A politician in Hungary recently said, “the Prime Minister
is acting as a Robin Hood in reverse. Whatever he takes from the poor, he gives
to the wealthy”.
Hmmm…, nowadays the GLOBAL economic system works exactly the same.
The gain of wealthy makes them more reach. The loss of wealthy makes the poor
pay for that.
We know little about the economies of the past. We usually
guess their functioning from the archeological finds and ancient works…
However some ancient societies remained to exist until now.
Recently there is a
big interest for Amazonas Indians culture and their hidden communities.
It is a fact, that their societies survived thousands of
years. And they function (most probably only until we do not
franchise them with our amazing market society model) over much more
time, than we can even imagine. They live in the nature and they live a
sustainable life with the nature. (http://www.amazon-indians.org/yanomami.html)
Just for your comparison – let me put some pictures of a child of those Amazonas societies and one who had his bad luck to be born in India – an emerging
market economy;
I will try not to make you tired of statistics, but take a
look on this; (research date: 2013 July)
World Hunger Statistics
|
|
Total
number of children that die every year from hunger
|
1.5
million
|
Percent
of world population considered to be starving
|
33%
|
Time
between deaths of people who die from hunger
|
3.6
seconds
|
Total
number of people in the world who suffer from hunger and malnutrition
|
800
million
|
Total
number of people who do not have enough to eat
|
936
million people
|
Total
percentage who do not have enough to eat who live in developing countries
|
98%
|
Total
percentage of world’s hungry that live in 7 countries
|
65%
|
Number
of people who died of hunger today
|
20,864
|
Total
number of people who will die of hunger this year
|
7,615,360
|
Total
percentage of U.S. households that are at risk of hunger
|
11%
|
http://www.statisticbrain.com/world-hunger-statistics/
This year it is
expected, that over 7 million people will die of hunger.
We consider, as the bloodiest war ever fought is the World
War II. It started at September 1st 1939 and ended 2nd
September 1945 (some say in August the same year… In fact some Japanese
soldiers were defending the jungle for another 20 years, but better we stick to
some earlier end date..).
The World War II lasted 6 years. There were dead
about 75 million people, as the consequence of the war. Among them died about 40 million civilians.
It is always very hard to make calculations with such
figures. It is really heart breaking, but we need to do this for now.
In 6 years of war
about 40 million civilians died. Each year died about 6,6 millions of
people in average. We call this the
biggest tragedy in the human history!
Today we know, that 7.6
million people will die of hunger within this year. And how we can explain
this?
An immediate question: what do you think, who is the mass killer doing this?
He got no face, just like Jack the Ripper. But we certainly
got a name for him.
His name is very well known: Mr. Free Marketeconomy. His face appears for me like the "Joker" from a Batman movie. (I tried to select for you my favourite from Jack Nicholson)..
This Mr. F. Marketeconomy got even more casualties, not only those, who die of
hunger:
By WHO (World Health Organisation) estimates, it is about 2.8 million people die every year as a result of being overweight or
obese; (http://www.who.int/mediacentre/factsheets/fs311/en/)
I hope you get my point - on one end of the world people die of hunger - on the other end of over eating. Someone from an outer World would say - hey, this must be a joke... But no... This is very real, even surreal...
Especially if we look a bit further, we shall find some Nations, where both are present. The hungry and the fat. My favourite countries from this point of view are India and Mexico (this last one happened to be the Number one Heavy Weight Champion of the World!)
But this is not yet the end – just to prove, that our market
and consumer based life takes a really big toll on us;
The same WHO states, that about 17 million people dies of CVD (Cardio Vascular Disease, or in
other words, heart diseases or a disease directly related to our consumer status)…
Lets go further with our statistics:
Yearly dies:
7.6 million people – of hunger;
2.8 million people – of eating too much
17 million people – of combined effects of modern life
(eating junk, drinking, smoking, stress);
The total casualty
rate of Mr. F. Marketeconomy:
27.4 million people a
year… Over four times of what we had
during the II World War.
I feel like that Rabbit from the Walt Disney Robin Hood
cartoon… Hey Man, you are shooting the Wrong target!
I think we can all agree, that there is a general problem
with the way we arranged our Global System (or our Global System arranged us?)
This Mr. F. Marketeconomy
appears to be a mass killer!
We need to stop this guy!
Hey, Mr. Holmes do you have any idea how to catch him? He
is just around you on foggy London streets. http://www.userfocus.co.uk/articles/learn_from_Sherlock_Holmes.html)
- Understand the
problem to be solved
- Collect the
facts
- Develop
hypotheses to explain the facts
- Eliminate the
least likely hypotheses to arrive at the solution
- Act on the
solution
We may think, that
the points no. 1-3 are already done. We know very well Mr. Market Economy with
his wife Mrs. Consumersociety – she
is his lifetime spouse, a sort of a love at first sight. But they are not as Romeo
and Juliette, but rather as a kind of Boney and Clyde; just there is no one to
catch them at the moment of action. For me she rather appears like this... Just to make a nice couple.
Yes we have a problem on point 4 and point 5. We have no hypotheses to arrive at the
solution and we have no action.
Before we bring to Nuremberg or Hague this couple for a trial committing crimes against humanity, let me put for ourselves a question – do we know
Mr. F. Marketeconomy and his charming wife or not?
Jack leaved some written notes for the Scotland Yard, not like Mr. F. Marketeconomy;
so let us see him first in action.
Exactly 6 years ago the American financial markets crashed( at August
7, 2007), when BNP Paribas terminated
withdrawals from three hedge funds citing "a
complete evaporation of liquidity”. Could you try to understand what does
it mean “evaporation of liquidity” – It is not a typing error - liquid substances can evaporate, even some other substances, like iodine, but how the "financial liquidity" can do the same?
In my environment we like to name the things, as they are. We do not say "someone evaporated my money", but instead we say someone have STOLEN my money...
After this event, a “domino effect”
like meltdown happened in the US and later of the World financial system. (Or
should we call it “evaporation”?).
I must say I also love the expression of "meltdown", but at least it got some visual meaning and does not refer to some kind of disappearance.
The World and most of the governments continuously spend a lot of money to
forecast and to understand the situation of the Global and their own National
economies.
Let us see what said one year before (at his last Congress
hearing) Mr. Alain Greenspan (the
legendary 13th Chairman of the Federal Reserve) –
"But the economic fundamentals remain firm, and the U.S. economy appears to
retain important forward momentum,". "The longer-term prospects
for the U.S. economy remain favourable."
Than, after he left his precious chair, at February 2007 he makes
a prediction:
The American economy might slip
into recession by year's end.
He said the U.S. economy has
been expanding since 2001 and that there are signs the current economic cycle
is coming to an end.
"When you get this far away
from a recession invariably forces build up for the next recession, and indeed
we are beginning to see that sign," Greenspan said via satellite link to a
business conference in Hong Kong. "For example in the U.S., profit margins
... have begun to stabilise which is an early sign we are in the later stages
of a cycle."
"While, yes, it is possible
we can get a recession in the latter months of 2007, most forecasters are not
making that judgment and indeed are projecting forward into 2008 ... with some
slowdown," he said.
I personally very much like Allan for his ability to speak about the most complex economic issues with a
simple, understandable and human language.
Then come Ben
Bernanke, the 14th chairmen of the Federal
Reserve. Who by the way speaks in a way, that most probably even he does not
understand himself…
This handsome man speaks before the Joint Economic Committee, U.S. Congress at March 28, 2007. Few month before the crisis.
“Economic growth in the United States
has slowed in recent quarters, reflecting in part the economy’s transition from the rapid rate of expansion experienced
over the preceding years to a more sustainable pace of growth. Real gross domestic product (GDP) rose at
an annual rate of roughly 2 percent in the second half of 2006 and appears to
be expanding at a similar rate early this year.”
“At this juncture, however, the impact
on the broader economy and financial markets of the problems in the subprime
market seems likely to be contained. In particular, mortgages to prime
borrowers and fixed-rate mortgages to all classes of borrowers continue to
perform well, with low rates of delinquency. We will continue to monitor this
situation closely.”
The Statement by Treasury Secretary Henry M. Paulson, Jr. is even better. He talks on G7 Finance ministers meeting in Washington. It is 13th of April 2007.
“The current global expansion provides a positive
backdrop to our discussions. The
U.S. economy is healthy and is making a transition to a sustainable expansion. ………The deficit, which was 1.9 percent of GDP in FY2006, has been cut
in half three years ahead of schedule and the Administration's budget projects
a return to a surplus by 2012.
We continue to watch
developments in the subprime mortgage market. While challenges in this market
do not appear to pose a serious risk to the overall economy, many families have
been affected. As I testified before Congress earlier this month, we are
working closely with housing sector regulators on this issue.”
Later on Paulson repeats Greenspan’s idea (July 23rd 2007)
“We haven’t had a global financial
shock since 1998. I believe that these large and dramatic increases in private
pools of capital and in the credit derivatives markets since then have helped manage and disperse risk
and make the economy more efficient. When we do have one—and it’s when, not
if; that’s not me being negative, it’s just that we’re not going to defy
economic gravity—we’ll be seeing for the
first time how some of these instruments perform under stress.”
The same Henry Paulson will realize few
months later, that all the key instruments he believes in appear to have zero
effect on the US economy.
And what said
the IMF (in September 2007).
Outlook
and Risks
The forecast for global growth has been
marked up to 5.1 percent in 2006 and 4.9 percent in 2007, both ¼ of a
percentage point higher than in the April 2006 World Economic Outlook Growth in the United States is expected to slow
from 3.4 percent in 2006 to 2.9 percent in 2007, amid a cooling housing market.
Just lets stop for a second...
You have heard a lot about this magic subprime mortgage. What is this?
Let me explain it to you in few words.
You are a "bad boy", you never pay your credit in time, you love shopping, your card is full of debts. You have plenty of unpaid checks and bills.. So the banks put you already on all their black lists. Suddenly a young fellow wakes up in a bank and says...
Hey, you are full of debt, but you got a house! It is no problem, if it is under mortgage or not. We make for you a special mortgage. It will be special, as it will cost you more, but we as bank will land for you money. As far as the property market goes up, we have no problem. The moment the property market goes down, you will lose your house. This last sentence was written with extremely small letters - normally on the bottom of the contract.
And what is the end of the story? First the people lost their houses, than the banks lost their money (when there is no one to buy those houses)
But let us come back to our main topic:
There is one
more guy, who smelled out something:
Paul Samuelson, the famous professor
from Massachusetts states at
2005:
“In the short run the dollar
appreciates relative to the Euro and Yen. That can last for as long as those
countries recycle eagerly their trade surpluses with the US into holding dollar
assets (Such as low-yielding American Treasury bonds).
Be not misled. So strong
and irreversible are Americas balance of payments deficits, we must accept that
at some future date there will be a run against the dollar. Probably the kind of disorderly run that
precipitates a global financial crisis.”
But you would say, that this has
nothing to do with the current crisis. Yes, you are right, as Paul was afraid
of another Black Wednesday to spread around the World.
So
what do we have?
The main financial institution of the
World (IMF), the main financial institution of the US (the Federal Reserve) and
the most decorated scientists see absolutely nothing. They behaved like a blind donkey in the autumn mist.
Paul Samuelson dies at 2009 – he said
about the latest crisis (for which he felt some responsibility, since he had
helped develop financial derivatives that company executives did not
understand) proved that “free markets do
not stabilise themselves. Zero regulating is vastly suboptimal to rational regulating.
Libertarianism is its own worst enemy!”
His opponent and critic Milton Friedman died 3 years
before. He did not have the chance or
honour to give his answers to this later crisis.
He was firmly supporting Mr. F. Marketeconomy. And at 2006 he did not see anything, than the future failure of
the EU economic model. He was born 101 years ago on July 31st… Happy
birthday! And Have a nice chat with your good friend Augusto Pinochet!
Their good friend, Allan Greenspan is alive and well – he served 4 US presidents, our
friend Bob (Woodward) wrote about him a book and at the end of his professional career he had to admit, that he was
wrong… (Make sure, when someone writes a book about you, than you better
die immediately, otherwise all your opponents will constantly blame you).
But
Allan never said sorry for what have happened. He did not feel so. He
probably thinks, that all this was the act of God.
So here we are. Or better to say, that we are nowhere!
Few hours before the biggest financial
crisis, comparable only to the Great Depression, there was not a single person close to any global or national decision
making to forecast the big trouble or any kind of trouble. All the events came
to them as a total surprise.
Bigger
problem is, that the reaction of the Government was slow, incompetent and not
efficient at all.
This particular crisis globally caused USD 34.000.000.000.000 (are you tired to
count all this this zeros? I will help you - it is 34 trillion) loss of wealth
from August 2007till 2009.
Can you just imagine what could have
been done with all this money to make things better? The problem is, that no one can imagine.
Let’s go back to Sherlock and try to verify the described events by his method:
1/. Understand the problem to be
solved;
Obviously some saw some problems, but
they did not understand, that this is a problem; or they did not see those
problems, as related to the later event;
2/. Collect facts;
There is a huge system of collecting
facts; Millions are spent for different kind of statistics, indicators and
other data (as you see from recent news, the US even collecting data by hacking
practically everyone).
Still it looks like the data collection
has no proper effect or no effect at all; In general it completely failed; Or
in other words it has totally mislead the decision makers.
3/. Develop the hypotheses to explain
the fact;
This is what we have now… We have a lot
of hypotheses, which are absolutely useless, as our point 1 and point 2 remain
false;
Or if we observe the same subject from
another point of view, the 2007-2009 crisis:
-
No one could predict;
-
No one could prevent;
-
No one had the proper means to handle;
We
stop on these questions at the moment;
We shall wonder later on about our Mr. F. Marketeconomy, his charming wife and if
there is any help to stop this disaster, what we “enjoy” now involving the
massacre of yearly about 30 million of our fellow global citizens who fell
victim to our Mr. and Mrs.…
We shall wonder also how to find or
correct the current RE-DISTRIBUTION
mechanisms and see, if we can do something with the term of SOLIDARITY.
In general – if
anything can be done better?
At the moment we can give only one good advice. If you decide to go skydiving over the sea, don't forget to have a Flotation Device. (Remember tis advice, as it is also useful, when you get some meltdown..)
Until next time I
leave you with some text from Karl Popper, as this shall relate to our
further thinking…
What some people have in mind who speak of our 'social system',
and of the need to replace it by another 'system', is very similar to a picture
painted on a canvas which has to be wiped clean before one can paint a new one.
But there are some great differences. One of them is that the painter and those
who co-operate with him as well as the institutions which make their life
possible, his dreams and plans for a better world, and his standards of decency
and morality, are all part of the social system, i.e. of the picture to be
wiped out. If they were really to clean the canvas, they would have to destroy
themselves, and their Utopian plans. (And what follows then would probably not
be a beautiful copy of a Platonic ideal but chaos.) The political artist
clamours, like Archimedes, for a place outside the social world on which he can
take his stand, in order to lever it off its hinges. But such a place does not
exist; and the social world must continue to function during any
reconstruction. This is the simple reason why we must reform its institutions
little by little, until we have more experience in social engineering.
Karl Popper, 'The Open Society and Its Enemies', Chapter 9.
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