(This issue is submitted to a Washington D.C., Seattle, and Zurich think-tank as the English edition of “Straight from Shoulder”.)
"Straight from the shoulder " by Toshio Masuda Sept. 24, 2015
( Free of charge to the people I met)
The Beginning of the End of the Era of Global Capitalism
The end is nigh for the capitalist liberal nation state and free market economy.
The Eurozone has demonstrated that living standards in developed countries have peaked, it is difficult to create new demand, new investment is unneeded, and capital demand is not just zero: negative interest rates are starting to become the norm in developed countries as economies (GDP) shrink. The FRB, which has a free hand with the world’s key currencies, has pushed through three rounds of quantitative easing in an effort to bring the world economy out of the slump it slid into after the financial market crash triggered by the bankruptcy of Lehman Bros. in September 2008. The easing has taken the form of printing $4 trillion and buying back government bonds with it. Central banks in other developed countries have followed suit. The BOJ and the ECB have set a 2% increase in prices as a goal for their easing policies, but have had trouble hitting these targets. Price increases should be determined by the supply and demand of goods and services, but what these easing policies are attempting to do is lower the value of the currency (purchasing power) by printing more of it, thereby merely creating the appearance of price increases. No matter how much money is poured into an economy through such policies, capital will not flow through it if there is no demand, and the resultant money has flowed into the financial and real estate markets, like a gambler in a casino who keeps wanting to up the ante with no end in sight.
One event that caught my attention recently was a nation finally saying no to this free-market casino-like method of running economies which developed countries have been so focused on.
That event was the UK Labour Party election that took place on September 12. Jeremy Corbyn was elected party leader by an overwhelming margin over three other candidates, winning 59.5% of the vote (the others got 19%, 17%, and 4.5%). This was a major victory particularly in light of his portrayal as a lunatic by the Republican media and statements by major party figures such as ex-Prime Ministers Tony Blair and Gordon Brown to the effect that making Corbyn party leader would spell the end of the Labour Party. What caught my eye were Mr. Corbyn’s arguments. He criticized the Tories’ policies and said that the Labour Party should argue for an end to austerity policies, increased social welfare, higher taxes on the rich and corporations, rent support for the poor, and eliminating the political independence of the central bank, among other things. One key note he came back to over and over again as fundamental to economic policy was a movement away from free market economic policies which the Labour party and the Tories have both promoted in the past. In the area of politics, his emphasis on no longer following the U.S. drew attention, including leaving NATO, halting support of Israel which keeps invading Palestine, and stemming the tide of refugees coming to Europe by halting the air bombardment of Syria.
This party election adopted a new system whereby anyone could vote if they paid 3 euro, and it seems that voters were more serious than before and the will of the people was well expressed.
In my recent writings I have argued that capitalism does not work if demand for capital is negative.
What is necessary for the world economy now is to trim the fat in finance and real estate assets, which have swollen under cheap easing policies, and get back to the bare minimum of meat and bones we need.
The time has come to do the opposite of such cheap easing policies - raise interest rates, increase the value of currencies, and implement deflationary policies to bring the financial and real estate markets crashing down, in order to shrink the economy and push through some real restructuring.
We have become bloated with ever-increasing debt.
We can either die of a heart attack or cut the fat and allow our circulation to flow.
Which will it be?
This has been Toshio Masuda’s Straight From The Shoulder
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Written by Toshio Masuda