22 March 2008

The Menace of the Market

The Menace of the Market
John Maxwell
Most of us have always known that what is good for bankers or shopkeepers cannot normally be good for their customers. Nevertheless, we have swallowed the nonsense that the market will be the engine of development although every day we get new evidence to dispute any such possibility.
Paul Volcker. perhaps the most universally trusted and respected financial expert in the US, told TV interviewer Charlie Rose on Tuesday that the markets operated on the fallacy that mathematical models and historical data could provide rational guidance to human affairs. The markets were being run by mathematicians who knew nothing about finance while human intelligence should be in control. Years ago George Soros said more or less the same thing except that he felt that those humans who were in charge should be recognised as ordinary people whose actions might be motivated by how their wives treated them the night before and not as infallible high priests of some arcane religion..
And Kemal Dervis, head of the UN Development Programme, (UNDP) laid the blame for the current financial crisis at the doors of rapacious super bankers. These people, herd-minded financiers profit hugely from the inflation of asset bubbles, but pay little personal penalty when the bubbles burst, he contends.
As we have reason to know here, capitalism has two phases, boom and bust. In boom times capitalists can do no wrong, can rack up interest rates take as much as they want, and stifle development at will, earning outrageous profits. When the bust comes, the ordinary consumer whose money they have gambled with and lost, becomes the taxpayer whose duty it is to rescue the system from disaster. “It is the super-bankers, hedge fund managers and owners of private equity firms that have become the new barons of 21st-century capitalism,” the former Turkish finance minister and vice-president of the World Bank said in India.
“It is almost unbelievable: 40 per cent of total corporate profits in the US in recent years went to the financial sector that in itself does not ‘produce' ... but intermediates and organises' the resources that do produce.”
According to Dervis it is these greedy men that caused the last three world financial crises, the Asian Tiger crisis of 1997, the dot com bubble which burst seven years ago and the current crisis founded in the American sub-prime mortgage debacle.
In this crisis, financiers went on lending sprees, inducing people to take mortgages which they were told they could afford, inducing a housing demand which artificially inflated housing prices so mortgagees thought that their equity in their houses was rising faster than their debt. Then the mortgage repayments rose out of their reach, demand for houses faltered and many hundreds of thousands were left owing more on their houses than the houses were worth.
In the meantime, these mortgages had been, as they called it, securitised, bundled and sold as if they were packages of government bonds and assigned risk values above those assigned for instance to Jamaican government bonds.
These 'securities’ – apparently blue chip investments, were in turn traded, auctioned and used as gambling chips in the great game of Free Markets. The financiers were all dancing on air and when they looked down, suddenly, their dancefloor had vapourised, sabotaged by the inability of the mortgagees at the bottom to pay. Houses were being foreclosed by the thousands whole neighbourhoods were devastated, and people who though they were part of the American dream found themselves in a tawdry nightmare.
The President of the United Stets, following his theology, feels it would be dangerous to help out ordinary people. He thinks the help should go to the poor unfortunate financiers. Fortunately in the United States there are many people who actually understand the problem and are seeking ways to rescue those at most risk.
These of course, happen to be the lower middle classes, most of them black but many whites and Hispanics too. While the recession or depression will last perhaps a year or two, their communities and families will have been gutted by the crisis, families scattered and hopes dashed. New cultures of frustration, injustice and violence will be created to bedevil the entire society for decades to come. And, no doubt, the incarceration rate for black men will rise from ten percent to …???
In all of this there is one ray of hope for Jamaica. Mr Joe Lewis of Tavistock which is threatening to capture a sizeable chunk of the Trelawny coast for casinos, hotels, etc, lost nearly 1 billion dollars in the collapse of Bear Stearns. I would hope that that might turn his attention from Trelawny and leave us some space to enjoy our country.

Jeremiah and the hypocrites
Like his namesake 2,600 years later, the Old Testament prophet Jeremiah was tormented by the hypocrisy of his audiences. The wouldn't listen to him and as a consequence, according to the Bible, the ruling classes, king and all were carted of to Babylon (in Iraq) and the common people driven out of Palestine to captivity in Egypt.
The modern Jeremiah, Jeremiah Wright, has had his words taken out of context and used to portray him as a violent, dangerous influence on Barack Obama.
It has long been my studied opinion that racism permeates the US media and as I watch cable TV and read newspapers, it becomes clearer that rather than subsiding, racism has developed in more sophisticated ways, more instinctive and more damaging. In almost any story on CNN about some not so happy development, it has become routine that a black person's is the first face seen,if it is a 'good' story, the opposite is often true, even if the story has nothing to do with race. This past week, another network did its eugenic duty in digging up some DVDs sold by Jeremiah Wright's church, Trinity United Church of Christ in Chicago.
Jeremiah Wright was much quoted over the weekend as having said: ' "God damn America." As historian Ralph E Luker points out in Tuesday's Atlanta Journal Constitution

" the quotation comes not from Wright, but from the Rev. Martin Luther King Jr's first address to the Montgomery Improvement Association on December 5, 1955. Both African-American preachers have understood prophetic biblical preaching far better than those who feign shock at and condemn Wright's words.'
Martin Luther King was condemning then, as later, the bloody history of US intervention abroad and slavery at home. In this column I have repeatedly spoken about the savage brutalisation and exploitation of Haiti, of Panama, Guatemala and the rest of Latin America,the decapitation of democracy in the Congo, South Africa, Angola, Indonesia and dozens of other places. When he was murdered, King was condemning the American intervention in Vietnam, Laos and Cambodia, which eventually cost millions of lives
Had King been alive for either the military or economic assaults on Iraq, i don't believe anyone could imagine him not condemning them in the most forceful manner.
In his blog Mark Winston Griffith (an American who happens to be my nephew) succintly explains what Obama did:
"Barack Obama held the most sophisticated, mature, frank and insightful discussion of race offered by a politician in recent memory. It provided a historical context for Black (and white) anger, confronted the present-day circus passing for political debate, and presented a coherent vision of social change …"
"Barack did so much more than answer all those who have been parading images of Reverend Wright around like he was a modern day Willie Horton. Barack courageously told white folks that the stuff that Pastor Wright talks about is rooted in real pain and oppression. At the same time, he acknowledged resentment towards affirmative action and told Black folks that while it is expedient to retreat to a condemnation of white people and America, it can come at the expense of our own humanity and socio-political evolution." -http://www.dmiblog.com/archives/2008/03/post_32.html
Barack Obama has replied to his mealy mouthed critics. He has not abandoned Wright and he has tried to move the debate about race in America to a rational plane.
The reviews of Obama’s speech are so far, overwhelmingly favourable. But nothing Obama does or says will ever convince the formidable phalanx of pimps and prostitutes that constitutes so large a proportion of American frontline journalism. Obama, wisely, is speaking to the people, trusting in their goodwill and rationality and talking over the heads of the mainstream media.
The Press does not yet realise how much it has marginalised itself or how irrelevant it is becoming in the making of public opinion.
Copyright©2008 John Maxwell

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