Panic

As well one might?

It has been 10 years since the financial masters of the universe torpedoed the world’s economy, leading to, in the west, the implosions of any pretence of financial prudence, competence, or reliable expertise and trust, particularly from off the most liberal extremist economist that previously presumed proficiency in the management of a capitalist financial system or proffered the lite application of regulatory control in sovereign economics. This resulted in the exposure of useless high risk financial activities and the sinking of economic growth expectations, which in the UK alone required £500 billion of private financial debt held by banks, necessitating a resulting forced transfer of this debt onto the public purse. Since then the effect of the ‘liquidity credit crises’ has been the slow incremental rise in debt and deficit throughout Europe and USA with steps taken to bolster banks preparatory fighting fund resources against further upsets and continue pressure to support the rapacious financial markets with ‘lite regulation’ on an international scale. Other than “saving” the financial structures of the west, there has been no noticeable improvement in recovering losses or a return to optimistic trading activities.

At the same time as slugging through the lost past decade there has been the slow retraction of, what may be describes as “disposable income”; meaning that the majority of people in the employed sectors are in no better position economically now than 10 years ago. This loss they are beginning to really comprehend as their disposable income slips, in real terms, closer to those in the ‘gig market economy’ and are overall considerable poorer on some measure more than 20 years ago. As the UK’s general economy is especially totally reliant on consumer spending to keep its GDP afloat a great deal depends on disposable income being used in consuming as much as those in employment can afford. The economy does not care where that spending comes from, preferably from earning or as is obviously the case now, borrowing or savings, both of which are an unsustainable issue and if mirrored to the changes in consumer volume, how and where disposable income is being placed, can be a good indicator of impending economic stress; individually, socially and for the state.

Throughout all this decade no financial / economic expert has been able to lay out a cogent plan as to how the overall markets or commercial business activities sectors can be persuaded to aid in building a buoyant secure future, nor have the G7 (was G8 Russia is excluded) or G20 been able to really identify a way forward that offers some stability or growth. In fact they have not got a convincible clue as to what is going on in the global economy other than there is some form of ‘realignment’ taking place or there are elements of the ongoing fiscal drag from the 2007/8 CC, dampening expectations. None want to consider that the free market capitalist system has corrosive constituents that undermine the foundations of the supporting collective edifices it needs to survive and is showing up in palpable escalating social discord; currently disparage in signs of ‘popularism’.

Just now the global economy, although seemingly trundling alone on a 3% growth rate with the best countries dragging in 1 to 2%, the fear is that there is the threshold ahead of another slow down, driven by (it is assumed) the trade conflict that the Trump has started with, primarily China, Canada, and Europe under his “America first” theme to be understood as ‘trade on my terms and my way at your cost’. In this he may have a point in so far as the US is the largest unified buying economy with resources to support an internal consumer nation and has been buying in imports over exports but this comes with an accumulated debt financed by other nations. This imbalance is due to productivity outsourcing driven by the market for cheaper cost structures and higher returns for the globalised financial markets; this is a delegated instructed process inflicted onto own productive capacities that has retreated from any assumable position of ‘self sufficiency’.

This outsourcing was (and still is) a similar created trend that had impacted a long declined productive economy like the UK; it hollowed out the economic resources basis of the country making it increasingly difficult to raise revenues for investments, being reliant on foreign investments, generates broad fiscal retrenchment and consequently becomes inclined to resist effective taxation.

This trend of outsourcing, encourages commercial productive market investment to maximise into low cost providers (like China, E. Europe, India, Africa), to counter this loss and attract investment back, countries  give inducements and weaken regulations for any foreign investments yet subsequently the consumer nation has to keep borrowing to absorb imports against its assumed ability to repay a debt.  Having given away its productive and revenue raising capacities there is only, possibly, two ways such debtor countries can go, the Trump way – control trade to beggar the producer, selectively limit trade imports or the UK’s preferred practiced way, shrink corporate taxation, implore for foreign capital, trample all society and social structures, devalue, lacerate all state investments and impoverish a nation to become labour competitive in the hope that investment / GDP will grow and to cover any revenue gap, raise stealth taxes, which the consumer picks up while business is dithering for new or any increase in manufacturing exportable ability to be “competitive”. This hoped for improvement assumes that there is a foundation or spare or ample productive capacity with which to rebuild a balanced productive GDP and there is available financial strength to call on however a nation that has fallen to be debtor nation is not in a strong credible position. The force to be “competitive” has captured the country to believe that it has had to compete to be the lowest marketable location while borrowing to pay for the privilege with higher debt.

The fantasy behind this overall reductive trend, which is a prevailing and escalating position for any productive nation, is that it is still extensively established that free trade is good and everyone benefits. In some discrete ways and over a period of time this has been true but it is not intrinsically free or wholly advantageous for everyone. Trade has always been manipulated by government and corporate interest for inequitable ‘shared’ rewards, there is always a detrimental cost somewhere. It is not a zero sum game but practically a pursuit to be the lowest provider structure to aid the markets and is dependent on the applied power differential between the ‘buyer and seller. This disparity of market operations is generally very beneficial for one party, yet doubtfully in development maturity, can it be equally beneficial for the other. This arrangement may seem to be equitable in confident expansive markets and can continue for a long time while it works in favour of the stronger participant but consequent to a crunch occurring and then a switching of supremacy between participants, means raising a forced re-configuration. This for the rising debtor nation caused by the imbalanced trade and being use to being the prime beneficial recipient of free trade, is a situation that becomes unsupportable or unacceptable; then trade is no longer seen as fair! Re Trump!

It is extremely improbable that any government will actively take any action that places its own interest subservient to another once the danger of economic liquidation and civil unrest become apparent which is why a strong agent will use force to coerce another for advantages. This does not solve the underlying problem of the economic depletion of a country as buyer or seller and if the fiscal confidence of the country is doubted to recover debt / deficit, the spiral of decline gets faster which even a fire sale of assets, retrenchment of capital and revenue expenditure or higher taxation will not be a resolution. As is the apparent situation now, no government will have attempted to control / manage the clear excesses of ‘free market forces’ as their ability to do so is directly related to their individual power (or lack of) and due also to their policies and governmental philosophy being held captured in the ideology of the continued unfettered liberalisation of market forces. A situation useful only while one can control the flow of rewards; there are ample indicators that this power dynamic is altering.

Debtor nations like those within the EU, USA, GB; the main global consumers and debt holders, are totally reliant on ‘beneficial free trade’ for themselves funded by their raising debt. Having moved away from a measure of productive self sufficiency, gamed imports over exports conspired to use much cheaper unregulated product providers, feasted on markets low tax and relax controls; are now running up against the barriers of reducing market expansion, technological productive labour redundancy and diminishing revenue income; potentially becoming unable to retreat from being a secure debtor nation without taking draconian actions that will inevitable aid the raising of civil unrest. From this one might suggest that capitalism is consuming itself and it also indicate why governments are incapable of being voluntary decisive without external forceful interventions and have thus far held back from enacting remedial measures to curtail the excesses of market activities. It is little wonder then that after each G7/G20 meeting, in the past decade, it is safe to assume that all participant depart with a range of encouraging verbosity that they all have some agreement on, seemingly aware of their individual limitation but willing to move minor events forward as “business as usual” and hide the panic of repetitious momentum that they must understand but dare not let loose publicly.

Now it is reasonably known what went wrong with elements of the west’s international economy leading up to the liquidity crises, how it was allowed to happen and the damaged caused but sovereign economies are paralysed, incapable of taking any protective action to avoid the next collapse which one may say with some reserve will not be solved with more QE but will be as a direct result of the ongoing ‘laisser-faire’ market forces, geopolitical gaffs and exacerbated trade tensions which are constrained for the moment while the drug of the last QE cheap money with low interest rates disguises the dangers.

Government, business and commercial activity are trying to turn away (as if it did not happen) from the irresponsible causes of the last recession and are busy shaping a rational for the existing poor state of a global slow down to an assumed ‘cyclical effect’ that will work its way through the system and restart growth confidence. Those countries with surplus labour are happy to acknowledge that much of the cause of the reduction in productive employment is down to hyper automation, global competition, external cheaper labour cost with low restrictive legislations but assume the solution in part is for greater indigenous ‘flexible’ labour, easement of hindering legislation, investments from anywhere, re-skilling or those seeking employment encouraged to price itself into a market (result: increased gig jobs). None of this solves the problem of the increasing ability to produce massive consumables against the decline in the ability to consume them with reducing affordable disposable income. It is slow in becoming obvious but reduce individuals living standards to a point that they worry about how to afford to live, do not offer a optimism for clear obtainable improvement, allow the increasing disconnect of wealth devisor, do nothing with inequitable taxation and have governments being seen as nonresponsive to social problems, is symptomatic of festering malaise. On this, does stand the social existential dangerous angers that are being forced out to confront governments’ inaction, seen in the fluctuating extremism of the direction of certain essential fears that act on the various populaces. The longer governments ignore the radical action required to moderate markets, trade, resource inequality and imbalanced economies the inevitable consequences are clear.

As a new year begins it may be possible to point to some news worthy bits and pieces that are in place now, so that one can possibly establish them as potential formative matters leading to likely extraordinary events, this being beside the unforeseen. In taking a glance of prominent news items, which on their own are concerning and will continue to lead on the fright scale, it is the combination and collusion of different factors to events that can raise points on a panic Richter scale. So for now there are the obvious ones like:-

1) The slowdown of the economies of the prime economic drivers: USA, China and Europe, with an uncertainly of confidence in overall continuing growth, probable recession.

2) Courtesy of the USA and Trump, the imposition of trade tariffs or barriers,

3) Political instability and tensions throughout the Middle East.

4) USA straining relations with Russia, China, Europe, N Korea.

5) isreal and its biggest open prison in the world.

6) Turkey given the nod to start a gratuitous large offensive against the Kurds.

7) Brexit squabbles with the EU to cause trade and currency / financial problems.

8) Economic migration stress zones.

9) There are more fractures in and between prime governmental leadership and incapacity to ameliorate social     pressures.

10) Just for fun: history has a lot to offer in understanding events of the present by knowledgeable evaluation but humans do like to ignore, misinterpret and repeat blunders.

It is probably sound advice not to panic in the face of the unexpected tensions but a reasonable stance for any wo/man would be to be aware of the impending factors that could raise a feeling of panic, likely if one disregards or is ill-equipped for events that are silhouetted for attention. But as ever it may be unreasonable to consider that there are any imminent causes which are in sight that are any reason to panic on; things do go on one way or another and yet...

Let’s try for a few of positives:- the war hasn't started, there hasn't been a real global pandemic, global economy hasn't collapsed, causative famines are manageable, Gaia has so far been patient to restrained and saps ele hasn't happened.

Panic not?

© Renot

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