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29 August, 2015

A planet drowning in bubbles and debts: How long will it still last?

Governments continue to waste tax and state revenue to support the rotten structure called "free market"

globinfo freexchange

"As long as the government does not intervene, I will sell" a stockbroker recently commented on the fall of China's stock market. He meant that he will selling stocks, bonds and other financial products to trigger government intervention. Because he knows very well that the government of China, like the government of any large economy, sooner or later will shed those public funds are needed in the market to buy stocks and bonds, to support the bubble markets and avoid further decline of its stock market.

For although the global debt has reached 200 trillion dollars, toxic financial products ("derivatives") have surpassed 700 trillion dollars, and real (production) global economy has fallen significantly, the central banks of the world rely on distorted statistics that indicate an upcoming "recovery." In most cases, a more accurate term for these "statistics" would be "lies". But governments continue to waste tax and state revenue to support the rotten structure called "free market".

Especially China has tried every possible way to support the stock market: continuous funding injections, currency devaluation, buying market shares from its gigantic state pension fund, and a reduction in interest rates. The result, as the economic editor of the British Channel 4 Paul Mason noted on twitter a few days ago, is that markets are sinking, while the world understands that the main engine of growth (China) is in the hands of an incompetent, secretive, police state, which thinks that it can dictate the prices of shares.

And despite all the interventions, the downward trend of the Chinese economy continues through small short-lived rises and gains that quickly evaporated. But China, not only is not an exception, but also due to the size of its economy and the dependence of many states of their commercial relations with it, it has acquired the role of pacemaker for many "emerging" markets. As a result, the value of the stock market of many countries that depended on exports of oil and other raw materials to China, has dropped over 33% in the last year: Indonesian and Malaysian by 37% and Brazilian by 51%.

However, the international financial institutions regularly conduct cautious optimism forecasts and focus their attention to the repayment of relatively insignificant debt of Greece and other countries.

Such optimistic forecasts do not constitute an oxymoron, since market regulation is left to organizations like the Federal Reserve System (Federal Reserve) and the ECB. Who would feel safe for the medicines that buys if the organizations responsible for their supervision in Greece (EOF), or Europe (EMA), or USA (FDA), were companies whose shareholders were the major pharmaceutical industries and their administrations consisted of executives of these industries? Similarly, who can have confidence in large state or transnational banks when their boards include current and former bankers? 5 out of 12 members of the most important committee of the Federal Reserve are banking executives in active service, while two of the six members of the Executive Board of the ECB were banking executives - Mario Draghi, the managing director and vice president of Goldman Sachs, and Peter Praet, chief economist at Fortis Bank.

But even when the market regulation includes stringent rules, e.g. for the control of dangerous "derivatives", the big banks will find almost "invisible" windows to bypass each control: Reuters revealed on August 21, that hundreds of transactions worth billions of dollars of the 5 US big banks were "disappeared" by the US markets and had been transferred to London, where market regulation is more lenient for the bankers, to escape from the corresponding controls. As noted by a former finance minister of Cyprus, the big banks always manage to appear one step ahead of any restrictions and control imposed on them. And this happens, even when these controls and financial rules, were set up for the benefit of the richest 1% of the population of the world, as the American Senator Bernie Sanders noted last week.

Certainly, any avoidance of banking control grows the bubble of the markets and increases the risk to burst at any moment. Especially when most trade exchanges are conducted automatically by computers with breakneck speeds. When the bubble bursts, any banking step forward, no matter how fast, will be a step into the void.

Article by Michalis Gianneskis, translated from tvxs.gr

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