"A report by the UN Environment Programme’s Finance Initiative (UNEP FI) says loss of soils, forests, and fisheries, as well as rising resource costs, are likely to become increasingly important to a nation’s economic health – and may therefore affect its ability to repay or refinance sovereign debt." (Source: BusinessGreen)
This excellent report produced with the help of Global Footprint Network makes the link between the world’s financial debt crisis and the global ecological debt crisis. The debate on austerity gets a completely different dimension if you look at this double challenge.
Read the UNEP press release: “Risks to Sovereign Bonds Posed by Overuse of Natural Resources Need Greater Attention” and the full report .
“The finance, insurance and real estate (FIRE) sector has emerged to create “balance sheet wealth” not by new tangible investment and employment, but financially in the form of debt leveraging and rent-extraction. This rentier overhead is overpowering the economy’s ability to produce a large enough surplus to carry its debts. As in a radioactive decay process, we are passing through a short-lived and unstable phase of “casino capitalism,” which now threatens to settle into leaden austerity and debt deflation.”
The new book by economist Michael Hudson should be mandatory reading for anyone dealing with the global and European crisis.
Table of contents and an overview of the book on michael-hudson.com
“As some of the world’s top central bankers start to admit that standard quantitative easing is failing to generate growth, previously taboo ideas can be mentioned, including QE for the People, discussed here last week.” (Source: Reuters Blogs)
Interesting and provocative ideas from financial economist Anatole Kaletsky (author of "Capitalism 4.0"). Give the new money created by central banks to the people instead of the banksters.
The problem with Kaletsky’s potentially popular solution for our Great Depression? The money given to people should be used for new consumption. As in his famous book, Kaletsky does not question economic growth, the consumer society, inequality or capitalism. Worth reading nevertheless.
“The economic problems in the U.S. and Eurozone are mostly structural, not monetary. Unfortunately ideologues and politicians on both sides of the spectrum are interested in quick fixes rather than the real groundwork of economic progress.” (Source: Huffington Post)
Very good analysis by Jeffrey Sachs of the global economic crisis and why austerity policies and a return to classical Keynesianism will not work.
‘And all countries rich and poor will need to plug two more structural holes. The first is the explosion of tax havens, the kind where Mr. Romney reportedly keeps his savings. Without adequate taxation of corporate and high-end income, there is no way to close budget gaps in the U.S. and Europe. The second is ecological. No economic trick, no amount of education and training, will suffice, if we do ourselves in by human-induced droughts, heat waves, famines, and floods. It’s time, in short, to put away the gimmicks and to start thinking about the sustainable economic prosperity, built on education, skills, social inclusion, and environmental responsibility.’
"… in any given year, maybe one per cent of the financial economy has anything to do with the production of real, nonfinancial goods and services.
The rest? It consists of ways to make money from money. That seems innocuous enough, until you remember what money actually is. Money is not wealth; it’s a system of abstract, culturally contrived tokens that we use to manage the distribution of real goods and services. A money system can simplify the process of putting energy, raw materials, labor, and other goods and services to work in productive ways; that’s the reason we have money, or rather the reason most of us are prepared to discuss in public. That’s not what the other 99% of the world’s financial assets are doing, though. They are there to ensure that the people who own them have disproportionate, unearned access to real, nonfinancial goods and services." (Source: Energy Bulletin)
John Michael Greer’s brilliant and must-read analysis of the current financial crisis with some very valid lessons and predictions for the Eurozone. Here are a few more interesting extracts from this fascinating article:
“Since the crisis dawned in 2008, EU policy has demanded that every other sector of the economy be thrown under the bus in order to prop up the tottering mass of unpayable debt that Europe’s financial economy has become. As banks fail, governments have been strongarmed into guaranteeing the value of the banks’ worthless financial paper; as governments fail in their turn, other governments that are still solvent are being pressured to fill the gap with bailouts that, again, amount to little more than a guarantee that even the most harebrained investment will not be allowed to lose money. “
“the financial industry has done a superb job of convincing people that what they do is important to the rest of us. It’s true, to be sure, that having currency in circulation makes economic exchanges easier, and the kind of banking services that people and ordinary businesses use are also very helpful, but governments used to produce and circulate currency without benefit of banks until fairly recently, and banking services of the kind I’ve just mentioned can be provided quickly and easily by a government that means business…”
“So the downside of any financial crisis, however grandiose, can be stopped promptly by proven methods. Then there’s the upside. Yes, there’s an upside. That’s the ultimate secret of the financial crisis, the thing that nobody anywhere wants to talk about: if a country gets into a credit crisis, defaulting on its debts is the one option that consistently leads to recovery. “ (see Argentina and Iceland).
“Ensuring that banks are boring may prove to be a key element of a new business model for the banking sector, enabling the sector to re-establish its ethical framework and focus financing on sustainability.” (Source: Forbes)
Good article on the future of banking and the financial sector in Forbes. Title is misleading in my view: what is boring about working for real value and the real economy?
"Since the financial crisis of the late 2000s, most analyses have placed the failure of markets on a lack of information: traders lacked the skills to interpret complex algorithms; regulators lacked awareness of the risks banks were taking with capital reserves. Few analyses have explored the usefulness of those limits to stakeholders who had something to gain from purporting the crisis was unperceivable or understandable until it happened – or even after it happened." (Source: Open Democracy)
Very interesting analysis of the financial crisis from a different perspective based on the work of great French writer George Bataille. Worth a read.
“As Europe’s debt crisis intensifies, top officials say the continent urgently needs a central authority with the financial muscle to fix its broken banks.” (Source: Business Week)
The flight forward for EU leaders: a "banking union". Finally full recognition that THIS European "Union" has always been a Europe for capital, never for labour and citizens. As long as things went well, we got the crumbs from the tables of the rich, now they send us back to the poor houses and debtors’ prisons.
In the end, this Europe will end up on the ash piles of history. Then it will be time for Project Phoenix Europe.
“Most of our credit system does not support economic growth in the sense of supporting transactions in goods and services,” he explains. “Most of our finance system, most bank loans, support increased asset prices, which have a number of detrimental effects on the economy.”
"The threat to growth today is not a shrinking of the financial sector, but it enormous size.”
Must-read article on the web site of the Institute for New Economic Thinking underlining the need for a radical reform of the financial sector.
“The Eurobond scheme only works effectively if taxation and spending powers are transferred to a central authority – “fiscal union”. But bar a series of truly extraordinary backflips by Europe’s divided rulers, spontaneously agreeing to settle their deep differences, this will not happen. Should anything resembling a “Eurobond” eventually be summoned up, it is liable only to be a feeble stop-gap measure. The underlying causes of Europe’s financial crisis will not have been addressed.”
Very good analysis by senior economist James Meadway on the New Economics Foundation blog.
Here is Meadway’s solution:
“The first steps to ending the crisis are to end austerity, halting and reversing the suicidal programmes of expenditures that have been launched; to write off debts that are now unpayable, whether owed by states (like Greece) or individuals and firms (as in Spain); and to allow the failure of private banks, nationalising and recapitalising them as needed. Tight restrictions on the movement of capital will be necessary to prevent financial panic spreading, and serious, radical efforts must be made to reverse the growing concentrations of wealth in Europe. For countries in the south, most especially Greece, this will not be achievable without abandoning the euro.”