I’m alarmed, and you should too, by the mostly uncontrolled invasion of the financial transactions on the global market. We should be aware of what’s happening and what are the real urgent reforms that can restore a well-balanced activity of the market, solving at least the worst part of this crisis.
Citizens must start to take interest in global economy and understand what’s going on, then they could be prepared to get together and take back the control of all the public and the most vital common goods such as public health, transport, education, energy, university research.
“We the people” says the American Constitution and we too must believe in the power and brainpower of the people.
Citizens must analyze what is going on, reflect on it and decide to participate in the construction of a better society and a better world.
The following post is inspired by the article “Crisi economica: la nuova ondata è già in viaggio, ma nessuno se ne cura perché…” (Crisis: a new tsunami is coming but nobody’s caring because…) published on his own blog on “Il Fatto Quotidiano Online” by Roberto Marchesi on Dec 15 2014. The English translation has been reviewed by Carla Ricciardi (Rome).
My best salutation
A new financial tsunami
A new financial tsunami, potentially more devastating then the one of 2008 is gaining ground. It is moving underneath and when it will be visible on the horizon it will be too late to stop it. This will probably happen in 2015 or, better still, in 2016 (ndr = because it’s an election year).
Why oil prices are dropping
The first symptom of this coming tsunami is the dropping of over 40% of the oil price. Consumers might think this is a positive change, but ultimately, it isn’t. The primary cause of the price drop is the fact that international finance has started to retreat its bids last summer following the tension on the market produced by the impending reduced liquidity due to the Fed decision to stop the USA Quantitative Easing policy.
Stock Exchanges as a global Las Vegas
But the real problem is not actually the reduced liquidity, but the excessive freedom wanted by the financial firms operating in the market to expand their bets. In a little more than ten years the liberalization of the financial markets has generated a huge mass of capital almost uncontrolled. The CDS alone (Credit Default Swaps are the most hazardous of those financial products) are moving 2.77 trillion dollars (or about 2,222 billion euro.) CDS are a sort of insurance on credits, but they are frequently used (like futures and other financial inventions) as a gamble on the market itself.
The Stock Exchange has become a sort of global Las Vegas moving huge quantities of capital with the speed of a few nanoseconds, then multiplying them thanks to bets on bets that create infinite artificial bubbles of virtual capital.
Strong financial rules needed
What the society desperately needs are Rules, Rules, strong Rules to govern those uncontrolled bets.
The governments and Europe do nothing
The government of Europe and the national governments do nothing to control these bets. They use only weak palliatives like the rules of Basel III or the European stress tests, which are totally inadequate to stop the invasion of CDS, futures and other highly hazardous financial products.
Obama tried to rule the financial market
Obama tried to regulate these invasions of derivatives, but met incredible opposition by the Republican member of Congress and also by his own Congressmen. The so-called Dodd Frank legislation, like the HR-4413 measure, established just last year, were envisioned to control the invasion of derivative risks but they were dismantled soon by the financial lobbies who wanted to have completely free hands to develop giant volumes of derivatives and spread them on the markets, hypnotizing naive savers and investors with promises of easy gaining that will never come true, because those derivatives are only bubbles which will vanish eventually.
Of course all foxes in the US Congress and in the Financial Market are perfectly aware of these dangers created by the massive use of derivatives and hazardous financial products, but they always think they will profit anyway from it because they think they are smarter. In any case those conservative and neoliberal politicians know that the disasters of the “Great Recession”, started with the Subprime crises, created the opportunity to destroy a large part of the welfare state allowing public money and taxpayers’ money to flow into the hands of their private owner friends.
– The market and the people need stricter global control of the financial market also reducing substantially the power of the financial lobbies.
– The market on the derivatives and hazardous financial products must be allowed only on the proper real commercial transactions, forbidding those of pure gambling. Also the use (and abuse) of the “short sale” (selling at a lower price stocks or bonds borrowed from a bank) must be stopped.
– The banks must return to the division of commercial banks and financial banks, forbidding the commercial banks to make the same operations of the financial banks and vice versa.
– When big companies or banks go on the track of bankruptcy and ask to be helped with public money, they must be nationalized instead.
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