All good things come to an end. The result of this whole financial-casino-zombie-world is that only 5% of our global volume of money is used for its original purpose: facilitation of bartering goods & services. The financial system, thus, is holding us hostage. No real growth, but a financial fiction, expressed in terms like “Gross National Product” and other theoretical financial parameters.
In June 2007, the U.S. bank, Bear Stearns, reported that two of its hedge funds are in trouble. This meant the start of a complete lost of trust by everybody in the financial system. Nobody trusted anybody anymore – banks did not trust other banks, and the entire financial world ground to a halt. Companies no longer had access to credit, so they shrunk and started to lay off employees. Consumers’ trust was down, so they stopped spending money. That is the endgame in a nutshell. The financial crisis leads to a global economical crisis.
According to The Economist magazine, this mash-up was a combination of factors. Looking back from 2013:
“With half a decade’s hindsight, it is clear the crisis had multiple causes. The most obvious is the financiers themselves—especially the irrationally exuberant Anglo-Saxon sort, who claimed to have found a way to banish risk when in fact they had simply lost track of it. Central bankers and other regulators also bear blame, for it was they who tolerated this folly. The macroeconomic backdrop was important, too. The ‘Great Moderation’ – years of low inflation and stable growth – fostered complacency and risk-taking. A ‘savings glut‘ in Asia pushed down global interest rates. Some research also implicates European banks, which borrowed greedily in American money markets before the crisis and used the funds to buy dodgy securities. All these factors came together to foster a surge of debt in what seemed to have become a less risky world.”
In the meantime, our money is gone, and so are most of our natural resources. People are angry and blame politicians, bankers, and others who have organized this “consumption system.” So, on one hand, people ask for more control and legislation, which is happily provided by vote-addicted politicians; on the other hand, we see bankers and other administrators saying “trust us, we can self-regulate and make it up with you,” without showing any real remorse. Amazingly, no U.S. or European bankers have been prosecuted for the roles in the economic collapse.
We have recently seen the Libor and Euribor scams, and reoccurring articles in newspapers about banks, like: “The Royal Bank of Scotland, which is owned by taxpayers and forecast to lose several billion pounds, is expected to pay its bankers an estimated £500m in bonuses this year (2013).”
No real change, but there are still lessons to be learned here!
Just take a look at some financial data, randomly chosen: during the last rescue round of European banks, The Netherlands funded €26 billion. How often can we do that? Our financial limits are in sight. Our “national guarantees” to the IMF, the European Central Bank, and the European Emergency Fund have risen to over €200 billion. That is almost 50% of our GDP. The total European bonding is over €700 billion, mostly lent to Italy and Spain. In 2013, the European Central Bank is still buying European government bonds to keep the system afloat. By doing this, the bank gives away its political independence, as it is supporting governments who are rumbling with their national debts and inter-European financial agreements. It is clear that countries like Italy and Spain cannot pay back the short terms loans they’ve received from the European Central Bank in the past years. Portugal and Greece will not be able to execute all the economical reforms they promised, and, in the next couple of years, they will need more European funding. This way, the liability for national governments, and thus the European taxpayer, remains unclear. It does not show itself on the national budgets.
The 40 largest European banks still need €70 billion in funding to comply with the new Basel 3 standard. The remaining 125 midsize banks, however, still need €225 billion.
In 2013, the Fed still takes (by buying mortgage-backed loans and state bonds) $85 billion out of the market monthly in the US. The Fed’s total balance has gone up 3.5 times since the beginning of the financial crisis, and is now, in the fall of 2013, $3.5 trillion. The total national debt of the United States in the fall of 2013 is already more than $16.7 trillion! However, downsizing this federal buying program creates an immediate increase in the US interest rate, causing, in turn, a dollar flow from emerging markets to the US. That drives local currencies to go down in value, making exporting to the US cheaper, thus destroying U.S. jobs. A “Catch-22” is what they call that in American slang: no matter what you do, it is always wrong. The 2013 government shutdown and the recurring struggle concerning the debt ceiling may have tremendous consequences for the global economy in the years to come. There is no guarantee whatsoever that we will not see the meltdown of the U.S. dollar (or the Euro) in the near future.
Another example: Japan, with a national debt of over 200% of the GNP, sees its financial institutions lending over $150 billion to countries like Brazil instead of keeping the money in the domestic economy. Solitarily, from a company’s point of view, this is understandable, but somewhere, this chain of money streams and expanding debts has to be broken.
The global monetary system is holding us hostage, even 5 years after the outbreak of the financial global crisis, and will be doing so for the next decade… there seems to be no way out. It is amazing that our social, financial, and political leaders still can sleep at night! The money used to pay the interest on the national debts, squeezed out of the taxpayer in order to release pressure on the banks, is destroying our economies.
The question arises: “What do we do about it?”
I think we have to regain our civil power. First in our own countries, then on a European level. By doing so, we will have to fight the established political and economic regimes. We have to be aware that these regents are still around. Somehow, the establishment still has enough money. Write off the debts and let the shareholders of the banks bleed. Make the system less important by allowing local alternative currencies. Support local credit unions. Take away the monopolies of all the quangos, as well as the power of monopoly to create money by the national banks. I will elaborate on these topics later in this book.
On top of that, we see countries like Brazil, India, China, Turkey, and Russia claiming a larger role on the global political and economical stage, so we also have to deal with, via acceptance, a global power shift.
Look at it from the bright side: in the Chinese language, the word “crisis” does not exist. The term is formed by a combination of two other terms: “danger” and “opportunity.”
So, obviously, we also live in an era of opportunity. Or, as I would like to say, we are at the end of the lifecycle of the industrial era, and on the brink of something new: Society30.
The road we have to take will not be an easy one. Our lives will change for a couple of decades, so we have time to adjust ourselves, but also, we do not have time to sit back and relax.
Let’s have a closer look at this development.