By Dr Liz Elliott
For more than a year, the International Monetary fund, the infamous IMF, has warned us a major depression is coming. It’s inevitable soon, because the conditions which gave us the 2008 Global Financial Crisis are worse than ever.
Massive derivative holdings, poor real production, jobs in non-productive ‘lifestyle’ sectors and escalating debts. No-one went to goal for the cruelties of the 2008 recession, except in Iceland. No-one got personally blamed for the toxic financial culture, the corrupt accounting systems, the lies. Meanwhile, worldwide, millions lost homes and jobs.
Instead of being regulated properly, or nationalized, the major banks got bailed out. Ordinary people suffered with austerity measures. Wall Street helped themselves to bail-ins, more than 17 trillion dollars of debt, according to Senator Bernie Sanders. Main Street, small businesses, went broke. Those bailout monies did not go to productive investment, but to mergers and CEO rewards, whereas taxpayers still to carry the debt. Worldwide, debt is now 360% of world income.
Australia, co dependent on China, which is outside the Central Bank system, was buffered by China’s ability to ride out the storm in 2008. Australia is now more deeply in household debt than Ireland or Argentina just before their crashes, 120% times household income. Half of renters say they are worried about homelessness, and shanty villages are popping up near towns in Western Australia, where mortgage stress now affects 30% plus of people. Such stress leads to social breakdown and illness.
If there is a crisis, there will be a credit contraction and small business will have trouble employing people, there will be difficulties paying for imports and even for welfare payments. Social unrest is likely.
The banks, sensing another crisis, but much worse this time, are setting up schemes to prop themselves up when a credit crisis arrives. Through the influence of the Bank of International Settlements (BIS) and the Central Banks of the world, ’bail-in’ laws have been enacted. Australia’s was passed in February 2018, and allows for deposits to be stolen by the banks in the case of a credit meltdown. A new law likely passed September 2019, bans cash transactions over 10 thousand dollars, but already the financiers are asking for a 2 thousand limit. This is to herd small business’ assets into the digital economy where banks can suck it out if needed. Negative interest on savings is another likely move, which will precipitate a run on cash, crypto currencies and gold.
What could trigger another crisis? Australian mortgage debt is one possibility, Italian business debt another, General Electric fraudulent accounting, Bao Shang and Deusche Bank derivative exposure…the list goes on. Where financial institutions are so interlocked, one default could drag down the whole crazy edifice, cascading like a row of dominoes.
Another big factor is war, long a profitable exercise for big corporations, it results in suffering to the victims, usually brown people, and loss of infrastructure even for the aggressor nation. Currently Trump threatens Iran, Venezuela and China. The US uses its SWIFT international transfer system to penalize countries, so that their citizens cannot use credit cards ability and vicious sanctions.
On top of this we have major climate chaos ramping up. Food production losses are already happening now and will increase exponentially in the next 10 years.
Both major Australian political parties dance to the tune of the Big Banks. The extraordinary thing is that the Labor Party supports the Central Bank dictats. The Liberal party knows the situation is unstable and unsustainable but opts for more debt as an answer. Kicking the can down the road! More immigration, more construction, first home buyers’ carrots, reduced lending standards and so more debt. No-one wants to face the difficult restructure of the economy to a sustainable future where we are not servants of the Big Banks. Where money serves the people, not controls them.
What can you do?
Firstly, stay informed and study the causes of financial crises. When we have one, the Murdoch propaganda machine will blame the poor, the foreigners, debtors; one needs to be ready to explain to neighbors the true cause; bank speculation and political mismanagement. Once the causes are understood people can demand true solutions.
We need a new Bretton Woods international conference to change the rules of banking so that the US does not have an unfair advantage. At home, we need a Glass Steagall Law to protect homeowners from having their homes absorbed by failing banks as they try to plug the derivative hole. Glass Steagall means separating gambling banking from boring banking which helps homeowners and farmers. Please look this up and write to your local member about the need to protect homeowners from bank speculation.
The major solution is a new Public Bank. This would fund infrastructure, smaller farms and small business. Such as bank operated in Australia, Canada and New Zealand for the beginning part of the last century and created a huge boom in the countries it served. 40% of the world still banks with such institutions, they are easily set up, proven. Basically they recycle interest monies to the good of the nation, not the hyper-wealthy. Ellen Brown has written clear straightforward books on Public Banking. 13 U.S. states have or are in the process of setting up such bank. Bob Katter, the Greens and other minor parties support a New Common Wealth Bank.
There are other options for financing, too. Small and local banks and credit unions need supporting, they are not speculators nor credit out of thin air creators. In Germany these banks are the norm and have inspired much innovation and wealth. Local currencies are also great. They tend to arise when there is a credit crunch, as in Greece. The rules for these are available on the net at Community Forge. Cryptocurrencies may be part of the solution but have problems including huge greenhouse emissions.
Gold is worth buying now before it skyrockets. Australia should demand its 80 tonnes of gold back from the UK where it is ‘stored’. The British Empire, Brexit and the London City Banking system is responsible for much suffering and financial centralization. We need an independent foreign policy and more self-reliance in Australian manufacture.
In your personal life, try to avoid and pay off debt, band with others to utilize real estate fully and encourage local food, energy and water suppliers. Health and friendship circles are crucial, also local media and ancient methods to stabilize personal sanity to ride out upcoming crises.
The key thing we need to share with friends and younger persons is that we can turn this ship around, we can prosper when Big Banks do not call the tune. We can repair our environment, create part-time work for all, have a UBI and heal our communities. There is a clear path to sustainability.