Monday, April 30, 2012

Austerity and disaster capitalism

The banks continue to vulture economies worldwide. Recall that the US financial crises was intentionally engineered to cause economic collapse for the criminal gain of a few. Key regulations were removed that prevented said banks to both lend and speculate. Once freed of consumer protections they created a devastating mortgage scheme, lending to people they knew could not make good on their loans by eliminating underwriting standards altogether. Why would they do such a thing, knowing the loans would default? Wouldn't they lose money and go out of business? Well, if finance worked the way it used to that would be the natural result. But freed of those regulations they bundled all those toxic loans, had their cronies at the rating agencies say they were good as gold and then sold them en mass to 401k plans. To add insult to injury they then bet against the very junk bonds they created, knowing they'd make a huge killing because of the inevitable default. And all the while knowing that the government would bail them out, as they were now way to big to fail again from lack of appropriate regulations.

As a result conservatives offer solutions of austerity that only make the problem worse. Instead of addressing the causes of the crisis per above, they cut spending in all those necessary programs that actually stimulate real economic growth. Which per above then further reinforces a self-fulfilling prophesy when things get worse instead of better. We see this playing out in Europe's continuing downward spiral. (At least some of Europe; that some northern European nations are doing quite well is another story.) According to Robert Kuttner in this piece there is a popular backlash against austerity measures but the banks could care less because they again engineer economic loss and profit therefrom. When nations like Spain, Portugal and Greece cut spending their economies worsen, the rating agencies downgrade their bonds which the banks then bet against and make fortunes, perpetuating the cycle much like we've seen in the US collapse. Britain now follows suit with a double-dip recession.

Kuttner's sensible answer? “Let's stop trusting the verdicts of private financial markets and their corrupted rating agencies.... The EU as a whole needs to launch a massive development program in the spirit of the Marshall Plan.... The whole crisis of sovereign debt would be far easier to solve if we taxed away or regulated away the ability of banks, hedge funds, and other financial players to speculate in sovereign debt. It's not as if banks have had a good track record of making the right decisions throughout the crisis. On the contrary, their recklessness brought us the crisis.”

He also knows though that until conservative leaders are voted out of office this can never happen, as they just fine with the status quo which unceasingly line the pockets of the 1% at the expense of austerity for the rest of us. Let them eat cake indeed. A popular uprising is indeed what we're seeing in the US and Europe but it needs to stick to it and vote. As the title of Kuttner's article denotes, democracy is at stake here and the banks want anything but democracy, for therein their criminal behavior will be curtailed and punished. Upcoming elections are literally about whether we want to maintain this relatively new experiment called democracy or devolve back into the robber baron state that preceded it. Well, we've already done so, so do we want to continue the fight to birth this fledgling socio-economic opportunity or give up and let the barons completely take over?

It's your choice. We are rape victims and if we don't act it will happen again and again, worse and worse. I for one don't want to give my rapist Vaseline to make it easier. Or pretend the s/he truly loves me and it's for my own good. I want to face the rapist and stop the crime. How about you?

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