Tag Archives: Odious Debt

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

‘Austerity’ . . . This Will Kill it!

Are we now seeing the beginnings of the destruction of the financial and corporate world as we know it? If this month’s Finance and Development report from the IMF, no less, is anything to go by, with its headline “Neoliberalism: Oversold”, the writing is certainly on the wall.

Before I go any further let me just offer a couple of official definitions of Neoliberalism so that we are all singing from the same hymn sheet.

  1. A modern politico-economic theory favouring free trade, privatisation, minimal government intervention in business, reduced public expenditure on social services etc. Collins Dictionary
  2. Neoliberalism is a policy model of social studies and economics that transfers control of economic factors to the private sector from the public sector. Investopedia.com

Over the last 30 years or so it has become very noticeable how there has been a gradual erosion of democracy, countered by an escalation in corporate power and unregulated abuse which caused the financial collapse of 2008 and continues unchanged to this day.

Interspersed with this we have been assaulted by ‘Austerity’ measures across the globe and which, it has become increasingly clear, are a device to sell off public assets at a discount to the private sector.

In addition, there has been an escalation in debt originated money supply that has placed governments in varying positions of obligation to financiers. Because of this ‘obligation’, lenders have not only demanded ‘Austerity’ but also increasingly violated the democratic process by ‘quietly demanding that governments go against, or ignore, the wishes of the people.

Both of these abuses were particularly evident in the case of Greek debt. Here a (newly elected) government referendum against continued ‘Austerity’ measures was not only ignored but harsher terms were inflicted, in what appears to be a punishment and to deter any repeat of such action in other debtor countries in the EU and elsewhere.

We have also seen public outrage and demonstration against the odious TTIP agreement, Fracking and in the UK the gradual destruction/privatisation of the NHS. These actions have been equally rigorously ignored/defended by governments and the non-elected technocrats in Brussels, showing a complete contempt for the people who actually pay their wages and expenses.

All of the above, plus a whole lot more, can be laid fair and square at the feet of the application of Neoliberal doctrines, as time is now showing. What time is also demonstrating is that they don’t work and are simply benefitting the already rich, by increasing their wealth exponentially at the expense of the many.

The bombshell this week is that the IMF experts, in the shape of Jonathan D. Ostry, Prakash Loungani and Davide Furceri, are actually confirming what we already know. I quote from the heading of their report

“Instead of delivering growth,

some neoliberal policies have increased inequality,

in turn jeopardizing durable expansion”

The paper goes on to say:

“Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand—and thus worsen employment and unemployment.”

These findings suggest a need for a more nuanced view of what the neoliberal agenda is likely to be able to achieve. The IMF, which oversees the international monetary system, has been at the forefront of this reconsideration. ­

OR, to you and me . . . they got it badly wrong!

It explains why the IMF Managing Director, Christine Lagarde, is at loggerheads with German banks over Greek debt. The banks want blood from Greece and the IMF are now recognising this will not work and will jeopardise the standing of themselves and Brussels. It could also be another nail in the coffin of this currently disintegrating project that is the EU.

(Even President Obama is now backing Social Security programmes he was previously against for the American people.)

And if that wasn’t enough, according to Zero Hedge Euro-Area manufacturing is near stagnation, damping confidence in the strength of the regions recovery.

The cracks are beginning to appear in the established and very abusive order of things, if the perpetrators are now publicly admitting there is a problem of their own making. We are talking here of fundamental beliefs that have dictated how governments rule and what place, if any, democracy plays in the process.

Millions of people are homeless and struggling to feed themselves, some so overwhelmed by what they have been made to face that they have committed the tragedy of suicide. That the civilised world has been taken to this place is a lesson for us all.

The values demanded by ‘the people’ are the correct moral values for Society because it is the majority who are expounding them. The minority view can only ever be the view of vested interest, as this paper has identified and the IMF are to be respected for allowing it to be published. If it were Brussels it would have been sat on!

So my friends, where do we go from here? As you know my mantra is “Awareness breeds understanding and understanding breeds change”. There can be no way forward with ‘Austerity’ after this damning report.

Any government who continues to pursue these measures should be ousted from power as totally lacking in credibility and care for the people who have placed their trust in its leadership. And that goes for Brussels as well!

Until the next time

 

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