The world depression can come in handy
by Francesco Cappello
They are able to ensure that the world press channels their interests and that laws and courts are increasingly on their side. The large investment funds, which control multinationals, large investment banks and rating agencies, are only one of the instruments of domination and control, acting on a global scale, in the hands of the oligarchies that exurge the power of self-determination of organized peoples. The connective tissue of this system of domination on a global scale is the system of private debt money together with the post-war imposition of the dollar as the only international currency, albeit undergoing drastic downsizing starting from the Asian markets.
If a few thousand people are able to impose their dominion on the rest of humanity it is because this oligarchy has crept into the major public and private institutions.
Instability and bank-financial collapses
Huge debts and related credits that do not meet generate less and less sustainable tensions that the injections of liquidity (fictitious capital) by central banks try to ease but with the side effect of fueling financial and banking instability throughout the economic system. The global health crisis following the spread of the coronavirus is making it possible to shore up and stamp the debt economy based on the monopoly of private debt money (which China and Russia escape). The strategies of prolonging their obscene privileges, in the face of the evident instability of the financial system, show cracks that are difficult to heal; it appeared close to implosion even before the covid era.
The usual, albeit cyclical, overproduction crises destroy financial and real wealth and, nevertheless, manage to 'reset' the system by maintaining its dominant structure and concentrating wealth in the hands of even fewer people: "The time to buy is when blood flows in the streets ” reads a maxim attributed to Baron Rothschild. Today, however, this system of privileges based on private monetary creation managed by the system of private banks reveals its unsustainability more and more explicitly. We are not sure that the changes brought about by the current crisis are not capable of questioning the debt economy and its related private monopoly of debt money creation . It seems legitimate to hope for transformations of a profound structure.
The distancing between productive and financial capitalism
The Fed and other major central banks (BCs) are desperately trying to avert a financial-banking collapse. At the base of the structural crisis of the dominant economic model is today the negative profitability that affects very large sectors of the real economy (1). Economic activity is generally motivated by the production of that margin that allows you to have a positive profit even after paying the interest, essential for the sustainability of the debt economy . However, this positive margin is increasingly eroded (fall in the rate of profit) and often impossible to achieve except in a few sectors which, moreover, introduce more automation for this purpose, consequently expelling the workforce, a process which in turn determines a downsizing of domestic demand. . Since speculative financial profits are very often higher than those deriving from investments in real assets, and moreover achievable in a very short time, they represent a very attractive alternative to productive investments in the real economy. The latter are thus diverted to the financial economy which guarantees average increasing stock prices, ensuring more certain and immediate profitability compared to the investment aimed at the production of real goods.
The bursting of the financial bubble of 2007 was overcome thanks to the injection of enormous amounts of liquidity. To avoid collapse, the Fed turned on its taps from which $ 29 trillion poured for Wall Street banks and their foreign derivatives counterparts.
When mistrust takes over and the race to get rid of the securities begins, the numerous small investors lose. Wealth is further concentrated in the hands of the financial aristocracy who know how to profit from the financial markets even in such extreme conditions.
The financial drug peddled if necessary by the big bc, FED, ECB, BOJ… contributes to artificially keeping share prices high (inflation on financial assets). The CBs buy huge quantities of shares which together with the share buyback operated by the same companies give an illusion of wealth, good only for speculative purposes, a fictitious wealth that sees GDP decreasing in the face of stock prices, miraculously as well as dangerously, rising with the effect of further rising of the global speculative bubble. Central banks from an instrument originally aimed at growth through credit to the real economy have turned into an instrument to protect financial assets that no longer reflect the real value of the underlying economy. Financial capitalism appears to have a life of its own, completely dissociated, decoupled from the real economy. In the current economic situation it is impossible to believe in real increases in the profits of listed companies and yet their shares are bought with great optimism … The big central banks support their risk capital and financial assets. Keeping the yields of stock markets artificially growing has made them unrelated to everything that happens in the real world: drastic decrease in industrial production, layoffs, collapse in company turnover, etc. The growing difficulty facing the real economy is also visible. from the decrease in the demand for oil, already reduced to two thirds of that of the precovid era, from the price of gold, a safe haven par excellence, which skyrockets while colossal figures are parked in tax havens. However, these phenomena are unrelated to the upward trends of the stock markets, in which (fictitious) wealth appears to be continuously on the rise, causing the global speculative bubble to rise dramatically. In other words , the separation between financial capitalism and productive capitalism has now been completed . The operators of the first claim to be able to continue making money with money (if with D we indicate money, speculative financial capitalism is characterized by the model: D-D ' with D'> D), without going through the production of goods. The real economy in the form of productive / industrial capitalism (if with M we indicate goods and services, the capitalist production model is DM-D ' with D'> D) is rather parasitized and condemned, as we will see better later, to recession permanent in order to be able to inject BC money without arousing generalized inflation processes.
Debts and credits (high-risk loans), however, have not met for some time and also the various strategies implemented: securitization, derivation of securities to make them marketable, packaged in those debt securities that we knew in the previous crisis of 2007 , such as collateralized loan bonds (CLO), which have given them the value of fictitious money scattered around the world, toxic securities sold to various funds… but the strategies for managing toxic speculative securities (2) have their limits. The financial normalization carried out by the large central banks which, in the face of loans with unsustainable financial levers (forms of bank loans granted to already heavily indebted companies with junk credit ratings), has come to introduce negative rates no longer seems sufficient to guarantee stability. of the financial system which in the face of the spread of zero or even negative interest rates is forced to measure itself with low returns on invested capital and strong drops in the Dow Jones average, now appearing close to a cascade of self-sustaining sales potentially able to lead to collapse of the entire financial system.
The virus that prevents inflation
In the era of sub-zero rates , how can speculators continue to care about what's going on in the real world? how can large central banks continue to inject money in support of a financial system that has become seemingly independent from the real world and at the same time highly unstable without side effects? How to avoid the collapse of the entire financial system and the banking system, which is intimately linked to it? The only way is to feed the financial bubble by letting it continue as an insatiable drainage pump to sustain itself thanks to the injection of additional liquidity for the exclusive use of the financial world. However, this is only possible if a way is found not to blow up inflation (2); to this end, the currency introduced must not be able to circulate in the real world. It must remain confined within the confines of the financial world. This strategy, albeit short-term, may allow the world of speculative finance to continue doing its business for a while. The declaration of a pandemic on a global scale seems to have come to the rescue of this state of affairs by generating a sudden drop in global demand impossible to induce otherwise. .. the virus has imposed a global austerity, severely limiting the demand for goods and services and at the same time the drastic downsizing of global trade, ideal for prolonging the stability of the financial system a little longer. Until? The answer is simple, as long as this state of affairs does not collapse supply as well, in terms of generalized bankruptcies that will affect private and public companies. Ultimately, what seems to be eluding is the self-evident fact that the underlying of any financial economy is the real economy . When the flight of "normal" investors begins and the black swan takes off, spreading its wings, to obscure the skies of the world (4), if the nation states were completely colonized they would not know how to defend their interests and would gain from them once again the financial aristocracy that would become even more powerful and wealthy. The immense losses would be socialized and the gains privatized. The virus appears, in other words, as the new global gold standard that imposes poverty and deflation to the advantage of prolonging the agony of the system of speculative finance.
The banking system and the financial system have now interdependent destinies. In fact, the growth of shadow banking-financial intermediaries has been allowed and fed with the task of putting into circulation those financial products carrying speculative investments. This is how the regulated banking system has been playing its game for too long now (1990s, Glass Steagall-act abolition) in those same channels and markets typical of the system of deregulated speculative finance.
With regard to the risk conditions faced by the Italian banking system, and therefore our savings, read the recent Consob document: “The Covid-19 crisis. Impacts and risks for the Italian financial system in a comparative perspective "
The economic and financial consequences deriving from the containment of the pandemic immediately seemed very severe. The forecasts on the growth rates of global GDP and individual countries for the current year have been revised downwards several times. In the first quarter of the year, the indicators relating to the performance of the financial markets showed tensions of proportions equal to or greater than those experienced during the 2008 crisis. There are fears of a sharp deterioration in public accounts, an increase in the insolvency rate of businesses, a significant worsening of households' economic and financial conditions. Possible repercussions can be seen on the quality of banks' assets and on their ability to lend at a time when primary capital markets are showing signs of a slowdown in activity.
on the global side, the IMF sibylline warns :
This crisis poses a serious threat to the stability of the global financial system. Following the outbreak of COVID-19, financial conditions have tightened at an unprecedented rate, exposing some 'cracks' in global financial markets
The state of things in our country
After having imposed state financing on the financial markets by forcing it to borrow money from non-residents and systematically demolished the welfare state with the demonization of public investments in an attempt to cope with debt, the economic crisis will be very difficult to face.
Only those countries that have not relied on supranational bodies and external debt resources, who have not renounced their central bank and their national currency, have adequate tools to best deal with the growing turmoil and indeed the economic chaos now rampant in the world financial economic. According to ISTAT, preliminary estimates see a collapse of 100 billion GP in the first half of this year (we are back to the '93 GDP …). The criminal response of the government in office lies in the increase in the country's debt level with the aggravating circumstance of the request for conditional loans (in the era of negative rates) which can only facilitate the race towards the country's bankruptcy . At this rate, the debt / GDP ratio (if GDP decreases and debt increases, the ratio explodes) will soon exceed 200%. The fiscal compact that we have guilty inserted in the Constitution, wanted to bring it back to 60% in 20 years; according to these intentions, in 20 years we should have cut 50 billion a year from the welfare state for 20 years.
In the meantime, since February we already have 600,000 more unemployed and we have recorded the collapse of almost half of industrial production. The increase in inactive people (who have given up looking for work) is 700,000 units, then there are zero-hour redundancies (8 million workers).
Under these conditions these data will only get worse. How will this situation evolve also from the point of view of social cohesion… will there be social unrest? Will the obligation to wear a mask and the prohibition of gatherings be sufficient to contain social claims?
If the spread machine were restarted, our bonds downgraded by rating agencies to junk bonds would go out of business; although they have always been requested to a greater extent than the offer, they would no longer be bought and on the contrary, those who own them would be forced, following the current criteria of acceptable risk, to get rid of them in a short time. The downgrade of Italian stocks is the sword of damocles that constantly threatens the country; it is held suspended over our heads by the thread underlying the rating agencies.
See also "A tsunami of unimaginable proportions is about to hit the Italian economy"
The National Salvation Plan
However, there are financial instruments and internal resources that would allow us, by renouncing foreign loans and the use of private debt money, to raise the fortunes of the country (see the PSN https://scenarieconomici.it/la-salvezza-nazionale- in-a-plan-and-six-interviews / ) which is known by the government but culpably ignored. Only the PSN, even within European constraints, would be able, immediately, to free us from the alleged dependence on foreign financial markets by enhancing, and at the same time protecting, the immense endogenous resources we have for the structural recovery of our economy. public and private.
The sooner we understand that it is good to go back to financing our country by resorting to endogenous resources as proposed in the national salvation plan, focusing on the response to internal needs, the better. It is necessary to reverse course very quickly if you want to avoid the near collision with the iceberg.
The rebellion against the elites must be waged at several levels simultaneously. We must prevent them from still managing the finances of the states by creating the conditions for a rediscovered exercise of sovereignty , starting with monetary and political and food sovereignty . At the international level, a new Bretton Woods is needed that reforms the international payments system and finally abandons the current paradigm based on liquidity which envisages a completely abusive market, that of money; to institute and enforce new laws that finally regulate world finance, close tax havens, unearth and prevent shadow banking, and establish an International Tribunal against financial crimes .
The credit system, centered on the pretentious national banks and powerful money lenders, and the usurers swarming around them, represents an enormous centralization and assures this class of parasites a fabulous strength, not only to periodically decimate the industrial capitalists. , but also to intervene in the most dangerous way in actual production and this gang knows nothing about production and has nothing to do with it (…) bandits to which financiers and speculators join.
(Karl Marx, Capital )
(1) The other coin by A. Galloni – Arianna Editions, 2019
(2) the growing number of investors control much of the global liquidity which they preferentially use in speculative investments. Here are some examples: futures, real estate and global commodities transactions, buying and selling foreign currency and derivatives outside regulated markets, credit swaps (CDS), secured loans (CLOs), securitized asset-backed securities (ABS), collateralized debt (CDO), high yield bonds and junk funds, residential and commercial mortgages (RMBS, CMBS), leveraged acquisitions (LBOs), stock market speculation, short selling of shares. In practice, a perpetual financial carousel, on a global scale, where short-term speculative opportunities are pursued.
(3) Remember that inflation erodes the financial resources of credit holders. See "The economy that appeals to the very rich"
(4) When the bubble inevitably begins to deflate because it is artfully inflated by fictitious wealth (i.e. a central bank monetary drug destined to artificially pump up stock prices, with the share buyback system) the value of companies, subsidiaries, banks, insurance companies, it falls because panic spreads and many begin to sell but the large foreign billionaire hedge funds, Americans, French, Germans, Arabs and all over the world, buy speculatively on the downside with a technique called short selling .
here is a brief summary of how it works:
I borrow, for the time I deem necessary, a financial security in order to sell it and then buy it back and finally return it.
Why do I do such a thing?
Because I know prices are falling and will continue to do so.
To get what I want to sell I will pay 10 (it is not even necessary to have them right away). I sell what they lent me at 100. I buy it back at 70. Revenue 30. I return 10 making a profit of 20. If I am very sure that prices will drop I can "risk" by multiplying my profit or "betting" with a leverage effect by earn double, triple, 10 or twenty times as much …
Here, who knows and is able to do things of this type, generally the great financial speculators, in times like this invariably take the opportunity to enrich themselves even more.
In many in this period they lose. Some more shrewd little ones have learned to rely on big speculators. While the real economy, the one that claims to build wealth with work, is declining frightfully. Finance no longer serves the real economy but itself by causing bankruptcies, layoffs, misery, suffering, destruction of the welfare state …
They, the vampires, extract value at the expense of all of us … Crises, and great crises are their daily bread. They are parasites, said my father, a man of peasant culture. They don't build value. They extract it and destroy it.
'Naked' short selling is even more extreme. 'Naked' means that traders can also do without loans for their trades. They buy shares without spending a penny. 100% leverage. It would be like selling something you don't own …
Naked short selling results in the value of the shares of listed companies targeted by speculation falling. Their debt increases as it becomes more difficult for them to continue to finance themselves by issuing shares. The overall result is almost always a renunciation of corporate investments, an increased risk of bankruptcy and job loss.
Here is the "freedom" they promote, that of enriching themselves at any cost, here and now, cyclically vampirizing, parasitizing, enslaving. We let them do it in the name of "freedom" which is license to kill …
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The article The world depression can be useful comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-depressione-mondiale-puo-far-comodo/ on Mon, 24 Aug 2020 08:08:07 +0000.