‘The Coming Collapse of the Middle Class’

This salutory lecture by Elizabeth Warren (via Unfogged) is definitely worth a watch if you’ve a break this morning, but it’s unlikely to cheer you up:

Distinguished law scholar teaches contract law, bankruptcy, and commercial law at Harvard Law School. She is an outspoken critic of America’s credit economy, which she has linked to the continuing rise in bankruptcy among the middle-class. Series: “UC Berkeley Graduate Council Lectures” [6/2007] [Public Affairs] [Business] [Show ID: 12620]

Or if that’s just too bloody depressing you could just go out and sit in the sun and contemplate the wonder that is spring.

Even Sheep Can Turn Savage

There are mayoral and local elections looming in Britain and true to New Labour form, the Brown government has manufactured a pre-election crisis that requires all loyal New Labourites to instantly rally round the flag for fear of a Tory victory. But they’ve fucked that up too and now they’re about to get an electoral kicking.

This past few days I’ve been buried in the comment threads about the 10p tax band in the British daily papers and mainstream blogs and of all the comments about how New Labour has targeted the least well-paid to fund tax breaks for the more well-off (while handing 50 billion to bail out the profligate banks) this one sums up best the general tenor:

EastFinchleyite

Comment No. 1295787

April 23 21:51
GBR

In my 50s. Skills and energy winding down. What little I make is through being self-employed. Living on savings and investments until company pension kicks in in 7 years time.

No kids. Not married. Not a chance in hell of being one of the “compensated” so I expect to be damaged by this to the tune of £200 per year or more which is £1500 by the time I get to 60 and then at about £100 per year for the next 5 years. After that who knows.

My NuLabor MP is Rudi Vis. Current majority is 741. I used to be a Labour voter; now I will vote for whoever is most likely to unseat him. 370 more like me and you are toast mate. I have been unhappy with this Government’s illiberal policies for some time (ID cards, 42 days, PFI,PPP etc) but really couldn’t bring myself to vote Tory. Until now. They can’t be any more anti-poor than this. Stuff the rhetoric; any party that increases taxes on the poor to pay for reduced tax for higher earners is beyond the Pale. This has tipped me to voting for the best chance of ditching NuLabor regardless of who they are. Even Boris! Bite me and I bite back.

And there’s many many more like him, all prepared to vote against New Labour next week. Gordon Brown and Alistair Darling shouldn’t be feeling smug this morning, although I expect they’re thinking themselves very clever now that Frank Field, self-appointed leader of the glorious 10 pence backbench revolution, has folded in favour of a few empty and entirely conditional promises of ….what, exactly?

In exchange for a letter outlining possible avenues of future potential action that may or may not be possible and which will be kicked into the long grass as soon as the next crisis comes along, Field and his fellow would-be insurrectionists have betrayed millions of the low-paid, who are feeling the pain in their pay statements and overdrafts right now, not in some far-off misty future of indefinite clauses and conditional half-promises.

The 10p tax backbench rebellion may have melted away like so much spring snow, but then it never was a real rebellion in the first place was it? It was just so much political theatre; funny how Frank Field always likes to stage his backbench rebellions when all looks ominous for Labour and usually just before a crucial vote or election, isn’t it?

Crisis? Potential vote of no confidence? Cue Field and his rebels, party whips, loyal journos and Polly Toynbee: “Oh noes! The sky is falling! The Tories might get in! Hold your nose and support New Labour!” But you only have to look at his voting record to see that Field is no old left Labour rebel and that his staged insurrection was just another bit of recycled spin.

Blair did that all the time: faced with defeat No. 10 would provoke a showdown which the government always won because of course the whips know all the MPs’ dirty secrets and can easily pressure backbenchers into backing off. Backbenchers would threaten rebellion, a face-saving agreement (which was really no agreement at all) would be cooked up between backbenchers and Alistair Campbell; the ‘rebellion’ would then mysteriously evaporate, leaving the government looking triumphant whilst at the same time reassuring local electorates that at least their MP wasn’t one of those slimy Blairite bastards. Neat.

It’s a good trick to pull off and more often than not it’s worked for New Labour, because at least when Blair lied and spun he did it semi-competently. But Gordon Brown can fuck up anything, even deceit. In any other political generation a Prime Minister who had been accused of outright falsehoods by a columnist in a broadsheet paper would sue for libel. But of course he can’t, because he is a liar and not just a liar but an incompetent fool of a liar:

A third possibility, of course, is that what Brown said was untrue. After all, once the budget was public on March 21, it did not take long for the IFS and the opposition parties to work out that the numbers of losers far exceeded any figure like 25,000 (publicly, Brown gave no figure for the number of losers in his speech to parliament). Today the estimate is that more than 5 million of the poorest voters have lost out. The gap between what Brown said to Blair and what is now acknowledged is so great that it appears fairly clear that Brown gave Blair false information. My information is that Blair thinks this is the case.

I wondered when Blair would stick the knife in. Kettle goes on:

One can guess at many reasons why Brown behaved in this way – and any theory is not much more than a guess. Maybe Brown and Balls didn’t trust Blair and didn’t want to hand him a reason for reopening the budget and disrupting their strategy. Maybe Brown and Balls, with the premiership at last in their sights, had such accumulated contempt towards Blair that they thought that they could fob him off with false information. Or maybe Brown and Balls thought the number of losers did not matter in the bigger scheme of things. Perhaps they were so fixated on using the budget as a springboard to launch Brown towards an early general election that they thought it made overriding political sense to produce a tax-cutting budget that would cause confusion among the Tories – irrespective of the marginal impact on the poor.

For once Martin Kettle gets it right – they just don’t care.

Take Brown’s continued insistence on no deviation from his disastrous tax policy, regardless of the results and add it to Ed Balls’ “So what?” moment at Budget questions in the Commons and it’s clear as day the current government really don’t give a damn what the fallout from their decisions is, or who gets hurt, as long as Labour hang on to power just that little bit longer.

That truth is certainly sinking in to many voters as a result of 10p tax fiasco; those who’ve taken the time to publicly comment are almost unanimous in planning to give Labour a bloody nose in the local elections and they don’t care who they have to vote for to do it either, whether it’s Boris or the BNP. For far too long Labour have treated the poorly-paid like sheep, forgetting that sheep also have teeth and will bite when cornered.

As for Frank Fields’ empty histrionics and his immediate acceptance of what any idiot could see was an empty promise from an empty suit, written in disappearing ink on soluble paper, well, that particular bad actor will be also up for re-election at some point. I hope he’s got a job to go to.

Ain’t That the Damned Truth

Patrick Nielsen Hayden at Making Light:

What libertarians (and the softheaded quasi-libertarian burghers of science fiction fandom, most of whom think the Economist is a voice of reason) need to learn is that capitalism is never about free markets, or in fact “freedom” of any sort; it’s about using the power of the state in order to make it easy for large amounts of capital to get together and rearrange the rules for its own convenience. “Privatize the profits, socialize the losses” is the logical consequence of capitalism’s prime directive. What we wind up with is socialism for the powerful, and tough shit for everybody else.

The Not So Almighty Dollar

AMSTERDAM (Reuters) – The U.S. dollar’s value is dropping so fast against the euro that small currency outlets in Amsterdam are turning away tourists seeking to sell their dollars for local money while on vacation in the Netherlands.

“Our dollar is worth maybe zero over here,” said Mary Kelly, an American tourist from Indianapolis, Indiana, in front of the Anne Frank house. “It’s hard to find a place to exchange. We have to go downtown, to the central station or post office.”

That’s because the smaller currency exchanges — despite buy/sell spreads that make it easier for them to make money by exchanging small amounts of currency — don’t want to be caught holding dollars that could be worth less by the time they can sell them.

The dollar hovered near record lows on Monday, with one euro worth around $1.58 versus $1.47 a month ago.

There’s More Than One Kind of Warfare

Could they by chance be connected? In the news today Credit Suisse, long thought to be untouchable, has been hit hard by the banking crisis and is blaming employees for its massive losses:

The Zurich bank said it has concluded a previously announced internal probe into the value of some asset-backed securities in its collateralized debt-obligation trading business, which had been wrongly priced by a small number of traders who have since been sacked or suspended.

The company said the final write down comes to 2.86 billion francs, 200 million francs less than originally estimated.

Similarly the UK financial regulating body is saying that the attempted run on HBOS yesterday was deliberate market manipulation by rogue employees:

Authorities avert run on HBOS caused by false rumours

The Financial Services Authority yesterday launched an unprecedented investigation into dealings in the shares of major financial companies amid suspicion that speculators have been spreading false rumours to force down shares in HBOS.

In an extraordinary day on the stockmarket, shares in the country’s biggest mortgage lender were suspended for five minutes in early trading as its shares plunged almost 20% amid speculation it was facing a Northern Rock-style liquidity crisis.

The Bank of England took the unusual step of publicly denying talk that it was cancelling staff holidays over Easter and convening emergency meetings to discuss a bank in crisis. The Bank rubbished rumours ripping through the City as “fantasy”.

Seemed highly co-incidental to me, even allowing for the natural venality of arseholes in the financial sector. So I asked myself the question I’ve learned to ask of any political or economic situation these days – who benefits?

Step forward Larry Elliot with one potential answer:

Oil money is coming – and there is little the west can do about it

Energy producing countries are buying global power after decades of subjugation

[…]

The fivefold increase in the price of crude oil to more than $100 a barrel has provided a windfall for the coffers of oil and gas producing countries, while the nations of east Asia have amassed huge holdings as a result of export-led growth. Britain, as a report by PricewaterhouseCoopers pointed out this week, could have built up a £450bn sovereign wealth fund had it not spent its North Sea bonanza on politically expedient tax cuts and higher public spending.

Elsewhere, sovereign funds are rich, they are growing in size and they have been bailing out the west’s tottering banks after ill-advised speculation saw their assets slashed in value by the American sub-prime mortgage crisis. The Abu Dhabi Investment Authority – the world’s biggest SWF – has taken a $7.5bn (£3.8bn) stake in Citigroup; one of Singapore’s funds has injected $11bn into the Swiss bank UBS, the other has invested $5bn into Morgan Stanley. China has ploughed $5bn into Merrill Lynch.

Train wreck

A study by one of the biggest banks, HSBC, noted: “The owners of emerging SWFs look unlikely just to roll over. They are enjoying the boot being on the other foot after an awfully long time. The train wreck that was the 1990s, when they had to go cap-in-hand to the developed world, was bad enough.

“Going back further, western jibes about state capitalism would, perhaps, have more power had they themselves not ruled many of these countries for years via state-licensed companies.”

[…]

There are few signs that SWFs are being used as an instrument of foreign policy, although Brussels clearly has misgivings about the Kremlin’s intentions. Equally, there is evidence that the governments behind the SWFs are enjoying the clout their wealth has given them. And with no immediate end in sight to the credit crunch, their bargaining position is strong and getting stronger.

Capitalism has always been warfare by other means and while western governments have been busy whipping up public fear of Moslems with bombs, to consolidate their political power, sovereign wealth funds have been quietly undermining their whole economic systems without firing a shot.

When the US, supported by the UK, pushed hard for punitive world free trade agreements and for the liberalisation of global trading and relaxation of banking regulations they assumed they’d always be top dogs, the exploiters not the exploitees. Now those carefully crafted economic weapons have been turned against them.

Those ‘rogue employees’ may well have been greedy little shits on the make. Lord knows there’s plenty of them about. On the other hand international finance is, well, international, as are its workers. Who knows what little tweaks to an already unstable system are being made – for whatever motives.