Continuing to force states to finance themselves at high-interest rates is just a strategy to justify wage control, the privatisation of public services and, ultimately, to enslave peoples, says Juan Torres Lopez
Spain has once again received a visit from the so-called Men in Black, the Troika inspectors, coming to elucidate if all is going as it should, so that Spanish banks can continue their recovery to the ultimate benefit of Germany and other European countries.
A visit dressed up as an assessment of the policies of economic adjustment Spain is deemed to need, through reforms which, as is well known, consist in giving aid to the banks, lowering wages and pensions, reducing social spending and privatising public services.
The crisis is the excuse, and since these measures will make it impossible to get out of the crisis, and we are already seeing evidence of this, they will say that the measures taken are on the right track but that they are insufficient and that they must be deepened. More of the same to achieve the same, benefitting the rich and powerful at the expense of almost everyone else.
Whenever the Men in Black speak they elicit the applause and support of large employers and bankers. Each are them – the European Commission, the IMF and the ECB – are separate, but they boil down to the same thing: organised money. As US President Franklin Delano Roosevelt, who was not exactly a leftist, said: To be governed by organised money was more dangerous than to be governed by organised crime.
And he was right, as we can easily see today, contemplating what European authorities are pursuing in out midst – a true crime perpetrated by organised money against the people.
Ruin for governments, free money for banks
How otherwise can one describe, for example, the decision to allow private banks like Citigroup, Morgan Stanley, Merrill Lynch, Bank of America, Barclays PLC, Bear Stearns, Goldman Sachs, Royal Bank of Scotland, JP Morgan Chase, Deutsche Bank, UBS, Credit Suisse, Lehman Brothers, Bank of Scotland, BNP Paribas, Santander, BBVA …, among others, to secure financing at 0.01%, when in difficulty, while countries are ruining themselves because their governments have to borrow at 50 %, that is, 5,000 times more expensively?
I am not exaggerating. Between December 1, 2007 and July 21 , 2010, the US Federal Reserve gave, in secret, $1.2 trillion at 0.01% interest to some of the world’s leading banks. Yet Greece was paying a 50% interest rate on its (two year maturity) public debt, in September 2011.
Even when rates are lower than this, the gulf is huge.
A few days ago, the Spanish Treasury placed securities on the market at 4.45%. An interest rate that is now considered low but that, even so, is 445 times higher than the above mentioned 0.01% or 9 times more expensive than the 0.5% at which the ECB currently lends to all private banks which request money.
Astronomical public debt
How can public debt not be astronomical when governments have to finance such high interest rates?
And so how to describe, if not but as a crime, the fact that governments are obliged to do this, and so doing, leading them to ruin, when they could be financed, at least on par with the private banks?
If it is said that debt is so harmful why let it increase as a result of such interest rates, that add more debt, when primary deficits – the difference between state income and expenditure, less interest – have been greatly reduced.
What, if not a crime, are the penalties and measures that condemn to misery countries that have seen public debt rise to stratospheric levels simply because they have to pay much higher interest than private banks, while at the same time giving money to the private banks that caused the crisis that led to a plunge in state revenues?
Living beyond our means?
Let’s be done with the lies and deceit, and let’s be clear. Public debt is not the result of overspending that must be cut in order to confront and purge our excesses, because we have been living beyond our means, as we are endlessly told.
If primary budget balances in European countries had been financed with the same generosity with which private banks have been financed, public debt today would be minimal and would not be a problem for almost any country. It has grown solely and exclusively because of the amount of financial interest that had to be paid.
Public debt now in Europe (as before in other times), is but a crime against the people committed by that organised money Roosevelt was talking about. It has been decided that governments will not be financed by central banks (which could offer virtually zero-interest finance as they have done with private banks) in order to build up public debt, justifying privatisation, while private banks lend to governments, profiting handsomely in the process. The banks are currently receiving – in interest payments – over 350 billion euros per year in Europe.
To cover their backs for this scam, neoliberal economists say that if central banks had continued to provide funding at no cost to governments inflation would have skyrocketed. An assertion without foundation. It amounts to saying that a public debt of 90% of GDP or more, at 5% or even higher rates, does not create inflation, but a debt of 5% of GDP (which France would have now if it had continued to be financed by its central bank since 1973) or a debt of 15% of GDP (which Spain would have if it had been financed by its central bank since 1989 at 1%) would instead create inflation. It is a hoax.
Financing without interest, or interest reduced to the levels of loans to private banks, would mean that public debt would be much lower today, even assuming reckless spending by governments. And it would be lower still if, in addition, money was spent well by government, and without any waste.
And meanwhile primary spending growth would remain in step with economic growth, and so ensure sufficient effective demand, thus avoiding inflationary pressures. There is, therefore, nothing to prevent interest-free finance for governments, once put in place elementary precautionary measures that are very different from those established in the European Union to justify the current status of private banking. Nothing, that is, but the desire to maintain the privileges conferred on the private banks.
So it is clear that continuing to force states to finance themselves at high-interest rates is just a strategy to justify wage control, the progressive privatisation of public services and, ultimately, to enslave peoples. This project is perfectly contrived to artificially increase the debt that destroys societies and kill thousands of human lives. An authentic organised crime, perpetrated, among others, by the Men in Black currently visiting Spain.
Translated/edited by Revolting Europe