Infoholix blog

In the previous seven parts I have argued that we do not have a debt crisis the way it is portrait by the media..

Instead we have entered into the endgame of capitalism. The remaining capital of the many is to be transferred to the few.

My argument is best supported by indisputable facts:

1. Add up all the claims of economical growth and values of the top companies around the world and these would have doubled in 7 to 10 years. Inflation has doubled prices in 10 to 11 years, so the top companies always beat inflation.

Now let’s look at reality, I have taken the top industrial indexes of November 1999 and compared to November 2011:

Dow Jones went from 10.800 to 11.500
S&P 1.400 > 1.200
NASDAQ 3.300 > 2.500

FTSE 100 6.800 > 5.200
DAX 5.900 > 5.600
CAC 40 5.300 > 2.900

Nikkei 18.600 > 8.400

The Euro and the US$ were at parity in 11/99, today EUR = $1.35.
Pound Sterling was worth 1.57 of each, today it still buys the same amount of US$, but EUR1.15 only.

So today, 12 years later, you’d expect FTSE to be above 14.000 and an extra one third higher to compensate for the devaluation of Sterling. But in reality you get one quarter only of the near 20.000 you’d expect.

You can do the same calculation for the US values and you get the same result. The German and French values should be above 10.000, but they are also worth less than twelve years ago, by half or two thirds respectively.

All the governments lie every day in the face of irrefutable facts that are there for everybody to see. There has been no growth but an incredible shrinkage, only government expenditures have grown, they are obviously believing their own lies when they claim that they can balance budgets in the near or distant future.

Does this continuously increasing debt really matter?

Japan’s sovereign debt stands at 233% of GDP, the highest debt ratio in the world, and it doesn’t matter a bit, because all debt is owned by its own people. There is no international market holding this debt, so credit ratings become irrelevant. When it comes to debt Japan has opted out of capitalism.

Sovereign debt is nothing else but uncollected taxes. Instead of paying taxes people buy government bonds. If the tax rates were higher the government would not have to issue bonds. So the balance between taxation and bonds becomes a tool for stimulating and regulating the economy. When you tax high people have less money to spend and the economy shrinks, when you tax low it increases spending power and demand increases.

In the case of Japan, however, people seem to have all they need and demand does not increase, so they save their money. They save in secure investments – Japanese bonds, hence the Japanese government issues more bonds to meet demand and increases its debt ratio as a result. Funds from these bonds are invested in infrastructure, hospitals, roads, etc.

What works for Japan would not work for USA or Europe. Here people don’t buy their own government bonds but spend every Euro, Dollar or Pound on consumer goods. Then they elect the government that promises the lowest taxes. So all governments are underfunded and rely on “the markets” to provide the necessary capital.

The process of raising capital creates competition between states, who can raise the most at the lowest possible interest rate. All administrations adhere to the same principle of “as we can’t raise the funds from our own people we might as well create an overblown administration and raise that little bit (or a lot) more”. In the wake of this debt mountains are generated that no population can ever repay, so the children and grand children act as collateral.

So who provides this capital?
The capitalist.

Where does the capitalist get the capital from?
Look at the above stockmarket figures and you can conclude that a large proportion has been siphoned off into the pockets of a few. How this has been done I’ll explain in detail in a further part.***

*** Briefly: The 3rd world has the raw materials and the 1st world the capital. The 1st world installs puppet regimes in the 3rd world that shares revenue from the exploitation of resources 2 to 98 in favor of the capital. The puppet regime uses its 2% to buy million pound homes in London in to invest in the City. The multi-national companies of the 1st world sell those raw materials to their off-shore subsidiaries at 100, and the off-shore unit sells at 500 to the HQ in 1st world. The bit that is added above the level of 500 is reflected in stockmarket values, and the 400 siphoned off is the capital that controls banks and governments. (Note: figures are for illustration purposes only).

In the endgame that has started now states will pay higher and higher interest rates on more and more debt – thus transferring the remaining capital of the many to the few.

2. Euro-zone refuses to surrender to capitalism.

Capitalism requires Euro-bonds which would transform the Euro into the same kind of currency as the $US – money just gets printed and people and states deeper enslaved in debt. The $US volume amounts to 60% of all currency reserves held by the world’s central banks and the Euro to 26%, when both are managed in the same way you have one currency adding up to 86%, so remaining currencies become irrelevant and can be manipulated or crushed at will.

It took one man only in 1992 to crush Sterling within hours just by selling it short. This incident should always serve as a reminder of the power of capitalism.

The next two days will lay the foundations for a new Europe, a monetary union with common fiscal and economic policies and laws. It will comprise the 17 countries that have the Euro plus 9 EU members that do not have the Euro yet.

Cameron no longer pretends to represent the British people but will use his veto powers in the interest of the City of London.

Why should a country that does not have the Euro be able to veto the Euro?
The new EU treaty will require a 85% majority decision of those who have the Euro,
veto powers are abolished.

Why should bonds of sovereign European nations donated in Euros be exclusively traded in the City?
Because the City permits CDS and other “financial tools” that have been outlawed in France and Germany as of this month, so the banks prefer the City where they can execute their predatory instincts.

Cameron’s veto won’t even buy time for the City. The 17 Euro countries will have to sell their bonds to their own population first, then the rest to other Euro members, this will create conditions similar to Japan – no capitalist investors and no City needed.

Rating agencies will loose their power over Euro countries.

There are forces in Europe that consider it an eyesore to be indebted to capitalism, to international investment funds. Society cannot be at the mercy of rating agencies and markets if it wants to create a stable economy.

The Social Market Economy (Soziale Marktwirtschaft) of Germany works on these principles:

a. The central bank, Bundesbank, is independent of the government and has the constitutional duty to safeguard the value of the currency.

b. A network of local banks is licensed and controlled by the Bundesbank. These are the Kassen (and Volksbanken as competitors). The Kassen give credits to local companies and local people only, they are not allowed to engage in any “external activities”. All people have their wages and savings deposited there and all small and medium sized companies use them exclusively. This generates assets called “Bodensatz” which in turn determines how much the Kassen can borrow from the Bundesbank.

Kassen have low overheads and lend with minimal margins. Hence big commercial banks cannot compete and never got a foot in this market. The Kassen system was considered to violate EU treaties as it prohibits the participation of the “free market”. The big banks got their way and laws were revised to let Kassen take part in the “free market”. Those who did needed to be bailed out in 2008.

c. The Kassen also provide mortgages and control the property market. You take out a mortgage contract for 100.000 Euros, then you have to save up 40% over 7 years and get 2% interest. When the contract matures you get a 60% loan at 4% over 11 years. Interest rates are enshrined by law and never change. There are tax advantages which make your monthly payments for the 60% no higher than what you paid during the saving period. Hence there are no defaults and no repossessions. Should you become unemployed your mortgage is paid as unemployment benefit.

d. Workers Unions invest in local companies and thereby assert their influence. When they call for strike they have to pay the worker’s wages. The workers don’t loose out. If the unions were companies quoted on the stockmarket they would be the largest companies in Germany.

The “German Economic Miracle” was no miracle at all, but the result of plenty and cheap capital available to local businesses and employer-employee relations that made them all sit in the same boat.

The Europe of the future will be an enlarged Germany – or it will become crushed by capitalism.

The media has been feeding us with data about sovereign debt. This on its own shows a fraction of the whole picture only. You need to look at the debt of banks, private people and companies to get the true picture of the state of a country.

These figures will be on the table in Brussels on Thursday and Friday:
I have composed them by country as a percentage of GDP in 5 colums, total, government, banks, private, companies:

Germany 321% gov 83% ba 98% pr 60% co 80%

France 449% 87% 151% 61% 150%

Italy 377% 121% 96% 50% 110%

The low private debt enables a shift from government to private, so the citizens can buy their own bonds and there is no need for “exposure to markets”.

Looking at UK figures gives us a different picture:

UK 847% banks 547%, gov 81%, pr 101%, co 118%

A large proportion of bank dept needs to be added to private and government debt as both have aquired a considerable stake through bailouts. This situation is beyond remedy – Britain is the first European victim of capitalism.

Unless citizens have stashed huge amounts under their mattresses that they are willing to give to the banks, the Pound Sterling is worth no more than 20 Euro cents. Private debt at 101% has reached a level that prevents the purchase of their own sovereign bonds, so the UK remains at the mercy of the markets and the City – you need the money of the third world dictators and equivalent elements to keep Britain afloat. The interest on this further drains Britain, un upward spiral that can be brought to a halt through massive devaluation only.

Now let’s take a look at those EU countries that are supposed to have a problem:

Spain 457% gov 67% only, pr 87% only, co a massive 192%, banks 111%

Portugal 422% gov 106%, pr 106%, co 149%, banks 61% only.

Greece 333% gov 166%, pr 71% only, co 74% only, banks 22% only.

Spain has an economic crisis only caused by insolvent property companies sitting on unsellable and overvalued property. This in turn killed the jobs in construction. But sovereign dept is low enough and Spain can get back on its feet through investing in other industries that create jobs.

The same applies to Portugal, more or less.

Greece does have a sovereign debt crisis, but their other debt is a clear indication that Greece could solve its problem on its own. To the low private debt you need to add the private bank accounts of Greeks in other countries. More than anything else it is the political will to make their citizens pay up.

Last not least:

Ireland 1166% banks 689%, pr 123%, co 245%, gov 109%.

This is another victim of capitalism. Ireland needs to be bailed out as a matter of European solidarity. The actual figure of 170bn Euros of government debt for a nation of 4.5m people is peanuts – bailing out the banks is a different issue, their exposure to US derivatives caused the mess, so let Obama write a cheque.

To complete the picture:

Japan 641% banks 188%, pr 77%, co 143%, government 233%.

No problem as debt is held by Japanese citizens as I explained above.

USA 376% banks 94% (after bailout), pr 92%, co 90%, gov 100% which does not include a further 95% found by the audit as I reported earlier. The secret printing of money will continue, the people have lost control and the few at the top are helping themselves to whatever they feel like. Of the $16tn official debt China holds over $5tn. This could become a headline of the near future:

Scandal! – China copies financial crisis.

The next few days will shape Europe, the new Europe.

Capitalism will throw its spanners into the wheels.
Will Europe survive and introduce Social Market Economy or will it succumb to capitalism?

Should the latter be the case their figures will soon look like those of UK and Ireland today.

There is always a choice for individuals, nobody forces you to live in a particular system.
Your alternative could be Permaculture Paraguay

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