Tuesday, January 18, 2011

Naomi Klein saw this coming

Klein claims that crisis’s are manufactured or at least exploited on purpose - what she calls disaster capitalism (but is more accurately crisis capitalism) – we can now see that the end goal is the laundering of electronic money into hard assets.

In the financial bubble version of crisis capitalism, everyone’s wealth is first hyper-inflated via transient electronic/virtual currency and the velocity of speculative financial transactions bids prices up, and then eventually the bottom falls out.  However, some people are still left with considerable piles of money after the fall, and those left with the biggest piles of wealth after the crash are in an excellent position to exploit everyone else by scooping up assets in distressed sales and defaults.  During the crisis; cash is king.

In this phase we see huge purchases happening at prices far below the levels of just a few years ago, but since no one has access to cash or loans, the prices (while comparatively low) are effectively unreachable for most people since no one will lend them money to match up to buyers with cash.  As a result, all sorts of hard & productive assets change hands: prime real estate is purchased for a song, productive companies are swallowed by others, publicly owned assets and revenue streams are privatized (roads, state parks, and public parking systems), access to markets and resources is acquired through long-term sweetheart-deal leases with state and local governments, etc.

As a bonus to the elite in this phase, various public gains are un-done in the name of austerity and shared sacrifice.  Union contracts are nullified via obligation-laundering bankruptcies, long-term pension obligations are renegotiated under bipartisan crisis committees, worker pay is slashed to levels it takes decades to recover from, and the like.  This time around, we see also the perverse argument that in order to recover from the crisis, taxes must be further cut for the elite. This is all textbook disaster capitalism.

But in order to make this orgy of wealth transfer possible, you must first get the current owners of prime assets into a leveraged position, so that when the crash happens, they are desperate to sell.  This is accomplished by the speculative bubble phase.  But to make the speculative phase happen, you must first entice people to play along; which you do with cheap money and a loose regulatory environment, along with a variety of other mechanisms from official cheerleading to a milieu of arcane regulatory and fiscal incentives...  which is where the US government comes in.

The government itself sets up the scheme.  What’s more, the US government is financing the end game: the US government and central bank is literally bankrolling this elite spending spree by providing low interest loans, toxic debt laundering, and other subsidies directly to the elite (via the banks), while simultaneously doing very little to prop up the financial strength of everyone else.

In absolute dollar terms, the elite look worse off compared to before the bubble burst, but in terms of real wealth relative to everyone else, they are much better off.  In the end when the dust settles, a few people have taken over ownership of a whole lot more real wealth.  The post-crash atmosphere creates an extent of wealth transfer that makes it apparent that although the bubble was lucrative, the real point of the game is the crash.  In the end, everyone’s balance sheets have shrunk, but a very few people now hold a bigger pile of deeds and titles in their safe, which reflects a concentrating of the real wealth.

Of course crisis capitalism has been practiced by the US and global elites around the globe for decades; what is new is that it is being practiced by the west, on the west itself.

You can see evidence of it here:

In Corrupt Global Food System, Farmland Is the New Gold - IPS ipsnews.net

But the evidence is everywhere, just watch the headlines about banks consuming smaller banks, which commercial and prime real estate changes hands, what assets are being sold off by cash-strapped governments at a discount, and anything bought by Goldman Sachs.

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