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Liu: No Choice Now But Depression or Hyperinflation

by NBBooks Fri Jan 25th, 2008 at 07:07:40 PM EST

In Asia Times Online, the inestimable Henry C. K. Liu lays out the terrifying reality of where the world financial crisis is headed. In a lengthy article entitled, The Road To Hyperinflation, Fed Helpless In Its Own Crisis, Liu responds to the former U.S. Federal Reserve chairman Alan Greenspan's defensive but arrogant article in the December 12, 2007 edition of the Wall Street Journal, in which Greenspan blamed the current world financial crises on China and the developing world for "saving too much." Liu harshly condemns Greenspan, explains how Greenspan engineered the mess during his tenure as Fed chairman, and concludes that now there are only two options left:

The Fed has a choice of accepting an economic depression to cut off stagflation, or ushering hyperinflation by flooding the market with unproductive liquidity.


The first web page of the article is rather dry, as Liu reviews the fundamentals of how the U.S. Federal Reserve functions. Along in the second web page, things get more interesting. First, Liu demolishes the idea that the current bi-partisan "stimulus" package in the U.S. will do any good, and heaps scorn on the Bush tax cuts of 2001 and 2004 as ill-conceived and implemented without preparation of proper incentives for new investment. And Liu is not shy about pointing directly at the underlying problem:

... for the last two decades, even in boom time, the US middle class has not been receiving its fair share of income while increasingly bearing a larger share of public expenditure. The long-term trend of income disparity is not being addressed by the bipartisan short-term stimulus package.

Liu then surveys the explosive growth of credit swaps (CDS) (now at $45 trillion, three times the size of U.S. GDP) and collateralized loan obligations (CLO), and details why and how the loan insurers like MBIA and Ambac Financial were brought to their knees, and explains how the crises is now heading toward territory outside the banking system and will soon cause the collapse of companies other than banks.


For the insurers to maintain the necessary triple-A rating, their capital reserve would have to be repeatedly increased along with the premium they charge. There will soon come a time when insurance premium will be so high as to deter bond investors. Already, the annual cost of insuring $10 million of debt against Bear Stern defaulting has risen from $40,000 in January 2007 to $234,000 by January of 2008. To buy credit default insurance on $10 million of debt issued by Countrywide, the big subprime mortgage lender, an investor must as of January 11, 2008 pay $3 million up front and $500,000 annually. A month ago, the same protection could be bought at $776,000 annually with no upfront payment.

Credit-default swaps tied to MBIA's bonds soared 10 percentage points to 26% upfront and 5% a year, according to CMA Datavision in New York. The price implies that traders are pricing in a 71% chance that MBIA will default in the next five years, according to a JPMorgan Chase & Co valuation model. Contracts on Ambac Financial, the second-biggest insurer, rose 12 percentage points to 27% upfront and 5% a year. Ambac's implied chance of default is 73%.

SNIP

As big as the residential subprime mortgage market is, the corporate bond market is vastly larger. There are a lot of shaky outstanding corporate loans made during the liquidity boom that probably could not be refinanced even in a normal credit market, let alone a distressed crisis. A large number of these walking-dead companies held up by easy credit of previous years are expected to default soon to cause the CLO valuations to plummet and CDS to fail.

At he begins to wrap up, Liu is not interested in taking prisoners.

The last decade has been the most profligate global credit expansion in history, made possible by a new financial architecture that moved much of the activities out of regulated institutions and into financial instruments traded in unregulated markets by hedge funds that emphasized leverage over safety. By now there are undeniable signs that the subprime mortgage crisis is not an isolated problem, but the early signal of a systemic credit crisis that will engulf the entire financial world.

Both former Fed chairman Greenspan and his successor Ben Bernanke have tried to explain the latest US debt bubble as having been created by global over-saving, particularly in Asia, rather than by Fed policy of easy credit in recent years.


Yet the so-called global savings glut is merely a nebulous euphemism for overseas workers in exporting economies being forced to save to cope with stagnant low wages and meager worker benefits that fuel high profits for US transnational corporations. This forced saving comes from the workers' rational response to insecurity rising from the lack of an adequate social safety net. Anyone making around $1,000 a year and faced with meager pension and inadequate health insurance would be suicidal to save less than half of his/her income. And that's for urban workers in China. Chinese rural workers make about $300 in annual income. For China to be an economic superpower, Chinese wages would have to increase by a hundredfold in current dollars. . .

Not only do Chinese and other emerging market workers lose by being denied living wages and the financial means to consume even the very products they themselves produce for export, they also lose by receiving low returns on the hard-earned money they lend to US consumers at effectively negative interest rates when measured against the price inflation of commodities that their economies must import to fuel the export sector. And that's for the trade surplus economies in the developing world, such as China. For the trade deficit economies, which are the majority in the emerging economies, neoliberal global trade makes old-fashion 19th-century imperialism look benign.

The role central banking plays in support of this systematic fleecing of the helpless poor everywhere around the world to support the indigent rich in both advanced and emerging economies has been to flood the financial market with easy money, euphemistically referred to as maintaining liquidity, and to continually enlarge the money supply by financial deregulation to lubricate and sustain a persistently expanding debt bubble.

Concurringly, deregulated financial markets have provided a free-for-all arena for sophisticated financial institutions to profit obscenely from financial manipulation. The average small investor is effectively excluded from reaping the profits generated in this esoteric arena set up by big financial institutions.

SNIP

Greenspan blames "the Third World, especially China" for the so-called global savings glut, with an obscene attitude of the free-spending rich who borrowed from the helpless poor scolding the poor for being too conservative with money.

Yet Bank for International Settlements (BIS) data show exchange-traded derivatives growing 27% to a record $681 trillion in third quarter 2007, the biggest increase in three years. Compared this astronomical expansion of virtual money with China's foreign exchange reserve of $1.4 trillion, it gives a new meaning to the term "blaming the tail for wagging the dog".

Liu's conclusion is stunning in its brutal truth:

While the equity markets are hanging on for dear life with the Fed's help through stealth inflation, the bond markets have collapsed worldwide, with dollar bond issuance falling to a stand still, euro bonds by 66% and emerging market bonds by 75% in Q3 2007. Lenders are simply afraid to lend and borrowers are afraid to take on more liabilities in an imminent economic slowdown. The Fed has a choice of accepting an economic depression to cut off stagflation, or ushering hyperinflation by flooding the market with unproductive liquidity. Insolvency cannot be solved by injecting liquidity without the penalty of hyperinflation.

Display:
NOTE: I will post this on DailyKos in about 13 hours, when it is morning in the eastern United States. I suspect it would probably be wasted on a Friday night. I will also post this at the Agonist and at TPM Cafe.
by NBBooks on Fri Jan 25th, 2008 at 07:10:05 PM EST
The blackest of black pictures, and yet it all makes sense. I think my weekend is going to disappear checking into his own website.

You can't be me, I'm taken
by Sven Triloqvist on Sat Jan 26th, 2008 at 02:18:36 AM EST
A complete list of his Asia Times diaries

It reads like an ET diary list:

  • PART 2: Deregulation: Global war on labor
  • PART 2: Bank deregulation fuels abuse
  • Part 1: The rise of the non-bank financial system
  • Central bank impotence and market liquidity
  • Economics of denial
  • A dialogue of the mute
  • Liquidity boom and looming crisis
  • China's misguided 'experts' on the US
  • Beyond Munich: Geostrategy and betrayal

etc

You can't be me, I'm taken
by Sven Triloqvist on Sat Jan 26th, 2008 at 05:18:46 AM EST
[ Parent ]
are both showing up in MSM more now, because they are known critics who have been allowed a pulpit (or, at least, a soapbox) for awhile now. Trouble is - as you imply above - what about solutions? Even my favorite econometricist, John Williams, is all about criticism and almost nothing about policy.

One thing that NBBooks and Jerome are doing is cross-posting. I wonder if we could cross-develop some solution-oriented pieces. We could post them on a bunch of different sites and assign one of us to each site to keep the discussion going as long as possible.

I suppose that the main problem might be agreeing on the policies. Chris doesn't want to hear about socialistic programs. Others think Chris' dialectic is naive. And I'm quite sure that there are other mutually-exclusive tendencies here, too. What do you think, Sven? Worth a try? Doable?

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sat Jan 26th, 2008 at 12:24:43 PM EST
[ Parent ]
Paul - I totally support Chris C' vision, and I know he has had the experience for his unique insight. We are working jointly and separately on some RW projects that could put some of the concepts into action. I don't have Chris' financial background and I am largely just a lightweight cheerleader for the intellectual views expressed here. But I do know the media.

For both Chris and I (and others), putting these ideas into practice is the only way to disprove the 'naivity' criticism. We are also both lucky to be operating in a Nordic environment that has less entrenched views of what works and what doesn't.

I certainly agree that solutions are needed, I'm just not sure we ETers can agree on what they might be. I personally believe that chaos is necessary before a new paradigm can emerge. I can't speak for Chris on that view though ;-)

You can't be me, I'm taken

by Sven Triloqvist on Sat Jan 26th, 2008 at 01:27:47 PM EST
[ Parent ]
I may have some doubts about the inevitability of it, though - as, I think, do others here at ET. Also, I think that Chris' theory may give too little consideration to the roles of government and contract. As far as 'vision', though, kudos to Chris, to you, to Solveig, and so on.

Particularly, his concepts justify/rationalize the role of the investor. That part had eluded me for the whole of the 40 plus years that I've been interested/involved in the co-operative movement. His approach is holistic, and his system is both just and fair. Can't say much better than that.

Meantime, my main point above should say something like this: What type and level of policy can we collectively agree to promulgate and publicize? If we can generate some policy recommendations, can we organize to publicize them broadly?

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sat Jan 26th, 2008 at 02:06:08 PM EST
[ Parent ]
Chris doesn't want to hear about socialistic programs. Others think Chris' dialectic is naive

Not quite: firstly, I agree with the aims and values of both Socialism and Communism. I go back 3 generations as a "Labour" man: but this UK government has got f..k all to do with Labour as I knew it.

It's just that to date it has been impossible to implement either Socialism or Communism: similarly Cooperativism (if that is a word), which should be a no-brainer.

IMHO that is because the legal protocols - in particular, in the case of Socialism, those relating to the relationship of "the State" and the Citizen - simply do not work in practice.

Secondly; I don't do Dialectic. I'm a dyed in the wool Pirsig ("Zen and the Art of Motorcycle Maintenance" man, and I believe that we lost as much as we gained when we took the route of Reason and the Dialectic.

Where I am working is the "Both/And" space between "either/or".

Particularly, his concepts justify/rationalize the role of the investor. That part had eluded me for the whole of the 40 plus years that I've been interested/involved in the co-operative movement. His approach is holistic, and his system is both just and fair. Can't say much better than that.

Now that is high praise, Paul, which I hope I can justify in working with inspired people like you, Sven, and anyone else here on ET who is "up for it".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 26th, 2008 at 03:20:24 PM EST
[ Parent ]
I will not contribute to a debate about Chris' policies here, but i wish to put the first plank down on our economic foundation of "solution oriented pieces."

Many of us agree that energy policy is the underpinning to today's economics, and that a tidal shift is necessary.  There is strong agreement that a forced global investiture in massive energy efficiency programs and a subsequent greater push towards wind and solar will be one of the cornerstones of a new economy.

All the aspects of a media sexy story are there:  jobs, local industry, circular local cash flow, based upon technologies where if not manufacturing, at least assembly provides a huge economic stimulus.

Not to mention it diminishes the warfare necessary to protect the establishment's energy sources.  Not to mention it mitigates the untimely death of millions from the pollution caused by our society's energy failure.  Not to mention it still allows cows and soybeans to graze uninhibited amongst the spinning wind machines and silent solar collectors.

I'd like to spend an hour with Mr. Liu, and i'd bet he'd then be on board with helping develop the global policy necessary to put a dent in this madness.

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Sat Jan 26th, 2008 at 04:04:21 PM EST
[ Parent ]
solution oriented pieces

Yup. It's about "What Works".

If I can put in place a few "Community Energy Partnerships" in the US, UK, wherever, and they actually work the way I reckon they will, then off we go.

If it happens, it will happen, "Bottom Up" not top down, because the conventional Capitalist Fish rots from the head down.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 26th, 2008 at 04:17:49 PM EST
[ Parent ]
This may be difficult, but I'd love for you to outline a proposal for such a "Community Energy Partnership" here on ET in a diary. I instinctively like your ideas, but being the numbskull I am I can't quite grasp how they work. The application to an actual project might help me (and others!) understand.
by Metatone (metatone [a|t] gmail (dot) com) on Sat Jan 26th, 2008 at 05:15:59 PM EST
[ Parent ]
That's a challenge!

You mean I actually have to write about it in language people might understand? Solveig says I should do that, too, but it doesn't come easy after a life spent writing Civil ServiceSpeak and CitySpeak....

I'll do my best in a Diary later in the week when I get back from London.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Jan 27th, 2008 at 04:14:25 AM EST
[ Parent ]
Our new 'digs' is located in an area that is prime territory for solar/wind power generation.  (At least to my ignorant eyeballs.)  If nothing else it would be a good area for solar/wind companies to Field Test, QC, QA, and quantify their equipment.  

Just to add to the Sales Pitch, there is land available at cheap or free for a company to put their buildings/offices.

AND there is incentive money available for already existing companies to move here.  

What the wide eyed radicals concerned citizens here want are (1) decent jobs (2) with a future (3) that doesn't rape the landscape (4) in a company that intends to stick for the long-term.  

There is a power line transmission project being planned and it wouldn't take that much political fiddle-dee-dee to get it to run close enough to our area to be usable for a local power generation station.  Naturally it would be even easier if we could go to the state with Letters-of-Intent in hand.  (hint hint. :-)

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Jan 27th, 2008 at 08:23:16 PM EST
[ Parent ]
if only he had come out and said "the common interests of the world's workers are now in plain view."

you are the media you consume.

by MillMan (millguy at gmail) on Sat Jan 26th, 2008 at 08:18:26 PM EST
[ Parent ]
you and Steve Nieman are definitely on the same track WRT the Zen approach. As far as my use of the word "dialectic", I realize that that is my brand of term, not yours. And, as you are probably aware by now, I am not abandoning that term - or Reason, for that matter.

Briefly - the socialist, the communist, the co-operativist, the regulatory-approach-to-capitalist systems - every recent politico/economic thing  except capitalism itself - have not been 'alive' long enough - they have not seen enough iterations and evolution - to have proven or disproven much of anything. The legal protocols have barely been tested, let alone shown to prove anything in practice. And we need to factor in the hostile environment that every such experiment has encountered.

Capitalism encountered the same type of environment and underwent the same sorts of trials. It succeeded - and this only recently in historical terms - partly because the natural practitioners took essentially consistent slogans and raised them continually in a variety of national and political contexts - sort of a 'whack-a-mole' strategy, except that they were the moles. The 'nobles' who were doing the whacking got tired of it and joined their movement.

The plutocracy is (mostly) not going to join us in our endeavor, so it will be a longer, more difficult struggle. We have barely begun, even going back to Marx and before. The point, though, of the foregoing paragraph is that we need to consistently put forward as much as we can mutually support. Crazy Horse says it well - and illustrates the point - with his example below of the major emphasis that should be placed on the renewable-energy-systems-development-and-implementation elements of policy.

So - what else can we all basically agree upon in terms of policy and program, rather than criticism of the existing system(s)? You agree with the "aims and values" of socialism and communism. How far can we stretch that toward program? Won't there be some level of administration or adjudication outside of the interaction of individuals? Will there be some national or regional inspection service for quality or safety levels of common trade products? When we have large-scale, capital-intensive projects, such as installation and maintenance of high-speed rail service, won't we need some kind of large-scale organization to control and optimize the implementation?

I'll start by stating complete agreement with your concept of money grounded in common, concrete value, such as kw-hour units. Where can we go from here? Shall we list points and take a vote?


paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sat Jan 26th, 2008 at 05:13:02 PM EST
[ Parent ]
Won't there be some level of administration or adjudication outside of the interaction of individuals?

won't we need some kind of large-scale organization to control and optimize the implementation?

The problem is "Organisations" like the State, and Corporations which exist outside of us as individuals.

Them and Us.

The simple but radical thing about the "Open" Corporate is that it is a framework within which individuals self organise.

The UK LLP is the first ever entity that I am aware of that combines the collective "joint" responsibility  -in pursuit of a common purpose - of Partnership, without the individual "several" responsibility.

Limitation of Liability (as in the UK LLP, which is the first example of an "Open" Corporate) is a red herring: it's a sort of protective semi-permeable membrane which lets Value in, but not out.

LLP's are conventionally being used as an alternative form of "organisation" - indeed, that is why it was conceived - to give professional partnerships the benefit of limitation of liability.

But the possibility is now there of creating networked , non hierarchical frameworks, which are capable of linking neighbourhoods, to "self Organise "Areas"; to link "Areas" to self organise regionally, and to link Regions, to self organise nationally.

In this "Open Corporate model, LLP's don't own anything, employ anyone, or do anything: but their members do, in pursuit of an agreed common purpose.

Individuals will of course make the planning decisions as they do now: but it will be on the basis of a delegated responsibility, not an imposed "top down" capability imposed either through representative democracy - and the tyranny of the majority - or by dollars as votes, through the Corporation.

Anyway: gotta run, cos I'm in London for a few days, so the best I'll be doing until Thursday is having a quick browse, I suspect.

Btw, I'll respond to your Klickitat LLC when I get back.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Jan 27th, 2008 at 04:35:51 AM EST
[ Parent ]
I also posted this on PBS's Bill Moyers Journal, and on The Agonist. If anyone misses the writings of Stirling Newberry, The Agonist is where he has been posting the past year or so. I think his view is that U.S. and European elites are going to blunder their way further into an economic morass, but it really doesn't matter whether we end up with a Depression or with hyper-inflation, because where we're really headed is into war with India and China over petroleum and other resources. A very scary prospect, but so far he's been correct on the unbelievable imbecility of political, economic, and media elites.

As far as solutions, I think a good start is Thomas Palley's page, http://www.thomaspalley.com/?page_id=17. And you should definitely get a copy of the book Financialization and the World Economy. The introduction by Gerald Epstein, Co-director of the Political Economy Research Institute at the University of Massachusetts  - Amherst, is here: http://www.peri.umass.edu/fileadmin/pdf/programs/globalization/financialization/chapter1.pdf

by NBBooks on Sat Jan 26th, 2008 at 04:48:03 PM EST
[ Parent ]
The pluts are in a bind.

War uses up oil fast.  If they go to war to grab oil then the oil they use to grab oil will exceed the oil they grab.  

Second, the Lebanon/Israeli War gave solid backing to the thesis the advantage has moved to the defense.  Anti-Tank, anti-air, and anti-ship missile systems ensure the attacker, who must be exposed, is at a severe disadvantage; we're talking World War I kind of disadvantage.

Finally, they've stolen all the excess money and the only way to get the money needed to fund a war is to tax themselves.  (ha!)  

In theory, they could use neutron weapons to kill the populace without destroying the infrastructure and resources they want to grab.  In practice?  I'm not so sure.  Using nuclear weapons in a war of conquest is a new book, yet to be written.  Exactly how it would develop is unknown.  Simply from that I don't think they could get (enough) of the high-ranking military to go along.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Jan 27th, 2008 at 08:33:42 PM EST
[ Parent ]
But will the international circuit of financial capital break?

The United States is not as critical to that circuit as it was even a decade ago ... if China is eager to sell goods to nations on credit, there are any number of nations whose credit ought to be no worse than that of the United States ... perhaps not Zimbabwe, but much of Africa, for starters.

I understand this analysis if the choice is between demand driven inflation or depression ... but cost push inflation needs some other driver to turn into a hyperinflation. The most common source of hyperinflation is a structural inability to meet outstanding obligations in a foreign currency ... the Latin American debt crises of the 1890's, the War Reparations hyperinflation of Weimar Germany, the recycled Petrodollar lending hyperinflation of 1970's Brazil, the complete collapse of the social and physical infrastructure of the Congolese Economy in the last decade of the kleptocracy of Mobuto Sese Seko etcetera etcetera.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Jan 26th, 2008 at 07:00:44 PM EST
[ Parent ]
US slides into dangerous 1930s 'liquidity trap'

Professor Stiglitz, former chair of the White House Council of Economic Advisers, said it takes far too long for monetary policy to work its magic. This will not gain much traction in the midst of a housing crash.

"People have been drawing home equity out of the houses at a rate of $700bn or $800bn a year. It's been a huge boost to consumption, but that game is now up. House prices are going to continue falling, and lower rates won't stop that this point," he said.

"As a Keynesian, I'd say the biggest back for the buck in terms of immediate stimulus would be unemployment assistance and tax rebates for the poor. That will feed through quickly, but set against the magnitude of the problem, even a fiscal stimulus package of $150bn is not going to be enough," he said

"The distress is going to be very severe. Around 2m people have lost all their savings."

my bold

You can't be me, I'm taken

by Sven Triloqvist on Sat Jan 26th, 2008 at 02:37:18 AM EST
magic

Necromancy, I think: it's a dark art.

Shades of Lord of the Rings, and Star Wars....

Return of the Jedi is needed, I think, what say you, Chewy?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 26th, 2008 at 06:42:25 AM EST
[ Parent ]
Roar, Row, Wooar, Reeew, Waoer, Rar, Oaor, Wroah, Orh...

You can't be me, I'm taken
by Sven Triloqvist on Sat Jan 26th, 2008 at 08:01:15 AM EST
[ Parent ]
The Fed has a choice of accepting an economic depression to cut off stagflation, or ushering hyperinflation by flooding the market with unproductive liquidity. Insolvency cannot be solved by injecting liquidity without the penalty of hyperinflation.

So which is politically less hopeless? My guess is that the US government is currently suited to only meaningless gestures and will waffle until we get stagflation.

by rootless2 on Sat Jan 26th, 2008 at 02:39:57 AM EST
And all of this will come into public view way before the US November elections. There is going to be great anger and imo there is not a single candidate with the credentials to lead in such a situation.

It is hard to find one in Europe either...

You can't be me, I'm taken

by Sven Triloqvist on Sat Jan 26th, 2008 at 02:45:22 AM EST
[ Parent ]
too many years of empty keynsianism in the usa. None of that fake money went into infrastructure, education, building local economies.
by rootless2 on Sat Jan 26th, 2008 at 03:05:27 AM EST
[ Parent ]
Might be time to turn the tables, if we can get policy recommendations accepted among us, and then disseminate them. As Milton F. sort-of said, you can't win the lottery, if you don't buy a ticket.

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Sat Jan 26th, 2008 at 12:27:53 PM EST
[ Parent ]
If we are lucky the US will engage in meaningless gestures and will waffle.

If we aren't so lucky, they will engage in a stimulus package for the super wealthy, and increase military spending.

aspiring to genteel poverty

by edwin (eeeeeeee222222rrrrreeeeeaaaaadddddd@@@@yyyyaaaaaaa) on Sat Jan 26th, 2008 at 06:13:52 AM EST
[ Parent ]
The Telegraph goes increasingly prole

To appreciate the growing gap between the very rich and the rest, you have only to look at the ratio of bosses' pay to that of employees in general. An annual review by Income Data Services showed that the median total earnings of the chief executives of the FTSE 100 companies - the UK's 100 largest quoted companies - in the financial year 2005/06 was £2m, up 20pc on the previous year.

By contrast, the gross median pay for full-time British employees in April 2006 was £23,600, up a mere 3pc on the previous year. So the typical FTSE 100 boss earned 75.2 times what the typical employee was paid - and just one year's pay rise for that typical boss was £400,000, equivalent to 17 times the total pay of the typical employee.

In the obscene necrophilia of the US it is upwards of 450:1. In Finland around 40:1

The sums of money now accruing to top talent, especially in financial services, have become absurdly large. Some people are earning in a single year sums that they would not be able to spend in a lifetime, or indeed the lifetimes of their children and children's children.

Why should any of us care? For one thing, it's not healthy for democracy. The new super-rich have the means through the financing of political parties, the funding of think-tanks and the ownership of the media to shape Government policies or to deter reform of a status quo that suits them.

Not just unhealthy for democracy. The Death of Democracy.

They are victims, too, of the collapse of a British private sector pensions system that was until recently the envy of the world. The super-rich may be effortlessly becoming richer, but millions of people have been obliged to contribute more cash than they have ever done to guarantee even a modest income in retirement. Hard-pressed company pension schemes that were once a model of enlightened paternalism are now being transferred to specially created new companies backed by the super-rich - who see in them an opportunity to make a fortune for themselves, though not for pensioners. There is something unseemly in the way that the retirement hopes of millions of people who have saved all their lives can be bought and sold as though they were no different from Mars Bars.

Ordinary people are seen by the plutocracy as mere numbers. But it is those numbers that will eventually defeat them. Our job, as we often state, is to find ways to activate those numbers.

You can't be me, I'm taken

by Sven Triloqvist on Sat Jan 26th, 2008 at 03:33:46 AM EST
Yup. The numbers have votes.

I'm an optimist though. I think Napsterisation is changing everything.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 26th, 2008 at 06:11:56 AM EST
[ Parent ]
And this current discrediting of the hyperfinancial system is just going to speed up acceptance of what we have been talking about ;-)

You can't be me, I'm taken
by Sven Triloqvist on Sat Jan 26th, 2008 at 06:17:48 AM EST
[ Parent ]
Maybe now, at last, an article outlining a constructive solution - without slagging off the edxisting one (the system speaks for itself, it needs no help!) might just get printed?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sat Jan 26th, 2008 at 06:35:37 AM EST
[ Parent ]
This is where Milton Friedman's economic policies have led in the past and, 'zounds, that's where we are.

How completely expected.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Jan 27th, 2008 at 08:46:15 PM EST
European Tribune - Liu: No Choice Now But Depression or Hyperinflation
Both former Fed chairman Greenspan and his successor Ben Bernanke have tried to explain the latest US debt bubble as having been created by global over-saving, particularly in Asia, rather than by Fed policy of easy credit in recent years.
I'm still at a loss as to whether there is actually a sensible theory behind this "savings glut" accusation, or it is just a term thwy throw around to shift blame and pretend that they know what they're talking about.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sun Feb 3rd, 2008 at 04:44:25 PM EST


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