Friday 29 June 2012

Even more hypocrisy from David Cameron

The UK Prime Minister David Cameron has already exposed himself as a massive hypocrite by publicly criticising the tax dodging activities of the so-called comedian Jimmy Carr, whilst leading a party that has accepted millions in donations from other tax-dodgers. These tax dodging Tory donors that Cameron refuses to criticise include George Robinson, who donated £250,000 to the Tories and has been using exactly the same K2 avoidance scheme that Cameron described as "very dodgy" and "morally wrong" in the Jimmy Carr case. Other top Tory donors and supporters that avoided criticism from Cameron include the singer Gary Barlow who is under investigation for his involvement in a massive tax dodging scheme and the notorious "Belize based" tax dodger Michael Ashcroft who is the single biggest donor to the Tory party since David Cameron became the party leader.

Not content with making one stunningly hypocritical statement, Cameron then made another only days later when he decided to criticise the leadership at Barclays bank in the wake of their £290 million fine for rigging (Libor & Euribor) interest rates that effect millions of people and £trillions worth of transactions. Cameron attempted to take the moral high ground, claiming that "people have to take responsibility for the actions and show how they're going to be accountable for these actions," and that "it is very important that goes all the way to the top of the organisation". Noble sentiments indeed until you consider some of the numerous Tory corruption scandals under David Cameron's leadership.

Take the News International phone hacking scandal, has the man that maintained stunningly inappropriate relationships with high profile members of the Murdoch press empire and hired the liar Andy Coulson as his right hand man, taken "responsibility" for his actions? Of course he hasn't.

Take the Liam Fox, Adam Werrity, Atlantic Bridge corruption scandal. Did Cameron take responsibility for allowing such blatantly corrupt activity to go on under his watch? Of course he didn't. He actually attempted to shield Liam Fox to such an extent that he even breached the ministerial code in order to avoid a politically damaging independent investigation into the corruption scandal.

Take the Westminster expenses scandal, didn't the fact that dozens of Tory MPs were brazenly stealing from the taxpayer demand that accountability should have gone "all the way to the top of the organisation"? Did Cameron "take responsibility" for the corruption and theft that his MPs were engaged in? Of course he didn't. In fact under his watch many of the worst offenders got off scott free. Several Tory second-home flippers such as Michael Gove and William Hague are sitting in David Cameron's cabinet. This shows that under David Cameron's leadership, accountability not only doesn't apply to "the top of the organisation" it doesn't even apply to those that committed the offences.

Take the absurd case of Jeremy Hunt, the man who was parachuted in by Cameron to deal with the Rupert Murdoch's bid to take complete control of Sky because his predecessor Vince Cable was criticised as "too biased". Hunt was quite clearly Murdoch's pick as their inside guy, crucially sending a memo to David Cameron in support of the BSkyB bid weeks before Cameron had even appointed him as the minister responsible for determining the outcome. How on Earth Hunt did not consider this blatant bias a conflict of interests and recuse himself is a mystery, especially since his predecessor had been removed because of accusations of bias. Perhaps in Cameron's and Hunt's minds Cable was simply guilty of "the wrong kind of bias". Given all of the evidence of his cosy relationship with the Murdoch press, has Hunt been made to resign and somebody at "the top" of the Tory party taken responsibility for having made such a transparently biased appointment? Of course they haven't.

Take the blatant mismanagement of the economy by George Osborne and his numerous shambolic U-turns after his "back of an envelope" millionaires budget, has Cameron forced his Bullingdon Club buddy to take responsibility and resign for having driven the UK economy back into recession with his "cut now, think later" austerity fetishism? Of course he hasn't. 

It is quite astonishing to such brazenly hypocritical pontification from a man that has wriggled and connived to avoid responsibility for the corruption and incompetence of his party, a man that has done everything in his power to protect his MPs and supporters from the consequences of their corruption and incompetence too. By contrasting his statements on the immorality of tax-dodging and the need for responsibility to be taken at the top of an organisation, with his actions when it comes to these matters, we can see that Cameron clearly believes that there is one set of flexible and morally ambiguous rules for Tories and their supporters and a completely different set of clearly defined and morally rigorous rules for everyone else. A clear double-standard that is the classic sign of self-interested hypocrisy.

See also

Thursday 28 June 2012

The blame the victim fallacy

This graph demonstrates that any "savings" created through
 arbitrary attacks on the benefit entitlements for the under-25s
 would be drops in the ocean compared to other factors
in the current economic situation.
One of the core Tory tactics since at least the 1980s has been to drag out the blame the victim fallacy, otherwise known as scapegoating

Tory governments tend to create nasty spikes in unemployment. In the 1980s unemployment rose dramatically as the Tories waged economic warfare against the unionised heavy industries, working people that Thatcher famously called "the enemy within". The current administration are waging war against the public sector, using the mantra of austerity to justify their plans to create nearly half a million public sector redundancies. and impose harsh real terms salary cuts on the rest (whilst gobbling up huge salary hikes for themselves).

After creating pockets of extremely high unemployment in the formerly industrialised regions in the 1980s the Tories began to create a narrative that these people had no jobs, not because of deliberate Tory policies but because they were feckless and idle. In the 1980s Norman Tebbitt famously told the unemployed to "get on your bike and look for work" and the current Tory Prime Minister loves to demonise the unemployed and under-employed as idle scroungers. Cameron's latest initiative is to arbitrarily cut housing benefit for the under-25s, an utterly bizarre scheme given that 80% of people claiming housing benefits are the working poor. Stripping them of their homes and sending them back to live with their parents hardly seems like a sensible economic strategy, especially if it means that they have to give up their jobs.

If Cameron really wanted to cut the cost of housing benefits he could introduce simple measures such as ensuring that all employers pay a living wage (so that the state doesn't have to constantly top up wages via housing benefits and tax credits), to introduce rent controls to stop private sector landlords siphoning billions of taxpayers' cash by renting shit houses to the working poor and the unemployed and to invest in the construction of affordable social housing so that a greater proportion of housing subsidies go straight back to local governments via council rents. Of course this would never happen under Tory rule, since the parasitic rentier class is one of their key demographics and they have an ideological opposition to state spending, no matter how economically beneficial it may be. Another problem is that Cameron doesn't really give a damn about resolving the current situation, he is just casting around for another group to demonise and scapegoat, he can't attack pensioners, since they are the most likely to vote Tory, so he cynically decides to attack the young. The scale of government spending on housing benefits when put into perspective (see the table above) shows that any potential savings there are minuscule in comparison to other economic factors such as the banker bailouts, tax dodging and toxic PFI debt legacies.

It is undeniable that there are some "idle unemployed" but the vast majority of people in receipt of housing benefits are actually the victims of the Tories insane socially and economically destructive "cut now, think later" austerity death cycle and exploitative employers paying poverty wages in the knowledge that the state will top-up via housing benefits and tax credits. Arbitrarily removing the social safety net for under-25s is a classic example of blame-the-victim, since very few under-employed under-25s were responsible for the implosion of the global financial system that caused the ever growing UK budget deficit. 

It is amazing that the arbitrary punishment of the victims of three decades of barmy monetarist, neoliberal gibberish in lieu of sustainable economic policy gets so much public support, given the inaccuracy of painting all benefits claimants as "idle scroungers" at a time of extremely high unemployment. This public tendency to blame the victim is a classic example of the just-world-fallacy. It has been shown that observers of torture victims have been shown to derogate the victims, the greater the level of torture, the higher the level of abuse that the observers aim at the victim. When the observer is abusing the victim it is actually an attempt to pretend the world is naturally fair, and that because the victim is suffering, they must therefore deserve it. Thus the unthinking reactionary can support arbitrary and unfair attacks on the under-25s by pretending that all claimants are idle scroungers, rather than the working poor and economically destructive government policies.

The real problem in the UK is the "idle rich". Tax-dodgers cost the UK economy between £70-150 billion per year,
reckless financial sector gamblers (£900 billion in bailouts, £325 billion in quantitative easing), corrupt politicians who sign up to astonishingly wasteful and inefficient PFI schemes and outsourcing deals,  and idle buy-to-let parasites. The buy-to-let slumlord is the perfect example of the idle rich in this case, since, a huge proportion of the £20 billion annual cost of housing benefits end up in the pockets of the buy-to-let parasites that did so much to over-inflate the UK property bubble and rental prices in the first place. Housing benefit rarely rewards the idleness of the poor, it is in fact a form of direct taxpayer subsidisation of the profit margins for idle and parasitic property spivs.

Cameron and the Tories will never do anything to resolve the economic situation since their core financial donors are bankers, corporatists and tax-dodgers and the exploitative rentier class are a core Tory demographic, hence reform of the banking sector has been booted into the long grass, there is no discussion at all about the chronic lack of affordable housing, no real effort to clamp down on tax dodging, no effort to regulate the private rental sector and all the Tories seem to offer is yet more vindictive scapegoating of the unemployed and the working poor.

Blaming the victims of the recession that the Tories were instrumental in creating is just another example of Tories using the Great Neoliberal Lie strategy, the absurd and inaccurate claim that the cost of welfare rather than the reckless gambling of the deregulated, neoliberalised financial sector caused the current economic crisis. 

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Wednesday 27 June 2012

How Tory scapegoating works

A Tory campaign poster from the 2010 election. Jobseekers
Allowance was already being cut for people that refused to
work, but since when did the facts ever stop a right-wing rant?
Less than a week after David Cameron ignited a storm of criticism by hypocritically attacking the tax arrangements of the (so-called) comedian Jimmy Carr as "morally wrong", he decided to win back the public with a speech at the Bluewater shopping centre aimed at scapegoating the poor and needy.

Anyone capable of critical thought could spot the rank hypocrisy of a man who leads a political party funded and supported by tax-dodgers, who inherited a fortune from his father's tax-dodging empire, publicly criticising a comedian for his dodgy tax arrangements. Similarly the critical thinker should also be able to see that Cameron's speech was nothing more than an attempt to divert attention away from the huge scale of tax dodging and the brazen mismanagement of the economy under his leadership by attempting to blame the poorest in society.

One of the most bizarre and controversial proposals was to cut housing benefits to all under-25s, forcing them to return to live with their parents. The fact that around 80% of housing benefits clamiants actually have low paid or part time work, seems to have passed him by entirely. The reason the cost of welfare is so high is not because there are millions of "feckless scroungers" as Cameron would have us believe, it is because corporate bosses have got away with paying poverty wages which are then topped up by the state via housing benefits and tax credits. The main beneficiaries of housing benefit payments are not the poor sods that can't afford to buy their own homes or even pay the over-inflated rents in their areas, it is the virtually unregulated buy-to-let slumlords, that inflated house prices by buying up all of the available affordable housing then parasitically enriched themselves by renting their shit houses to the unemployed and the working poor, creaming off a huge proportion of the £20 billion annual cost of housing benefit for no effort at all. If any sector of society can be described as "idle scroungers" it is these buy-to-let parasites, living off other people's labour and when that is not enough, expecting the taxpayer to subsidise their "investments" through the housing benefits money faucet.

If Cameron really wanted to cut the cost of housing benefit payments he would ensure that employers actually pay a living wage and stop relying on the state to top up their poverty wages for them and he should ensure that the private rental market is properly regulated, via the introduction of rent caps and similar environmental and habitability standards to which all social housing properties must comply. Obviously these kinds of reform would never happen under a Tory government, since the corporate exploiters and the parasitic rentier class are two of their major sources of votes and political donations.

Cameron's proposed welfare cuts are an obvious smokescreen, to divert attention away from the people that really caused the economic crisis and the ever growing budget deficit, the reckless bankers, the tax-dodgers and the hopelessly compromised and incompetent political class. Under Tory rule the rich have continued to get richer whilst ordinary working people and the desperately poor have been made to pay for the reckless gambling of the financial sector elite via brutal "austerity measures". These austerity measures are also causing further economic contraction, via the austerity death cycle.

The core Tory objective is to further enrich the economic elite at the expense of millions of ordinary people, it doesn't matter to them if the UK economy falls back into recession, as far as they are concerned the only indicator of whether they are doing their jobs properly is if their rich friends continue to get richer.

Such a divisive and malicious core objective is impossible to justify to the millions of ordinary people that must suffer in order to further enrich tax-dodging Tory donors, exploitative rentiers, greedy corporate bosses, reckless bankers, landed gentry and the like, so the Tories need another strategy, a narrative that unthinking reactionaries will tend to believe in, thus the scapegoating of the poor, the blame-the-victim narrative.

From a critical perspective it is almost impossible to see how this strategy works. Even if you allow the absurd assumption that absolutely every claimant is a "feckless scrounger", that 100% of all housing benefit (£20 billion) and Job Seeker's Allowance (£12.5 billion) go directly to the workshy scroungers that Cameron invokes, these figures are drops in the ocean compared to the cost of the "feckless rich". It has been estimated that tax-dodging costs the UK economy between £70-150 billion a year, the Bank of England has devalued the Pound by "magicking up" £375 billion to distribute to their wealthy financial sector mates, the UK government handed out another £900 billion to the financial sector and the absurd Tory cut to the 50p tax rate for the extremely rich is set to cost up to £20 billion according to the Daily Telegraph. The facts just don't add up. Getting rid of housing benefit and Job Seeker's Allowance entirely still wouldn't be enough to cover the ever growing budget deficit created by Neo-Labour and significantly worsened by the Tory led coalition and their barmy cut now, think later austerity agenda.

The maths don't add up but these kind of scapegoating strategies remain popular with the right-wing press and the ever growing crowd of braying reactionaries that lap up and repeat the feeble narrative that "feckless poor" caused the recession and must be the ones to pay. The reason that this grotesquely distorted version of events remains popular has nothing to do with facts or reality, it is all to do with perception and ego.

Even the unthinking right-wing reactionary has to recognise that there is something wrong with the economy, after all they (like the rest of us) have probably suffered several consecutive years of pay freezes, whilst their costs of living has sky rocketed. Blaming the poor, the young, the disabled and immigrants is the easy option for the reactionary mind, since the reality that they are being robbed by the financial elite and the political classes implies that themselves they are lower down in the social order and that they must have been completely stupid to have allowed themselves to be duped in this way by their "superiors". Blaming "lower-class vermin" for the crisis allows the reactionary to feel superior and absolve themselves from all blame for the economic crisis.

The reactionary doesn't care about facts and accuracy, all he needs is a simple narrative that allows him to explain complex situations in basic terms. This narrative is much more likely to stick if absolves the reactionary of blame and gives them a smug sense of superiority. Hence the desperation from Cameron and the right-wing press to blame the poor and needy, who had virtually nothing to do with the global economic meltdown instead of allowing the finger of blame to point at Cameron's financial sector backers, (the ones that actually created the crisis in the first place) and the cack-handed mismanagement of the economy from his government that exacerbated it.

See also



Saturday 23 June 2012

Credit Default Swaps explained

Following financial sector deregulation in the US,
the CDS market grew exponentially
Credit Default Swaps are complex financial derivatives.
Although forms of Credit Default Swap had been in existence from at least the early 1990s, the financial giant JP Morgan is widely credited with creating the first modern Credit Default Swap in 1994.

In 2000, neoliberal financial sector deregulations in the United States meant that the Credit Default Swap market was exempted from virtually all regulation.

The Commodity Futures Modernization Act of 2000, (which was also responsible for the Enron loophole) specifically stated that CDSs are neither futures nor securities and so are outside the remit of the SEC and CFTC.  After these deregulations, the Credit Default Swap market grew exponentially. In 2000, the market was worth $0.9 trillion. By the time the global financial sector insolvency crisis occurred in 2008, the CDS market was worth more than $30 trillion (more than 15x the size of the entire UK economy at the time).

The easiest way to imagine a CDS is to think of it as a kind of financial sector insurance. The similarity between a traditional insurance policy and a CDS is that the buyer pays a premium and in the case that one of the specified events occurs (a company goes bankrupt, a currency loses value, a state defaults) the buyer receives a payment from the issuer of the contract.

The main difference between an insurance policy and a CDS is that the buyer of a CDS does not necessarily have to own the financial product they are "insuring", in fact the buyer does not need to have even suffered any financial loss at all in order to claim their payout. This creates a situation where Credit Default Swaps can be used to speculatively bet against troubled entities. In the last days before the American bank Bear Stearns went bankrupt, a large number of Credit Default Swaps were purchased on their stock, and during the Greek economic crisis a huge market for Credit Default Swaps on Greek government bonds developed.

These kinds of speculative CDS contracts, where the buyer is not interested in taking out insurance against the failure of one of their investments, but simply making a profit out of someone else's misfortune are often called Naked Credit Default Swaps. It has been estimated that Naked Credit Default Swaps account for over 80% of the global CDS trade.

To put Naked Credit Default Swaps into a simple context, lets use the analogy that they are like strangers buying insurance on your house because they think that there is a strong possibility that it will be robbed or attacked by arsonists. Since there is no need for the owners of the Naked Credit Default Swaps to have any financial interest in your house, lets say 200 speculators buy this kind of insurance on your house. The first and most obvious problem with this situation is that in the case that the house is attacked by an arsonist, the issuer of all of the Naked Credit Default Swaps is going to face an insurance payout 200 times the size of the actual economic damage of your house fire, because they must pay out over and again on the same event. This kind of multiplication effect contributed to the collapse and subsequent taxpayer bailout of the American insurance giant AIG, which issued hundreds of billions of dollars worth of CDS contracts without bothering to hedge against the possibility that the reference entities might lose value, meaning that when the 2008 financial sector meltdown hit, they faced CDS payouts in excess of $100 billion on the collapse of Lehmann Brothers bank alone.

The AIG collapse and taxpayer funded bailout illustrates another fundamental difference between CDS policies and ordinary insurance policies. In order to sell home/car/travel/contents/life/health insurance, the insurer must comply with strict insurance industry regulations and demonstrate that they actually have the capital reserves to pay out on the policies they have been issuing. There are no such constraints on issuers of CDS policies, meaning that AIG issued billions of dollars worth of CDS contracts with no obligation to actually maintain the credit reserves necessary to pay out on them. After the financial sector meltdown AIG received a $182 billion bailout from the government, At least $90 billion of which went towards payouts on AIG's unhedged Credit Default Swap policies. Most of this taxpayer funded cash mountain went to pay out on Naked Credit Default Swaps owned by large American and European banks, including Goldman Sachs which received a $12.9 billion taxpayer funded windfall.

The second problem with Naked Credit Default Swaps is that they actually provide a financial incentive for the buyers to then do whatever they can to increase the probability that the troubled assets that they are betting against will fail. In our analogy, the 200 strangers who have bought insurance policies on your house now have a financial incentive to increase the chances that your house burns down, since they have nothing to lose in financial terms from a house fire on a property that they don't own, and a lot to gain. They don't necessarily have to turn to arson and burn it down themselves, however they could easily ensure that all the local arsonists and vandals have your address and a good supply of petrol and matches.

there are two particularly egregious examples of financial institutions using Naked Credit Default Swaps to profit from the misfortune of their own clients. In 2001 the American financial giant Goldman Sachs received a $300 million payment from Greece for helping the country to hide the true extent of their debts from the European regulators. This deal shows that staff at Goldman knew that the Greek economic situation was far worse than the official figures stated. At the same time as they were helping Greece to cook their books they were also buying up Naked Credit Default Swaps on Greek assets, meaning that they would make large profits if the true extent of the debts they were helping Greece to hide became public. To return to the analogy, Goldman Sachs knew the Greek house was likely to burn down, as they had helped them to hide the fact that it was full of financial dynamite from the European safety inspectors, using this insider knowledge they bought a load of CDS insurance policies and waited for the financial bomb to explode and the cash to start rolling in.

Another example of firms betting against their own clients can be seen in the sub-prime mortgage crisis. Many American banks packaged up their worst mortgages into financial instruments called Collateralised Debt Obligations, paid the Credit Ratings Agencies to stamp them with AAA, top grade ratings then sold them on to their customers as valuable assets, rather than the toxic sub-prime junk that they knew they actually were. Packaging toxic junk as valuable assets and selling it to your unsuspecting customers is bad enough, but many banks went even further by taking out Naked Credit Default Swaps on the dodgy assets they had just sold. Returning to the house insurance analogy once again, this is as if an estate agent had made a hefty profit selling you a dangerously constructed house that they knew would be certain to burn down within a couple of years, then taken out insurance policy to make sure they made another profit when the fire actually happened.

There are currently debates in the United States and Europe about whether speculative uses of credit default swaps should be banned, however there is vociferous opposition from the financial sector players who have been allowed to use these products to make huge profits on other people's misery. Financial misery that in many cases they actively helped to create. The case for the regulation of the CDS market is an undeniably strong one, especially given that the American business magnate Warren Buffet (who is hardly some kind of socialist free market critic) described derivatives bought speculatively as "financial weapons of mass destruction".

The huge obstacle to sensible regulation of the CDS market is that the financial interests of those who would lose out under a properly regulated system have enormous influence over western political systems. The UK is run by a political party that is majority funded by the financial sector, meaning that the Tory party happily kicked UK financial sector reform into the long grass and spend hundreds of thousands of taxpayers' money on actively opposing virtually all new financial regulations proposed by the EU.

In America Barack Obama has surrounded himself with the very same bankers and economists who were at the epicentre of the global economic meltdown. People who were instrumental in the creation of the highly unstable derehulated financial sector in the first place. Any effort to regulate the CDS market in the US would be seen as a huge political u-turn and an admission of responsibility for the global economic crisis for whichever party did it, since both the Democrats and the Republicans introduced ideologically driven measures designed to remove regulation from the CDS market.

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Thursday 21 June 2012

Jimmy Carr vs David Cameron in the Tax Hypocrisy stakes

In June 2012 it was revealed that the comedian Jimmy Carr had been using an elaborate tax avoidance scheme called K2 to avoid paying tax on income of at least £3.3 million. His critics were keen to point out the hypocrisy of having attacked the dodgy tax practicesat Barclays bank on the 10 O'clock Live show whilst simultaneously filtering his own income through an elaborate tax dodging scheme.

WARNING - Video is far from funny, simply embedded as an example of Jimmy's hypocrisy.

Jimmy Carr may be an absolute hypocrite for attacking the Barclays tax dodging scam whilst simultaneously engaging in his own tax dodging activity, but the UK Prime Minister David Cameron is already outdoing him in the hypocrisy stakes by describing Jimmy Carr's tax arrangements as "very dodgy" and "morally wrong". 

It is funny how the Prime Minister is prepared to speak out against the tax dodging activities of one of his celebrity critics, but always hides behind the "can't comment on individual cases" clause when it comes to the tax affairs of huge corporations such as Vodafone, Goldman Sachs, Boots, Tesco, Barclays.... or the tax avoidance schemes used by high profile Tory supporters Michael Ashcroft, Philip Green or Gary Barlow. Another aspect to Cameron's hypocrisy is that he quite happily inherited £300,000 from his father, who made millions through the establishment of a tax dodging empire in the wake of Margaret Thatcher's abolition of capital controls in 1979. Yet another aspect of his craven hypocrisy is that the Tory party actually invited some of Britain's biggest tax dodging companies to form working groups to design UK tax policies. Companies invited to participate in these Tory tax policy working groups include serial tax avoiders (such as Vodafone, Shell, Tesco) and tax avoidance facilitators (such as Barclays, AIG, Lloyds).

After the publicity storm and Cameron's critical comments Jimmy Carr was quick to quit the K2 tax dodging scheme and make a public apology which read "I’m no longer involved in it and will in future conduct my financial affairs much more responsibly. Apologies to everyone. Jimmy Carr". Given David Cameron's new found opposition to tax dodging, I'm sure everyone will expect David Cameron to tear up any proposed legislation which included input from tax dodging companies, to publicly apologise for receiving a large inheritance from his father's "dodgy" tax avoidance empire and to publicly explain to big Tory donors and celebrity supporters like Michael Ashcroft and Gary Barlow that he and the Tory party want nothing more to do with them since they are morally repugnant tax avoiding bastards.


How the ECB are profiting from Greek misery

No wonder the unelected head of the ECB is smiling, his team have figured
 out a way to turn a profit on the hoard of Greek bonds his predecessor
bought in an insane attempt to shore up the failing Greek economy.
One of the most infuriating things about mainstream commentaries on the Greek economic crisis is the absurd assumption that the vast bailout loans being sent over to Greece are actually designed to help the Greek economy. One barely mentioned tranche of loans to Greece was a €4.2 billion payment from the European Financial Stability Fund (EFSF) in June 2012 provides a perfect example of how the bailouts are actually being used to benefit the European financial establishment at the direct expense of the Greek economy.

In May 2010 the European Central Bank initiated a barmy policy of buying up tens of billions of euros worth of Greek government bonds in an absurd attempt to prop up their market value. The ECB were given a significant discount on the market rate (estimated at 20%), meaning that after spending €40 billion they were sitting on a paper profit of around €10 billion.

In February 2012  Greece's private creditors were forced to take large losses on their investments, effectively slashing the value of Greek government bonds. In order to avoid turning their €10 billion "paper profit" into a large loss, the ECB insulated their own Greek bond holdings by insisting that the "old devalueable" bonds be swapped for "new" bonds as part of the deal. This bond swap ensured that the ECB would not suffer the same kind of large scale losses as Greece's private creditors.

The Greek bond swap allowed the ECB to avoid losses on their Greek bond holdings, but it still left them in the tricky position of holding tens of billions worth of Greek bonds at a time when extremely high profile European political leaders (such as Angela Merkel and David Cameron) were openly scare mongering about Greece being thrown out of the Euro if they dared to vote for anti-austerity parties. The ECB solution to this problem has been to force the Greek state to borrow billions more from the EFSF in order for them to begin buying back the ECB hoard of Greek bonds. The first tranche of bond buy-backs took place in June 2012 shortly before the re-run of the first undecided Greek legislative election.

Instead of providing money to the Greek government so that they could do something to combat the shocking shortages of medical supplies or to create some kind of demand in the austerity stricken economy, the European Union have actually used this €4.2 billion EFSF loan in order to reduce the ECB's exposure to Greek debt, meaning that all of this €4.2bn loan flowed straight back out of Greece, leaving only another vast debt for the Greek people to pay off behind it.

As if using the "bailout fund" in order to serve the ECB's financial interests isn't bad enough, 
it has been reported that Greece were made to buy back their own bonds at face value, despite having sold them to the ECB at a 20% discount, meaning that of the €4.2 billion in increased debt for Greece, the Greek economy will see no benefit at all whilst the ECB make a tidy profit of €840 million. Not only did the ECB use their powerful position to avoid the "haircut" other Greek creditors experienced, they used it to actually turn a tidy profit for themselves from the economic chaos in Greece.

From this arrangement alone it is quite clear that the European Union and the ECB are far more interested in protecting their own financial interests than they are in preventing the annihilation of the Greek economy or alleviating the suffering of countless Greek people. This situation is reminiscent of the IMF's handling of the Argentine economic crisis, which prompted the late Argentine president NĂ©stor Kirchner to say that "The IMF has transformed itself from being a lender for development to a creditor demanding privileges". This shady, virtually unreported bond buy-back deal demonstrates that the troika of the IMF, the ECB and the European Union are not the economic saviours they dress themselves up as, they are a ruthless bunch of sociopaths that are using devastating socio-economic chaos in order to enforce their favoured brand of ideologically driven neoliberal pseudo-economics under the guise of "austerity" whatever the cost to ordinary Greek civilians and to put their own financial interests first to such an extent that they are even prepared to turn a profit from the socio-economic chaos they have done so much to create.

See also

Tuesday 19 June 2012

Reaction to the 2nd Greek election

The fact that the pro-austerity New Democracy party crept into first place in the re-run of the 2012 Greek legislative elections has been greeted with unmitigated joy from the Euro fear mongerers that did so much to frighten the Greek electorate into voting against their own interests.

Shortly after the first inconclusive Greek election in May 2012 the Euro fear mongerers initiated their campaign of lobbying in favour of the pro-austerity parties. German Chancellor Angela Merkel telephoned the Greek President Karolos Papoulias in order to advise him to run the election as an unofficial referendum on Greece's membership of the Euro, in order to frighten the electorate into voting pro-austerity.  British Prime Minister David Cameron waded into the discussion, putting the threats in much more explicit terms with his statement that "we now have to send a very clear message to people in Greece: there is a choice – you can either vote to stay in the euro, with all the commitments you've made, or if you vote another way you're effectively voting to leave."

The unelected technocrats also joined in with the policy of Euro fear mongering in the lead up to the second Greek vote. Christine Lagarde of the IMF chose to sanctimoniously lecture the Greek people, claiming that she had no sympathy for the suffering Greek civilian population, insisting that it is "payback time" for Greece and making it clear that the IMF would never consider softening the terms of the country's austerity conditions. All in all a very clear message to Greek voters that they must vote for austerity or the IMF will pull the plug. 

The Belgian Finance Minister Steven Vanackere continued the fear mongering by stating that contingency planning for a Greek exit from the Eurozone was taking place. The mainstream western press got in on the fear mongering act with CNN even going as far as to claim that Greece could not only be thrown out of the Eurozone, but the European Union too, dependent on the election results. On the eve of the election the German tabloid Bild addressed a threatening letter to the Greek electorate, demanding that they vote for the pro-austerity parties or face "complete disaster".

Even after this co-ordinated campaign of fear mongering, significantly more Greeks voted for anti-austerity parties than for the pro-austerity establishment, making it quite astonishing to see how the mainstream press have been joyfully misleading the public with their coverage of the results. Instead of focusing on the extremely significant fact that the majority of Greek voters actually cast their votes for anti-austerity parties, the UK press has been gleefully describing the results as a victory for the pro-austerity minority, simply because New Democracy managed to sneak into first place with only 29% of the vote, meaning that they could claim the 50 bonus seats handed out to the single biggest party. Thanks to the bonus 50 seats the political establishment parties ND and PASOK (the people that led Greece into the crisis in the first place) can potentially form a coalition government to continue the policies of defunct neoliberal pseudo-economics dressed up as "austerity" and vast bailouts that flow straight back out of Greece to pay out on what should have been losing financial sector bets made by the reckless European financial sector.

Considering only 42% of Greek voters were intimidated into voting for the pro-austerity parties, whilst 55% of the Greek electorate voted for explicity anti-austerity parties, the undisguised glee of the pro-austerity Euro-bullys is particularly hard to stomach.

Angela Merkel telephoned ND leader Antonis Samaras to congratulate him on his victory, saying that she was confident Athens would "abide by its bailout pledges". Barack Obama's press secretary Jay Carney congratulated Greece and said that "we believe that it is in all our interests for Greece to remain in the euro area while respecting its commitment to reform". Italy's unelected puppet Prime Minister, Mario Monti, said he was delighted with the Greek vote, "which is also a great sign for Europe". The right-wing austerity fetishist Spanish Prime Minister Mariano Rajoy was also delighted that New Democracy had come in first, which he described as "good news for Greece, very good news for the European Union, for the euro and also for Spain".

As unpleasant as it is to see the pro-austerity forces gleefully celebrating this result and the mainstream media spinning it as if the Greek electorate had handed the pro-austerity forces a resounding victory, in the long run a continuation of the neoliberalisation of the Greek economy against the wishes of the majority of the electorate may actually do more to damage the credibility of the austerity fetishists than a win for the anti-austerity parties.

See also


Sunday 17 June 2012

Will the Greek electorate ignore the German threats?

On the day of the Greek legislative election re-run the German tabloid Bild addressed a threatening letter to the entire Greek electorate, which has been translated into English by the Guardian:

"for over two years now, the situation [has been] like this: Your ATMs continue to give you euros, only because we put them there, the Germans and the other nations that have the euro ... If the elections are won by parties that want to put an end to austerity and reform we will stop paying ... You will choose between painful logic and complete disaster."
The implication being that austerity measures have saved rather than further damaged the Greek economy, that the bailouts were used to provide cash to ordinary Greeks, rather than to pay out on what should have been losing bets made by reckless German and French banks on Greek government bonds, followed by a transparent threat that Germany will force Greece out of the Euro if they dare to vote for the "wrong parties". The conclusion being that voting the "wrong way" will lead to complete disaster.

The German tabloid newspaper Bild clearly consider Greece to be
nothing more than one of Germany's many insignificant client states.
The first point is transparently absurd. Keeping Greece in the Eurozone through the creation of vast unpayable debts in order to bail out the German and French banks that recklessly lent the money to the Greek government in the first place benefits only the European banking sector at the expense of millions of ordinary Greek people who have seen their standards of living annihilated by the austerity fetishists over the last two years.

The threat that Germany (and the other unnamed nations) will boot Greece out of the Euro if they vote the "wrong way" demonstrates quite clearly that the Germans now consider Greece to be their own subservient "client state" and an inconsequential economic backwater that can be bossed around and intimidated at will. The estimated cost to the Eurozone of a disorderly Greek exit from the Eurozone has been estimated at €1 trillion, (more than 3x the size of the entire Greek economy). It seems that the Germans actually have much more to lose from a Greek exit than the Greeks themselves do. The fact that they are so willing to make such threats makes it seem that they are so determined to make the Greeks suffer, they would attack their own economic interests to do so.

The only part of the letter that is not based upon transparent misrepresentations and threats is the conclusion that "you will choose between painful logic and complete disaster" which makes sense, but only because the German tabloid has got it completely backwards.

The painful but logical choice would be for Greece to exit the Euro and defaults on their external debts. It is time for the Greeks to put their own national interests above the interests of their financial sector creditors. The reintroduction of the Drachma would allow Greece to remove the economic straight-jacket they have been wearing since they gave away their monetary autonomy to the European Central Bank. The ensuing economic disaster would hardly be fun for the Greeks, but it would at least redistribute some of the misery to the Germans and the reckless financial institutions they have insisted upon supporting at the expense of millions of ordinary Greek civilians. If the Greeks vote for the anti-austerity parties and the Germans ensure that they are punished for their impertinence by booting them out of the Eurozone, at least the Greek government would regain the economic freedom to weaken their currency, making Greek industry more competitive and creating a tourism boom as European tourists head to Greece instead of significantly more expensive Eurozone destinations.

Allowing themselves to be intimidated into staying in the Eurozone implementing even more barmy neoliberal pseudo-economics dressed up as "austerity" and racking up even larger unpayable debts in order to pay off their financial creditors would quite obviously be a complete disaster for the vast majority of Greeks.

See also

Monday 11 June 2012

Tory immigration rules, discrimination against ordinary British people and their families

Note that Theresa May's favoured minimum income requirement in order 
to obtaina spouse visa is significantly higher than the international norm.
In June 2012 Tory Home Secretary Theresa May introduced new immigration rules to prevent low-mid income British citizens from bringing their foreign spouses to live in the UK. Her new rules set out stringent conditions on English language abilities and family income.

Theresa May had tried to set the new minimum income requirement for a British "sponsor" applying for the right to be joined in the UK by their foreign-born husbands, wives, partners and their children will be between £25,700 - £46,260, astonishingly high figures that looked set to exclude up to 60% of all applications.

In the end, the figure was reduced to a minimum of £18,600 under pressure from Nick Clegg and the Liberal Democrats, but this figure still accounts for 71.3% of the average UK salary, meaning that tens of thousands of low-mid income British workers would be forced to choose between their country and their loved ones.

This £18,600 sum is not the worst of it, the financial obligation rises to £22,400 for families with one child, and a further £2,400 for each extra child.

Does it really benefit Britain if an individual is working in a job that pays £22,000, is forced to quit their job and leave the country so that they can live together with their husband or wife and their child? How does it benefit their employer, who must hire and train up their replacement?

It seems quite obvious that this policy is more of a malicious act of class warfare than a coherent attempt to reduce net migration into the UK.

Theresa May's preferred income rules of £25,700 would have been set far higher than anywhere else in the World accounting for over 98% of the average wage, meaning that the right to bring a foreign spouse to live in the UK would have been restricted to a minority of wealthy individuals. Even the reduced figure of £18,600+ eclipses the requirements to bring a spouse to the United States (which is notorious for strict immigration policies) where the income level deemed necessary in order to support a spouse is set at a much lower level of 45.3% of the average wage. On page 22 of the Tory consultation document the immigration rules in several other states are outlined, yet Theresa May tried to set the immigration bar far, far higher than the other states mentioned (see diagram), and the Lib-Dem reforms still leave the British system as the most economically discriminatory immigration system in the World.

Rather than tackling immigration these immigration reforms look more like a brazen attempt to attack the rights of low income British citizens, than a coherent policy aimed at significantly reducing immigration.

Another glaring problem with this delusional Tory immigration plan is that it does nothing to address the fact that the European door is wide open to people with absolutely no connection to the UK other than a desire to work there. Setting ever more stringent conditions for the minority of non-EU immigrants who are married to British citizens when anyone can come in from the rest of the EEA without any English language skills or proper means of supporting themselves is an exercise in futility and cruelty against ones own people. When the Tories try to claim that all they are trying to do is ensure that "a spouse or partner must has a genuine attachment to the UK, be able to speak English, and integrate into our society" they are being utterly misleading. What better way is there to integrate into British society is there than marrying a British person and raising British children?

At a time when economic migration within the EEA is set to rise dramatically due to self-defeating austerity measures causing socio-economic havoc across the Eurozone, the Tories are busy chasing away people with genuine attachments to the UK because their spouse happens to earn less than 71.3% of the average salary.

Another factor that this barmy Tory policy glosses over is a piece of European legislation 2004 / 38 / EC - Right of Union citizens and their family members to move and reside freely within the territory of the Member States which states that "All Union citizens have the right to enter another Member State by virtue of having an identity card or valid passport [and] family members who do not have the nationality of a Member State enjoy the same rights as the citizen who they have accompanied" and that "under no circumstances may an expulsion decision be taken on economic grounds". This means that a non-EU citizen that happens to be married to a Pole, and Irishman, a Greek or an Austrian must not be prevented from entering the United Kingdom on purely economic grounds.

So there we have it; the Tories will continue to allow rich people to keep bringing their non-EU spouses into the country, they will continue to allow hundreds of thousands of European migrants with no connection to the UK to keep coming in and they will continue to allow European migrants to bring their non-EU spouses and children in with them. The only people they are concerned with blocking are non-EU citizens that have married below average income Brits.

If there is anyone still out there that hasn't noticed the Tory contempt for ordinary working people, this is about as clear a demonstration as you will ever get. In a futile effort to juke the immigration stats and pretend that they are actually doing something about immigration, the Tories have brought in an immigration system that discriminates against British working people who happen to have foreign spouses whilst allowing the rich to buy their way around the system, and not even applying the same stringent conditions to the families of immigrants from elsewhere in the EU.

There are a few things that you can do to get around this incompetent and grotesquely unfair setup. If you are a low-mid income person with a non-EU spouse, the most important thing for you to do is to determine whether you have any right to claim citizenship from another EU state (through an Irish grandfather or an Italian great-grandmother for example) and apply for it, because if you claim to be a foreigner from another EU state who happens to live in the UK, this Tory led government cannot kick your spouse out of the country on purely economic grounds. Under their rules, they can only do this to your family if you are 100% British.

If the Tory immigration rules are preventing your husband/wife from living with you in the UK are making you fear that you can only live together if you go back to their country of origin (which may be some terrible war torn place like Afghanistan, Palestine, Syria, Iraq or wherever) this is not the case. Even if you have no right to claim citizenship of another EU state, remember that as an European citizen you can claim the right to settle your family in any other country in the EEA as long as you can find a job there. As long as you have a British passport, you are a European citizen and have the right to settle with your family anywhere else in Europe under the terms of 2004 / 38 / EC Freedom of Movement legislation. 

Next time you hear Theresa May talking about "fairness",
remember that her rules discriminate against hard working British
people and their families simply because they are not rich enough,
whilst allowing immigrants from elsewhere in Europe to bring their
 families into the UK unhindered by such arbitrary economic rules.
It is unbelievably harsh that Theresa May is determined to make many tens of thousands of low-mid income British citizens choose between their country and their loved ones, but at least under European law they can settle elsewhere in Europe rather than having to live in exile in whatever country the love of their lives happened to have been born in.

In the opening paragraph of Theresa May's consultation document on immigration reform the claim is made that "this government is determined to bring immigration back to sustainable levels and to bring a sense of fairness back to our immigration system".

The fact that the European door is being left wide open to economic refugees from austerity stricken economies such as Ireland, Greece, Portugal and Spain, whilst the government attempt to chase away immigrants from outside the EU who have demonstrable connection to the UK (by being married to a British citizen or having British kids) suggests that they will ultimately fail in their first objective of "bringing immigration back to sustainable levels".

The fact that rich people will still still be allowed to bring their non-EU spouses into the country whilst low income people will be denied that right, and that immigrants from other EU states will be able to bring their non-EU spouses and families into the UK without complying with the same stringent economic conditions that British citizens have to, clearly demonstrates that Theresa May and the Tories have already failed in their second aim of bringing back "a sense of fairness back to our immigration system" by making the system even more unfair than it already was.

Update - September 2013
In July the High Court described Theresa May's bonkers immigration rules as "onerous" "unjustified" and  "disproportionate" but stopped short of declaring them unlawful (it seems it is perfectly lawful for the UK government to openly discriminate against UK citizens like this). A report from The All-Party Parliamentary Group on Migration stated that Theresa May's grotesquely unfair immigration rules are “tearing British families apart”. The Tories don't give the faintest damn about the thousands of UK citizens that have been left with the terrible choice of tearing their families apart, or living in exile from their own country. I mean, to the Tory hierarchy the only people affected are a minority of piss-poor plebs after all (it costs £50,000 a year to become a member of David Cameron's secretive cabal of wealthy Tory party donors called "The Leaders Group").

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