Ed,
At 20:32 28/09/2011, you wrote:
(EW) Very interesting, Keith, but I'm not in agreement on a few
points. One is one the status of Obama. I doubt very much that he
doesn't know what's going on.
He's certainly aware of the perilous situation. Only the other day he
described it as the most serious since the 1930s.
It's just that, given the composition of Congress, there's not
much he can do about it, so thank God that he has Geithner and
Bernanke to at least try to do something.
(KH) It's not so much the (political) composition of Congress that
inhibits Presidential decision-making but the Constitutional
separation of powers laid down by the Fathers in order to prevent
tyranny. Apart from declaring war in an emergency, there's very
little that a US President can do off his own bat. Nevertheless, he
has great executive powers that are intrinsic to his office. One of
the more serious charges against Obama is now coming to light, and
revealed in Ron Suskind's book "Confidence Men", is that in March
2009, having had the consequences of the Credit-Crunch dropped into
his lap by the recently departed Bush, the White House had sufficient
evidence of malpractice by several big firms in Wall Street. Obama
had the support of experienced people behind him, such as Paul
Volcker, a past-Chairman of the Fed, and, given the mood of the
country, there was a huge amount that a newly-installed President
could have achieved. He would have had huge momentum, with support
from both Republicans and Democrats, had he gone ahead. In fact, the
Attorney General Alan Holder was all set to go, initially with the
prosecution, winding-up and restructuring of Citigroup (for
starters!), but this was called off. Suskind alleges that it is well
known in the White House that Geithner quietly over-ruled the
decision and Obama acceded. From then onwards, Obama lost the
opportunity to thoroughly sort out the powers of the investment banks
and others in Wall Street and the more suspect derivatives. In the
battle between Washington and New York, the latter won hands down.
However, what is obvious even to the rest of us is that Geithner
sounds off aggressively in public all too frequently (e.g. at China,
and more recently at the Eurozone countries) on matters and in terms
that should be left to the President himself.
(EW) I'm also rather doubtful that transnational corporations would
step in and become, essentially, a global government and
distribution system when the crash comes, if indeed it will be as
severe as you suggest.
(KH) The severity of the possible crash is not what I'm suggesting
but what many others, much more qualified than me, are now saying.
Why transnational corporations would move first to try and bring
about order at a time of currency chaos and imminent collapse of
trade is that they already know how world-wide trade works in detail
and they'll want to protect both themselves and their markets as much
as possible. This would not be a humanitarian gesture on their part
but one of sheer self-survival. What should also be borne in mind is
that, unlike most bankrupt Western governments and banks, almost all
the transnationals (with the exception of some car manufacturers)
have masses of profits already in their balance sheets because the
situation is already so serious that they don't know where to invest.
(EW) I just don't see them doing it and I don't see governments and
international agencies sinking to that level of incapacity.
But the latter are already showing their incapacity! Apart from
printing yet more money (which will only postpone Credit-Crunch II)
they already don't know what to do! They have become so used to
printing money for the past 100 years to get them out of scrapes,
they don't know what else to do. The IMF (which legally should have
gone out of existence when Nixon abrogated Bretton Woods in 1971) is
the principal international body and it, too, doesn't know what to
do. It tried a particular sort of gold-backed currency, the Special
Drawing Right (SDR), many years ago and spread them all around (that
is, just the pieces of paper, but not the gold!). That didn't take
because it was, and was seen to be, America-dominated. The other
world-wide financial body, the World Bank, led by an American, Robert
Zoellick, and Chinese deputy Justin Lin, is ignored by America. This,
too, is proposing a world currency with gold as a standard reference.
(EW) And, as well, I disagree on the emergence of a global
currency. It would require the establishment of a global fiscal
system and I don't see it happening, not after the experience we've
had with the Euro.
(KH) A global currency (with its value established on a daily basis
by a global central bank) can be quite separate from a fiscal system.
Where the European Central Bank went wrong is that instead of
creating money in line with genuine economic productivity (and thus
consumer demand for money), which is established by the relative
success or failure of business innovation, it did so in increasing
amounts despite its customers (Eurozone governments) going into the
red and remaining there! The whole idea of the first central bank,
the Bank of England, was to prevent government profligacy of this
sort. This was the reason why it came into existence. Whether the
Eurozone should be accompanied by a central fiscal authority or by
separate ones, as now, is beside the point. The Brussels bureaucrats
want the former, of course, in order to increase their power. But if
the ECB had acted from the beginning as it should have done, then the
Euro by now would be immensely stronger than the US Dollar. Instead,
both of them have been constantly devaluing against the real prices
of commodities.
Keith
----- Original Message -----
From: <mailto:[email protected]>Keith Hudson
To: <mailto:[email protected]>RE-DESIGNING WORK, INCOME
DISTRIBUTION, ,EDUCATION
Sent: Wednesday, September 28, 2011 4:03 AM
Subject: [Futurework] How might the Crash be managed?
At a time when the Western world is poised at the edge of disaster
and should be trying to heal its broken currency system, we wake up
this morning to find that the stress of it all is causing at least
four bitter quarrels within and between the major nations (and maybe
a fifth one that's still being kept under wraps):
1. German Finance Minister Schauble is telling US Treasury Secretary
Geithner to mend America's own economic problems before interfering
with Eurozone's.
2. Chancellor Merkel's Coalition government in Germany faces defeat.
Several of her own party are threatening to resign over the matter
of the proposed Euro backstop fund.
3. President Sarkozy has lost his majority in the French Senate and
thus his hitherto credibility in speaking for France or the Eurozone.
4. In Italy, Prime Minister Berlusconi and his Finance Minister
Tremonti are at dagger-point as to what austerity measures should be
adopted -- and, indeed, which of them should keep his job.
And what is the fifth one?
5. It is being rumoured in blogland that, in America, President
Obama has so little grasp of America's economic situation that the
country is really being led by Treasury Secretary Geithner and the
Fed Chairman Bernanke (both, of course, unelected).
So what will happen if and when the Crash comes? My guess is that,
initially, the politicians will make themselves scarce. The only
example that comes to my mind is the chaos that occurred in 1972
when the oil monopoly countries (OPEC) suddenly reduced supplies and
simultaneously raised the price four times. In England there was an
immediate need for drastic petrol and diesel rationing. This was
when our civil service should have moved smoothly into action. But
it didn't. It didn't have the knowledge of how our fuel system
actually operated. What happened was that the top people at British
Petroleum invited the top people from the other three or four major
oil corporations to their penthouse offices, together with top
government officials as note-takers. Between them, the majors
organized an emergency system and the civil servants then hurried
away to carry out their end of it.
If the present dollar-euro predicament turns into a major Crash --
as many knowledgeable spokespeople (including big investors) are
forecasting -- which would inevitably involve China and much of the
rest of the world, it will be devastating to billions of people
within days or weeks as supply lines start to seize up. What will
happen in my view is that the major transnational corporations,
ranging from food production and supply through to energy through to
communications will hasten to assume command of an emergency
procedure. Maybe a score or so of the very largest would be involved
in a first phase whereby they'd divide into crucial economic sectors
and then other smaller corporations would be invited in as infills,
and then supplier businesses and so on. By this time I'm assuming
that the existing national currency systems within and between
governments would be in great danger of breaking down. To keep at
least a rudimentary economic system going initially and prevent
their customers actually starving, the corporations would have to
devise a brand new rationing system -- namely money -- for use
between themselves. Otherwise, national currencies would be so
haywire that they couldn't operate. And then, of course, the
corporation would have to extend it to their billions of vital
customers. (And, of course, some of them own the biggest printing
presses in the world, so this would be no problem.)
By this time, the various national civil services (with politicians
trailing behind them when it become safe) would start to integrate
with the corporations' procedures just as mentioned above during the
'72 Oil Crisis. Some might think that the corporations would want to
exclude them in order to increase their economic power as normality
returned. But that's paranoiac. Why should they? This would entail
an entirely different ball game of infinitely greater stress and
complexity than their own operations. Besides they, quite as much as
the least individual in any civilization, still need an objective
system of laws and justice and they need secular governments for this.
But if, in fact, transnational corporations had managed to devise an
emergency money system, then they are going to leave one residue
behind them. The emergency system is going to have to persist for a
long time to come for at least months, if not years, even if, for
reasons of amour propre, civil servants and politicians begin
reviving their own currencies in parallel in order to get their own
systems into gear again and to raise taxes. A rate of exchange
would arise between each of the 200-odd national currencies and the
emergency world currency. America, presumably still viable (after
all, it has numerous shale gas basins!), would have to give up its
pretensions of the dollar remaining as the predominant world reserve
currency. It (and the newly split-up European countries) would have
to agree with what China, Russia, India, Brazil and other emergent
countries have been calling for for years. The corporations'
emergency world currency could at least be symbolic, if not exactly
a prototype, of what is needed.
There's hope for us yet. But, as always in human affairs, it takes a
crisis to bring about major change. Thus it might need a world-wide
economic crash to bring about a world-wide currency that can serve
as the stable reference for any other currencies that different
cultures would still like to retain.
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/09/
----------
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Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/09/
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