How European Banks Hijacked the Euro Monetary Union

Buy, Buy Europe

Pieter De Vos (2013)

Film Review

This is a five-part miniseries describing how European banks have hijacked the euro monetary union to vastly increase their wealth. The upcoming Brexit vote in Britain makes this a particularly relevant topic.

Part 1 A Bank Crisis a Week

The series begins by describing the history of the European monetary union. Built at the height of neoliberalism it adopted all the rhetoric of Ronald Reagan, Margaret Thatcher and Alan Greenspan promising that globalized capitalism and free markets would end economic crises, increase prosperity and end inequality.

What really happened is that creating the euro massively increased inequality between northern and southern Europe and between workers and the super rich.

In seeking to make European banks as strong and competitive as US and British banks, Eurozone leaders ceased regulating them. Wall Street is often blamed for the EU’s 2008 meltdown. In actuality, deregulated European banks were equally guilty of risky speculation in derivatives and subprime mortgages.

Following the 2008 economic crash, European banks required massive government bailouts to keep European economies from collapsing. Promised banking reforms to prevent a recurrence of 2008 never happened. And according to the IMF, the global banking system is even more unstable today as it was right before the meltdown.

Part 2 Austerity Till the Grave

The bailouts required to keep their banks (and economies) going virtually bankrupted all Eurozone governments. All borrowed deeply (from the global banking system they had just bailed out) to keep their governments going. As a condition of this borrowing, the banks required them to reduce their deficits via deep austerity cuts. To qualify for further loans, they all cut pensions and benefits and laid off public service workers.

This segment focuses on Spain, where workers are organizing to block evictions, and Greece, where unemployed parents are forced to drop their kids off at orphanages because they can’t get welfare benefits to support them.

Part 3 Tax Haven Europe

This segment begins by profiling the Greek shipping magnates who run the largest merchant fleet in the world and pay virtually no tax. Corporations and the super rich pay far less tax than working people in all the EU countries. This massive tax avoidance forces all European governments to acquire major debt to keep from collapsing.

The documentary offers the example of Belgium, where the average tax rate is 12.5% and the most profitable corporations pay only 5% of their earnings in tax.

The filmmakers maintain that workers create wealth, though I doubt most neoliberals would see it that way. In 1981 Europe, 74% of the wealth workers created was returned to them as wages and government benefits. By 2012 only 49% of this wealth was returned to them and the super rich claimed the rest.

Part 4 Bratwurst, Lederhosen and Minijobs.

This was the most eye-open segment for me. It exposes the punitive conditions imposed on German workers from 2000 with the goal of making German export industries more competitive. Under former chancellor Gerhart Schroeder, massive wage reductions were imposed on all German workers – something IMF chief Christine LaGarde likes to call “labor market reform.”

Among other labor “reforms,” were a massive increase in “minijobs” – low wage part-time temporary positions that pay an average of 400 ($US 448) euros a month. Given Germany’s high cost of living, both parents need to work 2-3 “minijobs” (if they can find them) to cover a family’s basic needs.

The result was truckloads of cheap German imports flooding into southern EU countries (Greece, Spain, Portugal and Italy), shutting down local industries that couldn’t compete.

In this way, Germany’s vicious attack on their own workers forced wages down in other EU countries. This, in turn, forced countries like Greece and Spain to borrow lots of money from German banks to keep their governments going.

Ironically Germany currently has the highest number of working poor (7 million) of all EU countries.

Part 5 What Kind of Europe Do We Want?

It’s vital for people to understand that the mantra EU governments repeat ad nauseum – that saving the euro is essential to strengthening the EU and restoring prosperity – is pure propaganda. Seven years of austerity is massively increasing deficits and debt by putting so many people out of work.

The truth is that the Eurozone has been hijacked by banks and multinational corporations who are determined to use trade agreements to lock member countries into austerity and statutory destruction of Europe’s proud tradition of democratic socialism.

The only solution is a public takeover of too-big-to fail banks. Continuing to bail them out, while allowing them to privatize all the profits, is simply legalized theft of public monies. And a yes vote on Brexit.

 

Ayn Rand, Alan Greenapan and the 2008 Crash

I’ve just discovered another exciting series of documentaries by Adam Curtis

All Watched Over By Machines of Loving Grace*

Adam Curtis

BBC (2011)

Part I

Film Review

Despite its deceptive title, this BBC documentary is about Ayn Rand and her immense influence over Silicon Valley and Rand devotee Alan Greenspan.

Prior to seeing the film, I had no idea about the cult following Rand inspired in the computer geniuses who flocked to Silicon Valley in the late sixties. Believing they could create a new kind of democracy by combining Rand’s radical individualism with computer technology, they set up Ayn Rand reading groups and named their children after her. They were convinced that linking computers in vast self-regulated networks would do away with the need for politicians and authoritarian hierarchies. However instead of decentralizing power, as they envisioned, the computer revolution only further concentrated the power of wealthy elites.

Rand called her underlying philosophy “objectivism” and disseminated it through her novels and a close-knit group of devotees. It was a philosophy of selfishness. She believed it was in the best interest of humanity for everyone to pursue their own rational self interest, unimpeded by religion or morality. She maintained that altruism was especially destructive, as it interfered with happiness and freedom.

Rand Devotee Alan Greenspan

Former Federal Reserve chair Alan Greenspan was an early member of Rand’s Collective, the small select group that met weekly to hear chapters of her newest novel. He married a fellow Collective member and remained fiercely loyal to Rand even after her sexual jealousy broke up the group.

After cunningly convincing one of her strongest supporters to follow his own self-interest by having an affair with her, she somehow persuaded his wife (also a Collective member) to commit the sin of altruism by agreeing to it. When he continued to follow his own self interest by becoming romantically involved with a younger woman, Rand brutally attacked him (verbally and physically) and ordered him out of the Collective.

The Most Powerful Man in the World

After becoming Federal Reserve chairman in 1987, Greenspan became the most powerful man in the world.** In 1993, he somehow persuade the newly elected Bill Clinton to cut taxes instead of restoring the social programs Reagan and Bush had cut (as he promised during his campaign). Greenpan argued this would cause markets to boom, enabling Clinton to repay the sizable federal debt he inherited from Reagan and Bush.

So Clinton cut social programs even further. Markets boomed, as Greenspan predicted, but not because of tax cuts. The real cause was an enormous credit bubble by massive Wall Street lending to unstable Southeast Asian markets. All the Wall Street banks erroneously believed that feedback loops in their computer networks would protect them by allowing them to hedge (bet against) their risky loans.

Greenspan Recognizes His Error

By 1996, even Greenspan could see that productivity wasn’t increasing despite the massive increase in profits. He tried to warn Congress that stocks were overvalued in his December 1996 “rational exuberance” speech.*** The corporate media crucified him and he recanted, acknowledging that computers might be increasing productivity he ways he couldn’t decipher.

Robert Rubin Launches Indonesian Coup

The credit bubble Wall Street created in Southeast Asia led Thailand, Malaysia, South Korea and Indonesia built thousands of homes and commercial buildings that couldn’t be sold. In 1997, the bubble burst. Clinton, who was busy being impeached over Monica Lewinsky, was powerless to act. He allowed his Treasury Secretary, former Goldman Sachs executive Robert Rubin, to take over his Southeast Asia policy. Rubin, in turn, organized an attempted coup against Indonesian president Suharto for refusing to accept an IMF bailout.

Faced with massive civil unrest, Suharto eventually accepted the bailout and the structural adjustment conditions the IMF imposed (massive cuts in government spending on food subsidies and other social services, throwing millions of people out of worked). As typically happens, the IMF bailouts went to pay off the Wall Street banks. While the IMF-imposed austerity cuts (helped along by currency trader George Soros) led the currencies of all four countries to collapse. Residents of Thailand, Malaysia, South Korea and Indonesia were plunged into abject poverty comparable to the Great Depression of the 1930s.

China Escapes from Wall Street Domination

The most important outgrowth of the 1997-98 Southeast Asia economic crisis was a major shift in Chinese economic policy. Determined to remove themselves from Wall Street domination, China’s leaders devalued their currency, flooded the US with cheap consumer goods and used their profits to finance growing US indebtedness by buying US Treasury bonds.

In the mean time, Greenspan cut interest rates to near zero percent and the US was flooded with trillions of dollars of cheap (borrowed) money. Wall Street, in turn, recycled these funds as subprime loans to the third world population in American ghettos.

Again believing computers would keep them safe, Wall Street banks created the largest credit bubble in history. When it burst in 2008 Wall Street, as usual, got bailed out. This time Americans paid for the bailout, as they were plunged into widereaching soul-crunching misery.

The documentary features fascinating archival interviews with Rand and members of her Collective.

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* Title of 1967 monograph distributed free by California cybernetics enthusiast Richard Brautigan. Available for $400 from Abe Books

**On reflection, it seems a great pity Rand didn’t have the affair with Greenspan. We could have been spared the 2008 economic crash.

***”How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”