International Bankers Battle Inside the European Debt Crisis

Posted on December 15, 2011 by fgoldstein

While workers in Europe are battling unemployment, declining wages, and austerity cutbacks, the capitalist powers are fighting each other to protect the interests of their respective financiers and bankers.The world capitalist economic crisis, has intensified the conflict between German capital on the one hand, and the British financiers and Wall Street on the other. The great loan sharks of the world are at each others throats.

Britain’s. Prime Minister David Cameron refused to sign on to the German plan to impose austerity on EU  members, and especially on the 17 euro zone countries. The most widely publicized part of German president Angela Merkel’s was the measure to  force EU governments to submit their budgets to the European Commission before sending them to parliament.

Cameron boasted before Parliament that he “defended Britain’s interest “by not signing. Of course he did not defend the interest of British workers who are suffering the highest level of unemployment in 17 years. And he certainly did not defend the interests of the 276,000 public workers who have been laid off this year as part of the most severe austerity program in modern British history — and across the board cut of 19 percent.

Austerity for the workers was hardly the issue between Merkel and Cameron. The Wall Street Journal revealed that there are 49 pending financial regulations under discussion that could affect “the City,” as the London financial center is called. Among them regulations to require that certain transactions such as derivative trades be carried out in the euro zone.

Another proposal is for a financial transaction tax which would raise €57 billion, €40 billion of which would come from London because of its dominant position in finance. At least 10 percent of Britain’s entire Gross Domestic Product comes from finance.

As for the U.S., both president Obama and treasury secretary Geithner have leaned on the German government to institutionalize on a grand scale the bank bail out system devised by Washington.

According to the Huffington Post a  conservative estimate of the direct exposure of U.S. financial institutions to European banks is $1.48 trillion. U.S. corporations also exported $153 billion to Europe this year. With the EU sliding into recession, Wall Street wants desperately to head it off.

There is educated speculation by Paul Craig Roberts  that Washington and London and perhaps the European Central Bank  orchestrated the failure of German bond sales last week.  They were sending a message to Merkel to get on board with bail outs for European banks.

The U.S. and British interests coincide in their struggle against Berlin, their World War I and World War II imperialist rival. Britain is a conduit for U.S. financial investment in Europe. And the Obama administration wants to desperately avoid a further downturn before the presidential elections.

Wall Street is in a strong position to exert influence on the European bond market. The new president of the ECB is Mario Draghi who was Vice Chairman and Managing Director at Goldman Sachs International and a member of Goldman Sachs Management Committee, among other key positions in the upper echelons of the world banking establishment.

Italy’s new prime minister, Mario Monti, was a member of Goldman Sachs Board of International advisers, as well as being the European Chairman of the Trilateral Commission, an organization created in Washington that promotes U.S. global domination.

So far, the German government has used the sovereign debt crisis as a bludgeon to strengthen its dominant position on the continent. But this will be a Pyrrhic victory. Austerity will only hasten the development of the new phase of the economic crisis. The workers of the Europe and the U.S. are the targets of Berlin, Washington and London. There is no argument about imposing austerity on either side of the Atlantic. But Washington and London fear that Merkel’s refusal to allow the ECB to assume the status of the Federal Reserve Bank as the overseer of European bank bail outs will bring acute crisis to Wall Street and the City.

The historic inter-capitalist rivalries are taking on a new intensity in economic form as the capitalist system grinds to a dead end of jobless recoveries and renewed crises. But as the bankers fight it out, workers are mobilizing in larger general strikes in Europe and the Occupy Wall Street movement in the U.S. signals a turn around in this country which cannot be stopped.

Posted in Bank bail outs, Euro crisis, Sovereign debt crisis, Uncategorized | Tagged , , | Leave a comment

Euro summit intensifies crisis

Posted on December 14, 2011 by fgoldstein

By Fred Goldstein

The primary development at the Brussels summit meeting of European leaders was that the German capitalist government, headed by Angela Merkel, punched more holes in the sinking ship of European capitalism while attempting to throw away the life preserver.

The German proposal to “hard-wire” austerity into the European Union triumphed. At the same time, the German capitalist government ruled out allowing the European Central Bank to take on the same role as the U.S. Federal Reserve Bank, that is, to become the lender of last resort to buy bonds from failing indebted governments.

The European leaders in Brussels failed miserably in their efforts to resolve the financial crisis in Europe. That is because they are laboring under the illusion that the financial crisis can be separated from the global capitalist crisis.

The world crisis of overproduction, the inability of capitalism to grow its way out of the crisis, the steady slowdown of the world economy and the relentless rise of mass unemployment cannot be resolved by negotiation between capitalist governments or financial authorities. These negative developments arose because capitalism has reached a dead end.

The U.S. bankers, the big monopolies, the Obama administration and many capitalists in Europe wanted to emphasize the bailouts. U.S. financial institutions have several trillion dollars directly or indirectly invested in European banks. Europe is also the biggest export market for the U.S.

Also, the Obama administration wants to at least postpone any economic downturn in Europe until after the U.S. presidential election, because a downturn will increase unemployment here.

The agreement at the Brussels summit imposes an annual debt limit of 3 percent of Gross Domestic Product for each country. Most importantly, the European Commission can examine each national budget before it goes to parliament and can call for changes if the cuts are not austere enough. It can impose sanctions on countries that fail to comply. This means, of course, the poorer, weaker capitalist countries.
The nature of the so-called “sovereign debt crisis” is that the bankers and investors of the world created a government bond bubble by pushing government bond sales on the governments. In fact,Goldman Sachs is being investigated by the Greek government for its role in engineering part of the Greek debt crisis.

Government lending and bond sales account for a huge portion of easy profits for banks. In noncrisis economic times, a steady stream of fees and interest payments flows into the vaults of the financial sharks. Now that there is an economic crisis, tax revenues have fallen, treasuries have been used to bail out failing banks and the bond bubble has burst, just the way the housing bubble burst in the U.S. The investors want every government’s first priority to be paying interest on previous loans.

Both sides of the argument come from the perspective of the ruling classes. Both are for austerity. But one side wants to couple austerity with guaranteed bailouts. Neither side worries about the workers, only about guaranteeing the returns to millionaire and billionaire investors and bankers — at the expense of the working class.

The first working-class response to the Brussels summit came in Italy, as the three main labor federations — CGIL, UIL AND CISL — went ahead with a three-hour national strike on Dec. 12, the first time in six years that the three had united for a joint strike. The FIOM metalworkers’ union, including many auto workers, went on an eight-hour strike. The transport workers are due to walk out on Dec. 15 and civil service workers the following Monday, Dec. 19.

These strikes are part of a week of nationwide strikes called to protest the austerity plan decreed by new Italian Prime Minister Mario Monti, who announced new sales taxes, cuts in pensions and a rise in the retirement age prior to the summit meeting. The announcement was supposed to give assurances to investors that Italy could pay its debt, but instead it has only spurred the Italian working class into action.

Hopefully, the entire European working class will unite to push back this latest assault by the capitalists of Europe and the U.S. This also sets an example for the workers here, who are suffering from austerity imposed by every level of government — federal, state and city.

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Jobless Recovery Remains, Despite Statistical Hype

Posted on March 6, 2011 by fgoldstein

The big business press and TV is hyping the February job numbers as evidence of a coming turnaround in the recovery of jobs. The government announced that 192,000 net new jobs were created last month and that the private sector created 222,000 jobs. Thus, the unemployment rate was declared to have gone down from 9.0 percent to 8.9 percent.

But no matter how much hype is mustered behind these figures, no matter how much the pundits read good news into a miserable situation, the jobless recovery continues without letup.

The Wall Street Journal, of all publications, lifted the lid on the truth that is concealed in the current statistics.

[O]ne key gauge of the labor market’s health—the labor force participation rate, which measures the percentage of adults who have jobs or are seeking them—remained stuck at its lowest point since the mid-1980s.

A low participation rate both saps the economy’s long-term growth potential and can obscure deeper problems in the labor market. If, for example, labor force participation today were at the same level as before the recession, the jobless rate would have been 11.5% in February.

In other words, no matter how the government slices and dices the statistics, millions of workers have given up looking for jobs long ago and the statisticians of the capitalist government have no desire to count them. Thus they do not enter into the calculations of the unemployment rate.

The economy has officially added an average of 136,000 jobs per month since November. According to the Economic Policey Institute (EPI), which bases its numbers on the Bureau of Labor Statistics, it takes 127,000 per month just to keep up with new entries into the labor force.

Considering that there are 13.7 million people officially unemployed, around 8 million under-employed and over 2 million are officially counted as having dropped out, at the present pace of job growth, there will not be a dent in mass unemployment.  By one calculation from the Center for American Progress, a liberal think tank, it would take until 2033 just to get back to 5 percent unemployment!

While there was much crowing about the pitiful figure of 222,000 jobs added in the private sector, there was no report on how many of them are temporary jobs, low-wage jobs, short-hour jobs. The bosses have adopted a “just-in-time” hiring policy of temporary workers who can be disposed of at any moment.

Furthermore, it was quietly stated that state and local governments laid off 30,000 workers in February. States have cut 82,000 jobs and localities have cut 377,000 jobs since August 2008. And unless the working class can stop these state and local governments and the bankers and bosses behind them, the plan is to escalate layoffs of public sector workers.

The capitalist state, the Federal Reserve, the Treasury Department and the White House have pumped $10 trillion dollars into the economy, mostly to bail out the banks, the auto industry, and in loan guarantees. At the end of it all, there are around 30 million workers still unemployed, underemployed or who have dropped out and are totally unaccounted for in the government statistics.

Bankers’ profits are higher than ever. Corporate profits are up. The capitalists are recoverving, but for the tens of millions of workers it is still a jobless recovery.

What is a jobless recovery? It is a recovery of business production and profits while jobs either continue to be lost, or whatever gains take place are minimal. Under capitalism historically business recoveries are supposed to be accompanied by an upsurge in hiring, not job losses or job stagnation.

The first jobless recovery in the U.S. since the Great Depression followed the recession of 1991. This was followed by a second and much worse one after the 2000-2001 downturn. What the U.S. working class is experiencing today is the third consecutive jobless recovery only this one is far more severe, for more protracted, and shows little sign of abating at all.

Capitalism has hit an impasse. The more productive it becomes, the fewer workers it needs and the lower wages it pays.

The class struggle of the workers to keep the ruling class from unloading on them this huge debt crisis that was incurred by bailing out the millionaires and billionaires and to fight for jobs is the only way out.

The workers in Wisconsin and all the workers around the country who have rallied to their cause have set in motion a movement which must grow and spread so that it can become the spark that lights the fire of mass fight back to turn the capitalist recovery into a working class recovery.

Posted in Economy, Recovery, Uncategorized | 1 Comment

Walker, union-busting and bondholders

Posted on March 2, 2011 by fgoldstein

The focus of the struggle in Wisconsin has been portrayed as between the public employees unions and the right-wing governor Scott Walker and the Koch brothers, the Tea Party, etc.

That is certainly true but there is another, much larger dimension. The power of the state and municipal bondholders, not just those who hold Wisconsin’s bonds but state and municipal bonds in general, are being brought to bear against the workers.  The Philadelphia Enquirer wrote about how municipal bondholders are rooting for Walker in Wisconsin.

Of all the Republican proposals for not paying retired teachers and state troopers the pensions promised in more prosperous times, investors prefer Wisconsin-style union-busting over the state-bankruptcy gamble proposed by ex-U.S. House Speaker Newt Gingrich and ex-Florida Gov. Jeb Bush

State bankruptcy could let governments break their union contracts and cancel benefits, but it “is less desirable to the bondholder, because it creates a higher level of uncertainty that would increase borrowing costs for states and local municipalities,” says Michael Crow, who manages $3 billion in clients’ bond investments in state and local governments for Glenmede, the Philadelphia trust bank.

Barring unions from negotiating benefits, as Wisconsin Gov. Scott Walker wants to do, is more likely to improve states’ credit.

And it is not just bondholders who want Walker to win. The banks have guaranteed $53 billion in municipal debt nationally that comes due in 2011, $24 billion in 2012, and more.

So Scott Walker, like his brethren John Kasich (formerly of Lehman Bros.)  in Ohio and Mitch Daniels in Indiana, are really point men for the financial oligarchy in this country which was bailed out to the tune of several trillion dollars by the U.S. capitalist government.

Wisconsin’s deficit and many other state and municiplat deficits could be solved by redirecting the billions paid to the banks toward restoring government services.

 In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion, according to an analysis by The Wall Street Journal. The total is up 5.7% from $128 billion in combined compensation and benefits by the same companies in 2009.

This does not include the shadow banking system, the hedge funds, private equity firms, insurance companies, etc.

The public service workers and all their supporters from the union movement, the student movement and the communities are not just up against Walker, Koch, and the Tea Party.

They are being confronted by a hard-right governor and Republican legislative majority which has the silent, behind-the-scenes support of the coupon clipping  millionaires and billionaires who live in royal luxury by feeding at the public trough through the means of the public debt.

Wisconsin’s South Central Labor Federation, representing more than 45,000 workers, including those in Madison, has approved a call for a general strike should the union-busting bill pass. Just putting this on the agenda is a great step forward.

 But the labor movement must not let the workers of Wisconsin face this battle on their own. The fight against the combined force of capital is going to take the combined force of the labor movement, the communities, the students and youth to triumph. The time has come for a national mobilization in solidarity and, if necessary, a national work stoppage to defend the rights of all workers, communities and the future of the youth.

 

Posted in AFSCME, Public Service, Unions | Tagged | Leave a comment