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  • Money and the crisis of civilisation – Pt 2

    From Part 1

    Another major engine of economic growth over the last three decades, child care, has also made us richer. We are now relieved of the burden of caring for our own children. We pay experts instead, who can do it much more efficiently.

    In ancient times entertainment was also a free, participatory function. Everyone played an instrument, sang, participated in drama. Even 75 years ago in America, every small town had its own marching band and baseball team. Now we pay for those services. The economy has grown. Hooray.

    The crisis we are facing today arises from the fact that there is almost no more social, cultural, natural, and spiritual capital left to convert into money. Centuries, millennia of near-continuous money creation has left us so destitute that we have nothing left to sell. Our forests are damaged beyond repair, our soil depleted and washed into the sea, our fisheries fished out, the rejuvenating capacity of the earth to recycle our waste saturated. Our cultural treasury of songs and stories, images and icons, has been looted and copyrighted. Any clever phrase you can think of is already a trademarked slogan. Our very human relationships and abilities have been taken away from us and sold back, so that we are now dependent on strangers, and therefore on money, for things few humans ever paid for until recently: food, shelter, clothing, entertainment, child care, cooking. Life itself has become a consumer item. Today we sell away the last vestiges of our divine bequeathment: our health, the biosphere and genome, even our own minds. This is the process that is culminating in our age. It is almost complete, especially in America and the “developed” world. In the developing world there still remain people who live substantially in gift cultures, where natural and social wealth is not yet the subject of property. Globalization is the process of stripping away these assets, to feed the money machine’s insatiable, existential need to grow. Yet this stripmining of other lands is running up against its limits too, both because there is almost nothing left to take, and because of growing pockets of effective resistance.

    The result is that the supply of money — and the corresponding volume of debt — has for several decades outstripped the production of goods and services that it promises. It is deeply related to the classic problem of oversupply in capitalist economics. The Marxian crisis of capital can be deferred into the future as long as new, high-profit industries and markets can be developed to compensate for the vicious circle of falling profits, falling wages, depressed consumption, and overproduction in mature industries. The continuation of capitalism as we know it depends on an infinite supply of these new industries, which essentially must convert infinite new realms of social, natural, cultural, and spiritual capital into money. The problem is, these resources are finite, and the closer they come to exhaustion, the more painful their extraction becomes. Therefore, contemporaneous with the financial crisis we have an ecological crisis and a health crisis. They are intimately interlinked. We cannot convert much more of the earth into money, or much more of our health into money, before the basis of life itself is threatened.

    Faced with the exhaustion of the non-monetized commonwealth that it consumes, financial capital has tried to delay the inevitable by cannibalizing itself. The dot-com bubble of the late 90s showed that the productive economy could not longer keep up with the growth of money. Lots of excess money was running around frantically, searching for a place where the promise of deferred goods and services could be redeemed. So, to postpone the inevitable crash, the Fed slashed interest rates and loosened monetary policy to allow old debts to be repaid with new debts (rather than real goods and services). The new financial goods and services that arose were phony, artifacts of deceptive accounting on a vast, systemic scale.

    Obviously, the practice of borrowing new money to pay the principal and interest of old debts cannot last very long, but that is what the economy as a whole has done for ten years now. Unfortunately, simply stopping this practice isn’t going to solve the underlying problem. A collapse is coming, unavoidably. The government’s bailout plan will at best postpone it for a year or two (who knows, maybe until 2012!), long enough for the big players to move their money to a safe haven. They will discover, though, that there is no safe haven. As the US dollar loses its safe-haven status (which will happen all the more certainly when the government takes over Wall Street’s bad debts), you can expect capital to chase various commodities in an inflationary surge before a deflationary depression takes hold. If a credit freeze overpowers the government’s inflationary measures, depression will come all the sooner.

    continues …

  • Money and the crisis of civilisation

    Then one day, the first batch of IOUs comes due. But guess what? The person who scribbled his name on the IOU can’t pay me back right now. In fact, lots of the borrowers can’t. I try to hush this embarrassing fact up as long as possible, but pretty soon you get suspicious. You want your million dollars back — in cash. I try to sell the IOUs and their derivatives that I hold, but everyone else is suspicious too, and no one buys them. The insurance company tries to cover my losses, but it can only do so by selling the IOUs I gave it!

    So finally, the government steps in and buys the IOUs, bails out the insurance company and everyone else holding the IOUs and the derivatives stacked on them. Their total value is way more than a million dollars now. I and my fellow entrepreneurs retire with our lucre. Everyone else pays for it.

    This is the first level of what has happened in the financial industry over the past decade. It is a huge transfer of wealth to the financial elite, to be funded by US taxpayers, foreign corporations and governments, and ultimately the foreign workers who subsidize US debt indirectly via the lower purchasing power of their wages. However, to see the current crisis as merely the result of a big con is to miss its true significance.

    I think we all sense that we are nearing the end of an era. On the most superficial level, it is the era of unregulated casino-style financial manipulation that is ending. But the current efforts of the political elites to fix the crisis at this level will only reveal its deeper dimensions. In fact, the crisis goes “all the way to the bottom.” It arises from the very nature of money and property in the world today, and it will persist and continue to intensify until money itself is transformed. A process centuries in the making is in its final stages of unfoldment.

    Money as we know it today has crisis and collapse built into its basic design. That is because money seeks interest, bears interest, and indeed is born of interest. To see how this works, let’s go back to some finance basics. Money is created when somebody takes out a loan from a bank (or more recently, a disguised loan from some other kind of institution). A debt is a promise to pay money in the future in order to buy something today; in other words, borrowing money is a form of delayed trading. I receive something now (bought with the money I borrowed) and agree to give something in the future (a good or service which I will sell for the money to pay back the debt). A bank or any other lender will ordinarily only agree to lend you money if there is a reasonable expectation you will pay it back; in other words, if there is a reasonable expectation you will produce goods or services of equivalent value. This “reasonable expectation” can be guaranteed in the form of collateral, or it can be encoded in one’s credit rating.

    Any time you use money, you are essentially guaranteeing “I have performed a service or provided a good of equivalent value to the one I am buying.” If the money is borrowed money, you are saying that you will provide an equivalent good/service in the future.

    Now enter interest. What motivates a bank to lend anyone money in the first place? It is interest. Interest drives the creation of money today. Any time money is created through debt, a need to create even more money in the future is also created. The amount of money must grow over time, which means that the volume of goods and services must grow over time as well.

    If the volume of money grows faster than the volume of goods and services, the result is inflation. If it grows more slowly — for example through a slowdown in lending — the result is bankruptcies, recession, or deflation. The government can increase or decrease the supply of money in several ways. First, it can create money by borrowing it from the central bank, or in America, from the Federal Reserve. This money ends up as bank deposits, which in turn give banks more margin reserves on which to extend loans. You see, a bank’s capacity to create money is limited by margin reserve requirements. Typically, a bank must hold cash (or central bank deposits) equal to about 10% of its total customer deposits. The other 90%, it can loan out, thus creating new money. This money ends up back in a bank as deposits, allowing another 81% of it (90% of 90%) to be lent out again. In this way, each dollar of initial deposits ends up as $9 of new money. Government spending of money borrowed from the central bank acts a seed for new money creation. (Of course, this depends on banks’ willingness to lend! In a credit freeze such as happened this week, banks hoard excess reserves and the repeated injections of government money have little effect.)

    Another way to increase the money supply is to lower margin reserve requirements. In practice this is rarely done, at least directly. However, in the last decade, various kinds of non-bank lending have skirted the margin reserve requirement, through the alphabet soup of financial instruments you’ve been hearing about in the news. The result is that each dollar of original equity has been leveraged not to nine times it original value, as in traditional banking, but to 70 times or even more. This has allowed returns on investment far beyond the 5% or so available from traditional banking, along with “compensation” packages beyond the dreams of avarice.

    Each new dollar that is created comes with a new dollar of debt — more than a dollar of debt, because of interest. The debt is eventually redeemed either with goods and services, or with more borrowed money, which in turn can be redeemed with yet more borrowed money… but eventually it will be used to buy goods and services. The interest has to come from somewhere. Borrowing more money to make the interest payments on an existing loan merely postpones the day of reckoning by deferring the need to create new goods and services.

    The whole system of interest-bearing money works fine as long as the volume of goods and services exchanged for money keeps growing. The crisis we are seeing today is in part because new money has been created much faster than goods and services have, and much faster than has been historically sustainable. There are only two ways out of such a situation: inflation and bankruptcies. Each involve the destruction of money. The current convulsions of the financial and political elites basically come down to a futile attempt to prevent both. Their first concern is to prevent the evaporation of money through massive bankruptcies, because it is, after all, their money.

    There is a much deeper crisis at work as well, a crisis in the creation of goods and services that underlies money to begin with, and it is this crisis that gave birth to the real estate bubble everyone blames for the current situation. To understand it, let’s get clear on what constitutes a “good” or a “service.” In economics, these terms refer to something that is exchanged for money. If I babysit your children for free, economists don’t count it as a service. It cannot be used to pay a financial debt: I cannot go to the supermarket and say, “I watched my neighbor’s kids this morning, so please give me food.” But if I open a day care center and charge you money, I have created a “service.” GDP rises and, according to economists, society has become wealthier.

    The same is true if I cut down a forest and sell the timber. While it is still standing and inaccessible, it is not a good. It only becomes “good” when I build a logging road, hire labor, cut it down, and transport it to a buyer. I convert a forest to timber, a commodity, and GDP goes up. Similarly, if I create a new song and share it for free, GDP does not go up and society is not considered wealthier, but if I copyright it and sell it, it becomes a good. Or I can find a traditional society that uses herbs and shamanic techniques for healing, destroy their culture and make them dependent on pharmaceutical medicine which they must purchase, evict them from their land so they cannot be subsistence farmers and must buy food, clear the land and hire them on a banana plantation — and I have made the world richer. I have brought various functions, relationships, and natural resources into the realm of money. In The Ascent of Humanity I describe this process in depth: the conversion of social capital, natural capital, cultural capital, and spiritual capital into money.

    continues …

  • The 30-Year Lie of the Market Cult

    But putting aside for a moment the actual intent, details and results of the global bailout offers, it is their very extent that shocks, and shows — in a stark, harsh, all-revealing light — the brutal disdain with which the national governments of the world’s “leading democracies” have treated their own citizens for decades.

    Beginning with Margaret Thatcher’s election in 1979, government after government — and party after party — fell to the onslaught of an extremist faith: the narrow, blinkered fundamentalism of the “Chicago School.” Epitomized by its patron saint, Milton Friedman, the rigid doctrine held that an unregulated market would always “correct” itself, because its workings are based on entirely rational and quantifiable principles. (See John Cassidy in the NY Review of Books for more.) This was of course an absurdly reductive and savagely ignorant view of history, money and human nature; but because it flattered the rich and powerful, offering an “intellectual” justification for rapacious greed and ever-widening economic and social inequality, it was adopted as holy writ by the elite and promulgated as public policy.

    This radical cult — a kind of Bolshevism from above — took its strongest hold in the United States and Britain, and was then imposed on many weaker nations through the IMF-led “Washington Consensus” (more aptly named by Naomi Klein as the “Shock Doctrine”), with devastating and deadly results. (As in Yeltsin’s Russia, for example, where life expectancy dropped precipitously and millions of people died premature deaths from poverty, illness, and despair.)

    According to the cult, not only were markets to be freed from the constraints placed on them after the world-shattering effects of the Great Depression, but all public spending was to be slashed ruthlessly to the bone. (Although exceptions were always made for the Pentagon war machine.) After all, every dollar spent by a public entity on public services and amenities was a dollar taken away from the private wheeler-dealers who could more usefully employ it in increasing the wealth of the elite — who would then allow some of their vast profits to “trickle down” to the lower orders.

    This was the cult that captured the governments of the United States and Britain (among others), as well as the Republican and Democratic parties, and the Conservative and Labour parties as well. And for almost thirty years, its ruthless doctrines have been put into practice. Regulation and oversight of financial markets were systematically stripped away or rendered toothless. Essential public services were sold off, for chump change, to corporate interests. Public spending on anything other than making war, threatening war and profiting from war was pared back or eliminated. Such public spending that did remain was forever under threat and derided, like the remnants of some pagan faith surviving in isolated backwaters.

    Year after year, the ordinary citizens were told by their governments: we have no money to spend on your needs, on your communities, on your infrastructure, on your health, on your children, on your environment, on your quality of life. We can’t do those kinds of things any more.

    Of course, when talking amongst themselves, or with the believers in the think tanks, boardrooms — and editorial offices — the cultists would speak more plainly: we don’t do those things anymore because we shouldn’t do them, we don’t want to do them, they are wrong, they are evil, they are outside the faith. But for the hoi polloi, the line was usually something like this: Budgets are tight, we must balance them (for a “balanced budget” is a core doctrine of the cult), we just can’t afford all these luxuries.

    But now, as the emptiness and falsity of the Chicago cargo cult stands nakedly revealed, even to some of its most faithful and fanatical adherents, we can see that this 30-year mantra by our governments has been a deliberate and outright lie. The money was there — billions and billions and billions of dollars of it, trillions of dollars of it. We can see it before our very eyes today — being whisked away from our public treasuries and showered upon the banks and the brokerages.

    Let’s say it again: The money was there all along.

    Money to build and generously equip thousands and thousands of new schools, with well-paid, exquisitely trained teachers, small teacher-pupil ratios, a full range of enriching and inspiring programs.

    Money to revitalize the nation’s crumbling inner cities, making them safe and vibrant places for businesses and families and communities to grow.

    Money to provide decent, affordable and accessible health care to every citizen, to provide dignity and comfort to the elderly, and protection and humane treatment for the mentally ill.

    Money to provide affordable higher education to everyone who wanted it and could qualify for it. Money to help establish and sustain local businesses and family farms, centered in and on the local community, driven by the needs and knowledge of the people in the area, and not by the dictates of distant corporations.

    Money to strengthen crumbling infrastructure, to repair bridges, shore up levies, maintain roads and electric grids and sewage systems.

    Money for affordable, workable public transport systems, for the pursuit of alternative sources of energy, for sustainable, sensible development, for environmental restoration.

    Money to support free inquiry in science, technology, health and other areas — research unfettered from the war machine and the drive for corporate profit, and instead devoted to the betterment of human life.

    Money to support culture, learning, continuing education, libraries, theater, music and the endless manifestations of the human quest to gain more meaning, more understanding, more enlightenment, a deeper, spiritually richer life.

    The money for all of this — and much, much more — was there, all along. When they said we couldn’t have these things, they were lying — or else allowing themselves to be profitably duped by the high priests of the market cult. When they wanted a trillion dollars — or three trillion dollars — to wage a war of aggression in Iraq, they found it. Now, when they want trillions of dollars to save the speculators, fraudsters and profiteers of greed in the global market, they suddenly have it.

    Who then can believe that these governments could not have found the money for good schools, health care, and all the rest, that they could not have enhanced the well-being and livelihood of millions of ordinary citizens, and helped create a more just and equitable and stable world — if they had wanted to?

    This is one of the main facts that ordinary citizens around the world should take away from this crisis: the money to maintain, secure and improve the lives of their families and communities was always there — but their governments, and their political parties, made a deliberate, unforced choice not to use it for the common good. Instead, they subjugated the well-being of the world to the dictates of an extremist cult. A cult of greed and privilege, that preached iron discipline to the poor and the middle-class, but released the rich and powerful from all restrictions, and all responsibility for their actions.

    This should be a constant — and galvanizing — thought in the minds of the public in the months and years to come. Remember what you could have had, and how it was denied you by the lies and delusions of a powerful elite and their bought-off factotums in government. Remember the trillions of dollars that suddenly appeared when the wheeler-dealers needed money to cover their own greed and stupidity.

    Let these thoughts guide you as you weigh the promises and actions of politicians and candidates, and as you assess the “expert analysis” on economic and domestic policy offered by the corporate media and the corporate-bankrolled think tanks and academics.

    And above all, let these thoughts be foremost in your mind when you hear — as you certainly will hear, when (and if) the markets are finally stabilized (at whatever gigantic cost in human suffering) — the adherents of the market cult emerge once more and call for “deregulation” and “untying the hands of business” and all the other ritual incantations of their false and savage fundamentalist faith.

    For although the market cult has suffered a cataclysmic defeat in the last few weeks, it is by no means dead. It has 30 years of entrenchment in power to fall back on. And the leader of every major political party in the West has spent their entire political career within the cult’s confines. It has been the atmosphere they breathed, it has been the sole ladder by which they have climbed to prominence. They will be loath to abandon it, once the immediate crisis is past; most will not be able to.

    So remember well the lessons of this new October crash: The money to make a better life, to serve the common good, has always been there. But it has been kept from you by deceit, by dogma, by greed, and by the ambition of those who have sold their souls, and betrayed their brothers and sisters, their fellow human creatures, for the sake of privilege and power.

    Chris Floyd is an American journalist and frequent contributor to CounterPunch. His blog, “Empire Burlesque,” can be found at www.chris-floyd.com.

  • Interstate kayak aims to save lungfish

    teve Posselt sets out in his kayak again in his quest to save the Mary River.

     

    To convey the views of thousands of Australians, Steve is taking their letters and petitions in his kayak from Brisbane to Peter Garrett’s electoral office in Sydney.

     

    “Traveston Crossing dam will obliterate lungfish breeding grounds,” he says. “This creature is much older than the dinosaurs and it only lives in SE Queensland with the Mary River breeding grounds being fundamental to its viability.”

     

    “Peter Garrett can protect this ancient and vital species from the greed of the Queensland government. He can save Australia from acute international embarrassment.”

     

    Last year Steve paddled and dragged his kayak from Brisbane to Adelaide. This year he paddled up the Brisbane River, dragged the kayak over the Conondale Ranges, paddled the length of the Mary River and returned to Brisbane via the ocean.

     

    In less than a year he covered more than 4000km.

     

    He leaves from the boat ramp on Riverside Drive, West End, between Jane and Boundary Streets at noon Saturday 4th October. A flotilla of kayaks plus many supporters are expected. Speeches and media opportunities will be held for up to two hours before this but he paddles away at mid-day.

     

    Steve will be available for media opportunities and to talk to people all the way down the coast.

     

    He will arrive at the opera house in Sydney on Saturday 1st November at mid-day.

  • Bumper crop as drought recedes

    NSW Department of Primary Industries (DPI) acting district agronomist at Scone, Hayley Taylor, said falls of 20 to 66mm in the Upper Hunter were a welcome addition to good in-crop rain that had fallen through winter.

    “The rain during the weekend should ensure the crops have a good finish now because they were drying out,” she said.

    “It will depend on whether we get some hot, dry winds in the next couple of weeks, but if not, this rain should see the crops through.”

    B and W Rural senior agronomist at Moree, Rob Long, said falls of 15 to 20mm in the area wouldn’t make a lot of difference to maturing barley crops, but would be useful for chickpea and wheat crops that were in the grain-fill stage.

    “And most of the sorghum has been planted, so the rain will help it drive its roots down and get going,” he said.

    DPI district agronomist at Forbes, Ken Motley, said the rain across his area had been widespread, with falls between 20 and 25mm.

    “It’s been a saviour for some crops, particularly in the south-west of the region. For other crops it’s been a good top-up,” he said.

    The band of showers that pushed through the Riverina and South West Slopes brought weekend falls of about 16mm to Griffith, Hillston, Narrandera, Yanco, Gren-

    fell, Condobolin and Temora, but failed to register significantly on the far South Coast and in the far south west.

  • TV gardeners line up as rivals

    Gardening personality Don Burke has been hired by timber company Gunns to help win support for its northern Tasmanian pulp mill.

    The move pits Burke against former ABC TV gardening identity Peter Cundall, who has been a vocal critic of the controversial project.

    The $2 billion proposal has stalled as tighter credit conditions force Gunns to look overseas for funds.

    Burke has told ABC Local Radio he does not feel his role as an adviser to the company compromises his integrity.

    “The majority of the people on the planet have a job but that doesn’t mean their integrity is purchased by their employer,” he said.

    “I would have thought my track record stands out pretty clearly; that nobody buys my integrity.”

    Burke says he has received assurances from Gunns’s chairman John Gay that the role will be independent of the company.

    “So I’ve got access to the entire company. He asked me to monitor what’s going on, and work in the best interests as a green person,” he said.

    “At no state has he hinted that there would be anything other than objectivity.”