The awakening of the ghost of nationalism is at length the result of a double failure of the European Union and its leadership. The financial crisis [...]]]>
The awakening of the ghost of nationalism is at length the result of a double failure of the European Union and its leadership. The financial crisis and the immigration crisis that hit Europe during the last decade have proven the unsteadiness of the unification project. In both cases, European leaders’ capitulation to business elites’ interests led them to flawed responses — eventually turning the Union into a battleground where national political agendas of member states are played off against each other.
In its handling of the financial and immigration crises, EU leadership has repeated historical mistakes, surrendered democratic functions to turbo-capitalism and unlocked the door to authoritarianism. Photo Credit: Apostolis Fotiadis
But the elites’ commitment to democracy is not very sincere. They mostly remember it when the interests they represent are under threat. In a case in point, last month the German Finance Minister Wolfgang Schäuble started leaking versions of rescue strategies about the future of the Greek bailout program, hoping to find a new balance between additional rescue money and austerity obligations that the overburdened Greek public would have to digest.
In this way, Schäuble hopes to rescue the Greek pro-austerity coalition government from the likely beating in the municipal and European elections next May. To put it in a simpler way, his problem is that democracy might work and drive things out of control. Thus, he is hurrying to exercise preventive measures for a possible derailment of his strategy.
Schäuble’s last example of strategic thinking is the embodiment of the nature of European politics since the beginning of the debt crisis in 2009. It is also the kind of thinking that has failed Europe.
Austerity — and the international institutions created to implement it, most notably the Troika and the (European Stability Mechanism (ESM) — have become a structure through which some member states, with the participation of the European Commission and the European Central Bank (ECB), critically undermine the sovereignty of other member states. European institutions have become a vehicle for imposing hegemony on others, while any corrective mechanism like the European Court of Justice and the European Parliament have been marginalised in the process.
Immigration
The immigration crisis that’s been evolving since the end of the 1990s on the borders of Europe has also degenerated to brinkmanship between southeastern and northwestern member states.
When xenophobia dominated the debate on migration, instead of a humane immigration system with regular controls, European leaders away from any kind of public scrutiny chose to build a xenophobic high-tech fortress. A project promoted by the emerging security-industrial complex which today actively co-dictates European immigration policy.
In both cases, there were other ways to go. The Eurobond or a controlled debt restructuring were serious options that would have changed the course of the eurozone crisis from very early on. With the correct political navigation, they could have also deepened the European project politically.
The Dublin regulation was created in 1997 to identify the country liable to accept and consider an asylum application; The Common European Asylum System that outlines common high standards and stronger co-operation to ensure that asylum seekers are treated equally in an open and fair system was put on paper in 1999. Instead of utilising these further to create a just burden-distribution system, member states came up with an externalisation mechanism that pushed responsibility to others.
History repeating itself
Now, at the peak of the crisis, Europe’s technocrats react again like political dwarves. To defend the future they have chosen for Europe, they will flirt with the monster. They watch as Greece begins to turn into an authoritarian state where journalists are persecuted and racist neo-nazis have been offered appalling impunity, only because its government keeps up with fiscal consolidation.
During the boom years, European leaders promised that if we all run faster away from our history, unconditional and unlimited progress would wait for us around the corner.
What we managed instead was to start repeating Europe’s historical mistakes, surrender democratic functions to turbo-capitalism and unlock the door to authoritarianism.
Europe’ future has been captured by some who pay lip service to its vision while they do business for themselves and their patrons. The negotiation for the Transatlantic Trade and Investment Partnership between Europe and the US, cloaked in secrecy and aimed at lifting any barriers to the corporate domination of both markets, epitomizes this evolution.
Nevertheless, we shouldn’t destroy Europe and give in to nationalism because of them; we should fight to recapture it and reinstitute its purpose: peace and dignity.
Apostolis Fotiadis is a freelance correspondent based in Athens with a focus on ethnic conflict, human rights and the politics of immigration and the economic crisis in Europe. You can find him on his website and on twitter at @Balkanizator.
]]>Shadow banks may control about 25 to 30 percent of the word’s financial system. They may be about 50 percent of all banking assets in the world. I say may in both of those sentences because it is hard to tell how big this financial sector is. The United States may [...]]]>
Shadow banks may control about 25 to 30 percent of the word’s financial system. They may be about 50 percent of all banking assets in the world. I say may in both of those sentences because it is hard to tell how big this financial sector is. The United States may make up about 40 to 50 percent of all shadow banking. However, shadow banking is spread throughout the world.
Shadow banks are not as regulated as regular banks. They also go about gathering capital for lending in a different way than regular banks. They often securitize assets such as commercial and residential mortgages, corporate bonds, consumer loan packages, and the like. Shadow banks also find other assets and derivatives of those assets to back up their securitized debt instruments. Many use US Treasury bills and other sovereign debt (the debt instruments of many nations and their equivalent of Treasury bills, for example) to act as risk mitigation and collateral in the “loan” making process.
Shadow banks also rely on something called the repurchase (repo) markets to liquefy debt and other assets in the short run – even though most of these assets are long run ones, like mortgages and long term bonds. Simply put, repos are a way to quickly pay off short term debts and also to get some of the debt off the books of the shadow banks either overnight or even for longer periods.
Ok, this is all very complicated. Frankly, for the shadow banks that complexity has protected them over the years. It has also led to some very big crashes because the people who should have understood what was going on did not. That includes many governments and even some of the leadership of the shadow banks themselves.
So what we have is a large massive part of the world financial system basing its capital on sliced and diced assets with sometimes questionable risk calculations and even sometimes questionable valuations of the assets. How much might it be? How does $40 trillion dollars sound?
The valuation of the assets could be a real problem if there is a war with Iran that gets out of hand and leads to significant damage to oil and gas fields and facilities in the Gulf. If energy prices spike and spike again for the short run, the market could bear that. If the oil and gas prices spike and stay way up in many markets then we have a much bigger problem.
One of the mechanisms of asset destruction in the shadow banking system can be a huge increase in energy prices followed by recessions or worse in many places, including in the already fragile EU, China and the US. Other commodity and goods prices will be affected as well.
Many shadow bank assets are heavily leveraged. Does this sound familiar? Leveraged shadow bank assets took down the US and part of the world economy when the housing market went bust in 2007-2008.
Many shadow banks are heavily into derivatives and even derivatives of derivatives. If the underlying assets of the derivatives collapse due to falling economies then the derivatives collapse along with them.
It is quite possible that under some war and conflict scenarios attached to scenarios of oil and gas prices that the economic impacts of a protracted and quite damaging war with Iran could be magnified well beyond the normal way this is considered.
Shadow banking is huge. It needs to be considered in calculations about military conflict. The losses could be gigantic on the financial markets.
Some shadow banks might benefit from war if some of the sharpies in the shadow banks have already set up derivatives and options as hedges betting on a war. They cash in if the war happens.
Either way some people in the shadow banks could lose. Some could win.
The regular folks lose. The top guns in the shadow banks will drive their Ferraris. The regular people may end up selling apples.
You see, a war with Iran now would be very different than if it happened in 1979. Back then the shadow banking system was tiny. Derivative markets were tiny compared to what they are now. The leverage and risk inherent in sometimes unstable sliced and diced assets in the tens of trillions was just not there.
Is this something to think about? I surely believe so. I am going to look much more deeply into this situation and hope to have more to write about it to clarify and educate, hopefully before possibly catastrophic events take place.
Policy conclusion: take great care and do your homework on the realities of the risks within the world economy before stepping off the cliff toward a potentially very costly war.
To read more about shadow banking try:
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