Apologies in advance . This is a long post. I am getting feedback from those who have read the Green New Deal (GND) (which I co-authored) complaining that the Keynesian policies espoused therein will simply drive us back to the 1970s, to militant trades unionism and ’stagflation’. Their concerns need a response.
In this big bad world of the Credit Crunch, powerful central bankers – civil servants all – have bent over backwards to help powerful and rich private bankers.
On one day, ‘debtonation day’, central bankers in Europe and the US pumped an eye-watering $150 billion into the financial system, to keep big banks afloat. According to Bloomberg, the US’s Federal reserve has ‘cycled $2.58 trillion through U.S. money markets since December’. (Bloomberg 8th August, 2008).
US financial regulators are making the same mistakes as their Latin American equivalents in the debt crisis of the early 1980s, according to Andrés Velasco, Chile’s finance minister, in today’s Financial Times.
The balloon of irresponsible debt on which globalisation floated started to burst in August 2007. A year on from “debtonation day”, Ann Pettifor surveys the wreckage, pinpoints the culprits, and outlines the solutions.
We now know that on 9 August 2007 – which I called “debtonation day“ – central bankers and regulators finally woke up to the scale of bad debts on the balance-sheets of banks and other financial institutions. On that day blindfolds were removed and scales fell from the eyes – of at least some of the key players in the finance sector. The “guardians of the nation’s and the world’s finances” finally began to emerge from a long period of stupid and unforgivable denial of the havoc wrought on the international economy by the privatised, deregulated and globally integrated finance sector.
Read the rest of the article at Open Democracy….
…..see this story on Bloomberg….
Money Market `Plagued’ by Libor That Fed Can’t Reduce
Gavin Finch, Bloomberg, 8th August 2008.– A year after central banks started to pump trillions of dollars into the financial system to end a seizure in credit markets caused by subprime mortgages, cash is about as tight as it’s ever been.
Efforts by the Federal Reserve, ECB and Swiss National Bank to shore up the world’s biggest banks and promote lending have had limited success. The London interbank offered rate, the basis for at least $150 trillion of financial products, is within 0.06 percent of the highest since November 1999 compared with the Fed’s benchmark interest rate. The largest financial companies have lost almost $500 billion from subprime-linked securities.
`The key issue that has plagued money markets is the continued high level of borrowing rates,” said George Goncalves, chief Treasury and agency debt strategist in New York at Morgan Stanley, the second-biggest U.S. securities firm. “This time last year no one could have imagined the levels they are at now. We’ve seen a fundamental re-assessment of risk in this new world of tighter credit.”
Have been listening to debates about the conflict in Georgia over the week-end. There has been much wailing and gnashing of teeth about Putin’s disregard for democracy. In a similar vein, western commentary about President Hu Jintao’s Olympic Games is never complete without some tut-tutting about democracy and human rights in China.
Yet these leaders have in reality much in common with Alan Greenspan, former chairman of t he US Federal Reserve, who is held in the greatest esteem by western commentators. He came to London recently to promote his book, and I 
attended one of his sessions at Chatham House. The deference from the British political and media establishment was nauseating. The Prime Minister had already honoured him with a knighthood, so deferential is he. Yet this is Greenspan on democracy, as expounded in the columns of the Financial Times last week:
“It has become hard for democratic societies accustomed to prosperity to see it as anything other than the result of their deft political management. In reality, the past decade has seen mounting global forces (the international version of 
Adam Smith’s invisible hand) quietly displacing government control of economic affairs. Since early this decade, central banks have had to cede control of long-term interest rates to global market forces”
The world is now faced by a terrifying prospect: large scale and systemic economic failure of a globalised, highly integrated economy, caused by the collapse of massive credit and asset bubbles.
This credit bubble, created by the private, de-regulated or ‘liberalised’ finance sector, inflated other bubbles, notably in property, but also in dot.coms, stocks and shares, and more recently, commodities like oil. All these bubbles will burst. The deflation of credit will leave a vast stain of unpayable debt on the global economy which will lead to the deflation of asset, including property, prices and in turn to the deflation of prices of goods and services.
The World Service invited myself and Jim O’Neill, chief economist at Goldman Sachs on to the Business Daily programme today for what they hoped would be an intellectual punch-up. They were not disappointed. Prof. Jagdish Bhagwati had also been invited, but sadly was stuck in a traffic jam so unable to join us in the discussion, and instead was recorded separately…
O’Neill started by positively mocking the ‘peak oil thesis’. Ho, Ho, Ho… never heard anything so crazy he said… He had just read a book by a Californian – with no geological or economic background – calling for transition economies, and had never read such rubbish! “Don’t tell me you believe that peak oil nonsense!” I explained that I had grown up in a gold mining town, whose inhabitants and owners believed that gold would pay their wages and dividends for ever… Not so, mining there dried up in the mid 1990s and iIt turned out that reserves of gold, like oil, are finite. Today, my home town, Welkom in the Orange Free State, is a ghost town. When I asked him why Saudi oil production numbers seemed stuck, and would not budge even under intense pressure from the US, he looked incredulous.
A response to the "Triple Crunch" of financial crisis, climate change and oil depletion. Read the report published by the Green New Deal Group and nef (new economics foundation).
Welcome to my blog about the financial crisis. I'm Ann Pettifor, author and analyst of the global financial system, and co-author of the Green New Deal. I predicted an Anglo-American debt-deflationary crisis back in 2003, and am known for my work on sovereign debt and international finance, including Jubilee 2000. Currently a fellow of the new economics foundation and director of Advocacy International.