Friday, 8 July 2011

Comments On The ECB, Exchange Rates and Banking

On a more serious note, or to transform the ECB tour de farce into a dirge or elegy, there are lessons to be learned here: accordingly, I have promised a series of "Lessons on the Critique of Political Economy" so that we may all explore the "mysteries" of the capitalist economy and of that most mysterious sector of it - Finanzkapital. These I must deliver furtively, for fear of stepping on big toes, - a little like Hegel in Frankfurt who delivered his lectures looking circumspectly around the hall.... "as if someone might understand him".

In an interconnected global capitalist economy, exchange rates and capital movements act as a mechanism "to homogenise" or "homologate" the relationships of force between the bourgeoisie and other sectors of society (which grow broader and larger and deeper the more our society is transformed into a "society of capital" in both the subjective and the objective genitive) across different "nation-states" guided by their respective bourgeoisies. As I have often argued here, "peripheral countries" (otherwise mistakenly known as "emerging economies") have sought first to export their domestic political problems to other countries by "mobilising internal resources" - exploiting their workers and their environment - by expanding employment at low wages and concentrating all export income to create "national champions" (or in China "State-Owned Enterprises") that can compete with Western capitalist firms. The US were quite happy "to absorb" these exports so long as they kept nominal wages and inflation under control in "the Great Moderation". But the unavoidable problem with this is that the excess capital that the export-dependent countries could not invest domestically for fear of emancipating their workers excessively had to find an investment outlet which it did in the speculative activities of Western Finanzkapital (and infrastructure and capital-asset investments in China).

In Europe, this meant that "peripheral countries" borrowed from "core country banks" in a manner that was facilitated by monetary union, but was made unsustainable by the formal fiscal independence of members of the EU. The inevitable result is that now European bourgeoisies are faced with an enormous dilemma exacerbated by the fact that the US, who were formerly at the receiving end of the "export of unemployment" operated by "export-dependent" countries, began to print greenbacks to sustain their domestic economy and, by the same token, exasperate inflation in the peripheral countries. This has meant that the ECB has been forced to raise interest rates just at a time when the EU periphery faces unsustainable debt obligations and externally imposed austerity measures!

In reality, what is happening is that the US can no longer "subsidise" the social peace that the leaders of China and Germany, Japan and Brazil and South Korea have bought at the expense of high American unemployment and "de-industrialisation". For their part, the EU bourgeoisies face the "dilemma" that we mentioned above in the sense that they must seek to make national bourgeoisies "responsible" for dealing with their own workers - something that is no longer even "fiscally" possible - whilst simultaneously preserving and even expanding their "control" over the EU "territory" by concentrating decision-making power at the EU level, preferably in the hands of the "core" countries (Germany, France and Britain). And this is proving very hard to do. The US have practically put a gun to the Europeans' heads by both pushing global inflation and (in a lesser form) by telling them to get their act together on NATO.

One of the biggest losses for European capital would occur if their banks - burdened by Basel III and by sovereign debt losses - were to pass under the control of US banks financed and emboldened ad libitum by the Fed's "quantitative easing". Watch this space.


Allow me, friends, to bask for a minute in the reflected glory. Grant me, honourable participants to this influential Blog, a minute of solace, the faint aura of success radiated from the eminence of Gavyn Davies. Believe me, I am a modest person, and seek nothing further in life than the simple pleasure of an even simpler vindication. Did I read right? Or do my eyes deceive me - am I, in short, the victim of a deception crueller still than that of cunning Odysseus when first presented with the "shadow" of his mother's likeness once descended in the mephitic bolges of Hades?!
Yet did my eyes truly linger on this angelic vision, this sweetest of victories that come but rarely in one's lifetime - that regale one's keen mind with the glowing laurels of recognition! I did - and correct me, friends, if I utter profanity or "blasphemy" as Iduende (noblest of friends) averred but yesterday in a truthful submission to this Blog - that Gavyn Davies (he, our anointed one) styled the process whereby the ECB (getting technical one) has subscribed to so much bad debt accumulated by "peripheral countries" in the eurozone as..... "socialisation". Socialisation!! Are we all aware, is each one of us "alive" to the meaning of this word?? Why, it is the exact same "Gesellschaftung", that preservation of bourgeois "Sekuritat" that I have so valiantly and insistently - at times, I confess, stridently - pointed to and exposed as the unshakeable ineluctable "destiny" (Nietzsche's "Geschick" from "Geschichte", history) of our inter-esse (common being), the bulwark to that most bourgeois deprecable and hateful of notions - the one that has at once baffled and preoccupied the minds of all great bourgeois economists from Ricardo to Bohm-Bawerk, and then Wicksell and lately - yes, lately! something on which I shall report to our friends at www.eforum21.com - by Michael Woodford at the Fed in his "theoretical" work titled "Interest and Price" (the same as Knut Wicksell's magnum opus).

To be sure, had all our bourgeois readers listened to our constant advice contained in our "subversive analyses" of the capitalist political economy they would have made a mint(!) by now - just as we radicals have - but what atrocious perfidious and tragic "destiny" for us "neo-Marxists", corruptors of youth (like Socrates) to be vindicated via the confirmation of filthy lucre, the auri sacra fames!!
As a reward, I promise to start shortly with some excerpts from our "Nietzschebuch". Incipit Belbruno!

On a more serious note, or to transform the ECB tour de farce into a dirge or elegy, there are lessons to be learned here: accordingly, I have promised a series of "Lessons on the Critique of Political Economy" so that we may all explore the "mysteries" of the capitalist economy and of that most mysterious sector of it - Finanzkapital. These I must deliver furtively, for fear of stepping on big toes, - a little like Hegel in Frankfurt who delivered his lectures looking circumspectly around the hall.... "as if someone might understand him".

In an interconnected global capitalist economy, exchange rates and capital movements act as a mechanism "to homogenise" or "homologate" the relationships of force between the bourgeoisie and other sectors of society (which grow broader and larger and deeper the more our society is transformed into a "society of capital" in both the subjective and the objective genitive) across different "nation-states" guided by their respective bourgeoisies. As I have often argued here, "peripheral countries" (otherwise mistakenly known as "emerging economies") have sought first to export their domestic political problems to other countries by "mobilising internal resources" - exploiting their workers and their environment - by expanding employment at low wages and concentrating all export income to create "national champions" (or in China "State-Owned Enterprises") that can compete with Western capitalist firms. The US were quite happy "to absorb" these exports so long as they kept nominal wages and inflation under control in "the Great Moderation". But the unavoidable problem with this is that the excess capital that the export-dependent countries could not invest domestically for fear of emancipating their workers excessively had to find an investment outlet which it did in the speculative activities of Western Finanzkapital (and infrastructure and capital-asset investments in China).

In Europe, this meant that "peripheral countries" borrowed from "core country banks" in a manner that was facilitated by monetary union, but was made unsustainable by the formal fiscal independence of members of the EU. The inevitable result is that now European bourgeoisies are faced with an enormous dilemma exacerbated by the fact that the US, who were formerly at the receiving end of the "export of unemployment" operated by "export-dependent" countries, began to print greenbacks to sustain their domestic economy and, by the same token, exasperate inflation in the peripheral countries. This has meant that the ECB has been forced to raise interest rates just at a time when the EU periphery faces unsustainable debt obligations and externally imposed austerity measures!

In reality, what is happening is that the US can no longer "subsidise" the social peace that the leaders of China and Germany, Japan and Brazil and South Korea have bought at the expense of high American unemployment and "de-industrialisation". For their part, the EU bourgeoisies face the "dilemma" that we mentioned above in the sense that they must seek to make national bourgeoisies "responsible" for dealing with their own workers - something that is no longer even "fiscally" possible - whilst simultaneously preserving and even expanding their "control" over the EU "territory" by concentrating decision-making power at the EU level, preferably in the hands of the "core" countries (Germany, France and Britain). And this is proving very hard to do. The US have practically put a gun to the Europeans' heads by both pushing global inflation and (in a lesser form) by telling them to get their act together on NATO.

One of the biggest losses for European capital would occur if their banks - burdened by Basel III and by sovereign debt losses - were to pass under the control of US banks financed and emboldened ad libitum by the Fed's "quantitative easing". Watch this space.

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