, controls and moratoria of any nature.” This includes freedom from any form of personal taxation for all 2400 employees!

With this unprecedented level of unaccountability, the Fund can do whatever it likes. In the case of Greece, it has done precisely this without seeming care or concern, in what has now been described as the ‘immolation’ of Greece. (Merriam-Webster’s dictionary defines immolation as “to kill as a sacrificial victim”, which is the stand I have personally taken over the whole violation of this country.)

This lack of accountability has now been firmly placed in the spotlight, (with similar brutality), after its own internal watchdog, the Independent Evaluation Office (IEO) submitted a report  to the board, (to whom they are solely accountable), which has roundly condemned how the Fund is being run.

Its top level staff have misled and misinformed their own board into becoming the champions of the euro project and which has led to catastrophic misjudgements on Greece. They have also failed to grasp the basic concepts of money theory that ensured they completely ignored the warning signs of an impending crisis within the EU, a ‘serious scientific and professional failure’.

EU insiders have used the fund to rescue their own pet project, with an unprecedented 80% of all available funding being used to bail out Greece, Portugal and Ireland. An ethos of misleading seniors was also extended to the IEO, in its investigations of the activities of “ad-hoc task forces”, where decisions and provision of information remained elusive.

Heads have turned to its managing director Christine Lagarde, who is now to stand trial in France over corruption charges and who has responded to this report with a statement that offers ‘qualified’ acceptance of its contents. Something I interpret as “I hear you” and no more.

This arrogance, by the boss and her organisation, has led to an era of negative interest rates that is devastating savings and the future of pension schemes, whilst ruining the banking system in its wake. Their policies continue without any recovery, or hint of recovery in sight. Here lies the true cancer created by the inbuilt lack of accountability written into the Fund’s Articles of Agreement.

It goes to the very heart of why we need regulations and accountability to guard against the horrific abuses that can occur when human fallibility is not held in check. Millions of people’s lives have been ruined by the mismanagement of this powerful organisation and its independence must surely now be put in question.

And all of this at a time when the European Banking Authority has just conducted a ‘stress test’ across the European banking sector and nobody has failed, nor has anyone passed, as there are no criteria for such assessments.

Instead a rescue package has been put together to stop Italy’s Banca Monte dei Paschi di Siena collapsing and Deutsche Bank, defined by the IMF as “the world’s most systemically risky bank” is being ‘scrutinised’.

Of the 123 lenders covered in the last stress test in 2014 less than half have been covered this time and none of Portugal or Greek banks have been included. Neither will the results of 56 other banks that have taken the tests be published.

Like the IMF, lack of accountability and secrecy reign and beg two questions. Firstly, what was the point of these tests, other than giving the appearance that some form of regulation is being carried out. Secondly, what is the true extent of the fragility of these banks, given the millions of people are dependent upon them for running their personal and business finances.

This last point is even more significant when you consider that the world banking system is a carefully controlled cartel that is not open to competition. Cartels and monopolies offer the very worst of attributes of human fallibility in the unaccountable power and control they provide and a complete immunisation from healthy regulation and governance.

Thatcher and Reagan opened up the financial markets to unlimited growth and power, which has accelerated exponentially in the last 40 years and is now bringing the world to its knees, with an impending financial collapse that will make 1929 and 2008 seem but hiccups.

Only today the man convicted of the UBS £1.4 billion fraud, the biggest in British history, said that “major banks have done little to tackle the culture which allowed him to carry out his crimes”.

Indeed, the Financial Conduct Authority dropped a long-running enquiry into the culture of banking at the beginning of the year, with suggestions that former chancellor George Osborne had exercised pressure on the industry following last year’s surprise election win.

Never has there been the need for the re-emergence of democratically supported political power to bring these financial monoliths back under control. We need regulations that have teeth and can break the conglomerates up and return us to a banking sector that supports the needs of Society and not the needs of the few.

I worry that we hear nothing about the regulation of the financial sector from those seeking political office, either at home or abroad. It was strong leadership that gave them their power and it is that self-same strong leadership that can take it away again now.

Until the next time

 

Thinking from his Book: Global Magna Carta. Returning Power to the 99% . . . If They Want It! By J T Coombes

EU Cart Before The Horse

Regulation photo

History shows that ever since we first roamed this Planet the laws and customs by which we live and interact evolve in line with the current state of Society. The Concise Oxford Dictionary defines ‘law’ as:

“a rule or system of rules recognised by a country or community as regulating the actions of its members and enforced by the imposition of penalties”.

This recognises that the laws of different communities and races, colours and creeds reflect the prevalent socio-political norms of each particular Society. The laws of developing countries will be different to those of Western democracy, reflecting the level of how ‘developed’ each culture is.

Whilst the history of law-making dates way back to the 21st century BC, the oldest written laws on record were those of the Babylonian king Hammurabi in the 18th century BC, who created 282 laws that set the standard of conduct and justice for his empire of ancient Mesopotamia. The essence of these laws sought:

”to prevent the strong from oppressing the weak and to see that justice is done to widows and orphans.”

Even that far back they included the establishment of a minimum wage for workers. Field labourers and herdsmen were guaranteed a wage of “eight gur of corn per year” and ox drivers and sailors received six.

Society’s laws are often derived from religious beliefs, as well as civic procedure, some of which have remained in force right up to the present day. The doctrine of ‘innocent until proven guilty’ was not instigated by Magna Carta but rather copied from Hammurabi’s ancient dictates.

I would offer therefore, that Society, (‘the cart’), is directed by democracy, (‘the reins’), which steer government, (‘the horse’) and its regulations, in the direction Society is travelling.

All legislation is introduced, amended, or discontinued to reflect the current climate of Society and its needs. The law that required a man to walk in front of a motor car with a red flag to safeguard pedestrians, is no longer relevant.

200 years later and we see the enactment of legislation to ban smoking from public places, in recognition of our change of direction on cigarettes and how they endanger our lives. This is evidence of a properly functioning Society

The reverse is the case in an authoritarian regime.

Here rules and regulation are enacted to control how that Society functions, rather than reflect how it functions. By the very nature of an authoritarian environment, those rules are also inflexible, to maintain that control.

The ‘cart’ is put very much before the ‘horse’, who is pushing Society in the desired direction. Invariably, the regulations are biased to support one sector of Society at a cost to another sector.

In the case of the EU we have, for example, small businesses overwhelmed by bureaucratic red tape, which large established corporations can afford to accommodate. This has the effect of stifling the growth of new businesses, the accepted life blood of commerce and trade, encouraging a protectionist monopoly situation which supports the control of markets and prices.

Authoritarian control can also be seen in the Treaties that support the bureaucracy of Brussels, which are ‘welded’ onto the statute books in such a way as to inhibit any changes to the desired status quo.

Over the last 40 years EU Treaty change has occurred about once every 10 years on average and shows a regulatory inflexibility that is ill equipped, or desirous, of meeting the requirements of the hugely diverse cultures of the 500 million people over which it holds sway.

One simple example, right at the heart of this rigid bureaucracy, illustrates how these carefully constructed Treaties support an abusive authority and offer little or no benefit to anyone else.

For years now, each month the European Parliament, (that is all 751 MEP’s, some of their staff and all their paperwork) up sticks from Brussels and travel 200 miles to Strasbourg where they spend four days voting on all they have talked about in Brussels.

Currently, we are talking 3000 people being transported by two specially chartered trains for the MEP’s – dubbed the Euro Track Express – with their staff, translators and general helpers travelling by other means. This is all backed up by a fleet of lorries that, in convoy, transport 5000 plastic trunks full of official papers over the 200-mile journey and back again.

The annual cost to the taxpayer of this regular spectacle is £150 million, which includes the upkeep of both bases. Within this figure is £2.5 million for the relocation of freelance translators, £1 million for catering, £250,000 for the lorries and £200,000 for the trains.

The absurdity of this monthly relocation is recognised by everyone involved. Indeed, the MEP’s have constantly lobbied for it to be stopped but it has fallen on deaf ears. It seems it would take a ‘Treaty change’ to remedy the matter but after the troubled ratification of the Lisbon Treaty there is little stomach to go through the arduous process at present.

I question this, as in 2010, Angela Merkel declared there could be no Treaty change on ‘bailouts’ and in that same year EU leaders agreed to a €440 billion bailout fund . . . over a weekend! It appears that what is ‘impossible’ can be quickly overcome, particularly where the EU’s second largest economy is at stake.

In an era when we have deregulation of commerce and the banks and zero hours’ contracts for the working population, this type of immovable regulation is directed at the protection of power, emphasising the vast gap between what the 1% control and that which the majority control.

These ‘concrete’ treaties, for the protection of the technocrats and their growing federation/empire, do nothing “to prevent the strong from oppressing the weak”, whose taxes pay for it all.

Here we see how the cart has been put before the horse. History shows how this contempt for the people eventually results in the fall of all empires, including Rome and Ancient Greece.

Once again, in this 21st century, we are plagued by the power driven ineptitude of career politicians and technocrat’s intent upon a self-destruction that they believe they are immune from.

Whether we remain or leave, it is something that will come up on our radar with evermore regularity, demanding we retake the reins and direct our cart away from the looming abyss.

Until the next time

 

Thinking from his Book: Global Magna Carta. Returning Power to the 99% . . . If They Want It! By J T Coombes