Friday 13th marks the birth of subprime 2.0

A day which is culturally foreseen as unlucky (especially if you’re a Knight’s Templar) has seen the government announce its next disasterous policy: “Funding for Lending”

For every £1 of additional lending made by a bank, it will be able to access an extra £1 of cheap funding from the scheme. Those that reduce lending will have to pay higher fees to use the scheme.

They will be able to borrow up to 5pc of their existing lending stock, which will be increased if they expand net lending over the next 18 months.

This economic crisis was created by cheap money and endless credit; you do not rescue the economy with more of the same.  If anything, this is clandestine bailout scheme for the banking system. We are literally paying banks to lend to the wider economy; forgive me, but what has happened to the promise of sustainable growth?

“Funding for Lending” is a recipe for disaster.

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EU Summit Summary – Good for Britain, so far.

This is brief post to provide some update on the summit. Very good for Britain, the growth plan is quite similar to what the coalition is doing in the United Kingdom; EU will seek to unlock private capital funding, deregulation and lower administration costs for SMEs

EU Draft Summit Conclusions

•  Propose measures such as better mobilisation of EU structural funds for SMEs
• Increased support from the European Investment Bank for SMEs and infrastructure, rapidly examining the Commission’s proposals on a pilot phase for the use of “project bonds” to stimulate private financing of key infrastructure projects
• Increasing support for micro-enterprises
• Reduction of the administrative and regulatory burdens for SMEs.

The Fiscal Treaty itself has several key points:

• Article 15 states the Treaty will be “open to accession” of member states, who do not currently back the agreement.
• Article 16 clearly states it will be based on “assessment” before treaty is incorporated into EU framework. Majority decision required.
• Article 3 states member states budgets should be balanced or surplus.
• Article 8 fines will be 0.1% of GDP. The amounts imposed will be payable to the ESM. Non-EZ will be sent to EU general budget
• Since removing the veto on the use of institutions, especially the Court, the UK can financially benefit from a fine imposed on a member state – even though we are not subject to any levy.

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The fragility of Libya will expose a security crisis for Africa and Europe.

The ‘mad dog’, grand antagonist of the West and founder of hyperbolic propaganda, is no more. Gaddafi and his tyrannical rule have evaporated over night with the victorious revolutionaries liberating their capital city. An Orwellian state cease to exists; but the war is not over, yet. Whilst NATO special forces and intelligence services search for Gaddafi, the rebels must learn to co-operate with each other; liberals and Islamists is not the perfect constitution for a long term successful government. Potentially, this has all the ingredients for another Iraq-esque sectarian divide and breeding ground for violence.

Libya is divided into three traditional regions; Tripolitania, Fezzan and Cyrenaica. There is a significant danger of the country being torn apart along these lines. With the National Transitional Council relocating from Benghazi, there are many in Tripoli who will object to political dominance from Eastern Libya. Western aspirations and desires for the NTC to become the tutelage for this new democracy is very ambitious and premature. Subsequently, a blood soaked future might be a genuine reality. Yugoslavia and Iraq are warnings from history of potential occurrences when removing authoritarian regimes; power vacuums succumb to turmoil and chaos, with different factions manoeuvring for institutions of control. Whether we object to it or not, the United Nations might have to deploy a peacekeeping mission. There is no guarantee of former Gaddafi loyalists avoiding subversive actions or groups. Remember, Gaddafi came to power by a military coup and NATO will need to prevent another figure arising from the rubble. Currently, no evidence points to the NTC becoming a significant stabilising force for the country – majority of ordinary Libyans are armed. Theoretically, this could be much, much worse than the fall of Baghdad.

And there is one major obstacle for NATO; possible revenge attacks. Frequently over the past few days, reports of British, French and Arab Special Forces have been leading the rebel command structure and the conquest of Tripoli. Firstly, to provide leadership and correct military precision of the operation, but also to ensure revenge attacks and random executions do not take place. I’m not surprised to learn the hunt for Gaddafi and key regime figures is left to the responsibility of the SAS; many Western leaders are fearful what the revolutionaries would do, if they locate the whereabouts of the fallen dictator. That is why I was sceptical of reports of possible capture of Gaddafi’s sons’. Covertly, this is not a realistic revolution, but an NATO inspired overthrow of a tyrant. Libya is effectively Iraq without the jingoistic rhetoric or deployment of Western armies.

Benghazi is almost operating in a parallel universe when compared to Tripoli. The civil war divided the nation in two, and thus creating two rival capitals; dangerously, many governments recognised the legitimacy of the rival NTC administration at the start of the conflict. South Africa, and other African nations, did not. African Union’s timid and some what inept response creates more problems for NATO. What if the African Union refuses to recognise the authority of the new Libyan government? Nobody has considered the outcome. It would be near impossible to coerce the AU leadership into accepting the new Libyan arrangements. Plus, the Libyan economy would suffer as a result. Especially if Libya is suspended or expelled from the African Union.

We may celebrate the fall of Gaddafi, which I wholeheartedly do, but the consequences need to be investigated. A possible future is already bleeding into the present and becoming a reality. A power vacuum now exists in the Libyan capital, with no end in sight. A nation created out of violence tends to subsequently exist in that very state; for the sake of Libya and the region, let’s hope I am wrong.

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A European Civil War: The American Crisis Comes To Europe

The European debt crisis is a sign of a much bigger conflict within the European Union. It is a battle for what Europe is and what it should do. And, more importantly, where the power truly rests; Brussels or national governments.

For four long, tedious, blood soaked years in the 1860s, the United States engaged in a brutal internal conflict over slavery and the role of the Federal Government. The years 1861 – 65 unleashed a barbaric tempest of war and destruction; the premise of the conflict asked an innocent question over State sovereignty and rights. The Confederacy declared it was their unalienable right to maintain the institutionalisation of slavery, as a means to provide labour to their cotton industry. Northerners, however, saw slavery as abhorrent, grotesque and against the true spirit of America. The Federal government had the political power to overrule the States.
In April 8, 1864 the Thirteenth Amendment to the United States Constitution prohibited slavery and involuntary servitude. A year later, in 1865, 600,000 people were dead and the American Civil War was over. But what does a conflict, nearly 150 years ago, have to do with the modern European Union? Surprisingly, there is a correlation.

The European debt crisis is the first major internal dilemma for the European Union. It is a test, which will determine whether or not the Union will survive; a similar fate Abraham Lincoln warned about at Gettysburg. There is great uncertainty about the Euro as a currency and the European project as a whole because a default, by either Greece, Ireland, Portugal or Spain, has the potential to destroy the entire European banking system. Decades of stability, prosperity and wealth could vanish if this financial crisis fractured the foundations upon which the new Europe was built on. As Margaret Thatcher once said to the United States Congress, Europe experienced the ‘greatest transformation since the fall of Rome.’ And this new Rome is currently burning.

A solution has been constructed by the European Central Bank; a single economic policy with a Finance Ministry of Europe. To achieve a successful implementation of the ECB plan, Eurozone countries would have to concede economic sovereignty to the European Union. Potentially, this would be the beginning of a United States of Europe. But there is one problem: European citizens hold national pride so dear. I cannot envision the populis of Ireland, Greece or Portugal conceding their national sovereignty to Europe, especially after toxic and political damaging IMF-ECB bailout packages. Ireland was once among the great pro-European citizenry in Europe and now it is the most hostile. There are persistent rumours of Greece leaving the Euro and, potentially, the European Union too. The Treaty of Lisbon concludes any departure from the Eurozone requires succeeding from the Union itself. Commentators play down any significance of a possible member leaving; in 1860, South Carolina left the United States of America. Less than a year later, another ten States followed. Greece could provide the means for others, such as Ireland, to leave as well.

Granted, this is a difficult analogy to make. After all, I’m comparing a military conflict to an economic crisis, but it originates to a central and similar argument. What is the role, or duty, of a continental government? If it is to exist, then it is to exert some authority. When the smoke settled, guns were silenced and the soldiers went home from war, the American people granted their Federal Government the power to administrate the reconstruction of the South. The North not only won the military campaign, but also successful articulated the argument that the final arbiter was, indeed, the Federal Government. However, its actions were required to be benevolent, not oppressive. In the 21st Century, Europe must answer the similar question, when dealing with the sovereignty debt crisis; who truly has the authority to solve the problems?

The European narrative has many chapters in its rich history and many more to come. An American friend of mine once described contemporary Europe as similar to the United States, before the end of the civil war: a continent sure of its destiny, but not on the path of projection. Both Europe and America are experiments; experiments that are routinely tested. The United States could’ve easily ended the civil war within months and recognised the Confederate States, thus sparing hundreds and thousands of lives, but it chose not to. Europe could spare uncertainty in the financial markets by aligning economies and banking systems under a single European umbrella. But is there an European Abraham Lincoln, with the stomach to exert such fortitude and save the European Union? That is the question, which Europe must answer.

Originally hosted at Huffington Post

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Thoughts: Marxism and the Arab Spring

Economic prosperity and social stability are interlinked. Growth and employment opportunities provide means for tranquility, within a nation, and means for the individual to accumulate wealth and savings. But when economies fail and governments’ struggle to maintain control, social unrest occurs; in extreme cases, a black swan event, a revolution might result.

The Marxist theory of historical materialism articulates the economic bases of societies and its ever changing relation with an expanding or altering mode of production. As Marx himself said, “Society does not consist of individuals, but expresses the sum of interrelations, the relations within which these individuals stand.” And when the mode of production is no longer capable of furling the aspirations of society, a revolution must manifest. History depicts struggles and liberation movements, rebelling against-what Marx described-bases and superstructures. Superstructures are an expression, or avatar, for the mode of production and society itself. What contemporary anarchists renamed ‘the system.’ And history shows what happens to Ancien Régime when its avaricious behaviour and irresponsibility infuriates the citizenry.

Resistance and uprising, in the Middle East, began in December 2010. Unemployment, high inflation, poor living standards and corruption were the catalyst – especially in Tunisia; where the Arab Spring began. The economic situation and lack of productivity became a perfect reflection of the political establishment; failure to share the vast wealth more evenly led millions to revolt against their government. Tunisia, Libya, Egypt, Syria, Jordan, Palestine, Bahrain and Yemen experienced a great tempest of political and social unrest. The main criticism was the economic prosperity was only held by a minority, and the political class had nothing but tempt for its citizens. It was no coincidence that the governments, in each nation, were soaked with financial benefits and yet the population were starving. In order to attract investment, from global corporations, protesters believed government officials took either bribes or constructed generous taxation for foreign investors. In February this year, the media reported on the personal wealth of Hosni Mubarak (Former President of Egypt) and it was in the region between $40 – 70 billion. How was it that these Presidents’ and Prime Ministers’ had accumulated vast wealth, but the population witnessed poor living standards? The political establishment become a superstructure and the avaricious nature of politics is a product of the economic environment.

To understand the Arab revolts and the catalyst behind the events, it best to look for a historical comparison; most notably, the French Revolution. Historians tend to focus predominately on the Committee of Public Safety, Robespierre and The Terror. The causes of the revolution tend to be forgotten. In a way, the French Revolution is more important to understanding the Arab Spring than the American War of Independence.

Revolutionary France is one of the most significant periods of European history, along with the English Civil war, in my opinion. The causes for the revolution are deeply fascinating and rather complex. There are countless stimuli’s for the uproar, especially the crippling debt from strengthening the United States in the War of Independence. But the most fundamental component (in my opinion) was the famine of 1788-89, which saw the price of bread rise by a near 70 percent. Many of the poor and destitute struggled to survive and thus the infamous ‘bread riots’ occurred. The first signs of revolutionary intent in the air. Mass urbanisation of the cities helped fuel the hunger, due to over crowding and the high demand for employment. The hunger and poor living conditions are a breeding ground for civil unrest; we’ve seen this in the last six months in the Middle East and Northern Africa. When a significant population, collectively, faces catastrophic decline in income and prosperity, it is likely to become hostile to the state. Governments become vulnerable when the people become poorer and hungrier. Once held moderate views are easily manipulated by subversive thoughts, if there is a prospect for a better tomorrow.

The nobility of the French regime, with its gluttonous and avaricious behaviour, infuriated the population. Louis XVI and his wife, Marie Antoinette, were far from popular figures within the kingdom – especially his spouse. Their need for vast wealth and extreme expenditure, did not help the nation finances. Participation in the American War of Independence diverted the nation towards bankruptcy. France was broke. But the aristocracy was immune and unaffected; which was a great irritation to the peasant classes. And, similar to the present time in Northern Africa, the people had enough. Revolution was in the air.

The reason for selecting the French Revolution as a historical comparison was down to Karl Marx. He routinely wrote about the events of 1788-89, most notably in the Communist Manifesto. It was very productive in explaining the theory of historical materialism; the French Revolution enabled him to articulate and define his theory, without devolving into complex and structured language. History is a good tool, which Marx exploited effectively.

But, fundamentally, the authenticity of Karl Marx’s theory – was he right? Well, no. Karl Marx was gifted in understanding the present time, circumstances and historical precedents. However, the solutions were always misguided or completely wrong; Britain never experienced revolution, which Marx believed was inevitable. The working classes never aspired for revolution, majority wanted to be apart of the wealth creators not confiscate it from the rich. It is humorous to watch the modern left rally in solidarity with the Arab protesters, who are rebelling against socialist-esque regimes. Egyptians demanded reform and transparency, none of them sought to completely destroy the system and build a new nation. Which completely contradicts Marx.

The Arab Spring might have given birth to Marxist nostalgia, but there is no justification to suggest a Marx inspired or remotely socialistic reasoning. This utopia, which Marx believed in, never transpired and probably never will. Arab Spring revolutions will resort in either two outcomes: a bloody and more brutal regime (as we saw in France and Russia) or prosperous nation (the United States or India). Either way, these revolutions have once again injected more life into a forgotten political theorists and philosopher.

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Friends, liberals, countrymen, lend me your ears

£932 billion is the national debt-as of today-of the United Kingdom. We owe £14,819 per every man, women and child and it equates to £32,250 for every person who is currently employed. This year, we will increase the nation debt by £170 billion – taking the grand total to over £1 trillion.

In order to be able to finance and reduce the national debt, reform of the public services and economy are needed. There is no giant money tree. When the state borrows money, it borrows against our savings. You and I are not only associated to the debt, but we are liable for it, too.

Health and education reform are vital to the long term finances of this country, and to the taxpayer. The continuation of the status-quo is a vulnerable path towards generational austerity; a continuous cycle of the same crisis.

Worst policy for the coalition is to keep undermining reform with lightweight legislation. Competition and, yes, private sector capital will be required – the government can no longer afford the cheques. And it is about time we face reality.

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Who owns US Debt? Part II

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IMF: UK does not need a ‘Plan B’

The Treasury will be very pleased this afternoon. ‘Strong fiscal consolidation…remains essential’ is the key message from the International Monetary Fund, which is a direct contradiction of Labour’s position. Ed Balls perpetuated the need for a slower reduction, but the IMF-in its report-advocate a faster tightening, with tax cuts, if slow growth does occur.

‘Too fast and too deep‘ mantra of the TUC and Labour is officially dead. The opposition needs to mature on economic issues before Ed Miliband finds himself even more isolated. Arguing against this report will be difficult, but Labour are already starting to.

A smart policy, for Labour, would be to call for fiscal loosening on the poorest households in the United Kingdom. The IMF presented this idea in the event of slow growth. Instead, though, the opposition’s economic team are administrating populist policies and rhetoric. Reducing bankers’ bonuses will not liberate the deficit – not even make a dent.

Michael Foot wrote the longest suicide note. Ed Miliband is proceeding with the longest suicide attempt in history.

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The GOP War on Democracy

Republican Gov. Scott Walker of Wisconsin is among one of the most undemocratic politicians in the Western World. The manner, in which he is stripping public employees of their collective bargaining rights, would’ve made Franco applaud with admiration. His ‘repair budget’ achieves no real significant means of combating a $3 billion budget short fall, but instead targets political rivals and the opposition bases. Without increasing tax revenue, Walker’s cuts are draconian and depict European austerity as timid. Traditional Democratic voters, supporters and unions are among the worse off under his budget.

Far from very democratic.

Protesters have established ‘Walkerville’, a tent city, in and around the capital grounds to put pressure on the governor to stand down. Sadly, Walker has countermanded bipartisanship and authorised the authorities to use force to expel any dissidents. Including elected officials. And yet, media supporters-such as FoxNews-continue to push GOP propaganda against ‘the enemy within.’ According to Fox, these protesters are ‘Marxists’, ‘extremists’ and ‘trying to destroy American values’ – but what about the great American value of freedom?

Wisconsin is not an isolated incident. Throughout the United States, the GOP is using the fiscal crisis to eliminate all opponents that threaten their agenda. It’s a Trojan horse for the Christian Right and corporations to influence political decisions, which were historically left for the people of America.

President Reagan once championed the defence of collective bargaining rights for Polish unions under Soviet occupation. Yet, he’s GOP children wish to strip Americans of theirs.

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Where on Earth is the UN?

The main arbitrator of global peace and justice is nonchalant to the events in Yemen. Question: How many individuals need to die in conflict, before the United Nations even considers calling an urgent Security Council meeting?

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