Floating away and Bubbles

Abbott's youthful ( conservative ) paper upon the errors of floating the dollar in hindsight is notable. Our dollar has traded from 56c to 1.13 since, devastating many an industry amidst such instability. The floating dollar does raise serious issues.

The biggest of which is that every player is in it for themselves. And big financiers do mighty well out of such variable floating currencies, pushing one way then the other, making waves then plundering the instabilities.

Our high dollar has now wiped out much of our agriculture and agricultural processing, our manufacturing, ford holden .

It has risen from excess capital in US markets via low interest rates, pushing commodity prices into bubble zones. Profits for wallstreet bankers, disasters for the farmers and industrialists on the other side of the deals.

Then our dollar follows - bubble zones, till many industries are unsustainable.

We could have kept our dollar down with the right intentions and practises.

Right intentions? Selfish accumulation or seeking balance and common good?

Printing of money weakens currencies and incites inflation. For the latter reason it has largely been tabooed.

But where one considers and works with Steiner's solution - gift money - inflation need not take hold. Concievably printing money could have moderated our overblown currency, saving many of the industries lost over the last 5 to 7 years. Inflation would have gone through the roof is the argument against but had we significantly gifted support to needful countries, making lifelong friends, building global stability,mutual interest and respect, inflation imaginably needn't have emerged, let alone devastated.

Even now, were the government to use such gift impulses, in the form of vehicles, cars and parts for East Timor (bug free), New Guinea, Malaysia, India,Vietnam, Maldives, Africa......contracted into the future we could stabilise our industries. Similarly for bottled fruit, or for canned vegetables, for milk or for cheeses.

We have vast Intellectual advances and could also offer much as aid to Afghanistan or Iraq, medicine, agriculture, infrastructure.

The quest for sound government, for harmonious relations, is to look beyond the three year electoral cycle to the five, ten, fifteen and thirty year cycles, aiming not for corporate profits, but for commonwealth, for balancing, for global stability.

We need citizens with similar understanding if we want democracy to realise such developments.

The issue GFC is based upon the forward selling of credit and profit on such contracts for up to 30 years at rates that now are not realistic. The profits have been booked over the last twelve+ years, (as we see the rich richer) but those booked profits, taken from once future expectations, are now looking more like losses. This leaves a massive cramping of the economic organisation of the World as the profits have been withdrawn-- blood banked by the rich. The Economic dynamic of the World is as the blood loss patient, at the point of organ breakdown, not enough blood supply to the heart to sustain circulation, not enough oxygen to the organs, at the point of catabolic shutdown.
We do need more credit, the authorities have not realised the extreme of the imbalance. Yes, we will need austerity, but we need survival first. We need to avert the damage of shutdown, once stable and recovering, then moderate the drip of credit. Once recovered, then begin the paying back.

The austerity should also be for the rich, but that is a matter for individual governments, and for another time.

R.Steiner in his threefold economy speaks of gift money as being the solution to economic growth, and imaginably it could also be the solution to the euro problems.

In that last weeks flight of capital from Spain et al to safe havens-UK, US, Aus,.. has destabilised bond markets on both sides of the contagion divide I would like to put a case.

Instead of this becoming subvertly a feeding frenzy, where the capitalised west privately buys further into bleeding Spain et al we need something more.

If we, the 99%, in the west could call upon our governments to act towards stabilisation and rebalancing of the economy, and by this to distinctly limit the carnage and plunder, balance could at least be approached consciously-for the common good (as against freemarket capitalism up to now).

The plan would entail more stable countries, where favourably disposed, with balanced QE or by other means, providing buy-up funds for assets or infrastructure in the critical economies. This would strongly support prices and consequently add stability to the troubled banks while also reducing the plunderous aspect of the rapacious global privateers. Such arrangements might be entered into with an exit strategy over the 7 to 14 years expected recovery timeframe, or delivered as an international gift. The latter good will effect would have unsurmised  benefits of gratitude.

There are articles saying "wealth tax"; the problem arises, how can the 0.1% crystalise even 3% of their wealth to pay a wealth tax without shocking asset prices and markets further? 33% would be mayhem. This broken system will and must be fixed gradually and moderately. A more stable approach would be generate credit now, a year in advance of a wealth tax, maybe 1% for 2013, maybe 2% for 2014, and pay back/unmake the generated credit in future in proportion to continued balancing of growth and inflation targets.

The fundamental though is the motive - the intent; where an action is taken with underlying intent of selfishness/greed/getting the better of another, all will tend towards instability.

Where an action is taken with the underlying intention of brotherliness/common humanity/mutual support we will be bringing the stability and moderating influence of trust back into the economy, and trust is what credit is established upon. Gift money imaginably would be very beneficial.

I have felt significant affinity for W.J.Stein and D.N.Dunlop's work for a good 25 years, most notably their efforts towards moderating and harmonising the excesses of the emerging global economy. With the Eu in the throes of a meltdown again this issue comes enormously to the fore.
We can look at the TARP as a massive supply of funds for American banks to buy up world class assets at severely stressed prices , (ie it is an economic assault, a takeover, a conquest, war but in a different sphere) based upon reckless and excessive lending (from the west), then its opposite (drawing in the noose). The massive banker bonuses post 2008 are but an indicator.
The Brits were far more brotherly about bailouts and the profits went largely to the state (BofE). Currently the EU is like a patient with severe blood loss - haemorhaging, and Mario ex Goldman Sachs cries for Austerity (read stingyness and extension of critical period-all to the profit of the cashed up). Understandably Germany does not want to tie themselves up to life support all across the EU, and it likely would still collapse, as it has been unsustainable. In an emergency ward, with such a crisis, there would be a prompt infusion of saline solution, to bring up the fluid balance to a sustainable level, where the heart and other organs are not destructively overstrained. Blood transfusions would follow and stability would ensue promptly. Such in the EU's case is to provide cash, quickly. What we are not clear of is the means of doing this?? By Stein's reckoning, it has to be moral, and it has to be brotherly. There might be many ways to bring cash into the system morally, one could to increasingly provide loans with minimal charges to all Eu citizens in proportion with the tax they have honestly paid in the last 5 years?? Another way would be to establish a communal EU fund that buys up troubled assets across any and all member states. Once again it could be placed in the control of the best investment directors (again according to taxes paid or honest communal donations given). In five years or ten these loans or funds will be able to pay back to the EU their 2012 grant. It is like joseph the dreamer and the pharoah, but in this case we dont have seven fat years to store up protection from. In its place we have hope and trust, that over the years the extended credit will be recovered and payable. Without such an initiative the gulf states and the US megabanks will plunder much of Europe's wealth and likely destroy much culture along the way.
 Further the farm subsidies are reportedly under question, and they do seem exhorbitant and likely do need moderation, but a major cut will greatly increase food prices and as in the last five years with staples unaffordable to all but the Chicago agricultural futures players consider the instabilities that ensued.The process needs maybe ten years of transition planning, ie very gradual incremental reduction to subsidies. Please forward to all others who may be in any position to influence debate or policy. Please also advise me on your views regarding the crisis and any proposals,..

GFC Solutions?

In Goethe's Faust, Mephistopheles teaches Faust how to escape a funding shortfall of ducats, print paper money. Well and good but things dont get better and much pain is felt by the least responsible of people, aged innocent peasants end dying.
Well, such is my warning, still Ellen Brown is advising turn on the printing presses and dont give it to the fed, give it to the people via the government.
The only thing she hasnt thought through is how inflationary this might become and how destabilising such a maneuvre might be to world credit markets, financial funds flows and balances. Shockingly.
Still it holds some credibility.
Lets consider how this crisis has developed. For years the money was leant at less and less of a risk premium. There had been no storm clouds in sight, indeed trouble was inconceivable. Howard, Blair and Bush had fueled asset price bubbles, as a soporific for society, indeed a vote winner. Everyone was getting richer, draw down on the assets and live it up. Or gear it up if so inclined.
"Why did it have to happen on my watch?" Well he nearly escaped it, Bush! Did his best to pass it on. Howard still claims he left the Australian economy in good hands, but it was high as a kite on fueled credit and the reason Australia is no basket case today is not due to the resilience of Australians as Swann and co would flatter us with, nor due to Howards prided management. It is due to our having immense resoursce deposits which we can continue to sell off for many reckless years into the future.
Still if we are to understand the dynamic, as asset prices approach their peaks, the shrewd soon to be richer sell off their assets and begin to reduce what they have leant out. Kerry Packer once quipped , "You only get one Alan Bond in a lifetime!" Yes he sold high and bought back in after the bust, which no doubt he helped write into existence via the newspapers. He is a public operator, there are many outside of the public view but similar timing modus operandi.
So now, the executioners of this GFC are ready to assume even more of the global wealth by moving back into assets and high income securities at the crisis depths.

They are the unheard voices that will not condone the worlds governments printing their own moneys. The maths are if money is printed and enters circulation, thats money outside of their control meaning less power in the wealth these super rich already hold.

Other effects already noted of printing money are inflation, but in a deflationary environment this is not an immediate risk, rather where the deflation is destabilising as in collapsing home prices, some extra currency might be therapeutic.

Printing money as mentioned could severely destabilise global finance, but now we come to a distinct consideration. were most governments to agree to inflate their currencies modestly by printing money then currency exchange rates would not be dangerously stressed and we might reduce the damage of this GFC albeit at the expense of the super rich.

Absolutely fundamental to the health of such a maneuvre would be the exclusion of personal gain, and company gain, and national gain as much as possible from the arrangements. It would have to be wholly done towards the best interests as much as possible of all the citizens of the globe. It would be like an infusion of saline solution to a severly haemorhaging patient to reduce the possibility of toxicity and organ shock through unsustainable blood loss.
No doubt the super rich will lobby its not fair, changing the rules mid stream, and possibly will threaten to collapse some neccessary institutions or countries, or do damage in some other significant way? Paybacks.

Were the Paulson push instead of flooding wall street to have been to support house prices through purchasing some for the public, the fallout would have been moderated by delaying the revaluation to a sustainable pace, a pace the CDO writers could sustain.

I do not know of a full solution. Some have been living well beyond their means and some have appropriated far more than a sustainable share of global wealth. The only way forward is towards more fairness and a controlling or moderating influence from government that is not selfishly accumulative but instead comprehensively balancing.