SOVEREIGN GOVERNMENTS VS. LORDS OF FINANCE

By Hazel Henderson and - - Reprint | | Print |

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ST. AUGUSTINE, May 3 2010 (IPS) - If governments don’t work together and face down the bankers who operate the global casino, the dominoes will start falling, one by one.

The fate of Greece lies between the excesses of its previous government and its past Wall Street-friendly policies, the still-dominant ideology of market fundamentalism, their bondholders and marketmakers, and Goldman Sachs and the still-obscure USD 600 trillion derivatives market, a massive bet on Greece’s eventual default.

We have reached the inflection point in the globalised financial casino and its mountains of odious, unrepayable debt. With outstanding derivative positions totalling some USD 600 trillion -and world GDP only USD 63 trillion- today’s global debt is unrepayable. Central bankers cannot print enough money to fill this gigantic hole. So who will lose, aside from taxpayers, who are stuck with the bill thus far of USD 23 trillion just for the US bailouts?

The world’s citizens now see how governments allowed themselves and their taxpayers to be trapped by the lords of finance. The bankers funded their election to office, bribed their officials, and manipulated their regulators and public opinion. Through advertising and financing of mass media, financial moguls and media moguls converged with political moguls worldwide to form concentrated conglomerates (matching those in finance and industry): News Corp., Disney, NBC (owned by GE), Viacom, Clear Channel, as well as Comcast, Verizon and ATT, now seeking to dominate the Internet. All this is textbook fascism.

To save sovereign governments from further co-option and corruption, these government “leaders” and their economic “wise men” must now rise to the occasion. Together, they must act to downsize and curb the rogue global casino. The G-20 Summit in Toronto, June 26-27, is their next opportunity to re-assert control on behalf of their citizens and the global public interest. Will leadership come from Europe, China, India, the USA, or Brazil?

What must be done?

First, the derivatives betting on defaults of countries and companies must be shut down before the players drive Greece under to win their bets. This will help curb the “bear raiders” waiting to collect their bets against the other EU countries: Portugal, Italy, Ireland, Spain, and others.

The USA, often still seen as a “safe haven”, is on equally rocky ground with its huge trade deficits and external debts to China, Japan, and OPEC countries. Most states in the US are running unsustainable deficits, have huge backlogs of now risky bond debts, together with falling tax revenues due to high unemployment levels (10 percent nationally, 17 percent if all jobless are counted), as well as crumbling infrastructure needing over USD 1 trillion in repairs.

Only concerted action by the G-20 can arrest the takeover by the lords of finance. This will require a paradigm shift beyond economics and all its theories, from left to right, towards a reintegration of knowledge and systems approaches that “connect all the dots”.

We are now in a global, system-wide transition from the early, fossil-fuelled Industrial Era to the emerging, green, information-rich economies, from Wall Street’s corrupted and debt-choked money circuits to new electronic trading platforms that use free exchange and new currencies. The next info-currencies will be based on real assets and wealth such as KWH (kilowatt hours) as in the Planck Foundation’s Energy for Debt Plan for Iceland and their Energy Transition Plan with Ethical Markets.

Estimated world trade conducted in barter remains at approximately 25 percent but is ignored in GDP, which is based only on money coefficients. Electronic trading is a new multi-trillion-dollar market opportunity for IT companies, following the paths of eBay, Craigslist, Freecycle, Global Giving, Greengrants, Microplace, Kiva, Zopa, Prosper, and other micro-finance and philanthropy sites. Others bypassing Wall Street and the old “financial centres” include local, regional, and private company trading platforms like Chicago-based ENTREX, and local currencies like the Schumacher Society’s “berkshares”, Time Banking, and mutual credit groups.

To foster the transition from the monopoly of fiat money circuits (now just as bad as gold-based money) to 21st century electronic and local currencies, the G-20 needs to downsize financial sectors.

Wall Street and London’s bloated financial sectors have little social purpose and produce nothing. High-frequency trading by computer programmes now account for about 70 percent of Wall Street’s daily trading. Proprietary trading and risk-taking must be separated from government-subsidized deposit-taking banks. The best way to accomplish this is for the G-20 to agree on a less than one percent financial transactions tax (FTT) across the board. There are no good arguments against the FTT (debated since its introduction by economist James Tobin in the 1970s and recommended by Larry Summers in his 1989 paper).

These initial actions -banning naked derivatives (where betters don’t own the bonds) and bringing those needed for actual users of oil, commodities, etc., onto transparent exchanges; enacting the FTT; and banning ratings agencies from selling ratings to issuers- will begin the transition toward the new currencies and transparent electronic trading platforms. It is also essential to break up all too-big-to-fail banks, e.g., the six largest ones in the US: Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley, and Wells Fargo, which now control 63 percent of US GDP.

Only if G-20 leaders come together in Toronto and agree on these first steps, can they avoid the next financial crisis, already looming. If they cannot summon the courage to shake off the grip of the lords of finance, they will have forfeited what little public trust still remains.(END/COPYRIGHT IPS)

(*) Hazel Henderson is president of Ethical Markets Media (www.ethicalmarkets.com), founder and co-chair of the World Business Academy’s EthicMarkr for ethical advertising, and co-creator of the Calvert-Henderson Quality of Life Indicators.