Perspectives: A Review of 2010 The Slow Agony Of Absurdistan
by Gilles d'Aymery (Swans - December 13, 2010) Absurdistan, for the purpose of this year-end review, shall be defined as the benighted lands straddling the Atlantic Ocean, the last two bastions of the entrenched religious-like neoliberal ideology, tyrannically controlled by the Masters of the Universe known as the financial markets: namely, the United States of America and the European Union, with emphasis on the Euro Zone. Absurdistan stands for the kingdom of the investors and creditors that have taken hostage the economy and captured the body politic. It is the realm in which a few self-serving operators point a gun at civil society, willing to double down on their casino bets, turning their back on everything from the ecological disasters engendered by our socioeconomic paradigm to the ballooning poverty in the rest of the world, and diverting the attention of hoi polloi toward scapegoats, social networks, video games, and gadgets. It has never been clearer than in 2010. As the Oracle of Omaha, Warren E. Buffett, once put it: "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." In Absurdistan tragedy is fast becoming a farce, to paraphrase another Oracle -- but it's a farce played on the backs of the masses. The year began as 2009 ended with two or more wars no one discusses any longer since it's part of normalcy for a majority of people who have never known a time in their lives without a war here or there -- the topic was utterly absent from the US mid-term congressional elections; the economic engines, with the exception of Germany, kept sputtering on two cylinders at best; unemployment was (and remains) in double digits; but the Masters of the Universe, having been made whole through public debts, once again smelled the sweet aroma of the roses and champagne and bonuses. Indeed, 2010 has been a swell year for the financial markets. The too-big-to-fail banks have become bigger. In the U.S., according to Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, "the five largest financial institutions are 20 percent larger than they were before the crisis. They control $8.6 trillion in financial assets -- the equivalent of nearly 60 percent of gross domestic product." Much the same occurred in the core of the Euro Zone. Banks have been able to play on three fronts. First, the huge toxic assets on their balance sheets are no longer marked to market since there is no market for these rotten eggs. Second, courtesy of Basel II, they were able to shun lending to businesses, which requires holding 8 percent in equity and, consequently limiting their capital leverage to a 12.5:1 ratio (and, anyway, why would banks lend to businesses in the midst of production overcapacities?), but could trade in sovereign bonds, which when rated AAA by the rating agencies (the ones famous for giving AAA ratings to rotten eggs!) were deemed only 20 percent as risky as commercial loans. So banks could increase their capital leverage to an astounding 62.5:1 ratio. Prudence was discounted because, thirdly, the financial markets having captured governments and the banks remaining too big to fail, they once again would be "saved" by the public if anything went wrong. Let's pop open the corks! full: http://www.swans.com/library/art16/ga291.html _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
