Commentary on Political Economy

Friday 16 September 2011

The "Risk-Free Rate" and the Crisis of the Capitalist State - Part Two

Let us return for a moment to the discussion of the "risk-free" interest rate that we undertook below. You will recall that one of the most frightening consequences of the fact that capitalist nation-states are in so much "debt" is that their only option now is to default - for the simple reason that any attempt to re-pay the "debt" will simply result in a serious destabilisation of the Crisis-State as a political entity! In other words, in order for the Crisis-State to continue to function as a "State" - as a unit of command, political and military - over its "national territory", it must be able "to finance itself" through collecting taxes in its own "currency" so as to pay for its "services".

The problem is, however, that as the Crisis-State seeks to repay "private loans" in the form of "bonds" or "treasuries", it can either cut its expenditure, which will weaken it further, or it can raise more taxes - which will undermine its political authority and force it to be more "exacting" (this Latin word is applied to taxation) and "repressive" (we have spoken of "financial repression" on this site). Alternatively, it can try "inflation", which again is a form of "repression" and can unleash social conflict because it becomes harder "to measure accurately" the respective claims to social resources by economic agents in capitalist society.

In the event, what we begin to witness is a "breakdown of social solidarity" as each class in capitalist society, and each sector of it, seeks to avoid paying for the burden of "austerity" by not paying taxes, by resorting to crime or, as in the case of Finanzkapital, by resorting to sheer speculation - casino capitalism. These two or three articles that I am linking from LesEchos are in French, unfortunately; but they offer excellent appraisals of the current "listing" of the ships of state in various capitalist countries - from Eastern Europe to Southern Europe, and then even more in places like China, India and Russia and Brazil where we can clearly say that the "Crisis-States" are becoming nothing more than dens of thieves and bandits - from the Russian "oligarchs" to the Indian "robber barons" to the Chinese "princelings" - that increasingly threaten the peace of the entire world.

One of the articles deals with the UBS trading fraud scandal that erupted only yesterday and that shows the extent to which Finanzkapital, in its desperation to remain profitable in a time of deep capitalist crisis, endangers not just itself but also the entire "society of capital". Once again we are reminded of how "systemically risky" and how "out of control" the gang of bandits called "capitalist entrepreneurs" are becoming.

Above all, what this shows is that the "remedy" to this "crisis" lies not just in some "technical" or "regulatory" improvement, but rather in the overhaul of our political institutions - from governments down to bureaucracies. What is "failing" is not just the "capitalist economy": what is failing is "the Crisis-State" itself!! (Vittori on “endless crisis” – default only way out) Mais cette fraude jette aussi l'opprobre sur l'ensemble du secteur. Comme un accident dans une centrale nucléaire pose la question de la sécurité dans l'ensemble du parc. Cette affaire sera inévitablement interprétée comme la preuve de la persistance d'une culture du risque déraisonnable et décalé en dépit des efforts déployés pour mieux le réguler. Le symbole d'une finance coupée du monde, plus occupée à faire de l'argent avec l'argent qu'à financer l'économie. Il n'est d'ailleurs pas indifférent que cet « accident » ait eu lieu sur un « desk » traitant des ETF, les fonds indiciels cotés, nouvelle trouvaille des forts en maths de la haute finance, dont la fulgurance du développement n'a d'égal que  l'opacité.

No comments:

Post a Comment