Jun 25, 2016

Crisis: Brexit and 2008, Sanders on his wants, Brexit and Crisis
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2008 All Over Again
Here’s What We Want
3. Brexit: The Crisis Begins


This is a Nederlog of Saturday, June 25, 2016.

This is a crisis log. I had a choice today, namely between writing a more or less ordinary crisis log and finishing my essay on fascism, and chose for the former, since Brexit seems pretty momentous in terms of consequences.

Then again, there are thousands (tenthousands, hundreds of thousands?) of journalists who now write on Brexit, but since (i) most of them don't know much about economics or politics (in my opinion, for I know a fair amount, after some 50 years of reading) and (ii) anyway tend to be liars and frauds these days, much rather than honest investigative journalists (that also still are there, but rarely in the main media) I have chosen to have comments on Brexit from two persons I trust (without agreeing with them) namely Chris Hedges and Yves Smith. There also is a third item, not on Brexit, but on the plans of Bernie Sanders. In brief:

There are 3 items with 3 dotted links: Item 1 is by Chris Hedges on Brexit; item 2 is by Bernie Sanders on what he wants; and item 3 is by Yves Smith, and again on Brexit.

2008 All Over Again
The first item today is by Chris Hedges on Truthdig:

This starts as follows:

Great Britain’s decision to leave the European Union has wiped out many bankers and global speculators. They will turn, as they did in 2008, to governments to rescue them from default. Most governments, including ours, will probably comply.

Will the American public passively permit another massive bailout of the banks? Will it accept more punishing programs of austerity to pay for this bailout? Will a viable socialism rise out of the economic chaos to halt further looting of the U.S. Treasury and the continued reconfiguration of the economy into neofeudalism? Or will a right-wing populism, with heavy undertones of fascism, ascend to power because of a failure on the part of the left to defend a population once again betrayed?

As to the first paragraph: I don't know this (as yet), but it seems a likely scenario. We will soon see (although much of the news will probably be manipulated).

As to the second paragraph: This consists of four questions. Here are my answers (I am sorry to be so negative, and you find the questions above):

(1) It is not so much about what the American public will "permit", for what the ordinary public wants generally does not get a hearing (unless it agrees with the makers of opinions, who are all pro rich). So my expectation is that banks which need bailouts probably will get them, regardless of the public.

(2) The same answer as to (1): If there are bailouts, the public will have to finance them, from their taxes, regardless of what it thinks or feels.

(3) No. Even the word "socialism" is still feared by most 40+ year olds, while the younger generation in the USA doesn't have many properly socialist ideas anyway, while there also are great differences among "the left".

(4) There is hardly a real left in the USA. My own expectation is that the rightists will win, because they are organized (on the level of the main media,
at least) and have a lot of money, whereas "the left" is not organized and lacks money. [1]

Next, there is this on the present financial situation:

Whatever happens next will be chaotic. Global financial markets, which lost heavily on derivatives, are already in free fall. The value of the British pound has dropped by over 9 percent and British bank stock prices by over 25 percent. This decline has wiped out the net worth of many Wall Street brokerage houses and banks, leaving them with negative equity. The Brexit vote severely cripples and perhaps kills the eurozone and, happily, stymies trade agreements such as the Trans-Pacific Partnership.
Note Chris Hedges' text was posted yesterday, so this is very early. My guess is that he is correct that this will have major economic consequences, and indeed not only in Great Britain, but also in Europe and the USA. But again we will have to wait and see, though I am quite happy if indeed the TTIP gets blasted away.

Then there is this on Obama (mostly by Michael Hudson, who is an economist):

“I expect Obama to do whatever he is told to do by Wall Street,” Hudson said. “He has turned over management of the economy to his campaign contributors from Goldman Sachs and Chase Manhattan. He does not have views of his own, other than self-promotion. He wants his presidential library. He wants to have a big foundation like the Clintons. Most of the population will oppose a bailout, of course, and he will cry all the way to the bank.”
This seems mostly correct, simply because, while it is true that "[m]ost of the population will oppose a bailout", it is also true that "most of the population"'s opinions simply are irrelevant to nearly all political choices policy makers do decide.

The last quote I have is this:

There are now calls from the Netherlands, France and Austria for a similar referendum.”

“The debt imposed on countries like Greece can never be paid off,” Hudson went on. “And the intention is that it can never be paid off. The banks use this inability to pay to insist that governments sell off more and more of the public domain and privatize. Debt is the lever used to force privatization. It takes away the power to carry out public investment and build a public infrastructure.

“Some financial firms, banks and perhaps even governments will now default,” Hudson predicted.
I live in the Netherlands, and speak only about that: Geert Wilders is against the EU since a long time and will almost certainly call for a referendum like the British had. But he seems not able to put together a functional political party [2], and until he gets over 50% of the vote, the Dutch politicians will probably succeed in isolating him and his party.

And Hudson is right about major debts and its real use: to force privatization.

General summary: While I do not know whether Brexit will lead to a crisis like 2008 (which still continues for everyone who is not rich, i.e. is part of the 90%), it is a major economic decline.

And this is a recommended article.

2. Here’s What We Want

The second item is by Bernie Sanders on Common Dreams:

This starts as follows:

As we head toward the Democratic National Convention, I often hear the question, “What does Bernie want?” Wrong question. The right question is what the 12 million Americans who voted for a political revolution want.

And the answer is: They want real change in this country, they want it now and they are prepared to take on the political cowardice and powerful special interests which have prevented that change from happening.

No, I am sorry to disagree, but it really is much more important to know what Bernie wants than it is "to know" what the 12 millon who voted for him want, firstly because leaders and their opinions are important; secondly because nobody will ever know "what the 12 million Americans" want (too many persons, with too many varying interests, desires and values); and thirdly because nearly everyone who voted for Sanders voted for him and his proposals.

Also, while I agree with the second paragraph that the people who voted for Bernie Sanders "
want real change in this country", I must point out that 12 million persons among over 300 million people who are Americans, is less than 5% of all.

Next, here is Bernie Sanders' list of the things (he thinks that) those 12 million who supported him (and quite probably a considerable number more, though how many is difficult to quantify) want:

We want an economic and political system that works for all of us, not one in which almost all new wealth and power rests with a handful of billionaire families.

We want to overturn the disastrous Citizens United Supreme Court decision and move toward public funding of elections.

We want a criminal justice system that addresses the causes of incarceration, not one that simply imprisons more people. We want to demilitarize local police departments (..)

We want the United States to lead the world in pushing our energy system away from fossil fuel and toward energy efficiency and sustainable energy. We want a tax on carbon, the end of fracking and massive investment in wind, solar, geothermal and other sustainable technologies.

We want to end the rapid movement that we are currently experiencing toward oligarchic control of our economic and political life. As Lincoln put it at Gettysburg, we want a government of the people, by the people and for the people.

These are five paragraphs (from different places in the article). I will comment on them as I did in item 1, by enumerating them from (1) to (5):

(1) I agree in principle - but the "
handful of billionaire families" want a system that works for them, and the present system, which mostly does work for them, has been built quite consciously and quite successfully since 1980.

(2) I agree in principle - but the
Citizens United decision was long in preparing, and was a major success for the few rich, while it really needs another Supreme Court to undo it, and that may take ten or more years.

I agree in principle - but the criminal justice system has been reformed, and while I agree it is corrupt and horrible, it also is profitable (in case of private prisons) and is a strong sanctioning system for any deviance.

I agree in principle - but the whole GOP "doesn't believe" in climate change.

(5) I agree in principle - but (it seems to me) the rightists have had over 35 years (including Clinton and Obama: both were very strongly for the neofascistic NAFTA, TPP, TTIP and TISA) to get their "oligarchic control of our economic and political life" in place, and now that it functions will not give it up until "oligarchic control" is forced out.

General summary: I mostly agree with Bernie Sanders on what he wants, but I see very little reason to expect any of this soon, nor do I expect most points will be realized without (i) a major economic collapse, and without (ii) considerable fighting in the streets (and the second will probably not happen without the first - i.e. a major economic collapse).

And I am sorry I am pessimistic, but we really have lived through 35 years of deregulations, welfare crises, banks' bailouts, and a general shift of power from the democratical representations of the many, to the oligarchic representations by the few, and the few mostly succeeded in the last 35 years.

This is a recommended article.

3. Brexit: The Crisis Begins

The third item is by
Yves Smith on Naked Capitalism:
This starts as follows:
British voters delivered a stunning repudiation to their political and economic elites by voting to leave the European Union by a margin of 52 to 48. The fallout has already started. The pound is down by over 11%, and some experts anticipate that it could ultimately fall to as low as 1.05 to the dollar, its low in the early 1980s sterling crisis. British bank stock prices have fallen by roughly 25%. Safe haven investments have spiked: gold is up 6% and the yen has traded through 100 to the dollar. The Nikkei fell by 8% and US stock futures suggest that the Dow could open down by 600 points.
I say - and this is a sum-up of some economical factors by an economist.

Here is part of the background of Brexit:

Brexit is a crippling blow to the neoliberal order of unfettered trade and capital flows, and citizens being reduced to being consumers who have to fend for themselves in markets, and worse, increasingly isolated worker who are at the mercy of capitalists who are ever more determined to reduce labor costs and hoard the benefits of productivity gains for themselves.
Yes, indeed - but I also think that it is quite unlikely that the many poor who voted for Brexit will get any easier life. (On the contrary, is my guess.)

Then there is this:
A major complicating factor is that while unwinding the EU arrangements is comparatively easy (and that still means the process would take roughly two years), negotiating new trade relations is a far more time consuming process, and experts estimate it would take a minimum of five years and still could fail.
Yes - although I wouldn't call a legal process that takes two years "comparatively easy". Compared to what, for example? (I have no idea).

Here is one Good Thing that seems to emerge from Brexit:

In the meantime, there are immediate consequences and risks. The Transatlantic Trade and Investment Partnership is probably dead.
For me, that is a major advantage, if indeed it does happen. Then there is this:
The British government is likely to lose its AAA rating, which also means higher funding costs for its banks, since their borrowing rates are at a premium to the local currency risk-free rate. A recession is almost certain (..)
Yes, indeed. The article ends as follows:
No matter how this plays out, the UK and EU will have to blaze a difficult path. And this rupture is taking place when advanced economies almost without exception have singularly weak leaders. We are in for a rough ride, and the portents suggest it will be much rougher than it needs to be.
I agree, also on the "singularly weak leaders".

General summary: I am not optimistic, indeed mostly because the right has had 35 years to enormously strengthen its position, though I see two glimmers of hope in Brexit: it considerably increases the chances of another crisis, that also will hit the rich, and it considerably increases the chances that the TTIP will fail.

I think both are desirable, the first because I see little hope of unsettling the powerful right without a crisis that also hits the rich, and the second because the TTIP is horrible.

[1] I am saying what I think, and that is that most of the real left had been killed by the collapse of the Soviet Union, by Bill Clinton's, Tony Blair's, Wim Kok's and other "leftist" "social democratic" leaders, who followed the thoroughly fraudulent "Third Way", and by the enormous rise to power of the right since Thatcher and Reagan and took power in 1979 and 1980, since when the right got stronger and stronger, and the real left mostly died (and got replaced by a "left" that specialized in political correctness, postmodernism, and identity politics, none of which are - real - leftist).

[2] He has been trying to do this for around 10 years now, and it still doesn't work, probably in part because of Wilders' character. Also, he has been manipulated to stand mostly outside much of the ongoing Dutch politics by agreements between other political parties not to consult him or his party.

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