Iceland can refuse debt servitude

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Financial Times Olafur Ragnar Grimsson, Iceland’s president, has created uproar with his decision to block legislation that would have repaid €3.9bn ($5.6bn) lost by British and Dutch savers in a failed Icelandic bank, triggering a referendum that the government is expected to lose. The initial response by credit rating agencies was to downgrade Icelandic bonds, as if Iceland were repudiating its debts, Argentina-style. But opponents of the bill have no intention of reneging on their legal obligations. At issue is what the relevant European law says should be done – and, more to the point, what should have been done on October 6 2008, when Gordon Brown closed down the UK operations of Icesave, an online subsidiary of Landesbanki, Iceland’s second-biggest bank. ...

Washington cannot call all the shots

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Financial Times Challenging America will be the focus of meetings in Yekaterinburg, Russia, on Monday and Tuesday for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other leaders of the six-nation Shanghai Co-operation Organisation. The alliance comprises Russia, China, Kazakhstan, Tajiki stan, Kyrgyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. The attendees have assured American diplomats that dismantling the US financial and military hegemony is not their aim. They simply want to discuss mutual aid – but in a way that has no role for the US or for the dollar as a vehicle for trade among these countries. The meeting is an opportunity for China, Russia and India to “build an increasingly multipolar world order”, as Mr ...

Why the “Miracle of Compound Interest” leads to Financial Crises

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Oslo conference, “Financial Crises in Capitalism”, Aug. 27, 2007 I first met Erik Reinert in 1994 at an economic history conference in Germany, and have been a member of his Reality Economics group since its founding. Erik Reinert’s Reality Economics group has revived the awareness of economists whose names have disappeared from most histories of economic thought, even as many schools have dropped courses in that topic itself. Most students only are taught today’s mainstream orthodoxy, not being informed of the equally long history of another canon – one that turns out to be more helpful in explaining economic history and today’s dynamics. Looking at today’s global economy, the obvious question to ask is why more economies haven’t achieved the technological potential ...

The $4.7 Trillion Pyramid: Why Social Security won't be enough to save Wall Street

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Harpers Magazine, April 2005 They wanted something for nothing. I gave them nothing for something. -- J.R. "Yellow Kid" Weil Social Security, formerly the "third rail" of American politics, has now been trod upon, in rather dramatic fashion, by George W. Bush. Given that the maneuver is both stupid and unnecessary, one must ask why. After all, the program's alleged deficiencies, if there are any, will not manifest themselves until at least 2018. This is not quite the same as worrying about the sun's eventual collapse into a black hole, but for most politicians a problem that lies thirteen years in the future is nearly the same thing. Clearly all is not what it seems. Bush himself offers two reasons for the present boldness. ...

Privatizing Social Security to Inflate Stock Market Prices

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Contents Introduction Why it was regressive to fund Social Security as an autonomous system Financial engineering vs. industrial profits and employment Social Security, forced saving and Labor Capitalism What if the stock market does boom? Will that save Social Security? Introduction This would not seem to be an auspicious time to mount a campaign to privatize Social Security. The investors who placed their pension-plan accounts and other savings in the stock market in the 1990s have found much of their gain wiped out since the downturn began in late winter 2000. Throughout the world an aversion to losing one’s savings has been spreading. Last spring German citizens suffered such heavy losses gambling away their savings in 401(k)-type investment schemes that in addition to curtailing their investments, many are ...

The Economics of Reality: How Finance Dominates Production and Rents Overshadow Profits

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The Economics of the Future Wagner's Music of the Future - his "total art work" - sought to integrate music and drama (along with art, dance and poetry). In a similarly broad way, the economics of the future will integrate finance and production, thereby restoring the lost link (as drama had been lost to most operatic music in Wagner's day). Therefore, the economics of the future will pick up the thread where it was broken off in the 1870s. While many social sciences extended themselves to include physical science, technology and history, academic economics underwent its Great Narrowing. In an epoch of unparalleled social transformations, economics became marginalist rather than dealing with structural change. As politics was becoming radical, marginalism and its ...

Financial Capitalism v. Industrial Capitalism

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Contribution to The Other Canon Conference on Production Capitalism vs. Financial Capitalism Oslo, September 3-4, 1998. Our economy is evolving into something different from what most people imagine it to be. The emerging system bears little relation to what academic textbooks describe, to say nothing of what politicians are promising. Today’s problems also are different from those which Marxists and other critics have long denounced. True, the class war has been put back in business since the collapse of Soviet Communism. But industrial capital as well as labor has come under attack in an internecine war of finance capital against industrial capital, and even against the power of governments to retain control over national economies. Was Marx too optimistic? In the face of this new ...