----- Original Message -----
From: Ed Weick
To: Keith Hudson
Sent: Thursday, September 29, 2011 8:41 AM
Subject: Re: [Futurework] How might the Crash be managed?
As usual, Keith, lots to think about. Let's just call it a draw for the time
being.
Ed
----- Original Message -----
From: Keith Hudson
To: RE-DESIGNING WORK, INCOME DISTRIBUTION, , EDUCATION ; Ed Weick
Sent: Thursday, September 29, 2011 3:08 AM
Subject: Re: [Futurework] How might the Crash be managed?
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: Keith Hudson
To: 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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