We must stop listening to the reassurances of the elite. Radicalism is the only thing that can save us now.
China’s inflation climbed again – to 6.5% – last month, despite a plethora of measures from Beijing designed to stop it. There are, however, signs that the rate of increase is slowing down.Productivity in the US fell for the second quarter running. Germany’s June exports show a major fall, and the general view is that things have become worse since then.
The S&P 500 was down 6.7% yesterday. The FTSE has been officially declared a Bear market, having fallen 20% from its July peak. The US Fed is headlessly running round trying to decide how quickly they can start QE3. And despite the ECB’s purchases of Italian and Spanish bonds, global markets continued to slide in Asia overnight. Gold has hit a new high of $1778 an ounce, and the Swiss Franc is still surging ahead.
So, this is it. Things will settle now for a while. I’d expect to see a few mini-rallies here and there by the close of business today; but the correction has started – and it has a long way to go yet.
The reasons why the news will get worse are myriad, but the biggest factor is the absence of any convincing ideas about how to stop the rot. Looking across the data I’ve outlined above, the controls being used have either proved useless before, or are too expensive to persevere with for too long. The US Fed is welcome to try QE3, but QE2 didn’t work, serving only to siphon yet more cheap money off into big multinational business and investment banks. The ECB can’t keep on buying dodgy EU bonds forever. With none of its neighbours rich enough to buy its products, German exports will continue to struggle. Five rate rises on the trot have done little to dent China’s overheating economy. And the kind of economic spurt the US would need to escape its debt trap has never been seen in history.
Sooner rather than later, it will dawn on the markets that both the ideas and money cupboards are very nearly bare: after this, there ain’t no more of either. Having been conned for eighteen months by every clown from Christine Lagarde via Ben Bernanke to Herman Van Rompuy that the speed of recovery would pick up, things have reached a stage that can be summarised very easily. Nobody believes a word the EU says, very few believe Trichet’s ECB is independent of German pressure, hardly anyone thinks Obama has a grasp of the problems – or even one hand on the steering wheel – and perhaps one dealer in a thousand thinks the ClubMed/peripheral EU debt axis can be saved from insolvency.
At last today – two years after the Slog insisted for the first time that this was the case – the FT writes, ‘For all intents and purposes, most European and US economies have never fully exited the downturn, with output per capita still below its pre-crisis peak’. In short, there can’t be a double dip, because there never was a genuine rise – other than by throwing taxpayers’ money at the problem.
We are at a crisis point in global capitalism, and the crisis is not to do with misunderstandings or human error or any other ‘little’ thing that might be exaggerated by panic. The crisis is here, now and insoluble because over-leveraged financial capitalism is innately unstable, and mercantilist competition can never please even half the people half the time on a globalised basis: the system is flawed, and the system can never work in its current form. Indeed, its entire basis as a model has been proved both socially dangerous and economically reckless.
Output growth, speed of provision, eternally rising dividends, and measured investment simply cannot be maintained under the existing bourse/remote shareholder/globally-linked finance/credit-driven consumption system. And above all, the relatively low level of material provision available for a steadily rising world population from private means under free-market Friedmanism makes the welfare provision requirement from the national purse hopelessly unaffordable.
The Right blames the Left for indulging in Big Government at the expense of corporate profits, and the Left blames the Right for promoting Big business wealth at the expense of social stability. They are both wrong, because the Left v Right view of human endeavour is itself archaically irrelevant.
Big Government must be slimmed down, but not handed to Big Business. Rather, mutual businesses must replace both government industries and their overstaffed administrative parts – the civil service. And Global business must be downsized, but not replaced by command economics.
There are three things which must change. And from here on, we shouldn’t listen to any opinion leader suggesting that anything less will do.
The third biggest thing to change is the way commercial activities get financed: a much greater balance must be achieved between bourse and investment bank as the support for more and mergers on the one hand; and community/retail bank/mutual ownership models aims at helping small to medium-sized businesses get off the ground on the other.
The second biggest thing to change is ‘the point’: it should no longer be maximisation of material wealth via exports and growth, but rather maximisation of contentment via economic regeneration towards national self-sufficiency.
But the by far biggest thing to sweep away is the political model based on possessed v dispossessed, Left v Right, privilege v exploitation, and influence v neglect.
We are not and we never have been “all in this together”. The second after George Osborne made that remark, most of Britain’s citizenry thought ‘bollocks’. And we never will be in this boat together until the privileges of the big Party machines have been dismantled, and replaced by honest politicians with but one agenda: the greatest happiness of the greatest number.
The Slog 