The European Central Bank recently announced that it was going to provide European banks with an additional €500 billion - $700 billion - in loans at a rate of 1%, which is below the rate of inflation. This came on top of another tranche of the same amount given to them only last December. By loaning money at less than inflation the ECB is literally paying the banks to take their money. Money which, by the way, was conjured up out of thin air. Technically, it’s referred to as quantitative easing; basically printing money so there’s lots of it sloshing around the system.
It is said one benefit of throwing money at the banks is that they’ve been willing to lend to sovereign governments like Italy and Spain at lower interest rates than previously, accepting 5% instead of an unsustainable 7% as before. So borrow at 1%, turn around and lend at 5% and make a tidy profit. Meanwhile, those countries get to borrow at a close to unsustainable 5% instead of a totally unsustainable 7%.
But now you’re thinking that this is all very strange. Why not loan the money directly to Greece, Italy, Spain at 1%, avoid the bankster middlemen and make the additional sovereign debt not only sustainable but light as a feather. No, no, it can’t work that way. While the banks are silver-spoon-fed the people have to sacrifice and suffer, that’s the only way to teach them a lesson and get them on the road to fiscal rectitude.
As a result, one of the austerity measures required by the multinational-institution troika - the ECB, IMF and European Commission - for Greece to get its latest bailout at about 3 or 4% interest (Greece fought to have its debt reconfigured down to that level) is that the minimum wage be lowered from about $1000 to less than $800 per month for people over 25 and down to less than $600 for under 25’s.
Now Greece isn’t rich like Germany or Sweden, but it’s not a developing country. Six hundred dollars a month is doable in Cambodia, though nothing like high-living, where one can rent a city apartment or single family house and yard in a small town for less than $150 per month and everything produced locally is very cheap, but the same amount in Greece or even $800 per month is a life of hardship and privation.
Besides, you’re wondering again, how does lowering people’s wages lead to reducing the country’s debt? What’s the connection? Supposedly, if people work for subsistence wages, businesses will eventually come and employ them and the economy will start rolling again. The flaw in that thinking is that people who earn such low wages don’t pay much in taxes and are so poor they still need safety net assistance. They also don’t have the money to be consumers. And like in America, businesses don’t pay much in taxes in any circumstances because that’s what the corporate conservatism that’s taken hold of the developed world in the last thirty years demands. So even if businesses do come because of the low wages, they’re still not contributing much to the tax base.
Instead of relegating large numbers of Greeks to lives of poverty in order to please and serve the banksters, why not use some of that $1.4 trillion dollars to put the people to work at living wages doing things designed to bring the country forward to the future, like building trains and infrastructure and installing windmills and solar electric systems? That way they’d be paying taxes and be able to consume and get the economy moving. It’s free money after all, nobody paid for it, all it costs the ECB is the paper to print it on and the labor to keep the presses rolling. Why is it so easy to feed corrupt and/or incompetent banksters with cheap money, so hard to find the cash to put the masses to work?
At some point printing money will cause inflation so it’s not a step I would take lightly, nonetheless as long as the presses are running freely, why not do something of value with the money besides propping up banks destined to fail anyway, or at minimum that don’t deserve to live?
Yes, but the banksters will answer, if we go broke there’ll be catastrophe. Well, the banksters themselves would suffer for sure, but the people at large are getting nothing from these constant bank bailouts. Far better to close the banks down and take some of that vast amount of free money to cover losses by retail depositors. Then with a few additional spare hundreds of billions new banks can be funded that are designed to serve the people rather than indulge in casino banking and commodity speculation. Historically about 30% of crude oil futures contracts were purchased by speculators rather than end users, today that number is about 65%. Once again, the problem is there’s too much money in the hands of the wealthy who don’t know what else to do with it besides speculation that causes hardship for the rest of us.
The US Fed has been far more generous with American banks than the ECB with their banks, lending trillions of dollars at 0.1%. So borrow one million dollars, pay back one thousand. Sweet deal. Ah, but these bailouts are paying off, we’re told, the recession was over two years ago, the American economy is now growing at 3% and unemployment is going down. Evenly distributed, 3% growth would be great, but a recent study showed that 93% of America’s income growth in the last two years went to the top 1%. At the same time, the new jobs created are paying less than the old jobs lost. For the vast majority at the bottom of the economic pyramid, it’s all a downward spiral.
All of which is a cause for demonstration, protest and occupy, which is why the US House of Representatives recently passed a bill (HR347) by a nearly unanimous bi-partisan 388 to 3 that would criminalize a large part of what the occupy movement is doing with long prison sentences and heavy fines. The 1% (income over $400,000) which includes almost all of Congress, are scared shitless of the power of the 99% so are intent to crush dissent and turn the country into a police state.
Legislation has just recently passed that gives the president the right to kill Americans, as well as anyone else in the world, who he considers dangerous, without any judicial review. If he says you’re dead meat, his word is law. The US is already infamous for assassinating many political leaders over the years, including ones who were democratically elected, who were deemed bad for American economic interests. Moreover, as little regard as I have for Obama, there is the possibility of truly evil people gaining of the office of president, who might take the right to decide life and death to grotesque levels. Besides being a terrible example to the world.
Have I depressed you enough? Sorry that’s all I can manage today.
