An idiot’s overview of why Western capitalism is crashing
One is that in order to repay the debts, governments slash expenditure across the board, cutting, cutting and cutting back massively on budgets for everything including state pensions and social welfare benefits and services. Unemployment rises to unthinkable levels and living standards plunge to unacceptable levels. Eventually the citizens revolt and violence escalates. What passes for democracy is shut down and martial law is established. Orwell’s 1984 finally arrives. (Soon after Edward Heath ceased to be prime minister, my wife and I had lunch with him. I asked him what his biggest fear for the future was. I expected it to be related to global poverty because he had been a member of the Brandt Commission which studied it. His reply, calm in delivery and matter of fact in tone, was, “That Britain will become the first police state in the democratic world.”)
In the other scenario all debts, including mortgages on homes, are written off and we all start again.
By definition a re-start would have to be based on a rock-solid commitment to fairness with a real intention to make capitalism work for the benefit of all.
This idiot is in quite good company. American Martin Weiss is the founder of the Weiss Rating Agency (WRA). In his latest presentation he makes the following claims about his agency’s astonishing success in predicting economic disasters of the past 40 years, a claim which is confirmed by all the major American newspapers and economic journals.
Months in advance WRA warned about the S&L crisis of the 1980′s; the great insurance company failures of the 1990′s; plus the great “Tech Wreck” of the early 2000′s.
WRA was the only firm in the world to warn of the financial crisis of 2008 more than a year in advance, specifically naming nearly every major company that later collapsed.
Today Martin Weiss says this:
“Baring a miracle, an historic, world-changing event is about to end the American way of life as we know it. This monumental event will plunge vast numbers of families into the nightmare of poverty, homeless and hunger. In a worst case scenario you will see soaring crime, the confiscation of property, the suspension of civil rights, and even the enforcement of martial law by the U.S. military.”
The world-changing event he is anticipating is a decision by China to stop buying U.S. debt, which will mean, he says, that America will no longer be able to borrow money; and that, he adds, will see the beginning of “America’s Financial Doomsday”.
My own biggest fear which I have been expressing to friends in private for a number of years is that the unfolding economic crisis may take us all the way to World War 111. It could happen for two related reasons. One is the need of governments to deflect the attention of their own people away from the mess within. The other is the need to have an outside party to blame. There’s a case for saying that some American politicians are already setting up China for blame.
We shall see…
Footnote
European plans to bring in tough budget controls are irrelevant, even a farce. They are designed to stop the present unfolding catastrophe from happening again, but they won’t do anything to solve the present debt crisis. European leaders are shutting the stable door after the horse has bolted.
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Michael Kenny:
December 7th, 2011 at 4:56 pm
This is quite a good analysis. I have always believed that the real cause of the crisis was precisely that the poor of the world are slowly but surely taking their destiny into their own hands. Since the wealth of the developed countries were based on the exploitation of the poor ones, the ending of that exploitation has to be accompanied by an impoverishment of the developed countries and the consequent need for those countries to find a new economic model. Thus, there is no “euro crisis” or “debt crisis”. The crisis is systemic, but not in the simplistic and antiquated terms of the marxists, pipedreaming of old Karl rising from the dead as the new messiah and being born aloft on the shoulders of Lenin and Trotsky. I don’t fear a war involving Europe, though. After all the blood that was spilt here in the 20th century, and all the anniversaries starting to come up, I don’t think Europeans will be too busy contemplating the disaster war brought upon them ever go to war again. What the belliocse and belligerent Americans might do if their backs were to the wall is another matter. The footnote is, I’m afraid, rather silly. Of course the stable door is being shut! The horse has just bolted through the open door! A new horse is being got ready, but there is no point of putting it into a stable with an open door. The solution to the debt crisis will I think, be Mr Hart’s second scenario: a large scale write off. Essentially, there is no alternative. But letting banks go bust just hurts their depositors, thousands and thousands of small people. Nationalising would be better than just bailing out and that too will probably be inevitable sooner or later. Thus, I’m very optimistic about the future of the world, Europe, the EU, the euro and even my personal future (I retire next week!).
p:
December 7th, 2011 at 5:18 pm
If the “South” had been educated and made a little richer, so they could buy “Northern” gadgets, then we would have one world instead of two. The “steady-state” would be a single set of manufacturers (capital) and a single set of consumers (North and south, together).
After this happened, where would the next “growth” come from, a growth (in consumers) needed to sustain capital? And why are not today’s consumers in the North enough to sustain today’s capital?
Something wrong here. If an economic steady-state is possible (and I’m doubtful that it is), then a purely Northern steady-state would have been possible. But in fact things are breaking down.
If an economic sterady-state is not possible, then adding a large set of consumers via education and enrichment of the South will not create one.
What might happen, however, is that the GROWTH of consumers by educating and enriching the South might sustain the growth-demanding capitalism for a while longer. After that it would either CRASH, as it may do now, or find a way to come into cooperative equilibrium with people, nature, climate, etc.
(Better start learning soon, though!)
Graham Griffiths:
December 7th, 2011 at 8:08 pm
Very interesting analysis of the present situation. Never having fully understood world economics(but then, who does? The experts all argue with each other),I wondered why we couldn’t let the banks stew, and have a national bank to replace them, but then I thought I obviously don’t understand it. So it’s so refreshing to see Alan ask the same question. The comically eccentric Max Keiser, on Russia Today, has made similar comments.
David King:
December 7th, 2011 at 11:39 pm
Very interesting Alan. I wonder what else your friend Edward Heath had to say on the topic of marshal law? It seems that the US is about to enter that stage. I also note that gun sales in the US has gone up 30-35% year on year for the last 2 years. The US FEMA camps are also about to go online; as personnel are now being sort to man these facilities; and lastly I am seeing more online comments from everyday people who are starting to get worried about their US zionist government.
I would like to know what the future holds. I don’t mean what it promises but a real crystal ball. It is a very worrying situation. At this point I am hoping at least that the worst will happen first in the US and from your post Britain; giving us Aussies a small chance at least of preparing for the zionist takeover.
Todd Marshall:
December 8th, 2011 at 1:51 pm
Alan, it is you who has it wrong!
Thatcher: “We need not bother too much with our old industries and ways of creating wealth, the banks and the markets will do it for us.”
Hart: Events were to prove that she could not have been more naive and more wrong, but before they did American presidents starting with Ronald Reagan had followed her lead.
Marshall: A better way to obtain proper behavior is to have misbehavors suffer the consequences of their actions. Regulation just invites a whole new category of misbehavors … with more power than the misbehavors they are supposed to regulate.
As long as we have a concept of “too big to fail” we have an ailment of “too big” … period! This is not mitigated by making bigger.
The root of all our problems is mismanagement of our medium of exchange. The most important result of this mismanagement is that INFLATION is not zero as it must be.
Todd Marshall
Plantersville, TX
Vera Gottlieb:
December 8th, 2011 at 5:26 pm
Greed: mankind’s graveyard.
Steve Naidamast:
December 9th, 2011 at 8:23 pm
A very sound article on the economics of the world, then and now.
The “Steady State” concept is perfectly possible. However, the reason it does not appear possible now is because capitalism has been so horribly distorted. Capitalism was designed to be an open “playing field” for many small companies producing products that would compete for customer purchasing. The idea of the current, monolithic corporation that we have today is anathema to capitalism and is not in any way reflective of how the original system was supposed to operate.
With many smaller companies competing, government regulation would have been more easily enforced and less complex making it somewhat less intrusive since the governance of a small company requires a lot less work than that of a huge conglomerate.
With many small companies, capitalism could have achieved a normal sense of ebb and flow within the market place without the massive traumas that we currently experience since all such companies would have had less influence politically let alone within the market place.
Capitalism was also not formulated around the “corporation” but around small companies or businesses whereby the owners were responsible for everything that happened to them. The corporation of today was actually designed to get around early capitalism’s inherent limitations on wealth creation by actually being created as a scam that became banned for two centuries throughout Europe.
It wasn’t until Britain opened the doors again for this atrocity in the late 18th century (I believe) that the corporation was able to establish itself and metamorphose into the monster it has become today…
Tom Mysiewicz:
December 9th, 2011 at 11:28 pm
Finance or debt capitalism is the economics of plunder. In the U.S., for instance, banks can lend out $100,000 for every $1,000 in deposits (or even more). When they get bailed out–do they get $1000 or $100,000? That money has to come from someplace. The U.S. dollar–basically a debt instrument–has a carrying charge by its nature. These interest payments come from someplace. Add in Sorosian currency speculation (taking whole nations to the “chop shop”) and criminal fraudulent derivative instruments and you have additional layers of fraud. It’s all sleight of hand. The poor never figure it out and if they do can do nothing about it.