Wednesday, August 31, 2011
Speculation has always existed in economic history, but never to such an extent as today. Over time, the [finance] industry was able to rid itself of overly obstructive regulations. In fact, financial supervision was virtually eliminated. In 2004 the European Union had threatened to limit the foreign transactions of major US investment banks if the United States did not tighten its own regulations. This prompted five investment bankers to travel to Washington to exert their influence on the SEC. They proposed that the SEC be given the power to take a closer look at their high-risk positions in the future, but only if, in return, the banks would be required to keep less of their own capital in reserve to offset the risks of their transactions. From then on, the banks were able to expand their business unchecked. The second part of the deal -- the SEC's supervision -- was pursued far less energetically.
The financial industry had managed to create a belief system which held that what's good for Wall Street is good for society as a whole. Between 1973 and 1985, before deregulation began, profits in the US financial sector made up no more than 16 percent of the total profits of all US companies. This industry's share of total profits increased to 30 percent in the 1990s, and in the last decade it even reached 41 percent. It was no surprise that the myth of efficient financial markets was accepted so uncritically.
Of all people, it was an academic specializing in literary studies who managed to most accurately analyze the insanity of the financial markets and the impotence of economists. With his short 2010 book "Das Gespenst des Kapitals" ("The Specter of Capital"), Joseph Vogl wrote a bestseller that attracted attention among economists. His theory is that crises are not some kind of occupational hazard in the financial system. Instead, Vogl argues, it is the system itself that inevitably leads to new crises.
Vogl was teaching at Princeton University when Lehman Brothers collapsed. He knew nothing about financial markets, and yet he was fascinated by the "confusing empiricism," which had so little to do with theory. According to economic theory, the invisible hand of the market always leads to equilibrium, as Adam Smith wrote in his classic 1776 work "The Wealth of Nations," which Vogl refers to as the "Bible of economists." The same theory is still taught in universities today. But the theory also tells us that today's excesses in the financial markets should never have occurred. This leads Vogl to conjecture that "by no means does the capitalist economy behave the way it's supposed to." While the theory tends to be based on the economics of a village market, completely different circumstances apply in the financial markets, where both goods and expectations are being traded, and where speculative transactions are used to hedge against other speculative transactions.
Vogl describes the principle as follows: "Someone who doesn't have a product, and neither expects to have it nor will have it, sells this product to someone who also neither expects nor wants to have it, and in reality does not receive it."
This type of market will always have a tendency toward excess -- in either direction.
Paul Woolley holds the same view, but from a different perspective. He is intimately familiar with the financial markets, after having made millions working in the London financial district. He spent four years with the deeply traditional Barings Bank. He later worked for the American fund manager GSO.
In Woolley's experience, the idea that financial markets are efficient is erroneous. "All players in the financial markets behave rationally from their own perspective, but the outcome of this process can be disastrous for mankind," he says. His goal is to prove how dangerous the financial markets are. "It's like a tumor that keeps growing," he says. According to Woolley, there is no justification for the fact that this industry brings in more than 40 percent of all US corporate profits and pays the highest salaries in good years, while in bad years it is bailed out by taxpayers.
Woolley has observed the same phenomenon again and again. "The herd runs behind a trend until a crash occurs." Society, he says, also pays a high price for this behavior. "The financial industry is doing a pretty good job of destroying society," says Woolley. Many of his former colleagues, he adds, have a guilty conscience because "they can't believe that the financial industry is still getting away with it." He feels that bankers have a strong incentive to design products to be as complex and non-transparent as possible. These products enable them to earn returns upwards of 25 percent, because customers simply do not understand the extent to which they are being had. Structured mortgage-backed securities, the risks of which even their creators no longer understood in the end, as well as credit default swaps, which allow investors to bet on the bankruptcies of entire countries, are only the best-known examples.
The more activity there is in the markets, the higher the fluctuations and the greater the potential profits. There is little that the traders at investment banks and hedge funds fear more than a boring market, one in which the economy is humming along nicely and the prices show little movement. The conditions that are reassuring to managers and employees in the real economy often lead to depression in the financial sector.
Whoever has the fastest connection to the market stands the best chance of taking advantage of a critical millisecond and thus reacting to a price signal ahead of the competition. The computers are far more efficient than any human trader, because they can process hundreds of pieces of information per second. At the same time, such programs can also amplify -- or even trigger -- a crash. On May 6, 2010, prices on Wall Street plunged by almost 10 percent within a few minutes. To this day, no one knows exactly what caused the so-called Flash Crash. Because this sort of thing happens with growing frequency, the US Securities and Exchange Commission (SEC) has imposed a waiting period on computers in emergency situations. If the price of a stock has dropped by 10 percent within five minutes, trading is temporarily halted, allowing the human players to consider whether there is in fact a real reason for the sharp decline. Computers have long set the tone in foreign currency trading. The currency markets are now too complex for humans to manage alone. "We realized that you couldn't really manage this with the human thought process, it was too difficult, there were too many variables," says New York hedge fund manager Taylor. Many of his roughly 60 employees are IT experts, mathematicians and engineers. They feed massive volumes of data into the computers, including figures on the gross domestic product of countries, interest rates, commodities prices and inflation rates. "The only thing the computers can't handle are political developments, that is why we have me as Chief Investment Officer," says Taylor, although he points out that the money ultimately follows the instructions that are spat out by the computers.
Following the near-collapse of the markets, then-German President Horst Köhler characterized the financial markets as a "monster." And there were plenty of good intentions when it came to taming this monster. "History cannot be allowed to repeat itself," US President Barack Obama promised after the Lehman bankruptcy, while French President Sarkozy spoke of a historic opportunity to create a new world. The United States and Europe did attempt to constrain the monster that was the financial market but because the industry is globally interconnected solo efforts by individual countries are pointless. Internationally coordinated solutions are difficult. As a result, the regulations remain nothing more than piecemeal. Politicians haven't done much more than push around a lot of paper. The financial industry, new regulations are often little more than a sportsmanlike challenge to search for new tricks with which to circumvent the rules. In their conflict with politicians and regulatory agencies, banks and hedge funds have a clear competitive advantage: They hire the brightest minds in the financial world and pay them millions. The public-sector regulators can hardly compete. The banks' lobbyists can exert their influence on this process to make sure that many of the new regulations are watered down. But the monster cannot be tamed with half-hearted reforms
The European Commission has developed a draft of new capital market rules, which includes 165 pages of guidelines and another 500 pages of regulations. Under the proposed rules, banks would be required to keep more capital resources in reserve to protect against risk, and they would only be allowed to borrow up to a certain ratio. These proposals make sense, but the financial industry is already two steps ahead. It has created a world in which the usual rules for exchanges and banks do not apply: the realm of the "shadow banks." For bankers, this is by no means a world of illegal or semi-legal institutions, despite what the term implies. Hedge funds and private equity firms are known as shadow banks. In the United States, shadow banks have already incurred debts of more than $16 trillion, as compared with $13 trillion among commercial banks. It is believed highly likely by some commentators that the next crisis will emanate from this largely unregulated realm of hedge funds. Britain isn't keen on keeping too close an eye on hedge funds, because the financial industry is one of the few remaining sectors in which the British are still competitive worldwide. This poses a huge risk for the financial market.
An effective financial market reform would have to treat shadow banks the same way all other banks are treated. This would mean completely banning so-called short selling, which is essentially betting on falling prices. It would also have to improve licensing requirements on new financial instruments and ban some that already exist, because they are designed solely for speculative purposes. It would also involve establishing a number of other rules that would make doing business significantly more difficult for banks, hedge funds and private equity firms. All of these measures would rein in the financial market and put its importance for the economy into perspective. Banks would have to concentrate once again on the role they played prior to the great deregulation of the financial market, namely to organize payment transactions, manage the investments of private customers and companies and finance their business deals with loans.
But that seems unlikely. There are too many contradictions and conflicts of interest between the countries involved and governments to allow such a massive change to occur.
Tuesday, August 30, 2011
The One Big Union movement in Canada grew out of the discontent of the Western unions with the Trades and Labor Congress of the Dominion, On March 13, 1919, a conference was called at Calgary, Canada. The 237 delegates who attended immediately voted to sever connections with the old body and the A. F. of L. and to form a new industrial organization . Amidst “ringing cheers,” Western Labor Conference delegates unanimously approved a referendum to sever “the present affiliation with the International Organizations.” They adopted the name One Big Union, along with resolutions demanding the release of political prisoners, the six-hour work day, five-day week, withdrawal of Allied troops from Russia, and a general strike beginning 1 June to enforce these demands. Delegates approved “the principle of ‘Proletariat Dictatorship,’” called for “the abolition of the present system of production for profit,” and sent fraternal greetings to Russia’s Soviet government and the German Spartacists. A central committee was elected, consisting of five SPC members, three from BC, denouncing war profiteering and price fixing, an end to the sedition act (which had been used to ban the IWW and the SPC), equal pay for women as well as the right to vote, free public education, health and safety legislation for industry, the nationalisation of major industries especially railroads and utilities. The many members of the Socialist Party of Canada helped form the One Big Union movement. The SPC provided many of the activists of the OBU but they did not abandon the project of building the party for an anti-political syndicalist dream. The OBU. stressed class organisation rather than industrial organisation. In pursuance of this class policy it did not condemn political action, but rather declared that the only hope for the workers was "in the economic and political solidarity of the working class, One Big Union and One Workers' Party." The OBU. Bulletin, Dec. 20, 1919. The founding members of the OBU were determined to create an industrial union that would not discriminate between skilled and un-skilled, foreign-born or Canadian workers. A union that was opposed not only to capitalist war but to capitalism itself.
"it is not the name of an organization nor its preamble, but the degree of working class knowledge possessed by its membership that determines whether or not it is a revolutionary body.... It is true that the act of voting in favour of an industrial as against the craft form of organization denotes an advance in the understanding of the commodity nature of labour power, but it does not by any means imply a knowledge of the necessity of the social revolution." - Jack Kavanagh "There can be no question of industrial vs. political," he concluded in the fall of 1919, "the two are complementary phases of the working class movement."
The OBU at its peak had 101 locals and 41,500 members—almost the entire union membership of Western Canada. The OBU faced three very powerful opponents.
Employers blacklisted OBU workers and incited hysteria. A mine owner told the Calgary Herald, “One thing is for certain, and that is that we will have no dealings with the One Big Union nor officers of any organization representing that sentiment."
The CLC and its affilate UMWA which was anti-socialist and against militant industrial unionism. The OBU stood for everything it opposed.
The Communist Party following Comintern's orders began a campaign of disruption, forcing the OBU members back into the CLC unions or and working to destroy the organisation outright. Lenin argued against dual- unionism, against the setting up of revolutionary unions, and exhorted radicals to work in the mainstream of the labour movement in order to win the support of the majority of workers and to oust the various bureaucratic leaderships. In Canada, this meant rejoining the CLC.
Nevertheless, in 1925 the membership was 17,000 and grew slowly throughout the 1920’s to reach a maximum of 24,000 members. The year they joined the Canadian Labor Congress the membership stood at 12,000.
Today, union activists continue to strive for collective forms of organisation capable of superseding institutional barriers and a cumbersome legal apparatus. Driven by the same dreams that mobilised a generation behind the OBU, contemporary workers can learn something from the possibilities (and pitfalls) of the OBU. The OBU did not have all the answers by any means. But what they represented was a tendency that was stopped by so-called revolutionary proponents of Leninism and the reformist apologists of Labourism. Who knows what might have resulted had this development not been cut short.
The right to strike is one thing, the power to strike is another. The weakness of the members of the OBU was not in daring to dream and to act on those dreams, but not realising how many and how powerful the guardians of capitalism were.
Monday, August 29, 2011
Famines are not inevitable and they do not happen in isolation from the rest of the world. A drought is a natural event. Mass starvation is not. They are the consequence of human decision-making. Public indifference will only be dispelled when the media begin to explain, carefully and accurately, how and why famine occurs.
In 2002 Greg Philo summarised three major studies by the Glasgow Media Group that explored UK media coverage and public understanding of the developing world. Decisions made by broadcasters (on commercial criteria) about what viewers would desire to watch have produced very negative responses in television audiences towards the developing world and war, conflict and disaster within it. (2) That audiences are misinformed because of the low level of explanation and context that is given and because some explanations that are present in television reporting are partial and informed by what might be termed “neocolonial” beliefs. (3) That a change in the quality of the explanations that are given—for example showing the international economic and political links
that underpin the continuance of a war—can radically alter both attitudes and the level of audience interest.
There is a widespread belief in broadcasting that audiences are not interested in factual programming about the developing world. Commercial criteria are now a key consideration for programme makers and this comes down in part to providing what they assume the audiences will want to watch. One consequence of these assumptions on audience interest has apparently been the drastic reduction of factual programming about the developing world.
Yet the Glasgow Media Group's studies showed that audiences became much more engaged in stories about conflict in the Third World once they were able to situate what was happening in a broader explanatory context. As long as foreign news stories were presented as a series of disasters far away that had no connection with events at home, people's interest was weak. Not only that, Philo's interviewees would often say that the problems were down to the failure of people in poor countries to manage their affairs competently. Once it was pointed out that Western diamond and oil companies were helping to drive conflict in Angola, for example, people became much more engaged. The problems of ordinary people far away became more, not less, interesting as viewers were offered a structural account. Conflict is inexplicable without reference to resources and to the unaccountable financial infrastructure used to hide the spoils. Without an explanation that makes sense audiences will, not unreasonably, look elsewhere. Though the media may feel more comfortable offering emotionally accessible stories about individual suffering, the evidence suggests that clear structural explanations are more likely to engage audiences.
Taken from here
Saturday, August 27, 2011
Trade unions are necessary, not to overthrow the present system, but to resist capitalist encroachment under the system. To struggle for higher wages and better conditions is not revolutionary in any fundamental sense of the word; and the essential weapons in this struggle are not revolutionary either. Industrial militancy is just that: militancy on the industrial field. Those who are most active in this do tend to have political views, generally of a left-wing nature, but it is not for these views that they are supported; it is for their negotiating skills and their ability to stand up to the bosses and express what their fellow workers feel about pay and working conditions. There have been numerous examples of shop stewards and works convenors who at work have been able to “mobilise” thousands of workers but who, when they have stood at elections for the Communist Party, have received only a few hundred votes. Industrial militancy does not lead to political militancy, but ebbs and flows as labour market conditions change – and industrial militants can in no way count on leading their supporters on or on to the political field. Most experienced industrial militants are well aware of this and wouldn’t dream of trying to.
To be sure, participation in the class struggle does not automatically make workers class conscious. Workers are not "reformist" because "the unions" make them so; rather the level of political consciousness within a union will be a reflection of the general consciousness of the working class at the time. If more militant members are losing the arguments then this reflects a wider passivity: something that is hardly surprising given the shattering defeats organised labour has suffered in Britain in recent decades. Trade unions can only be as militant and class conscious (and effective) as their memberships are, which must depend on the wider situation. (Though this isn't to take away from the damage done by servile union bosses) To create a dichotomy between "the unions" and "the workers" can only lead to a distorted analysis of the uses and limitations of union struggle. Ultimately the union and the workers are one and the same thing. If these workers have reformist outlook on life, i.e. believe that capitalism can be made to run in the interests of all, the unions must therefore have the same outlook; on the other hand if there were more revolutionary workers in the unions—and in society generally—then the unions would have a more revolutionary outlook, no longer harbouring any illusions about 'common national interests' . That would not in any way alter the essential nature and role of the trade unions as the defensive organisations of the working class; but it would make them far more effective fulfilling that role
Socialism demands the revolutionising of the workers themselves. This does not mean that workers should sit back and do nothing, the struggle over wages and conditions must go on. But once we have learned the hard lessons , it becomes clear that this is a secondary, defensive activity. The real struggle is to take the means of wealth production and distribution – the factories, farms, offices, mines etc. – into the common ownership and democratic control of the entire world community. Only by conscious and democratic action will such a socialist system of society be established. This means urging workers to want something more than what they once thought was "enough". Socialists are accused of wanting "too much" because our aim is aim is a society in which the earth is the common property of all . The task of the Socialist Party is to show workers that it is a practical proposition which calls for their urgent attention in order to transform a picture of how we could live into a movement for how we shall live. To transform this desire into an immediancy for the working class. Democratic decisions will need to be made, not by leaders but by all interested people. That people are capable of organising their own affairs in common is one of the things that has clearly demonstrated. The socialist movement must be "the self-conscious, independent movement of the immense majority, in the interests of the immense majority" (Communist Manifesto).
One school of thought in the working class political movement sees unofficial and wildcat strikes as bona fide rebellions, not only against the labour leaders, but against the capitalist system itself. This school views unofficial actions and wildcat strikes as the beginnings of a real rank and file movement which will eventually result in the workers throwing out the union bureaucrats, taking over the factories, establishing workers' councils and ultimately a "workers society" based on these councils. Often If one reads in leftist journals an impression that a tremendous political movement of the workers is under way. Yet these wildcats still remain purely economic struggles on the part of the workers. They have a grievance arising out of the conditions of their work, instinctively they bring to bear their only weapon, withdrawal of their labour. For a brief period the workers are aroused. They assail their union leaders in no uncertain terms. But they learn nothing of the role of these union leaders in support of capitalism because they do not understand the society under which they live. In a few days, after the wildcat is over, the workers return to their routine thinking.
Some believe these wildcat unofficial strikes can be used as a lever to push the workers along a political road, towards their "emancipation." How is this possible if the workers do not understand the political road, and are only engaging in economic struggles? The answer is that "leaders in-the-know" will direct the workers, much as a guide-dog leads a blind person. But more often than not these leaders will also try to lead the workers in the wrong direction, toward the wrong goals (nationalisation and state capitalism), as the workers later find out to their sorrow.
The socialist approach of education - rather than the non-socialist approach of leadership - is much better. Through education it can be pointed out to the workers that strikes arise out of the nature of capitalism, but that they are not the answer to the workers' problems. These economic struggles settle nothing decisively because in the end the workers still wear the chains of wage slavery. It is the political act of the entire working class to eliminate the exploitative relations between workers and capitalists which can furnish a final solution. The socialist teaches the nature of both capitalism and socialism, so that, armed with this understanding, the workers themselves can carry out the political act of their own emancipation. This is the lesson of all other outbursts of class struggle among the workers. These struggles can be used as a means of educating workers to the real political struggle - socialism. They should not be used as a means to gain leadership over the workers, or to lead them along a political path they do not understand.
The U.S. Census Bureau says 12.5 per cent of the general American populace lived in poverty in 2007. For blacks, the poverty rate was twice as high, and three times higher than whites, with the gap widening.
African-Americans still earn about 20 percent less in weekly wages than whites.
According to Congresswoman Maxine Waters 40 percent of young black men under the age of 30 do not have a job.
Three in four black children born in the U.S. this year will be born to a single mom household and such homes often are a life sentence to poverty. Home ownership remains a cruel dream for 56 per cent.
Unemployment, death, poverty and disease rates are higher for blacks than white Americans.
One in five African Americans has no health insurance, compared to 12 per cent of whites. Meanwhile, blacks are fatter, eating less healthy and account for nearly half the one million AIDS victims in America, while representing about 12 per cent of the population. Some 60 per cent of all women with AIDS are black.
The share of blacks with four-year college degrees remains only two-thirds the level for whites. The graduation rate for NBA college players is 56 per cent for blacks and 84 per cent for whites. 6.3 per cent of the country’s physicians are black but rates would have to double to reflect and match the population.
Some statistics show blacks are six times more likely to be incarcerated than whites. In 2005, black men were 14 per cent of the U.S. population and 40 per cent of the prison population.
The growing black 'middle class' is a missed paycheque from disaster. “They have no safety net, no inherited wealth, no money in the bank so they are living from paycheque to paycheque. One third of black families have zero wealth or negative wealth. For whites it’s 10 per cent,” Andrew Grant-Thomas, deputy director of the Kirwan Institute for the Study of Race and Ethnicity, based at Ohio State University.
“In 1963 we were un-free,” Rev. Jesse Jackson told reporters “Today, we are unequal.
Cornel West, a professor at Princeton University, in 2009 warned: "if Barack Obama ends up being another black mascot of these oligarchs we’ll be in a world of trouble.”
Since then, billions in funds for the Wall St bail-outs and ever more concessions on health and welfare reforms. Now Prof. West accuses Obama of West being a “black mascot of Wall St. oligarchs and a black puppet of corporate plutocrats. . ..”
Friday, August 26, 2011
Hungarians will soon be performing "community" work under a new law, which dictates that anyone who is out of work for more than 90 days in a row forfeits the right to social welfare and membership in the social insurance system. The government is still searching for projects to put the army of the unemployed back to work, at a monthly wage of roughly €290 ($418). There is talk of building dikes, planting trees and collecting herbs. 40 gypsies from Gyöngyöspata have been assigned the job of clearing hibiscus bushes and undergrowth for four months. The plan to make community service compulsory targets the Roma minority according to the Guardian
Are "forced labor camps" being created here, in the middle of the European Union, as the Hungarian daily newspaper Népszava wrote? Are unemployed people from remote villages being housed in worker camps on large construction sites? When yhe prime minister Orbán praises the "workfare" model of social benefits in return for labor, he is "quoting the language of the 1930s verbatim." according to one of his ex-university professors.
The Jerusalem Post reports on a co-operative campaign by Roma and Jewish youth in Hungary to combat descrimination.
At a commemoration of the Roma Holocaust in Budapest Ágnes Daróczi, on behalf of Roma rights group Phralipe, drew a parallel between the anti-Roma attacks in 2008-2009 and the Auschwitz murders 67 years ago. Nine attacks were committed on Roma families living on the outskirts of small, rural villages between July 2008 and August 2009 in central and eastern Hungary, claiming the lives of six people, including a child of five.
Thursday, August 25, 2011
In 1980 the Supreme Court agreed with the Sioux that the land, long since settled, had been taken from them wrongfully, and $102 million was set aside as compensation. The trust's value continues to grow well beyond $1 billion, but the Sioux have never collected. The tribes say the payment is invalid because the land was never for sale and accepting the funds would be tantamount to a sales transaction.
Ross Swimmer, former special trustee for American Indians, said the trust fund remains untouched for one reason: “They didn’t want the money. They wanted the Black Hills. It’s a tough, tough group up there. I’m amazed that they have been willing to sit on the money this long without taking the money”
“The Sioux tribes have always maintained that that confiscation was illegal and the tribes must have some of their ancestral lands returned to them, and they’ve maintained that position since 1877” said Mario Gonzales, general counsel for the Oglala Sioux Tribe.
Former Oglala Sioux Tribe President Theresa Two Bulls said “If we accept the money, then we have no more of the treaty obligations that the federal government has with us for taking our land, for taking our gold, all our resources out of the Black Hills … we’re poor now, we’ll be poorer then when that happens”.
Lionel Bordeaux, president of Sinte Gleska University on the nearby Rosebud Reservation said “We won the battle against Custer. But the war continues.”
Quoted from http://lezgetreal.com/2011/08/forbes-middle-class-not-mega-rich-should-lower-expections-spending/
"The battle over public sector unions exposed the propaganda that is being fed to the easily persuaded. We should eliminate middle class salaries and benefits because “they” shouldn’t have what we don’t have. It would never occur to a worker in the Carolinas or Tennessee that they should aspire to the salaries and benefits that their auto or equipment manufacturers paid up north because earning half what “those union people” earned means having a job. They also suffer from mass amnesia. They were sold this concept when textile and clothing manufacturers moved south to escape New England’s unions, then saw those same companies move their operations to the next place with lower wages, then to the next place with even lower wages, specifically to Central America and then to the Far East. So, we should accept the idea of lower wages, part-time jobs instead of full-time, no employer-provided health insurance, no pensions, no job security while the rich get to protect their right to hoard billions. And we should accept their decree that we gut the programs that provide the social safety net that they refuse to provide in the work place. No. We shouldn’t...
...While the mega-rich might endow a museum (Getty, Alice Walton for example), the kind of charities that serve the poor are supported by the middle class, not the mega-rich. It wasn’t the Forbes 400 that funded free clinics when MSNBC begged for donations, it was ordinary folks. It wasn’t the Forbes 400 who donated their entire overtime pay for a little extra to help the employees of a seafood company in Gulf – it was a middle-class, blue collar man who knew what a little extra could mean. It isn’t the mega-rich who support food banks and homeless shelters and the Salvation Army – it’s us. We’re the ones who drop an extra can of food into the collection bin at our supermarkets or buy a bag of groceries to fill a collection bus. We’re the ones who drop our change in the buckets at Christmas. We’re the ones who donate our used items to thrift stores so they can be recycled for someone who can’t even afford to buy new at Walmart. And there is seriously no point in having museums if people can’t afford to go into them. With admission fees topping $25 per person for what are laughingly called public museums like the Smithsonian, having their tax money to support those would be a much better investment in culture than having Alice Walton create a personal art museum in the middle of nowhere....And then there’s the matter of what “charities” the mega-rich donate to in the first place. Try the Heritage Foundation, the Cato Institute, the whole pantheon of right wing think tanks and PACs and SuperPACs and anything else that will further their political power and influence....
Enough already with the scare tactics. It’s time to put the lie to the idea that the mega-rich should be allowed to keep everything they can get their claws on and unions should be destroyed and the middle class should give up any aspirations to a better life for their children."
Wednesday, August 24, 2011
Fusion doesn't produce greenhouse gases, it is intrinsically safe and it leaves no burden on future generations. The primary reaction does not produce nuclear material, only helium. There's a limited problem in that you produce neutrons, but this only makes the reactor chamber itself radioactive. Within 100 years, you could recycle the chamber so there's no need for geological-timescale storage as there is with the waste from fission energy. And the fuel is virtually unlimited. All you need is lithium and hydrogen. Sea water alone could fuel current human consumption levels for 30 million years. Reactors would be so safe that they could be located amid urban centres where the power is most needed. A tsunami, earthquake or bomb could hit a fusion reactor and the problems caused would only ever be structural. With fission, you have to release the energy if there's a problem, whereas fusion shuts down instantly if disrupted.
So, what are the barriers preventing a great leap forward?
"We could produce net electricity right now, but the costs would be huge," says Cowley. "The barrier is finding a material than can withstand the neutron bombardment inside the tokamak (doughnut-shaped chambers where the fusion reaction takes place). We could also just say damn to the cost of the electricity required to demonstrate this. But we don't want to do something that cannot be shown to be commercially viable. What's the point?"
It's hard not to look at the potential of fusion and scream: "We need this right now!" If the motivation was there, the global community could find the money to fund 10 rival fusion projects to fast-track the process of finding the optimum design. So, why haven't we seen a Manhattan Project-style push for fusion. As long as fusion research remains underfunded then it will never save humanity from climate change, oil wars and the poverty and underdevelopment caused by ever-higher energy costs.
Who will stand to benefit financially from its commercialisation? The global energy market is worth $5-6 trillion a year: somebody will make a lot of money out of this. If fusion (the star in the jar) ever becomes proved, Mailstrom can absolutely rely on one thing - our electricity bills won't go down. New technology tends to deliver wealth upwards, to the rich who own and control it, not downwards to the rest of us. An orgy of free energy would still have to wait for socialist society to be realised.
Tuesday, August 23, 2011
According to the U.S. Census Bureau, between 1991 and 2020, the number of over-60s will grow by 59% in the rich industrial countries, and by 159% in the "less-developed" ones though. There's no question that the population's aging is of major importance, and that it will change the whole tenor of social life health care, the consumer culture, architecture, living arrangements, and even population sex ratios, since women live longer than men. But the real crisis for capitalism and its governments is that the costs of health care and pensions will grow, something that's usually presented as a "burden" on the nonelderly members of society. Older people are not to be cared for, even cherished they're a cost that has to be minimised in the name of fiscal prudence, growth, and productivity. Unless older people are to starve, some provision for their income must be made. In pre -industrial societies, where life is short, people tend to work until they can no longer, and then their families take over. With industrialisation families break apart, and such informal arrangements can no longer be relied on.
According to the doomsters, there are many faults to existing pension systems. Too many of the benefits go to affluent retirees, funds that could be better targeted to the poor; public pensions crowd out spending on other worthy public purposes, like education; the assurance of a reasonably generous income at retirement discourages personal saving; and the retired are essentially a parasitic layer of old folk feeding off the non-old. While a public system may work well when it's young, when the number of contributors greatly outweighs the number of retirees drawing on it, as the system matures, the rate of outgo rises to match the rate of income. "Who pays for what?" This is the central question in public finance. But this one question is actually two questions: "who pays?" and "for what?"
The World Bank, the voice of world capitalism, proposes a three -pillared system. A mandatory public system, financed by tax contributions on a pay-as -you go basis, to provide a minimum floor income for the elderly possibly a single, flat-rate benefit for all. The second is a mandatory pri vately managed system, financed by contributions from either employers, workers, or both a form of forced saving with the accumulating balances invested (Privately management in order to prevent the backdoor nationalisation of the private sector that could occur if public entities invested their funds in the stock market). And the third is a system of similarly invested voluntary savings, also financed by worker and/or employer contributions, but not required by law. The public pillar would assure a minimum income (subsistence) in old age, but nothing terribly comfortable. Comfort would only be achieved through the second and third pillars.
Increasing reliance on private savings, forced or voluntary, to fund retirement takes it on faith that funds invested in the stock and bond markets will magically grow to meet rising needs. Over the very long term, interest rates on long-term bonds average about the same as economic growth rates. Stocks do better than this, but it seems economically unwise to bet that financial asset prices can forever grow more rapidly than the value of the underlying real assets the present and future profits of private corporations they're a claim on.
The Bank's favorite model is Chile yet the Chilean system fails to live up to the Bank's promises. The poorest, supposedly protected by a "safety net," get a payment equivalent to a loaf of bread and a cup of coffee per day. Less poor workers are hardly well taken care of by the new system; it's likely that about half of all retired workers will fall under the official poverty line. Women, with lower wages and longer lives than men, come up particularly short. Administrative costs are far higher than the old public system; investment managers are a lot more expensive than public sector bureaucrats. As with most private pension funds, workers have no say over how their savings are used; fund managers cast the stockholders' votes by their own lights, even though they're really only the workers' agents. In the USA the The National Academy of Social Insurance detailed some options workers could pay more; reduce benefits; reduce the cost of living adjustment; increase the age for full retirement benefits; lengthen the career-earnings averaging period; and reduce benefits for new beneficiaries.
Many call for the raise of the retirement age to 70. This isn't based on any evidence that people are working longer and don't actually need it, but on the fact that people are living longer and draining from the fund longer than in years past. In fact, the real belief is that many who have to retire before 70 will do so for health reasons on truncated benefits and die before they ever reach 70, thus saving the system money. Those few that actually can and do work until 70 will continue to pay into the system, so it's a win/win move. Added to that is the fact that earners in the top half of the economic strata have a longer life expectancy than those in the bottom half and have a far greater chance of making it to 70 and drawing full benefits Another solutions though could be raising the rate of immigration since immigrants (legal or not) tend to be young, and swell the ranks of those paying into the system rather than drawing it down. GDP growth will, since the size of the economy decades hence will determine how much money is available to pay retirees. The bankruptcy scenario is based on an assumption that GDP will grow at a rate seen only in depression decades.
The ones being sacrificed on the altar of economics are society's oldest and frailest, an almost inevitable result of the pursuit of profit above all else in our society..
21 signs that Baby Boomers will be to work as wage slaves until they drop dead
#1 According to a AARP survey 40 percent of them plan to work “until they drop.”
#2 A recent survey of American workers that included all age groups found that 54 percent of them planned to keep working when they retire and 39 percent of them plan to either work past age 70 or never retire at all
#3 A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.
#4 A recent study by a law professor from the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States. Back in 2001, they only accounted for 12 percent of all bankruptcies.
#5 Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.
#6 Most of the bankruptcies among the elderly are caused by the health care system. According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States. Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.
#7 The U.S. government now says that the Medicare trust fund will run dry five years faster than they were projecting just last year.
#8 starting on January 1st, 2011 the Baby Boomers began to hit retirement age. From now on, every single day more than 10,000 Baby Boomers will reach the age of 65. That is going to keep happening every single day for the next 19 years.
#9 Medical bills are absolutely devastating large number of elderly Americans right now. Many are going to great lengths to try to pay their bills. An elderly woman that lives in the Salem, Oregon area that is fighting terminal bone cancer tried to raise some money for her medical bills by holding a few garage sales on the weekends. However, a neighbor ratted her out, and so now the police are shutting her garage sales down.
#10 Social Security's disability program has already been pushed to the brink of insolvency and wave after wave of new applications continue to pour in.
#11 Over 30 percent of all U.S. investors currently in their sixties have more than 80 percent of their 401k retirement plans invested in equities. So what happens if the stock market crashes again?
#12 All over the United States predatory lenders are coldly and cruelly foreclosing on elderly homeowners. You can read what one lender is doing to a 70-year-old woman and her terminally ill husband right here.
#13 Approximately 3 out of every 4 Americans start claiming Social Security benefits the moment they are eligible at age 62. Most are doing this out of necessity. However, by claiming Social Security early they get locked in at a much lower amount than if they would have waited.
#14 According to the Congressional Budget Office, the Social Security system paid out more in benefits than it received in payroll taxes in 2010. That was not supposed to happen until at least 2016. Sadly, in the years ahead these "Social Security deficits" are scheduled to become absolutely nightmarish as hordes of Baby Boomers retire.
#15 In 1950, each retiree's Social Security benefit was paid for by 16 U.S. workers. In 2010, each retiree's Social Security benefit was paid for by approximately 3.3 U.S. workers. By 2025, it is projected that there will be approximately two U.S. workers for each retiree. How in the world can the system possibly continue to function properly with numbers like that?
#16 According to a shocking U.S. government report, soaring interest costs on the U.S. national debt plus rapidly escalating spending on entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every single dollar of federal revenue by the year 2019. That is before a single dollar is spent on anything else.
#17 Most states have huge pension liabilities that are woefully underfunded. For example, pension consultant Girard Miller recently told California's Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities. When you break that down, it comes to $22,000 for every single working adult in the state of California.
#18 Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern's Kellogg School of Management recently calculated the combined pension liability for all 50 U.S. states. What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds. That is a difference of 3.2 trillion dollars. So where in the world is all of that extra money going to come from? Most of the states are already completely broke and on the verge of bankruptcy.
#19 According to one recent survey, 36 percent of Americans say that they don't contribute anything at all to retirement savings.
#20 According to another recent survey, 24 percent of all U.S. workers say that they have postponed their planned retirement age at least once during the past year.
#21 Even though prices for necessities such as food and gas have been exploding, those receiving Social Security benefits have not received a cost of living increase for two year in a row. Many elderly Americans that are living on fixed incomes are being squeezed like they have never been squeezed before.
There are millions of Americans out there that have done everything "right" all of their lives, but that now find the system letting them down in their golden years. The unemployment rate for those over 55 is the highest it's been since 1948. If older people lose their job, chances are very good they may not be able to get another and will never work again for the rest of their lives. Employers are reluctant to hire older workers who may not be with their company more than a few years and are seen as costing more, due to years of experience, than younger prospective employees who are willing and eager to work for less money over a longer period time. Simply put, in a society that translates everything into "business" terms, older workers are seen as a bad "investment". For the older people they are draining savings and retirement accounts, if they have anything left after the market roller coaster of the last few years, simply to survive. And their money is running out. Many older people are finding themselves in a position they never expected to be in at retirement age: still working or in need of a job.
Monday, August 22, 2011
Lord Steel, the former Liberal party leader, was hired by the businessman, Benoy Berry, to give credibility to his firm's bid to win a $100m contract from the Ugandan government. The Scottish peer lobbied the Ugandan president, Yoweri Museveni, after he was paid to go to the country's capital, Kampala. Berry is being investigated over alleged corrupt payments to secure contracts for a different company in another African country, Nigeria.
Berry, an Irish economist who lives in a large house in Barnet, north London, is the main owner of a London firm, Contec-Global, says he appointed Steel to be chairman of the technology firm in August 2005. At the time, Contec-Global was striving to persuade the Ugandan government to award it a large contract to develop a national ID card. Steel was hired to "open doors" and introduce Berry to ministers and officials in Kampala. Berry said: "The purpose of Lord Steel's visit was to give credibility to Contec's tenders which faced competition from other tenderers" [from Israeli and South African firms].
The competition to win the ID card contract was suspended by the Ugandan government after it became mired in a series of corruption allegations. Uganda's official anti-corruption watchdog, the inspectorate of government, found that a Ugandan government minister, Isaac Musumba, was "fronting and/or lobbying" for Contec to win the contract. The watchdog accused Musumba of engaging in "gross interference, manipulation and influence-peddling" in the award of the contract.
Steel came under pressure to step down as the director of a firm called General Mediterranean Holdings when its subsidiary was investigated by the SFO in 2002 over an alleged fraud.
Taken from here
Sunday, August 21, 2011
Former Labour cabinet minister Lord Mandelson is reported to have made an offer to buy an £8 million house.
The Mail on Sunday said the former business secretary was planning to buy the Grade II listed building in "one of London's most exclusive districts". The property is described as a four-storey Gothic revival house, featuring a wine cellar and a two-storey atrium, which once served as an almshouse.
A previous property deal famously cost Lord Mandelson him his first cabinet post in 1998 when it was revealed he bought a house in Notting Hill with the help of an undisclosed £373,000 loan from the then paymaster general Geoffrey Robinson.
Tory MP Richard Bacon said his proposed purchase now of such a lavish property little over a year after leaving government was "a matter of considerable public interest.. how he can afford such an expensive home within barely a year of leaving government."http://breakingnews.heraldscotland.com/breaking-news/?mode=article&site=hs&id=N0500361313879310064A
Thursday, August 18, 2011
US clothing brand Abercrombie and Fitch has offered to pay the rowdy, hard-partying cast of MTV reality show The Jersey Shore NOT to wear its clothes. The company said their association with the clothing was "contrary to the aspirational nature of our brand". It singled out Mike "The Situation" Sorrentino, saying he could cause "significant damage to our image". The show portrays the loud, hedonistic, mostly Italian-American cast carousing in the US state of New Jersey.
The company describes its Abercrombie and Fitch brand as "rooted in East Coast traditions and Ivy League heritage" and "the essence of privilege and casual luxury". The company said in a statement it had offered "a substantial payment" to Mr Sorrentino and the television show's producers to have Mr Sorrentino wear another clothing brand. It has also extended the offer to the other cast members, and was "urgently" awaiting a response.
Sunday, August 14, 2011
The early Christian theologian Tertullian, who argued 1,800 years ago the world’s “teeming population” was overly burdensome, and pestilence, conflict and other deadly events were a useful “remedy” to prune the overgrowth.
At the end of the 18th century, Thomas Malthus, an English clergyman and scholar, theorized population expansion would inevitably outpace society’s ability to feed itself, meaning famine and disease would sooner or later bring the boom to a halt.
Paul Ehrlich, the Stanford University biologist whose 1968 book, The Population Bomb, became an unlikely bestseller. The swelling ranks of humankind would lead to “hundreds of millions” dying of starvation by the 1970s
In 1973 the movie Soylent Green imagined a dystopic, over-populated future where authorities feed the masses a mysterious substance that turns out to be made from other people, sacrificed for the common good when they get old.
Today, Lester Brown, founder of the environmental group Worldwatch Institute, says population growth, coupled with climate change, threatens to bring an end to global civilization unless corrective measures are urgently taken.
Global average death rates have dropped to eight per 1,000 per year, from 13 in 1970. Life expectancy has soared from 56 years to 67. Fertility rates are also dropping to below the replacement level of two children in much of the industrialized world and in emerging economies such as Brazil and China. Other regions are hovering just above that level. The problem is so bad in Russia, which may shrink by 25 million people in the next 40 years. The entire world's population could fit in the state of Texas with a population density similar to that of New York City? Granted it would be crowded, but it would leave the rest of Earth unpopulated.
A 2008 report by the UN’s Food & Agriculture Organization says feeding nine billion people by 2050 can be done, but would require annual private and public investments of US$83-billion on developing-world agriculture.
Joel Cohen, head of the laboratory of populations at New York’s Rockefeller University says enough grain is produced globally to feed 11 billion mouths The problem is a third is eaten by cows, pigs and other livestock — helping sate the rich world’s craving for meat— and a sixth is used for fuel, other industrial applications and seed. He advocates an end to U.S. farm subsidies that divert much of the country’s corn crop to ethanol production. “The world chooses to feed its machines and its domestic animals before it feeds its people”
Thursday, August 11, 2011
The gigantic machine which resembles an underwater wind turbine weighs 1,500 tonnes and stands 70 feet off the seabed and will generate enough electricity annually to power about 1,000 homes. Hundreds of these machines could be installed in the turbulent waters of the Pentland Firth off Scotland's north coast. 400 of the turbines in the Inner Sound tidal site in the Pentland Firth, behind the island of Stroma and the mainland would provide enough electricity for about 400,000 homes.
However, questions remain about the impact of tidal renewable energy on marine life.
Monday, August 08, 2011
Once a poorly understood area of research, plasma physics has become highly developed. Scientists not only produce 100 million-degree plasmas routinely, but they control and manipulate such “small suns” with remarkable finesse. Since 1970 the power produced by magnetic fusion in the lab has grown from one-tenth of a watt, produced for a fraction of a second, to 16 million watts produced for one second — a billionfold increase in fusion energy. Seven partners — the European Union, China, India, Japan, Russia, South Korea and the United States — have teamed up on an experiment to produce 500 million watts of fusion power for 500 seconds and longer by 2020, demonstrating key scientific and engineering aspects of fusion at the scale of a reactor.
What has been lacking is the political and economic will to develop materials that can withstand the harsh fusion environment, sustain hot plasma indefinitely and integrate all these features in an experimental facility to produce continuous fusion power. Fusion has the potential to help with all the emerging challenges of this still-new century: energy independence, national economic competitiveness, environmental responsibility and reduction of conflict over natural resources. A rough estimate is that it would take $30 billion and 20 years to go from the current state of research to the first working fusion reactor. But put in perspective, that sum is equal to about a week of domestic energy consumption, or about 2 percent of the annual energy expenditure of $1.5 trillion.
But socialism won't be placing a price tag on research as does capitalism.
What is striking is that even people who are that poor are just like the rest of us in almost every way. We have the same desires and weaknesses; the poor are no less rational than anyone else—quite the contrary. Precisely because they have so little, we often find them putting much careful thought into their choices: They have to be sophisticated economists just to survive. Yet our lives are as different as liquor and liquorice.
The average poverty line in the fifty countries where most of the poor live is 16 Indian rupees per person and per day. People who live on less than that are considered to be poor by the government of their own countries. At the current exchange rate, 16 rupees corresponds to 36 U.S. cents. But because prices are lower in most developing countries, if the poor actually bought the things they do at U.S. prices, they would need to spend more—99 cents. So to imagine the lives of the poor, you have to imagine having to live in Miami or Modesto with 99 cents per day for almost all your everyday needs (excluding housing). It is not easy—in India, for example, the equivalent amount would buy you fifteen smallish bananas, or about 3 pounds of low-quality rice. Can one live on that? And yet, around the world, in 2005, 865 million people (13 percent of the world’s population) did.
Living on 99 cents a day means you have limited access to information—newspapers, television, and books all cost money—and so you often just don’t know certain facts that the rest of the world takes as given, for example, that vaccines can stop your child from getting measles. It means living in a world whose institutions are not built for someone like you. Most of the poor do not have a salary, let alone a retirement plan that deducts automatically from it. It means making decisions about things that come with a lot of small print when you cannot even properly read the large print. What does someone who cannot read make of a health insurance product that doesn’t cover a lot of unpronounceable diseases? It means going to vote when your entire experience of the political system is a lot of promises, not delivered...And so on.
Scientists now rave about a new, green revolution. Using genetic engineering and sophisticated breeding and selection methods, biochemists are transforming blue and green algae into tiny factories for oil, ethanol and diesel. Algae do not require any farmland. Sun, saltwater, a little fertilizer and carbon dioxide are all the undemanding little organisms need to thrive. And because they consume about as much CO2 during photosynthesis as is later released when the oil they produce is burned, algae-based fuels are also climate neutral. In contrast to ethanol, the end product is not a low-quality fuel, but a highly pure product that contains no sulfur or benzene. "You could put our product in your car." Algae are also astonishingly productive. A hectare of sunny desert covered with algae vats can yield almost eight times as much biofuel per unit of biomass in a year than corn grown for energy purposes. To obtain the oil, the algae must be harvested and the oil extracted in a complex process. To overcome this obstacle, other scientists are developing algae that don't even have to be harvested. Instead, they essentially ooze the fuel of the future. Evolution has not yielded anything that produces biofuel from CO2 on a large scale, explains biologist Venter, "which is why we simply have to build it." The bioengineers' tools include culture mediums, incubators and, most importantly, databases containing the DNA sequences of thousands of microorganisms. Robertson and his team search the databases for promising gene fragments, which they then isolate and inject into the genetic material of blue algae.
But will the laboratory creations really work as well in open fields as they do in the lab? Calculations show that some algae plants will likely consume more fertilizer and energy per hectare than grain crops. And the carbon dioxide in the air won't be enough to feed the microalgae. Scientists estimate that a commercial algae fuel plant would require about 10,000 cubic meters of CO2 a day. Whether and how large amounts of the gas could be derived from the exhaust gases of large coal power plants, for example, and then brought to the algae farms, remains unclear. The farms could also require enormous tracts of land. In a recent article in the journal Science, researchers at Wageningen University in the Netherlands calculated that, in theory, an area the size of Portugal would have to be filled with algae pools to satisfy Europe's current fuel needs. A "leap in micro-algae technology" is needed to at least triple productivity, say experts.
Pyle and Robertson are convinced that this increase is possible. They insist that algae technology can be used to meet a significant portion of our energy requirements in the future. "There is certainly enough non-arable land with enough solar radiation and enough CO2 and water sourcing in the world," says Robertson. Another important advantage, he adds, is that algae-based fuel could easily be pumped into the oil industry's existing pipelines and refineries, and that cars and aircraft would not have to be modified to accommodate the biofuel.
From Der Spiegel
Saturday, August 06, 2011
Marx was scathing of the capitalist economic notion that the air, rivers, seas and soil can be treated as a "free gift of nature" to business."
Today, with climate change threatening life itself, the ecological contradictions of capitalism have reached truly dire proportions. The environmental crisis will undoubtedly play a far larger role in the demise of the system than Marx and Engels realised 150 years ago.
Karl Marx’s analysis of the environment under capitalism shows how saving the planet is inextricably linked to transforming our society. Exploitation, war, hunger and poverty were not problems that could be solved by the market system, he said. Rather, they were inescapable outcomes of the system itself. This is because capitalism is dominated by corporations devoted to profit above all else. According to Marx, capitalism is an economic system profoundly at odds with a sustainable planet. The exploitation of nature is as fundamental to the profit system as the exploitation of working people. Capitalist farming is unsustainable because it inevitably starves the soil of nutrients. It is nothing less than "an art, not only of robbing the labourer, but of robbing the soil" Marx also pointed out that "The development of civilisation and industry in general has always shown itself so active in the destruction of forests that everything that has been done for their conservation and production is completely insignificant in comparison.
Capitalism has created a metabolic rift between human beings and the Earth. Karl Marx came up with the term “metabolic rift” to explain the crack or rift that capitalism has created between social and natural systems, humans and nature. This rift, he claimed, led to the exploitation of the environment and ecological crisis. Marx argued that we humans are all part of nature and he was also the first one who saw social societies as an organism with a metabolism similar to that of humans.The general idea is that disruptions, or interruptions, in natural cycles and processes creates an metabolic rift between nature and social systems which leads to a buildup of waste and in the end to the degradation of our environment. The growth under capitalism of large-scale agriculture and long distance trade only intensifies and extends the rift. large-scale industry and large-scale mechanised agriculture work together in this destructive process, with industry and commerce supplying agriculture with the means of exhausting the soil. All of this is an expression of the antagonistic relation between town and country under capitalism. As Engels later put it: “The present poisoning of the air, water and land can only be put an end to by the fusion of town and country” under “one single vast plan.” Despite its potential cost to society in terms of increased labor time, he viewed this fusion as “no more and no less utopian than the abolition of the antithesis between capitalist and wage-workers.”
The market system is incapable of preserving the environment for future generations because it cannot take into account the long-term requirements of people and planet. The competition between individual enterprises and industries to make a profitable return on their investment tends to exclude rational and sustainable planning. Because capitalism promotes the accumulation of capital on a never-ending and always expanding scale it cannot be sustainable. Engels explained this destructive dynamic: "As individual capitalists are engaged in production and exchange for the sake of the immediate profit, only the nearest, most immediate results must first be taken into account. As long as the individual manufacturer or merchant sells a manufactured or purchased commodity with the usual coveted profit, he is satisfied and does not concern himself with what afterwards becomes of the commodity and its purchasers. The same thing applies to the natural effects of the same actions"
We disrupt the natural ecosystem at our peril, Engels warned. "Let us not, however, flatter ourselves overmuch on account of our human victories over nature. For each victory nature takes its revenge on us. Each victory, it is true, in the first place brings about the results we expected, but in the second and third places it has quite different, unforeseen effects which only too often cancel out the first." Engels added: "At every step we are reminded that we by no means rule over nature like a conqueror over a foreign people, like someone standing outside of nature." On the other hand, "we have the advantage of all other creatures of being able to learn its laws and apply them correctly." That is, we can organise society in step with nature's limits.
This is impossible unless the profit motive is removed from determining production in human society and a system of participatory democracy and rational planning is built in its stead. A rational agriculture, which needs either small independent farmers producing on their own, or the action of the associated producers, is impossible under modern capitalist conditions; and existing conditions demand a rational regulation of the metabolic relation between human beings and the earth, pointing beyond capitalist society to socialism and communism. Engels argued that only the working people organised as "associated producers" can "govern the human metabolism with nature in a rational way". This "requires something more than mere knowledge. It requires a complete revolution in our hitherto existing mode of production, and simultaneously a revolution in our whole contemporary social order."
For Marx and Engels, people and nature are not two separate things . Marx wrote that: “Man lives from nature, i.e., nature is his body, and he must maintain a continuing dialogue with it if he is not to die. To say that man’s physical and mental life is linked to nature simply means that nature is linked to itself, for man is a part of nature.” Marx goes so far as to define communism as “the unity of being of man with nature.”
The most basic feature of communism in Marx’s projection is its overcoming of capitalism’s social separation of the producers from necessary conditions of production. This new social union entails a complete decommodification of labor power plus a new set of communal property rights. Communist or “associated” production is planned and carried out by the producers and communities themselves, without the class-based intermediaries of wage-labor, market, and state. Marx often motivates and illustrates these basic features in terms of the primary means and end of associated production: free human development.
Marx does not see this communal property as conferring a right to overexploit land and other natural conditions in order to serve the production and consumption needs of the associated producers. Instead, he foresees an eclipse of capitalist notions of land ownership by a communal system of user rights and responsibilities:
"From the standpoint of a higher economic form of society, private ownership of the globe by single individuals will appear quite as absurd as private ownership of one man by another. Even a whole society, a nation, or even all simultaneously existing societies taken together, are not the owners of the globe. They are only its possessors, its usufructuaries, and, like boni patres familias, they must hand it down to succeeding generations in an improved condition."
Friday, August 05, 2011
Events such at the appropriation of £200,000 of private money by King Charles I from the royal mint, in 1640 caused merchants to lose trust in the existing institutions and drive them to find more trusted alternatives such as the goldsmiths. The goldsmiths soon found themselves with money for which they had no immediate use, and they began to lend the money out at interest to both the merchants and the government. Finding substantial profit in this business, they began to solicit deposits and pay interest on them. The goldsmiths eventually discovered that the deposit receipts they provided were being passed on from one person to another in lieu of payment in coin, which prompted them to begin lending paper receipts rather than coins. By promoting acceptance of the receipts as a means of payment, the goldsmiths discovered they could lend more than the gold and silver coin they had on hand, a practice that became known as fractional-reserve banking. These practices created a new kind of "money" that was actually debt, that is, goldsmiths' debt rather than silver or gold coin, a commodity that had been regulated and controlled by the monarchy. This development required the acceptance in trade of the goldsmiths' promissory notes, payable on demand. Acceptance in turn required a general belief that coin would be available; and a fractional reserve normally served this purpose. The monarchy's urgent need for funds at rates lower than those charged by the goldsmiths, and the example of the public Bank of Amsterdam, which had been able to make an ample supply of credit available at low interest rates, led in 1694 to the establishment of the Bank of England. The Bank of England succeeded in raising money for the government at relatively low rates.
The issue of the fractional reserve money and the money supply seems to be generating a huge amount of confusion when the issue is really quite simple. An urban myth is circulating on the internet that banks have been creating money out of thin air. This is another one of the millions conspiracy theories that have existed in the Earth before biblical times until now, and all of them are based on false ideas. Bank can not produced nothing from nothing, money is transformed into capital ( or dead labor ) by a process in the capitalist mode of productions, and it is a product of exploitation, and it did not all from heaven. This concept has been propagated by groups that believe the world is controlled by twelve banks owned by Jews, and therefore, the whole world is controlled by the Jewish people, and they are the ones that controlled the US instead of blaming the problems of our world in the capitalist mode of productions, they are blaming them on somebody else. It is like the Neo-Nazis are blaming the real estates crisis of the US on the Latin American, the blacks and other minorities, instead of blaming the problem on the capitalists over-production, and it is a normal crisis of the capitalist society, and not only that, it is an indication that capitalism is operating properly. Socialists have argued that banks just cannot create purchasing power at will and if they could it would be a negation of the Marxist labour theory of value. There are other flaws in this urban myth that banks can create new money. The ability of borrowers (and most bank lending is to capitalist firms rather than individuals) to pay interest depends on industries which employ people making a profit and continuing to pay wages to their their workers. So, in this sense, interest is a share of profits and so depends on profits being made. As long as profits are being made then finding the money to pay interest won't be a problem. Capitalism won't collapse but it will go through a rough time when profits are down (but they always recover sooner or later).
Terms should always be defined otherwise people risk talking at cross purposes. By "banking system" is meant - all banks together including the Fed. The other term that needs defining is "money". Modern Money Mechanics defines it as currency (MO) + bank loans = M1. Confusion often arises when people think, when this claim is made, that you are talking about M0 when in fact you are talking about M1. This is why it is best to keep to the original definition of money as what the wiki passage calls "base money", i.e money issued by the central bank or government. To include bank deposits arising from bank loans as money is just confusing. (Of course it is useful to know how much money banks do lend, but there's no need to call this "money").
A bank cannot lend more than savers have deposited with it, that in fact it can only lend less than this as it has to keep a proportion of these as a cash reserve to cater for any withdrawals savers are likely to make. Banks don't create money out of nothing. They can only lend out what has been lent to them and they make their profit out of the difference between the rate of interest they charge their customers and the rate of interest they pay their depositors (or they pay on money they borrow on the money market). Generally, small banks are deposit-rich and large banks are deposit-poor. Large banks loan out more money than has been deposited with them by borrowing from small banks. Small banks themselves borrow from depositors and other banks as well. An entire national economy can loan out more money than has been deposited in its banks by borrowing from foreign banks. Money is also printed by the Treasury and injected into the economy through the Federal Reserve, which loans to banks. (Something similar is done in other countries but I don't think there is a strict separation of Treasury and Federal Reserve in most countries.) There is nothing "bizarre" about this. Banks loan out more money than are initially deposited with them, because the initial deposits will cause a certain amount of lending, which causes additional deposits, which causes additional lending, up to a point determined by the reserve ratio. But the total deposits will always be greater than the total money lent, unless we count the money that enters the money from the central bank or treasury.
Many dherents to banks create money out of thin air assert that, with a cash ratio of 10%, a single bank on receiving a deposit of $10,000 can then immediately lend out $90,000 and claim support for this in Modern Money Mechanics. It is not what Modern Monetary Mechanics says. This booklet claims only that the whole banking system, not a single bank on its own, can, under favorable circumstances, increase the money supply (defined so as to include bank deposits and bank loans, not just currency) by x times (depending on the fraction that banks have to keep as a cash reserve) the initial deposit. If this statement was true, then people should be opening their own bank. The trouble is that everybody else would be too. The fact that they aren't is surely further confirmation that it is not true. Modern Money Mechanics argues that, with a cash ratio of 10 percent (which means that banks are required to keep at least 10 percent of what is deposited with them as cash), the "banking system" can expand the "money supply" by 9 times. But it definitely does not say that a single bank can do this on its own if it receives a deposit from the Fed (or from anywhere else). What banks can do is expand M1 but not M0. They do this when they give anyone a loan in the form of a current account. Nothing is remarkable or fraudulent in this. It's what banks (and loan clubs and credit unions) do. If you include loans via current accounts in the definition of money then of course banks can "create" money. What banks are doing is creating loans not out of thin air but out of the money deposited with them. Banks "create" money but this is only because it defines money as including bank loans (since by bank deposits it means not just what savers have deposited but also deposits banks have opened for those borrowing money from it). This means that, by definition, a bank "creates money" every time it grants a loan. Which in fact is not saying much more than that banks lend money. The real question is: in granting a loan does a bank create extra purchasing power which didn't exist before? This definition is misleading in that it does suggest that this is what banks do. But this is not the case (and the passage does not in fact say this). A bank can only lend already existing purchasing power. It can only lend money it already has, either from deposits by savers or what it has itself borrowed on money markets or its own money. What banks do is to channel money that people don't want to spend for the time being to those who need money (but don't have it) for some project. In lending this money they are no more creating extra purchasing power than I do if I lend you $1000. They are just redistributing it from one person to another. Both the depositor and the borrower cannot spend the same money (any more than you and me could both spend the $1000 I lent you). When a bank makes a loan it doesn't creates money. When a bank makes a loan it loans already existing money, either which savers have deposited with it or which they have themselves borrowed (usually on the money market) or their own money.
In the chapter "Bank Deposits - How They Expand or Contract" it is assumed that the Fed wants to expand "the money supply" ( essentially bank loans), so what it does it to buy "$10,000 of Treasury bills from a dealer in US government securities". This bank (Bank A) now has $10,000 extra cash. As it only needs to retain 10 percent as cash it can now lend out $9,000. It cannot lend, as the way you originally put it suggests, keep the whole $10,000 as cash and lent out $90,000. What happens, according to the booklet, is that Bank A's loan of $9,000 is spent and finds its way back to other banks in the system. Assuming it all ends up in Bank B (which won't be the case since parts of it would normally end up in many different banks), then Bank B has an extra $9,000. It can now lend out 90 percent of this, i.e. $8,100. This in turn ends up in Bank C, which can then lend 90 percent of this, ie. $7,290. And so on till in the end a total of $90,000 will have been lent out. Note that even this will not have been created out of "thin air" since it requires the money from the original $10,000 to be continually re-deposited. If, for some reason it isn't, then the process stops and/or the total amount of bank loans does not reach its theoretical maximum.
A more accurate description of the Fractional Reserve process can be found at http://www.federalreserveeducation.org/fed101/fedtoday/FedTodayAll.pdf page 5
"The fact that banks are required to keep on hand only a fraction of the funds deposited with them is a function of the banking business. Banks borrow funds from their depositors (those with savings) and in turn lend those funds to the banks borrowers (those in need of funds). Banks make money by charging borrowers more for a loan (a higher percentage interest rate) than is paid to depositors for use of their money. If banks did not lend out their available funds after meeting their reserve requirements, depositors might have to pay banks to provide safekeeping services for their money. For the economy and the banking system as a whole, the practice of keeping only a fraction of depositson hand has an important cumulative effect. Referred to as the fractional reserve system, it permits the banking system to "create" money." (The inverted commas round "create" are particularly appropriate. They should also have been around "money" as they are using the word to include "bank deposits" and nobody denies that the circulation of money through the banking system leads to an increase in the number of bank deposits.)
The New York Federal Reserve also gives a rather more sophisticated explanation at http://www.newyorkfed.org/aboutthefed/fedpoint/fed45.html
"Reserve Requirements and Money Creation: Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000). In contrast, with a 20% reserve requirement, the banking system would be able to expand the initial $100 deposit into a maximum of $500 ($100+$80+$64+$51.20+...=$500). Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity.
In practice, the connection between reserve requirements and money creation is not nearly as strong as the exercise above would suggest. Reserve requirements apply only to transaction accounts, which are components of M1, a narrowly defined measure of money. Deposits that are components of M2 and M3 (but not M1), such as savings accounts and time deposits, have no reserve requirements and therefore can expand without regard to reserve levels. Furthermore, the Federal Reserve operates in a way that permits banks to acquire the reserves they need to meet their requirements from the money market, so long as they are willing to pay the prevailing price (the federal funds rate) for borrowed reserves. Consequently, reserve requirements currently play a relatively limited role in money creation in the United States." (Note that the pyramid is based on the assumption that the money loaned on the basis of the original deposit is also deposited in a bank.)
Let's look at a very simple, analogous example that should clarify the issue.
Let's say that we have a holding facility for backpacks. People drop off (aka deposit) their backpacks at this holding facility, and the holder of the backpacks loans out backpacks to those who need them. If you deposit a backpack with him, you can withdraw it at any time with no advance notice. There is no money paid for the service. No backpack-interest is paid (i.e. if he loans you a backpack, he expects to receive it back after a certain period of time, let's say 1 month -- he does not expect 2 backpacks in return for his loan). All of the backpacks in this society are identical. Anyone who deposits his backpack receives a receipt saying "1 backpack" on it. The holder of these backpacks (let's call him the "banker") keeps account of all the backpacks deposited with him, all of the backpacks on reserve, all of the backpacks loaned to others, and all of the backpacks owed. When youleave a backpack with him, this goes down in his ledger both as a liability (since he owes you a backpack) and as an asset (since he has a backpack). When he loans out a backpack, he records this as an asset.
The banker starts with a reserve of 1 backpack, which was his initial capital that he started with. This is an asset. He expects to keep a total of 1 backpack as an asset at all times (after canceling out liabilities and assets) since that is what he has started out with, and he is not in this business in order to accumulate backpacks but
just to increase the distribution of existing backpacks. He already knows, from previous conversations with famous bankers, that during the month in question, the total number of customer withdrawals is never greater than 1 backpack.
Let's say you, Mr. X, deposit 1 backpack with this banker. He credits your account for 1 backpack, and gives you a receipt letting you know that you have 1 backpack in your account. He goes to his own ledger, and notes that he now has 2 backpacks as assets (the backpack on reserve and the backpack you have loaned him), and 1 backpack as a liability (the backpack in your account).
He doesn't want to keep unnecessary reserves of backpacks in his holding center, so he takes your backpack and loans it to Mr. Y. Mr. Y agrees to give it back to the banker at the end of the month. The banker still has 2 backpacks as his assets (but now 1 is a reserve and 1 is a loan to Mr. Y) and 1 backpack as his liability.
As it so happens, Mr. Y does not need the backpack until next week. So he gives it to the banker to hold for him. The banker gives Mr. Y a receipt saying "1 Backpack", credits Mr. Y's account for 1 backpack, and then goes to his own ledger and counts this backpack as both an asset in his reserve of backpacks, and as a liability. He now has assets of 3 backpacks (2 in his reserve and 1 out on loan to Mr. Y) and liabilities of two backpacks (1 backpack in Mr. X's account and 1 backpack in Mr. Y's account).
Since he still has more than enough backpacks in his reserve to cover the usual number of withdrawals during this month of the year, he loans out a backpack once again, now to Mr. Z. Mr. Z agrees to repay the backpack within 1 month. Unlike Mr. Y, Mr. Z actually needs to use the backpack as his school starts the next day. So he does not deposit this backpack, but just uses it. The banker still has assets of 3 backpacks (but now 1 is in his reserve, 1 has been loaned to Mr. Y, and one has been loaned to Mr. Z) and liabilities of 2 backpacks (still one backpack each in the accounts of Mr. X and Mr. Y).
Looking at it from the perspective of the deposits, Mr. X has 1 backpack in his account, Mr. Y has 1 backpack in his account and one which he owes to the bank within 1 month, and Mr. Z has -1 backpacks.
Over time, economists come along and claim that backpacks are not actually the things you wear on your back, but just ledgers in the accounts of a banker. It is said that Mr. X, Mr. Y and Mr. Z, all have backpacks, except in different forms. The banker has apparently created 3 backpacks, if not out of nothing then out of 1 backpack deposit, and economists look upon this situation as a miracle which arises from the peculiar power of the backpack holding system.
But let's say Mr. X decides he wants his backpack today. He withdraws one backpack from his account. To do honor this claim, the banker has to give Mr. X the 1 backpack that was in his reserve. The reserve is now down to zero, and Mr. X's account has zero backpacks in it. The banker's ledger now reads 2 backpacks as assets (the backpacks loaned to Mr. Y and Mr. Z) and 1 backpack as a liability (in Mr. Y's account). The banker thinks he is okay, since he already suspected that 1 backpack would be withdrawn this month, and he does not expect any more backpacks to be withdrawn until the beginning of the next month, at which point he will have been repaid his loan to Mr. Z and perhaps will have received additional deposits.
As it so happens, Mr. Z's dog eats his backpack and he is forced to default on his debt. The banker has to erase 1 backpack from his assets, so he now has 1 backpack as an asset (the backpack loaned to Mr. Y) and one backpack as a liability (the backpack in Mr. Y's account). But the backpack loaned to Mr. Y was already deposited at the bank and credited to his account. Mr. Y decides he wants the backpack the next week, because school is about to start. He tries to withdraw the backpack but his claim cannot be honored as there are no reserves at the bank. The bank is insolvent and is forced into bankruptcy.
So what has happened in in this hypothetical bank? Have new backpacks been created by loaning out backpacks? No. All that has happened is that the distribution of backpacks has changed. People who are not using their backpacks allow the bank to loan their backpacks out to others, with the expectation that their backpacks will return to them, just as if they held their money in a safe and withdrew their money from time to time, as necessary. The bank has economized on backpacks by reducing the need to form hoards. In the absence of a holding system for backpacks, each owner of a backpack would need to have his own backpack and hold it himself while he isn't using it. Instead, in the banking system, 1 backpack can supply the needs of 3 backpack users. Also note that deposits have not actually increased the
bank's assets, since any backpack the bank acquires through a deposit is not only an asset, but also a liability, which cancels it out. It is neutral.
This all can be applied, with appropriate modification, to a bank that holds money and lends it out at interest.
A bank does not create money whether we consider this from the point of view of an individual bank or the banking system. A bank receives money and credits it to your account, which is basically an IOU saying that the bank will pay you whenever you wish to withdraw your money. In normal circumstances it functions just as well as a piggy-bank would -- in fact even better, as it is simpler to use, there is no need to pay for security costs once the sums get large, and you earn interest on your money. When two customers of the same bank participate in some kind of purchase/sale of a commodity and one writes a check to the other, the bank simply credits the account of one client and debits the account of the other. (Just like if person A owed person B $20, and I owed both person A and B $20, and they agreed to have me pay person B $40 and pay no money to person A.) No money actually enters into the transaction. In Marx's terminology, money figures in here only as a measure of value, not as a means of circulation. The same thing holds in the case of two customers at different banks, where the checks go through a clearing house and cash is only used to settle the balance. The banking system greatly reduces the need for means of circulation, since physical money is only needed to settle remaining balances between parties. But any time you are loaning money out, there is a chance that the money will not return to you and it will be lost. The fact that the bank doesn't create money becomes obvious during a commercial crisis, during which too many depositors try to redeem their IOUs (their deposits) than can be redeemed.
Another description can be read here karthiksankar.com/moneycreation/#
Banks get money from what we deposit in them. Deposits are banks’ liabilities, since banks must return it to us when we ask for the money. Banks lend loans by using this deposit money of ours. Loans are bank’s assets.
The Cash Reserve Ratio:
Reserve Bank of India (RBI) is the central note issuing authority in India. Commercial Banks in India are required to hold a certain proportion of their deposits in the form of cash. This minimum ratio (that is the part of the total deposits to be held as cash) is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio. It is a tool used by RBI to control liquidity in the banking system.
The Process: Let’s assume there are various Banks in the Banking System. Bank_1, Bank_2, Bank_3, etc. Let’s assume the CRR to be 10%.
Anand deposits Rs. 100 in Bank_1. Keeping Rs. 10 in reserve (CRR is 10%), Bank_1 lends Rs.90 to Bala. Bala deposits his Rs.90 in Bank_2. Keeping Rs. 9 in reserve, Bank_2 lends Rs.81 to Clara. Clara deposits her Rs.81 in Bank_3. This process continues.
The Math Behind This: Time for some calculations. In the first cycle, the bank could loan out 90% of Rs.100. In the second cycle, the bank could loan out 90% of 90% of Rs.100. Thus the amount of money the bank can loan out in some period n of the cycle is given by:Rs. 100 * (90%)n
Let A be the amount of money infused into the system (in our case, Rs. 100) Let R be the required reserve ratio (in our case 10%). Let T be the total amount the bank loans out Let n represent the period we are in.
From the equation above, the amount of money the bank can loan out in any period is:
A * (1 – R)n
Thus, the total loan amount is:
T = A*(1 – R)1 + A*(1 – R)2 + A*(1 – R)3 + …
T = A * [ (1 - R)1 + (1 - R )2 + (1 - R)3 + ... ]
x1 + x2 + x3 + x4 + … = x / (1-x)
T = A * (1 – R) / R
How much money have our banks loaned out using the Rs.100 deposited initially? Using the above equation, this would total up to 100 * (1 – 0.1)/0.1 = Rs.900.
In this entire process, to find the total amount deposited (D), we need to take into account the initial Rs.100 too.
D = A + T
D = A + [ A * (1 - R) / R ]
D = A * (1/R)
Which, for our example, will total to Rs.1000.
The cash in reserve for any period is:
R * A * (1 – R)n-1
Total reserve is:
( R * A ) [1 + (1 - R)1 + (1 - R)2 + (1 - R)3 ... ]
which simplifies to A = Rs. 100
The Balance Sheet: This is how the combined balance sheet of the Banks will look like:
Bank Liabilities-Deposits Assets Credits Reserve Total Assets
Bank_1 100 90 10 100
Bank_2 90 81 9 90
Bank_3 81 72.9 8.1 81
- - - - -
- - - - -
Bank_n 00 00 00 00
Total 1,000 900 100 1000
Such is the power of this simple process that banks have created an asset of Rs.1000 using an initial money of Rs.100. In other words, Banks have created money. This type of banking is called “Fractional Reserve Banking”
Why does this process succeed? This process succeeds because most money transfers today do not involve cash or currency. It involves just cheques, Direct Debit, etc. or electronic transfer – mere numbers on a computer screen.
When would it fail?
This system fails in two main cases:
Cascade of withdrawals - When all depositors come asking for their money back at the same time. The banking system will not have enough currency to meet the demands. In fact, one main purpose of the CRR is that the banks must be able to repay deposits when there are significantly large number of withdrawals.
Loan defaults - What would happen when the debtors default or fail to repay the loans? This would also result in banks having insufficient money to pay back depositors.
The financial system is much more complicated than what we have discussed. But the above two are one of the basic reasons for the recent recession – just that it involved a cascade of selling stocks on the market, and defaults of subprime mortgage loans.
The above described correctly how the banking system as a whole (but not a single bank on its own) can, on the assumption of a 10% cash ratio, eventually make loans totaling Rs 900 from an initial deposit of Rs 100. What is misleading, however, is saying that this means that "banks create money out of thin air". They are lending out only what has been deposited with them (in fact only 90% of this). What is happening is that the initial deposit of Rs 100 is being continually recycled in the form of new deposits. You yourself actually state this yourself when you say total loans amount to Rs 900 and total deposits to Rs 1000:
How much money have our banks loaned out using the Rs. 100 deposited initially? Using the above equation, this would total up to 100 * (1 – 0.1)/0.1 = Rs. 900. In this entire process, to find the total amount deposited (D), we need to take into account the initial Rs. 100 too.
D = A + T
D = A + [ A * (1 - R) / R ]
D = A * (1/R)
which, for our example, will total to Rs. 1000.
In other words, total loans cannot exceed total deposits. What banks are doing is creating loans not out of thin air but out of the money deposited with them.
As it happens, an article Financial Times confirms that banks can only lend money they've already got (either from their own capital and reserves or from depositors or what they have themselves borrowed from the money market):
"Yesterday, the CML [Council of Mortgage Lenders] warned that its own members - who make roughly 94 per cent of all the mortgage loans in Britain - are facing higher costs as they compete for retail deposits to replace maturing wholesale loans. This is likely to mean that rates on mortgages may have to rise even if the Bank rate remains on hold." What is happening is that money which the banks have borrowed from the money market is due to be repaid soon and they are seeking alternative sources of money to re-lend, from depositors. To attract depositors they have to offer them a higher rate of interest. Which means that, to make a profit, they will have to charge a higher rate of interest too to those they lend money to. Banks make a profit out of the difference between the rate of interest at which they borrow money and the higher rate at which they re-lend it. If they really could create money to lend by simply monetarising what a potential borrower would owe them they would never be in the position reported by the Financial Times. But they are.
Banks, in pursuit of profit, have every incentive to make as many loans as they can (since the more loans they make the more income they stand to get as interest) and that in recent years they overdid this by creating all sorts of complicated and dubious loans financed by money they had borrowed on the money market. This all came unstuck when the US housing construction sector "overproduced" houses (in relation to paying demand, not real need, ). That's the way capitalism works. In a boom every capitalist enterprise (banks included) tries to make as much profits as they can. Then one sector overproduces and this has a knock-on effect on the rest of the economy. This happens every time and there's nothing governments can do to stop it. That's one reason why we've got to get rid of capitalism and its production for profit and replace it with socialism and production directly for use.
If you just abolished the Fed and brought in a different monetary system this would still leave corporations owning and controlling productive resources and using them to generate a profit rather than to directly satisfy people's needs. So world poverty, pollution, wars, waste, etc that arise from the competitive struggle between profit-seeking corporations would continue. No monetary reform can change this. Rather than thinking about new banking structures, surely the most urgent need is to get rid of capitalism (of which banking is just a part) altogether! A fundamental point is that it's not "greed" which has caused this crisis, it's capitalism. Crisis is inherent to capitalism and the only way to have a world without crisis is to have a world without capitalism. That means consciously dismantling capitalist social relations: money, commodity production, wage labour, national frontiers and ... banks!!