by David Malone
What will it cost us to bail out the banks and keep the financial system from suffering its losses?
Well last week in Dublin we started to see the outlines of the answer.
It happened at a meeting of steely knives in Ireland’s flesh at the Merrion Hotel in Dublin. Last week not only was the IMF delegation there but so, according to a Banker friend of mine who happened to be there too, were the French, Chinese and an Arab delegation.
So what were they all there to decide?
Well after a round of confidential meetings of representatives of ‘bond holding nations’ and officials from the EU, ECB and IMF, the EU/IMF held in press conference at which they began to unveil Ireland’s political future. Here is a quote from Dan O’Brien, the Economics Editor of the Irish Times who was there listening.
“nothing quite symbolised this State’s loss of sovereignty than the press conference at which the ECB man spoke along with two IMF men and a European Commission official. It was held in the Government press centre beneath the Taoiseach’s office. I am a xenophile and cosmopolitan by nature, but to see foreign technocrats take over the very heart of the apparatus of this State to tell the media how the State will be run into the foreseeable future caused a sickening feeling in the pit of my stomach.”
Loss of sovereignty is right. And it will come to us all. Ireland is NOT to make its bond holders nor the bond holders in its private banks share the pain. ALL the pain is to be taken by the Irish people. Even though billions of Euros of these loans were made by Private banks to people, institutions and other private banks NONE of them in Ireland, it will be the Irish people who will pay the debt.
And that will happen not just because financial experts at the European Commission, the ECB and the IMF have said it will, but because the continuation of all the ruination visited upon us so far by these people depends on it happening.
The banks are to be bailed out yet again. Not just those in Ireland but those in France, Germany, the US and the UK as well. Which is why for two days of stock markets around the globe have rallied. the entire rally has been fueled by greed and relief predicated upon and caused by the rumour, now confirmed by M. Trichet, that one way or another the ECB will continue to buy up any bond of any degree of worthlessness from anyone who tenders it.
At the same time, on the same day (yesterday) the European Commission suggested the Portuguese government should cut its unemployment payouts. The Portuguese tartly replied it did not yet need any ‘suggestions’ from Europe.
And this caught my eye. It was an impolitic thing to say to any sovereign nation and particularly so when Portugal is watching as the bond speculators (AKA banks) push its debt costs up and up and the nation further and further into the quicksand of unpayable debt.
So why say it, why mess with the sovereignty of a second country and why now?
The answer is that the bail out and the ‘suggestion’ are intimately related.
In the conclusion of the Debt Generation book, I wrote this, from May of this year,
“…to quote one leading market analyst, ‘there are still doubts on whether the peripheral countries can deliver on austerity.’ That’s their worry now. That is what the financial class sees as the proper and apparently only role of government. DELIVER ON AUSTERITY. That is what your government is for. Welcome to your future.”
Things have moved on and the question the financial class have been mulling over is HOW?
We now have an embryonic version of their likely answer. It was released a week ago by the IMF. One of the names on its cover and the man who authorized its release as an official IMF document, is Ajai Chopra, who is head of the IMF mission to Ireland and was last week probably in the Merrion Hotel (can’t be sure) and later was at the press conference.
Its title though dull hints at its agenda. “Lifting Euro area growth: Priorities for Structural reforms and Governance.” It would have been more honest if it had been called Structural reform OF governance. For that is what it is about.
In the eyes of the IMF, finance requires that governance change – in the direction of removing democracy a step or two away from the people.
It has a few key points which it stresses.
This reform package would combine (i) a shift from labor to VAT taxes, (ii) a reduction in the level/duration in unemployment benefits and in early and old-age retirement schemes,”
The IMF document says over and over again that what is wrong with Europe, what holds it back is its labour costs. They are too high. So first reduce tax on labour. Which means income tax should be reduced and the burden of tax shifted to VAT. Which means a shift from a graduated tax system where the higher the wage the higher the tax to a flat rate of tax.
The employer no longer has such a high wage bill and the tax burden shifts to the worker simply by re branding him/her as a consumer. The wealthy get taxed a LOT less and the poorer find all their essentials cost a lot more. VAT in the UK IS going up. Funny coincidence.
The IMF likes point ( i) so much it says,
“Shifting taxes away from the labor factor and toward consumption therefore presents strong potential for growth.”
Also in the spirit of ‘reform’ AKA cutting the costs of paying people, there is point (II) … If people should become unemployed make sure they are paid less and for a set period after which they should forage as best they can, as befits those who are nothing but an economic liability and whose children will doubtless grow up to be the same. And when they get old keep them working for as long as possible and when they do eventually retire cut what they get paid.
All of that reduces taxes on the wealthy and on business, cuts the tax base of the state this ensuring even if some pesky left wingers do get in they will be in charge of a state that has no income. No chance of rebuilding any welfare without the cash to do it.
Then the IMF gets back to the cost of work
“Promoting decentralized wage bargaining… moderate minimum wage…softening employment protection,”
Or, in English, cripple unions and collective wage bargaining, reduce the minimum wage idea and make it far easier to fire and hire. Oh and ‘harmonize qualifications’. Making a mockery of national standards.
This last point may seem soft but it is not it gets to the rotten anti-democratic core of the IMF and its ‘reforms’. The IMF is non democratic and in its heart distrusts it. It is and always has been One dollar one vote. The IMF believes in the rule of technocrats and ideologues – its own preferably. The IMF has spent half a century forcing governments to ignore their people and follow IMF diktats. It is what the IMF believes. It is what it knows.
“EU-driven reforms have been more successful where national authority was delegated”
Delegation is the dirty word here. Delegate too near to the unwashed people and nothing ‘good’ can be forced through.
Much of the paper talks about how new powers should be created and held at the European instead of national level . New powers OVER nations, of surveillance, funding and punishment. At one level, the idea of keeping an eye on errant debtor nations sounds fine. At another it is clearly about removing democratic control over tax, spending and financial regulation further from the people. It is about concentrating that power in the hands of fewer, more removed officials and panels of experts.
The EU would like to be seen as democratic and ideally the EU should be, but as it it presently constituted and run, it is in fact a mechanism for removing democratic control and making it ever more remote.
Here is another quote of how how the IMF sees the EU.
“The Single Market Program, coordinated by the European Commission, has been successful in opening product market access and leveling the playing field. By contrast, labor market and social policy reforms, left to national authorities, and subject only to peer pressure, have proceeded gingerly.”
In other words the great success story of the EU in the IMF’s eyes is the way Finance and services has been deregulated and markets opened. Which is exactly why and how we had German banks selling securities and making loans to southern Europe out of the ‘self regulated’ Dublin financial centre which caused the largest and still ongoing, continent-sized and systemically suicidal financial collapse of all time.
That is what the IMF and now the EU, in its almost limitless intellectual enslavement to a blind ideology is about. That is the model they want to impose on all aspects of our democracy.
Be seen to be in favour of democracy, but in reality cut off its balls and sell them to the financial class as sweet meats.
This article is reproduced with thanks to David Malone. He is the author of the book Debt Generation. You can read and listen to excerpts from his book here: http://www.debtgeneration.org/index.php