Global Finance

Posted 18th October 2011

The challenge for the various Occupy movements is how to create a coherent message.  Clearly the movement is born out of frustration and anger but different people have different priorities.  In addition, the media and others want to know the purpose of the occupations and their objectives.

If one accepts the root cause of the ills in the world today is the monetary system which enslaves the 99% in debt while banks continue to accrue yet more wealth and power, an alternative system needs to be developed.  Fractional reserve banking has evolved over centuries and the financial system has become infinitely more complex over the last thirty years.  Coming up with a new system is not going to happen overnight; it will take time and much discussion across a broad range of people with different interests.   And so we need a process or framework to ensure the movement doesn’t become distracted or diverted into subsidiary issues which would weaken it.

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Posted 16th October 2011

The mainstream media is beginning to wake up to the global, grass roots uprising coalescing around the Occupy Wall Street movement (OWS).  Inspired by the youth demonstrations which began in Spain in May this year and the various uprisings (Egypt, Tunisia, Greece etc.), disparate groups came together on Wall Street on 17th September 2011 to protest against the financial system which no longer works for 99% of the people.  In spite of being ignored, dismissed or ridiculed by the mainstream media the occupation of the renamed Liberty Square in New York persisted.  Repressive police tactics against the peaceful protesters only swelled their numbers and four weeks later the movement has spread across the globe with over 1000 demonstrations taking place on 15th October.

In London yesterday, the occupation of St Paul’s Churchyard, next to Paternoster Square began, coinciding with the global demonstrations.  The initial objective was to occupy Paternoster Square itself but heavily manned police barricades denied the protesters access.  At midnight on the first day of the occupation there remained between 300-500 protesters and a heavy police presence (circa 600 officers).  During the day the police attempted to kettle and intimidate the protesters using riot gear clad officers and police dogs.  A line of some 40 officers with riot gear to hand were posted along the top of the steps to St Paul’s, where they remained throughout the night.  The following day, Reverend Giles Fraser, Canon Chancellor of St Paul’s, said he was happy for people to “exercise their right to protest peacefully” outside the cathedral and asked the officers “guarding” the entrance to the Cathedral to go as he felt the Cathedral was not under any threat. The first victory is won.

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Posted 6th October 2011

The rationale for this second round of quantitative is similar to the justification for the first round undertaken in 2009.  According to the Bank’s leaflet, Quantitative Easing Explained, by buying government and corporate debt (currently held by banks) it will inject £75bn into the financial (banking) system which will foster economic activity.

The £200bn of quantitative easing in 2009 had little effect on the real economy but was certainly beneficial for banks, helping to repair their balance sheets and make profits.  It created an illusion of recovery as stock markets steamed away driven by the liquidity provided by the Bank of England and the US Federal Reserve Board.  But in the real economy people continued to suffer falling living standards and bleaker employment prospects.  The leaflet explains that banks will use this capital injection to increase lending to businesses but, since 2009, the banks have fallen woefully short of expectations in this regard.  Why should QE2 be any different? Meanwhile the debt/leverage bubble continues to grow and this £75billion merely adds fuel to it.

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Posted 4th October 2011

Examine the growth of debt and leverage in the global economy and it is difficult to conclude that the route to salvation is additional stimulus from governments, taking on yet more debt to accelerate growth. Public sector deficits and consumer indebtedness weigh heavily upon economic activity and more debt will add fuel to a potential meltdown. But how did the world arrive at this parlous state? The responsibility rests not with individuals, politicians or otherwise. It is the result of a system with skewed incentives exemplified by the banks’ profiting from ever expanding debt. Banks wield such power that governments’ policies inevitably pander to their interests. If one doubts this statement, one only needs to look at the sub-prime mortgage crisis which was created by perverse structural incentives to obscure the truth. The major culprits were the banks which issued and traded mortgage backed securities and derivatives. But others were by no means blameless.

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