The European destruction of Cyprus has begun

In a moment of sheer insanity, brutality or just economic incompetence, the European Union has destroyed the Cypriot economy and left untold destruction. The off shore banking system is in ruins and the domestic credit supply has been broken into pieces; capital controls effectively suspend Cyprus from the internal market and only the German Parliament will get a vote on the bail out terms. Not the Cypriot politicians who are forced to agree with unfair and draconian terms.

 

Between now and 2017, the Cypriot economy will lose 20% of its GDP in a designed depression to rescue the banking system and prevent bankruptcy of the country. Anyone with deposits over €100,000 in Cypriot banks will help pay for the bailout – regardless if you’re actually a millionaire or a pensioner, who saved up for retirement. In the eyes of the Bundesbank and the German Finance Ministry, you’re paying for it. Not them.

 

Brussels have decided the unravelling of the Euro and the wider European Project is unthinkable; in order to save the post-World War II consensus, principles and agreements are now void. The Euro must be saved at all costs. Merkel has resigned to accepting the end will justify the means; a banking and political union must occur, regardless of the path of misery that awaits the periphery. A promise of co-operation, mutual respect and European democracy is currently suspended. We are discovering a disturbing reality of the European Union not being this equal playing field. Transforming smaller members into slave states, dependent on ECB funding, is a dangerous experiment which could create generational hatred towards Brussels and most notably Germany.

 

The hubris nature of the European Union and its contempt for national parliaments is quite telling. Ordinary citizens of Cyprus will have no say in whether or not these terms are fair and acceptable to them. If the people don’t like it, they can leave the Euro – which is precisely what the Eurogroup told the Cypriot President. It is unnerving that the 2012 Nobel Peace Prize winner now resembles a 19^th Century imperial power and not a regional body which was meant to offer a brighter future to a war-torn continent. I struggle to understand those who still defend the actions of the European Union after the untold economic damage to Greece, Spain, Portugal, Ireland and now Cyprus. The pro-European arguments are sounding like apologists, who refuse to recognise a broken system in need of reform or to be halted altogether. There is nothing pro-European about terrifying levels of unemployment, poverty, economic collapse and misery; yet, EU advocates still celebrate the bailouts and punishing terms.

 

What is remarkable, though, is how the European Union has managed to achieve all of this with little or no opposition. There would be riots in northern European countries or the United States if their respected governments tried to transfer private savings into the hands of the banking system; those nations would become ungovernable in a matter of hours. Yet, the European Union managed to persuade the Mediterranean into submission; Rome had to use thousands of Legions and slaughter people in the tens of thousands to achieve a similar result. That is quite impressive and horrifying. I hope Brussels know what they’re doing.

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Forget Greece, IMF warns of the ‘American’ problem

IMF chief economist Olivier Blanchard says if the US fails to deal with “fiscal cliff” it could potentially be an “enormous shock” to other economies. [Telegraph]

The Obama administration probably will not be best pleased with the IMF’s recent ‘endorsement’ of the US economy and the policies of the current President. His rival, Mitt Romney, is jumping on this briefing and I expect the Republicans to provide as more oxygen to this report as humanely possible.

Overly, the report is quite chilling. A perfect economic storm is gathering.

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My contribution for Catch 21: IMF reform

I had the wonderful pleasure of working with Catch 21 Productions, recently, on discussing the future of the global economy. Preliminary, I focused on the IMF and how it could (and most likely will be) transformed into a global central bank. Here is brief look;

IMF intervention is much more common in the post-crash global economy, with its role become more or less that of a global central bank. Yet, it lacks the credible reforms to achieve such status; the transition towards a global central bank has begun. Globalisation requires a stronger, more robust and vibrant monetary system, which is independently financed and has the necessary administrative skills to stabilise global markets.

Please visit Catch 21 for the full essay.

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£15 billion for the IMF? No, thanks.

IMF are prohibited from bailing out currencies; it is not in the remit. Plus, there is no evidence to suggest the Euro is sustainable and will last the year – without countries leaving. The economic arguments are so negative, that this is huge risk for the British government and taxpayer. There is a reason why the United States are not keen; Congress will not sanction a Euro bailout.

Japan are reluctant, too.

Taxpayers are already facing massive losses with RBS and Lloyd’s Banking Group, so why on Earth should Parliament risk £15 billion?

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Understanding the economic news without media spin

‘IMF warns of UK recession’ is the main discussion point for the press today. But the probability-based on a quarter-is less than 20% in the United Kingdom – 17% to be exact. (see the chart to the side)

The IMF were more concerned with a potential lost decade of growth in the United States and Europe’s inability to tackle sovereign debt. Page 19 of the IMF report, states an “increased risk of a new recession from the 3d Q of 2011 for the US, to a lesser extent for France and UK” and page 6 concludes Britain was either above or in line with growth, between July 2010 – July 2011.

As for public sector borrowing; let us read the actual document:

“The central government net cash requirement for August is increased by £5.1 billion due to the redemption of an index linked gilt while last August an extra £3.1 billion cash was received from the Bank Payroll Tax. These factors should be considered when making comparisons between 2010/11 and 2011/12.“

And, when reviewing central government receipts, we are currently better than last year. Increasing tax receipts is not a sign of an impending recession. Granted, the medicine is not working fast enough – but its working. These borrowing figures are not precise (yet); a revision is likely and the ONS have a habit of underestimating borrowing figures, too.

Hopefully, journalists will read the documents-in detail-before printing ridiculous and fearful headlines. I’m looking directly at you, Daily Mail.

 

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Blogs: Two of the best

These two blogposts have caught my attention this week from the e-world.

• The World is Watching takes an interest, and albeit controversial, take on the Johann Hari plagiarism scandal.

• After the collapse of the court case in New York and his resignation from the IMF, Political Parry investigates the behaviour of the media towards Dominique Strauss-Khaun

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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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Are we all Marxists after all?

This is only a snapshot of Europe. It does not reflect the grassroot movements in Africa, the Middle East and Asia.

Spain is the most high profile and notorious in Europe, with protesters gathering a million signatures in order to trigger a possible people participation in political affairs.

Social media have christened these movements as ‘#worldrevolution’ and invoking the right of self determination against the hostility of global finance and international organisations. These are not necessarily a rebellion against capitalism per say, but resistance against consequences of global corporatism; which I would argue is separate from capitalism. It is a rebellion against the state itself and not its agents.

Grassroot movements have synthesised a coherent, credible and all inspiring message that has been able to appeal to a variety of social-political groups. It is not a workers-centric socialist alternative to the state or advocacy of a socialist utopia; but it does maintain the Marxist premise of the world revolution concept.

The left in Europe have been forced to resign to its original core principle or anti-state and anti-authority. Far left groups have abandoned support for authoritarian parties -British Labour party- and are turning towards the democratic left. And because of this transition, activists are able to subdue the political stereotypes and generalisation.

After all, the Wisconsin protests in the United States have attracted widespread support from minor conservative and libertarian associates. The arbitrary power and abuse of the state is a position that can unite socialists and libertarians.

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Globalisation might have provided prosperity and economic freedom to different regions of the world, but it has dangerously undermined national and individual sovereignty in the accumulation of wealth.  Sovereignty is not an abstract idea. We are either free or we are not. There is no interpretation of its definition; the IMF and European Central Bank think otherwise.

If humanity is to progress politically and economically then the current geopolitical governance system must be overhauled. Governments are eradicating fiscal deficits, yet the engulfing democratic deficit still dwarfs the international community.

And only Marx has the answer: world wide revolution is the only solution.

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Let’s be clear: Greece should default

There is nothing left to cut in Greece, but still the government continues austerity measures. €110 billion bailout scheme was forced onto the population by the European Central Bank and the IMF. But yet national debt has grown to over €300 billion. GDP for the final quarter of 2010 was near -7%

Zero growth and growing signs of a depression are settling over the Greek economy.

Greek membership of the Euro denies them any opportunity to devalue their currency. In fact, the country should’ve never been allowed to join the single currency; Brussels were either nonchalant or reckless in overlooking Greek tax evasion problems.

However, the Germans are closing the cheque book. Wolfgang Schäuble (German finance minister) revealed the worse kept secret in Brussels: Greece is effectively bankrupt. There is nothing left. The ECB and the IMF are refusing to even consider a plan for a potential debt reconstruction and are insisting the loans will be repaid. Regardless of the aspirations and wishes of the Greek population.

Other European nations -notably France and Germany- are reluctant to cough up any of their taxpayers hard earned wages on a lost cause. The bailout packages are delaying the inevitable, in the cases of Ireland and Greece; these countries will no doubt require a reconstruction of debt or defaulting on repayments in the next five years.

In order to retain any dignity (and sovereignty) Greece should embark on the actions of Argentina in 2001: default. And it was not disastrous, for the record. The Argentinian economy enjoys growth of 8-9% a year and is now a member of the G20. A successful reorganisation of the economy and a radical plan for growth led to massive expansion within 9 years.

Greek politicians should take note.

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“We’re broke. Let’s be honest with ourselves,”

The words of the  US Speaker of the House of Congress. House Speaker John Boehner ushered those words after hearing President Obama’s plan for $7.2 trillion deficit spending over the next decades – that is four times the national debt of Great Britain.

Ten-year Treasury yields have increased by 120 basis points since October with many analysts fearing a rapid spike in short term bonds, if the markets see no fiscal tightening in the United States. Even the IMF have produced gloomy and forlorn reports on the potential for an apocalyptic debt crisis in the United States – America is expected to surpass the 90% debt of GDP next year. The point of no return.

The United States has poor domestic savings rate thus giving the government no choice, but to rely on the benevolence of foreign governments and investors. And China has already, slowly, been reducing its holding of US Treasuries and Dollars; the Communist government recently questioned the Dollar status of the reserve currency – something Europe is sceptical of, too.

If the Obama administration continues to show poor leadership and refusal to acknowledge the ever growing US debt (currently $14 trillion) then we are about to witness the mother of all sovereign debt crisis. And it’s going to be ugly.

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