The Credit Crunch

ramonmercado

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Its a nasty one for the working and middle classes, for pensioners, the sick, the unemployed.

Austerity Budget 2012 Key Points and Budget Protest
http://www.indymedia.ie/article/102832
by T

Property taxes, PRSI increases, Children allowance cuts
The key points so far are increases to PRSI working out at about €250 per year per person. Children allowance cut by €10. Property tax set around €500 per year for a Celtic Tiger era house. 10 cents on the pint.

Cuts to electricity allowance and telephone allowance for OAPs. The devil will be in the details.

March to the Dail this evening for the Budget 2012 protest. Image courtsey WSM photo stream

From about 4pm onwards today there was a protest outside Leinster House where a large crowd had gathered.

The PR machinery in the weeks leading up to this budget were constantly warning us it was going to be tough. The idea seemed to make it sound worse so that if it was slightly better than the worse conditions then people wouldn't think it was so bad and hence would be less inclined to complain afterwards. However everyone will be hit and the initial figures suggests it will be anywhere from a minimum of €250 to well over €1000 when all is considered.

Some of the key elements are:

1. Children allowance cut by €10 per month. Drops to €130 from €140.
2. Property tax at 0.18% up to €1m home. For average Dublin home of say €250,000 this is €450 per year. And rate is 0.25% for house valued over €1m
3. PRSI -abolition of the weekly PRSI allowance for workers. Estimated average worker to pay an extra €264 per year
4. 10 cents on the pint of beer, cider and spirits and cigarettes by same. €1 on a bottle of wine.
5. Third level student admin fee currently at €2,250 to rise by €250 pear year for three years. So will be €2500 in Sept 2013, €2750 in Sept 2014 and €3000 in Sept 2015
6. Cuts to electricity allowance for OAPs.
7. Cuts to telephone allowance for OAPs. Reduced by 50% to €9.50 per month
8. Prescription charges for medical card holders from 50 cent to €1.50
9. Cuts to respite care grant by by €325 to €1,375 per annum.
10. No cuts to corporate welfare as the corporation tax will remain unchanged
11. Capital Acquisitions Tax up from 30% to 33%
12. Civil service numbers to be cut by 38,000 to 282,500 by 2014 from a peak of 320,000 in 2008
13. Duration of Jobseeker's Benefit reduced by three months, from a year to nine months
14. Maternity Benefit to be taxed from 1 July 2013
15. Threshold for Drug Payment Scheme increased from €132 to €144 per month. The threshold was €90 only a few years back
16. Motor Tax rates to increase. For 1.0 litre increases €14, up to 1.1 litre by €21, up to 1.2 litre by €23, up to 1.3 litre by €25, up to 1.4 litre by €27, up to 1.5 litre by €29 and so on.

Some key points to note:

Corporate influence: It was reported this evening that Minister for Finance Michael Noonan said Labour’s proposal for a 3 per cent increase in the universal social charge (USC) for those earning €100,000 was rejected on the advice of the multinational sector. -Well what do you know? So who is calling the shots here? Certainly not our "elected" representatives but the corporate sector who have bought have sold politicians for many decades now.-

100 Garda stations to close: Yet the government still finds the money and resources to have a huge Garda and general security presence up at the Gas terminal in Bellanaboy in Mayo to help secure the giveaway of the estimated €540 billion worth of natural gas which was handed over for free to international corporations (e.g. Shell) by successive corrupt politicians from Ray Burke to Bertie Ahern. -Lesson to learn is that government don't really care about crime and people being robbed and assault. They put their money where their mouth is and that is protecting large corporations rob us of our resources and give them huge leeway when they pollute.

Deferral Scheme Allowed for Property Tax = An Inheritance Tax for the poor: According to the Local Property Tax document put out by the government, you will be able to defer payment if you are unable to pay. BUT it says:

Interest will be charged on deferred amounts but at a lower rate (i.e. 4% per annum) than the rate charged in default cases (i.e. 8% per annum). The deferred amount, including interest, will be a charge on the property. Deferred property taxes and interest will have to be discharged on the sale/transfer of the property.

What this really means is that if an OAP has an house and they can't pay then when the house is transferred to their children for inheritance the money will be taken then. For the top 20% of this country this situation is extremely unlikely to occur. However for those nearer the bottom, it means the one chance they might have in their life of getting a few quid will be taken from them and the probability of this will be higher the poorer they are. Now if there is say a person (probably middle aged) caring for a parent who is unable to afford the new property tax and that carer is also not in good financial health and is living at home then when they go to get that home when the parent dies, the state will want its slice and that person is likely to be kicked out of their own family home especially if they don't have the cash to pay. So take an average house in Dublin valued at say €250k -perhaps built in the 1970s. The property tax would be close to €500 per year. After 10 years of deferral, this is not just 10x€500 but accounting for the interest rate would be about €6243. For 15 years it is: €10412. In effect an older person who can't pay ends up effectively transferring that tax burden onto their siblings. But again it must be stressed this situation is only going to realistically affect people already at or below the poverty line.
 
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rynner2

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Conflicting stories today:
British banks admit poor lending decisions, says Lord Green
Britain's largest banks privately admit they are in a “downward spiral” of poor lending decisions and have a "computer says no" attitude to small businesses, according to the former chairman of HSBC.
By James Hurley, and Louise Armitstead
7:27PM GMT 14 Jan 2013

Lord Green, now the Government’s trade minister, told a House of Lords Committee that the rise of so called "casino" investment banking has seen lenders “deskill” their commercial banking businesses, which has led to “extraordinary” lending decisions about small companies being made. Bank bosses “know it’s a problem”, he added.

...

http://www.telegraph.co.uk/finance/news ... Green.html
However..
UK recovery on track, OECD data show
Britain's recovery is on track, with the economy in better shape than any of the world’s other leading nations bar the US, according to the Organisation for Economic Co-operation & Development.
By Philip Aldrick, Economics Editor
5:42PM GMT 14 Jan 2013

The Paris-based think-tank’s latest composite leading indicators (CLIs), which have a good record for predicting changes six months in advance, pointed to “growth firming” in November alongside signs of a “stabilising outlook in most major economies”.

Evidence that the economy is picking up will help counter the bleak news expected next week, when the Office for National Statistics publishes its first estimate of growth for the final three months of 2012.

...

http://www.telegraph.co.uk/finance/econ ... -show.html
 

OneWingedBird

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That's how you screw with people's heads... feed them conflicting stories until they can't make sense of a fricking thing. :x
 

Mythopoeika

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OneWingedBird said:
That's how you screw with people's heads... feed them conflicting stories until they can't make sense of a fricking thing. :x
Yeah, this kind of thing happens a lot in the news.
Example: One news report will say the property market is in the doldrums and house prices have fallen. Another news report (citing a different source) will say that house prices have gone up slightly.

The most frequent occurrences of conflicting reports I've seen seem to be about the state of the British economy. Are we being fed shit, in the same manner as the Ministry of Truth in 'Nineteen Eighty-Four' or is it just misleading, crap journalism?
 

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Critique Conference

23 Feb 2013
10.00 am- 5.00 pm

London School of Economics

Why Keynesianism cannot save the system

Speakers:

Hillel Ticktin - The conflict between the two sections of the bourgeoisie over the return to 19th century capitalism vs Keynesianism
Michael Cox- The conflict between the two sections of the bourgeoisie over the return to 19th century capitalism vs Keynesianism
Savas Matzas - Greece and Capitalism today
Yassamine Mather - Iran's economy in free fall

St Clements Building
London School of Economics

[email protected]
http://critiquejournal.net/conf2013.html
 

Cavynaut

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The "unacceptable face of capitalism" grins again!

The Bank of England warned on Thursday that the next phase of the UK's six-year financial and economic crisis may be triggered by the collapse of debt-laden companies bought by private equity firms in the boom years before the crash.

In its latest quarterly bulletin, Threadneedle Street said the need over the next year to refinance firms subject to heavily leveraged buyouts posed a systemic threat.

The Bank added that it would use its new role as the watchdog of the City to monitor private equity deals in future "episodes of exuberance" to prevent a repeat of the debt-driven takeover boom in the run-up to the banking crisis.

"In the mid-2000s, there was a dramatic increase in acquisitions of UK companies by private equity funds," the Bank said.

"Many of these buyouts, especially the larger ones, were highly leveraged and the increased indebtedness of such companies poses a risk to the stability of the financial system – a risk that is compounded by the need for companies to refinance debt maturing over the next few years in an environment of much tighter credit conditions."

Noting that there had been a surge of private equity deals in the first six years of the last decade, the Bank said a feature of the investments had been the use of debt. Buyouts were typically financed by money borrowed from banks, with the debt becoming the liability of the purchased company.

There was evidence, it said, that private equity companies had been particular beneficiaries of "forbearance" by commercial banks – the tendency of lenders to go easy on borrowers for fear that they might go bust. But it said a refinancing challenge was looming in 2014, because the peak in debt issuance was in 2007 and the average maturity of leveraged buyout debt is seven years.

Deals became bigger and bigger as the decade wore on, and this trend coincided with a loosening of credit conditions by banks, which made debt finance even more attractive as they vied for business.

The study cited the case of Royal Bank of Scotland, now 83% owned by the taxpayer after being rescued from collapse by the Treasury in October 2008. An aggressive expansion into leveraged finance was an important factor in RBS's credit losses, Threadneedle Street said.

Owners of private equity companies say the buyouts help to make companies more efficient by spurring management to provide regular interest payments on the debt.

But the Bank said there were also potential downsides to private equity, including the risk that the pressure for short-term returns would starve companies of long-term investment.

"A consequence of the increased use of debt financing on buyouts in the mid-2000s was that debt to earnings ratios, in particular on deals in excess of £100m, climbed to persistently high levels.

"One risk to the UK financial system from these debt levels is the heightened fragility of the corporate sector. Specifically, higher debt levels could make companies less likely to undertake long-term investment if that investment is crowded out by the costs of servicing debt."

In a separate article in the bulletin, the Bank said it would expect to make a profit on the purchase of gilts under the £375bn quantitative easing programme unless the announcement that the scheme was to be reversed triggered a big rise in long-term interest rates.

The Bank has been making money on its gilt purchases since QE began in early 2009 because the price of government bonds has risen.

When the time comes for QE to be reversed, the Bank expects the fall in bond prices to push up yields – a measure of the cost of borrowing – on gilts.

Work by the Bank's economists has shown that the state would still make a small profit on QE if yields on 10-year gilts rose from 2% to 5% but there would be a £5bn loss if they increased to 6%.
http://www.guardian.co.uk/business/2013 ... of-england
 

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Podcast: Hillel Ticktin on forms of decline

The fifth podcast on the capitalist crisis by Critique editor Hillel Ticktin.
http://www.cpgb.org.uk/home/podcasts/po ... of-decline

Hillel will be presenting three sessions at this year's Communist University: 'Capitalist crises and their causes' (Wednesday 14 August), 'Capitalism: terminal crisis or long term decline?' (Thursday 15) and 'Socialism or barbarism' (Saturday 17).
http://www.cpgb.org.uk/home/action/comm ... rsity-2013
 

rynner2

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Count the ways the credit crunch changed our lives
From a worsening of the nation’s teeth to an improvement in its lofts, we investigate the bizarre reordering of our universe after six years of austerity Britain
By Harry Wallop
8:34PM BST 08 Aug 2013

Six years ago today, the high summer of economic prosperity ended with an horrific bang. On August 9 2007, BNP Paribas, the giant French investment bank, stopped investors withdrawing their money.

It was the start of the credit crunch and “the day the world changed”, according to Adam Applegarth, chief executive of Northern Rock, which just a month later caused the first bank run in Britain for 150 years.

We all know what happened next. The credit crunch turned into a financial crisis, which morphed into a deep and nasty recession. Businesses collapsed, many of them well-loved favourites such as Woolworths.

If you were lucky enough to keep your job, you probably had to accept a pay freeze. Interest rates were slashed, hitting savers and ushering in an era of uncertainty and austerity.

But a series of reports this week suggests that the economy is finally on the mend – and we’ve a dynamic new Governor breathing life into the Bank of England. It’s a timely moment to examine the 15 most intriguing ways in which our lives have altered since the darkest days.

1. The £10 Friday feast

The microwave had a good credit crunch. When families cut back on the luxury of going out to local restaurants at the weekend, canny supermarkets stepped in to fill their place. Marks & Spencer started a trend with its dine-in-for-£10 deal, and others followed suit. The upmarket ready meal, complete with side dish and bottle of wine – usually eaten while watching a glitzy talent show – is now a staple in millions of middle-class households on a Friday or Saturday night.

....

15. Red lights turned off

Rising rents, falling demand from cash-strapped consumers and higher competition from discount operators and the internet – yes, the high street has had a torrid few years.

And the oldest retail profession of them all has been hit by identical pressures. According to a recent report by Westminster Council, funded by the Department of Health, prostitutes have been forced to cut prices by 50 per cent. Sex sells, just not as well during a recession.

http://www.telegraph.co.uk/finance/rece ... lives.html

Lots of interesting comments follow! ;)
 

ramonmercado

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Full text at link.

Capitalism: Declining forms, failing system

What does austerity tell us about capitalism itself? Hillel Ticktin discusses three key features

I have said that austerity is a deliberate policy: it does not flow automatically from over-expenditure, as the governments in Britain, Germany, the United States or wherever have tended to argue. Although, of course, officially the United States is not implementing a policy of austerity, this is the effect of what it is pursuing, even if in a lesser form than in Europe.

So the question is, why are they pursuing this policy? I have argued that austerity is needed in order to control the working class and therefore defend the system. But I would like to examine this question a little more deeply. Why is it that the bourgeoisie has lost control of the system?

The present crisis is deeper and more extensive in fact than in the great depression - the drop in production in many countries has been greater than it was then. That is not true of the United States, but the US effectively went in for a salvage operation and saw to it that its banks were propped up and dealt with the situation in a way the other countries did not.

But why, under conditions where unemployment is extensive and rising, is it still felt necessary to introduce a policy of austerity? I have argued that this has happened because it was felt there was no alternative. Taking the road of expansion would mean making a series of concessions to the working class and would risk a loss of control.

What that implies is that the ruling class has already lost control of the system itself. Now that is no new discovery, but it is very much connected to the question of decline. Capitalism in decline begins to shed crucial features which buttress it and are essential to its functioning. To put it in a dialectical way, we can say that a system in decline finds that the mediations which ensure that the poles of its contradictions are able to interact begin to malfunction to a greater degree, or even cease to exist. That results in crises, which become increasingly difficult to overcome. That is what is meant by the decline of capitalism.

What is not meant by the decline of capitalism is that total production is decreasing, that productivity is going down, and so on. That is not what I am arguing. The question is not one of absolute decline (though there are aspects of absolute decline at any given moment, in any given system). The overall system is in decline, even though productivity continues to rise and production continues to increase.

Let us look at the form of capitalism which previously provided the necessary control.

Reserve army

In the first instance it involved the existence of a reserve army of labour. The reserve army of labour includes a large number of long-term unemployed and also people who lose their job and then find a new one, people who are in and out of work over their lifetime. The essential point is that this mass of unemployed workers competes with other workers for jobs, and consequently those in work are forced to accept both lower wages and inferior conditions compared to periods of full employment.

However, the potency of the reserve army of labour is not just based on its size. Thanks to the pressure exerted under the democratic or semi-democratic forms that exist, governments were compelled to introduce the welfare state. While that is very limited in the United States, it is quite extensive in Europe. Workers today who lose their jobs are not in the position they would have been in the 19th century, when they would have had to beg, borrow or whatever in order to survive. So today workers do not have the same fear of unemployment as they had even in the first half of the 20th century.

That is why austerity very much involves cuts in welfare benefits. It is argued that workers are skiving, that they are not telling the truth when they say that they cannot get a job, that they are disabled or that they have no savings. Consequently a privatised arm of the state has been created to declare workers fit for work whether they are or not. This privatised arm amounts to a modern apparatus of economic force to ensure that as few people as possible receive benefits. ...
http://www.cpgb.org.uk/home/weekly-work ... ing-system
 

OneWingedBird

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According to a recent report by Westminster Council, funded by the Department of Health, prostitutes have been forced to cut prices by 50 per cent. Sex sells, just not as well during a recession.
I'd image that stiff competition from Eastern European whores and East Asian sex slaves haven't helped much either...
 

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I would have thought stiff competition would be welcomed. :)
 

rynner2

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Things are getting better! :D What shall we worry about next? :(

Is the UK's recovery too robust?
Robert Peston

With living standards still squeezed and the value of what we produce in Britain not yet back to where it was in early 2008, most would say that any recovery will do.
Surely, therefore, it's great news that the Bank of England has described the UK economy as growing robustly.

Such has been the mind-befuddling density of the gloom that enveloped us after the Crash, it is quite difficult to remember when the Bank of England sounded so positive.
If nothing more (and there has been more), the arrival of Mark Carney at the Bank of England has sparked a cultural revolution: today's Inflation Report from the Bank read less like the traditional plan to fend off any incipient inflationary threat and more like a manifesto for economic expansion.

But, at the risk of sounding like a curmudgeon, is there a danger that the growth - at 3% or so for the next three years - is too robust?
Because growth that prompted a sharp rise in inflation would (surely) force the Bank of England to raise interest rates sharply.
And that would be a miserable prospect for millions of people with big mortgages and other debts. :(

To remind you, since the Crash, the indebtedness of British people has come down as a percentage of income, from a record 163% in 2007-08 to 140%.
But that is still high by historical standards - and the absolute value of those debts is a record, at more than £1.5 trillion.
What's more, the debts are not distributed evenly; there are millions with disproportionately larger debts.
So if interest rates rose by only two or three percentage points, too many would struggle to maintain their payments.

How great is the risk of an inflation-induced, economy-crippling rise in interest rates over the next couple of years? :shock:
The Bank of England calculates the risk as low: its conviction is that there is plenty of slack in the economy, and that therefore there won't be a self-reinforcing cycle of rising prices and wages as we all buy more or invest more.

But this assumes the productivity or efficiency of workers will improve significantly, that the extra demand for stuff (goods and services) can be met by all of us producing more for the same money.
Which may turn out to be what happens.
But the Bank's confidence in this assumption - to coin its own phrase - does not seem especially robust (a new era, Carney-esque leap of faith, perhaps).

http://www.bbc.co.uk/news/business-24929379
 

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Wages for the majority have not risen in real terms for 20 years. The fact that economists make repeated attempts to lump wage rises in with the reasons for inflation is nothing more or less than anti-working class and anti-union propaganda.

Even most of the huge pay rises back in the 70's (most, not all) were in direct response to then then high rates of inflation not unconnected with a certain policy which did indeed affect the pound in your pocket.

I'm no union man - the closed shop and the refusal to embrace the changing nature of jobs did no-one any favours - but in trying to make sure their members' pay and conditions kept up with inflation they were merely doing their job.

edited due to cruelty to the common apostrophe
 

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Cochise

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Pietro_Mercurios said:
It is the Tory strategy to see it through the next election, however. If it lasts that long.
Well, lets hope it doesn't. This is the single most incompetent government (not necessarily the worst - its very incompetence is preventing it from doing its worst) that I can recall. And the Tories alone would undoubtedly be worse still.

At least with Labour we might be relatively comfortable as the ship slides below the waves!
 

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Sex, drugs and R&D

There are lies, damned lies, and headline economic statistics, writes Paul Demarty

A peculiar thing happened to the Ghanaian economy in 2010 - overnight, it went from being a ‘low-income’ to a ‘middle-income’ country. Quite a feat!

Yet, oddly, we were not subjected to endless nonsense about the ‘African tiger’ or the like. Because this sudden lurch from poverty to prosperity was the achievement not of industrialists, or even financiers, but statisticians. Ghana’s method of measuring gross domestic product had changed significantly; unsurprisingly, so did the resulting figure.

We were reminded of Ghana’s fortunes this week by a flattering adjustment to our fair nation’s own recent GDP history. The Office for National Statistics declared, after much research and general wonkery, that over the period since 2009, UK GDP has been underestimated by an average of 2%. Billions of pounds, somehow, managed to go missing from the grand tally (adjustments for the next decade back are still to be calculated).

So what was missing? One significant change is the reclassification of research and development (R&D) spending by capitalist firms: previously it was considered consumption, and now it is considered output. That accounts for a large slice of the good news, as does incorporation of non-profit enterprises to various degrees.

The headlines have been grabbed by other matters, however - the new estimates include, among other things, the illegal drug trade and prostitution. Earlier this year, the ONS claimed that, taken together, these two economic activities added up to around 0.7% of total British GDP, roughly on a par with farming. ...

http://weeklyworker.co.uk/worker/1025/sex-drugs-and-rd/
 

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Hillel Tiicktin weighs Paul Krugman and the Neo-Kensyians in the balance and finds them wanting. He sees the Social-Democratic parties as being woefully inadequate in the face of the tasks confronting them

The capitalists themselves are working with a wonky rudder in his opinion.

What is the capitalist strategy?

... The form of capital itself has, therefore, changed. The introduction of the joint stock company marked the beginning of its transformation into a complex, bureaucratic-market structure. That has now evolved to the point where the top managers have been enfranchised within the capitalist class itself, in that their salaries and share holdings may give them more income than the controlling shareholders.

The bourgeois response to the change in form, therefore, has been to try to turn the clock back to the 19th century, with a competitive market of a large number of small firms, requiring the break-up of companies, privatisation and the hiving off of parts of companies or parts of the administrative machine of the state. Industry has been transferred to the third world, where poverty provides a huge army of the unemployed. Control has been assigned to finance capital, today largely represented by private equity. Trade unions have been restricted and union membership has plunged.

How successful has this strategy been? Its immediate weaknesses are extensive and we can list them as follows:

Firstly, the idea that small to medium-size firms can play the crucial role in modern capitalist society is simply utopian.

Secondly, as discussed above, there is a ceiling to investment at the present time.

Thirdly, there has been a relatively quick and largely spontaneous self-organisation of labour in the third world, as shown in South Africa.

Fourthly, finance capital has in fact imploded and is now under regulation, limiting its ability to control.

Fifthly, there is tremendous discontent in the increasing inequality of incomes, partly shown by the incredible popularity of Thomas Piketty’s Capital in the 21st century.
Sixthly, the ruling class is itself divided, most obviously between management and the nominal owners of the enterprises: ie, the shareholders.

Seventhly, the decline in the role of trade union leadership among the working class has meant that the unions cannot now play a mediating role between the classes, as they have done for over a century. This was the role so deplored by Lenin in his seminal work, What is to be done?11

Finally, as an extension of this point, the loss of social democracy as a credible defender of capitalism has removed a barrier to confrontation with the working class. This issue is further examined below.

The reduction in welfare benefits and growth of the unemployed has meant that social democracy has had to choose whether to become more militant or abandon social democracy altogether. By and large, social democratic parties are today little more than a shadow of their former selves, whatever that was. The effect has been disastrous for political democracy - not in the simple elimination of social democracy, but in so far as there used to be a party which proclaimed that it stood for a socialist society, however distant. Although there was a great deal of hypocrisy and betrayal, nonetheless, there was at least a formal statement of principles dedicating representatives to genuine change. Its elimination has made parliamentary democracy appear as a contest among political parties whose members have no principles and whose parties do not essentially differ in their aims. The increasing anger among the population following the financial implosion has found no outlet. ...

http://weeklyworker.co.uk/worker/1025/w ... -strategy/
 

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Krugman bounds back.

Raise the wage: Paul Krugman shatters the myth that we can’t afford to boost workers’ pay

Three things are inevitable in this life: death, taxes, and conservative claims that we simply can’t afford to give low-wage workers a pay boost. Nobel Prize-winning economist takes on the latter inevitability in his New York Times column today, seizing on recent developments to illustrate why arguments against wage increases don’t withstand serious scrutiny.

Take McDonald’s announcement this week that it would pay its workers $1 above the minimum wage per hour at the 1,500 outlets owned and operated by McDonald’s itself. (The move, which still falls well short of what workers and their advocates seek, affects 90,000 workers, but it doesn’t apply to the 750,000 workers employed by McDonald’s 3,100 American franchisees.) While modest in scope,McDonald’s move — coming on the heels of similar wage boosts by bold-faced names like Walmart and Target — suggests that “[m]aybe it’s not that hard to give American workers a raise, after all,” Krugman writes.

While free market fundamentalists might retort that global competition will sink firms that boost worker pay, Krugman responds by noting that most American workers are “employed in service industries that aren’t exposed to international trade.” ...

http://www.salon.com/2015/04/03/rai...pay/?utm_source=twitter&utm_medium=socialflow
 

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Apocalypse now: has the next giant financial crash already begun?

A predicted global meltdown passed without event. But there are enough warning signs to suggest we are sleepwalking into another disaster.
@paulmasonnews

The 1st of October came and went without financial armageddon. Veteran forecaster Martin Armstrong, who accurately predicted the 1987 crash, used the same model to suggest that 1 October would be a major turning point for global markets. Some investors even put bets on it. But the passing of the predicted global crash is only good news to a point. Many indicators in global finance are pointing downwards – and some even think the crash has begun.

Let’s assemble the evidence. First, the unsustainable debt. Since 2007, the pile of debt in the world has grown by $57tn (£37tn). That’s a compound annual growth rate of 5.3%, significantly beating GDP. Debts have doubled in the so-called emerging markets, while rising by just over a third in the developed world.

John Maynard Keynes once wrote that money is a “link to the future” – meaning that what we do with money is a signal of what we think is going to happen in the future. What we’ve done with credit since the global crisis of 2008 is expand it faster than the economy – which can only be done rationally if we think the future is going to be much richer than the present.

This summer, the Bank for International Settlements (BIS) pointed out that certain major economies were seeing a sharp rise in debt-to-GDP ratios, which were well outside historic norms. In China, the rest of Asia and Brazil, private-sector borrowing has risen so quickly that BIS’s dashboard of risk is flashing red. In two thirds of all cases, red warnings such as this are followed by a major banking crisis within three years.

http://www.theguardian.com/commenti...mageddon-crash-warning-signs?CMP=share_btn_tw
 

Quake42

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The real issue, I think, is that over the last two or three decades the value of labour has plummeted. Automation and global overpopulation mean that it's simply not possible for large swathes of the population to earn a living by selling their labour.

No one wants to face up to this reality because it's in the "too hard" box. So we see an explosion in personal debt; propping up of asset prices via quantitative easing etc; governments spending huge amounts on "in work" benefits to hide the fact that millions of jobs are completely unviable; unrest in the Middle East and Africa, fueled by radical Islam bu able to draw on a huge pool of bored unemployed or underemployed young men.

The 1980s saw traditional working class jobs destroyed - the 2010s are seeing millions of middle class jobs vanish.

This is going to get worse and worse in future decades with perhaps 30-40% of jobs disappearing. What will everyone do? How will people live?
 

Yithian

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Well, I know a lot of people living and working overseas.
 

Mythopoeika

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The real issue, I think, is that over the last two or three decades the value of labour has plummeted. Automation and global overpopulation mean that it's simply not possible for large swathes of the population to earn a living by selling their labour.

No one wants to face up to this reality because it's in the "too hard" box. So we see an explosion in personal debt; propping up of asset prices via quantitative easing etc; governments spending huge amounts on "in work" benefits to hide the fact that millions of jobs are completely unviable; unrest in the Middle East and Africa, fueled by radical Islam bu able to draw on a huge pool of bored unemployed or underemployed young men.

The 1980s saw traditional working class jobs destroyed - the 2010s are seeing millions of middle class jobs vanish.

This is going to get worse and worse in future decades with perhaps 30-40% of jobs disappearing. What will everyone do? How will people live?
This, to me, is THE hot topic of the day. It is the most awkward, unanswerable question that people squirm to avoid even attempting to answer. I've really given it some heavy thought for a long time and have so far come up with a blank.
Perhaps the only thing I have come up with is a huge global cooperation between all countries to take humanity into space, colonising the Moon and Mars. Some people are already pushing this idea. It would be a massive job creation scheme. Somewhere along the line, the most wealthy 1% will have to be made to contribute.
 

LittleBat

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This, to me, is THE hot topic of the day. It is the most awkward, unanswerable question that people squirm to avoid even attempting to answer. I've really given it some heavy thought for a long time and have so far come up with a blank.
Perhaps the only thing I have come up with is a huge global cooperation between all countries to take humanity into space, colonising the Moon and Mars. Some people are already pushing this idea. It would be a massive job creation scheme. Somewhere along the line, the most wealthy 1% will have to be made to contribute.
Without going so far as outer space, I would suggest that the 1% have to contribute in the event of a major war.

WW3 would liberate goverments, corporations and individuals from their obligations to pay their debts. Periodically writing off debt is essential for economic functioning. Usually, it is accomplished by inflation, but we are in a deflationary mode. Chaos and war can break the stalemate.
 

rynner2

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Meanwhile the cuts go on cutting. Now the council want us to pay another £4 or £5 p.w. to fund a sort of warden to help run this community. There used to be a fulltime, live in warden when I first moved here, but that position was 'let go' - although we still continued to pay for the various services we never got. So now, in effect, we'll be having to pay twice. :mad:

(Well, we'll get the option of not paying, but then we'd have the hassle of dealing with the Council and its various services direct, which I hate doing. As I get older and more vulnerable, it would help to have someone to fight my corner.)
 

Quake42

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Well, I know a lot of people living and working overseas.
Yeah, but the point is that automation and overpopulation are global issues. People with particular skills may be able to find work overseas - for now at least - but how long before those jobs go the way of manufacturing, retail, maybe even law and medicine shortly?

It is extraordinary that no one is talking about this.
 

ramonmercado

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Friction is now between global financial elite and the rest of us
Robert Reich
The anger and frustration felt by hard-working people who have seen their wages and job security steadily diminish is fuelling a populist revolt against the political establishment

The standard explanation for why average working people in advanced nations such as Britain and the United States have failed to gain much ground over the past several decades and are under increasing economic stress is that globalisation and technological change have made most people less competitive. The tasks we used to perform can now be done more cheaply by lower-paid workers abroad or by computer-driven machines.

The left’s standard solution has been an activist government that taxes the wealthy, invests the proceeds in excellent schools and in other means that people need to become more productive, and redistributes to those in need. These prescriptions have been opposed vigorously by those on the right, who believe the economy will function better for everyone if government is smaller, public debt is reduced and taxes and redistributions are curtailed.

But the standard explanation, as well as the standard debate, overlooks the increasing concentration of political power in a corporate and financial elite that has been able to influence the rules by which the economy runs.

And the interminable debate over the merits of the “free market” versus an activist government has diverted attention from how the market, both in Britain and in the United States, has come to be organised differently from the way it was half a century ago, why its current organisation is failing to deliver the widely shared prosperity it delivered then and what the basic rules of the market should be. This means that the fracture in politics will move from left to right to the anti-establishment versus establishment.

http://www.theguardian.com/commentisfree/2015/nov/11/us-uk-politics-economics
 
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