Dealing With The Lords Of Finance
By Hazel Henderson
We have reached the inflection point in the globalized financial casino and its mountains of odious, unrepayable debt. With outstanding derivative positions totaling some US$600 trillion — and world GDP only US$63 trillion — today’s global debt is unrepayable. Central bankers cannot print enough money to fill this gigantic hole. So who will lose, aside from taxpayers, who are stuck with the bill thus far of $23 trillion just for America’s bailouts?
The fate of Greece lies between the excesses of its previous government and its past Wall Street-friendly policies, the still-dominant ideology of market fundamentalism, their bondholders and marketmakers, and Goldman Sachs and the still-obscure US$600 trillion derivatives market. There is a massive bet on Greece’s eventual default.
The world’s citizens now see how governments allowed themselves and their taxpayers to be trapped by the lords of finance. The bankers funded their election to office, bribed their officials, and manipulated their regulators and public opinion. Through advertising and financing of mass media, financial moguls and media moguls converged with political moguls worldwide to form concentrated conglomerates.
To save sovereign governments from further co-option and corruption, these government leaders and their economic wise men must now rise to the occasion. Together, they must act to downsize and curb the rogue global casino. The G-20 Summit in Toronto, June 26-27, is their next opportunity to re-assert control on behalf of their citizens and the global public interest. Will leadership come from Europe, China, India, the USA, or Brazil? So what is the remedy?
First, the derivatives betting on defaults of countries and companies must be shut down before the players drive Greece under to win their bets. This will help curb the “bear raiders” waiting to collect their bets against other EU countries, such as Portugal, Italy, Ireland, and Spain.
The USA, often still seen as a safe haven, is on equally rocky ground with its huge trade deficits and external debts to China, Japan, and OPEC countries. Most states in the U.S. are running unsustainable deficits, have huge backlogs of now risky bond debts together with falling tax revenues due to high unemployment levels (10% nationally, 17% if all jobless are counted), as well as crumbling infrastructure needing over $1 trillion in repairs.
Only concerted action by the G-20 can arrest the takeover by the lords of finance. This will require a paradigm shift beyond economics and all its theories, from left to right, towards a reintegration of knowledge and systems approaches that connect all the dots. Such a shift is required to arrest the slide.
We are now in a global, system-wide transition from the early, fossil-fueled Industrial Era to the emerging, green, information-rich economies, from Wall Street’s corrupted and debt-choked money circuits to new electronic trading platforms that use free exchange and new currencies.
Estimated world trade conducted in barter remains at approximately 25% but is ignored in GDP, which is based only on money coefficients. Electronic trading is a new multi-trillion-dollar market opportunity for IT companies, following the paths of eBay, Craigslist, Freecycle, Global Giving, Greengrants, Microplace, Kiva, Zopa, Prosper, and other micro-finance and philanthropy sites.
To foster the transition from the monopoly of fiat money circuits (now just as bad as gold-based money) to 21st century electronic and local currencies, the G-20 needs to downsize financial sectors. If governments don’t work together and face down the bankers who operate the global casino, the dominoes will start falling, one by one.
Wall Street and London’s bloated financial sectors have little social purpose and produce nothing. Proprietary trading and risk-taking must be separated from government-subsidized deposit-taking banks. The best way to accomplish this is for the G-20 to agree on a less than 1% financial transactions-tax across the board.
It is also essential to break up all too-big-to-fail banks, e.g., the six largest ones nationally: Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley, and Wells Fargo, which now control 63% of USA’s GDP.
Only if G-20 leaders come together in Toronto and agree on these first steps, can they avoid the next financial crisis, already looming. If they cannot summon the courage to shake off the grip of the lords of finance, they will have forfeited what little public trust still remains.