I’ve been trying to wrap my mind around some of the important economic and political developments cascading across Europe, and how they might affect us.
Late last week, the financial markets were rocked with the announcement that the biggest, and heretofore assumed most stable US bank, J.P. Morgan, lost $2 billion - the outcome of speculation in high-risk financial securities. In other words, the kind of investing that set off the previous global financial crisis in 2007.
Yet JPMorgan Chase Chief Executive Jamie Dimon speaking just two weeks ago at a conference, where he was lauded as "executive of the year" and introduced as a "CEO Statesman,", argued that the government should focus on resolving its own fiscal issues instead of reengineering a financial system that is healing itself. Dimon claimed:
"The consumer is in my opinion 80% repaired, business 100% repaired," "We have the widest, deepest and most transparent capital markets in the world."
Wow, how’s that for Hubris!
I urge you to listen to William Black’s interview on Democracy Now!
Now we may be witnessing once again the unraveling of the capitalist global financial system.
Europeans stocks are tumbling and investors around the world are keeping a close eye on Greece as the Euro crisis enters a new phase. Thanks to the worldwide economic meltdown and trickle-down austerity response - the Greek economy has been in recession for the last five years.
On the heels of elections that ousted the pro-austerity government in Greece – there will be a new round of elections on June 17th. The Left will likely pick up even more seats in Parliament - making an anti-austerity coalition government a real possibility just before Greece runs out of money. When Greece goes broke - if the likely new left government refuses as expected to sign on to the austerity and bailout plans - then Greece will default and likely be forced out of the Eurozone.
We see huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.
Those of you that follow such stuff may have noticed the speculators’ “flight to safety” in both Europe and the U.S. This is not caused by a “little thing” like JP Morgan Chase losing $2 billion. They’re estimated to have an exposure of $79 trillion (that’s t from trillion) on a market capitalization of only $140 billion! Talk about being highly leveraged.
What happened with J.P. Morgan last week—and is still yet to happen further with J.P. as well as with other US banks—shows how deeply the US banking system is integrated with the European. J.P’s losses are Euro-centered, speculation driven, and Credit Default Swaps and other derivatives based. That means what’s been happening in Europe and its banking system is not isolated from the U.S. banks. Today’s emerging European bank crisis—the second globally since the first in 2007-09 centered in the U.S.—will have a significant impact on the U.S.
Some recent headlines read:
Get Ready for the Spanish Bailout
Spain Is the New Greece
Growth Chill About to Hit the US
Keep in mind there are $trillions of dollars of Credit Default Swaps (bets), and other toys the geniuses on Wall Street created, piled on the worlds’ economies and ready to tumble like the proverbial stacked cards.
There’s no way the U.S. economy, despite all the false hype about another recovery now occurring in the U.S., can avoid a further downturn as well.
What’s already been the impact on our jobs, retirement security, on the state budget and services, on our families? One indicator: in 2010, 93 percent of all new income created in the previous year went to the top one percent, while the bottom 99 percent of us had the privilege of enjoying the remaining seven percent. In other words, the rich are getting much richer while almost everyone else is falling behind.
The real solutions to the parallel failures of economic policies in both the U.S. and in Europe today require basic restructuring of the banking systems in both economies. This will only be possible if we change what’s currently politically possible. We are beginning to see that change:
People across Europe have been shaking things up on the job, in the streets, and at the ballot box.
* Last week, hundreds of thousands of British public sector workers staged a 24-hour strike against their government's attacks on pensions.
* in Spain, hundreds of thousands marched against government plans for more austerity despite record 24% unemployment.
* Polish union members protesting against plans to raise the retirement age chained together barriers meant to keep them out of Parliament on Friday. `We will decide when they will leave,' a Solidarity trade union leader said. `At least for once we will decide something instead of them.' The union members took their action after lawmakers voted to raise the retirement age.
The Greek and French elections show that the people want real income growth and jobs -- and they are clear that austerity is undermining both.
In Germany - Chancellor Merkel saw her Conservative Party get crushed in state. Merkel has been leading the charge for austerity around Europe - but now finds herself vulnerable as support for her Party plunged to 26%.
The voters of Europe have spoken, and surprise: they are not too keen on fiscal austerity. What are we waiting for–a translator? Everywhere you look - the supporters of trickle-down austerity are getting hammered by voters. However, the anti-tax bogeyman isn't going away soon with Governor Shumlin having the bully pulpit. Let's help Vermonters and other Americans get the message.
The ‘Arab Spring,’ the movement of the ‘indignant ones’ in Spain, the numerous strikes and demonstrations in Greece, the worldwide ‘Occupy’ movement which started in the US, as well as the campaign for a Peoples Budget in Vermont are all a source of encouragement. It is high time to strengthen the organizing and protests! Together, through strong grass-roots activity in Vermont and around the country, we can change the direction of our state and this country. Please don’t ever forget that, even in these difficult times.