Eleven years of endless “bank bailout”

How to prepare for the time after

Anyone who has followed the reports and comments from the financial sector over the past few years cannot help but notice, behind the curtain of the ongoing success reports from the stock market, increasingly critical voices that provide cause for more serious and further considerations.

rt. Bustling Christine Lagarde (former French Minister, former President of the IMF) has been appointed President of the European Central Bank ECB in a roundabout way, thus inheriting Mario Draghi, a former Goldman Sachs manager, in his role. Both are from the high finance personnel pool (cf. Current Concerns No. 16 of 25 July) and stand for the so-called expansive monetary policy. This means that money is spent without return service and the savings rate is brought down to zero.

Old-age provision destroyed

This financial policy, which was launched to “rescue” the big banks run into difficulties in 2008/2009, is not without consequences:

  1. Savings and old-age provision are reduced by the zero interest rate policy.
  2. Saving money for bad times no longer pays off. The money is invested in real estate, shares and bonds in order to maintain its value.
  3. This fuels the speculative bubble on the stock market and the real estate market. The prices there no longer reflect reality.
  4. Unprofitable companies can only survive on cheap loans. Their bankruptcy will finally come when the low interest rate policy ends. Similarly, there will be major problems on the mortgage market as soon as interest rates rise and subsequently the value of the properties falls.

Reduce money supply

The original rationale of this expansive monetary policy, to rescue “systemically important” banks in order to prevent a global economic crisis as in the 1930s, was achieved. However, the problem discussed in 2009 of how the huge amount of money can subsequently be taken off the market again to prevent inflation has not been tackled.
After the banks had been rescued with even more money, it was said that the economy had to be boosted with a lot of money in order not to fall into recession. The most recent reason for the constant increase of the money stock through bond and equity purchases is that inflation of 2 per cent is needed to prevent deflation.

Problems not tackled

Whichever way you look at it, the governments and the responsible central banks have not done their homework. Not even the mandatory separation of business and investment was enforced at the banks. Interestingly, in recent years some states such as Russia and China have increasingly switched to secure their currencies by buying huge amounts of gold.

The crash

The fact that a change in monetary policy has been delayed for eleven long years and is being delayed further means that debt is rising to ever more astronomical heights. Today, no one claims that this money will ever be repaid. A crash becomes inevitable. But this also narrows the possibilities for an “exit” from this mismanagement:

  1. A global economic crisis with economic stagnation, unemployment, deflation, impoverishment and subsequent inflation (currency devaluation) or expropriation through a currency reform.
  2. The transition to a state-run economy with wage dictates, compulsory levies and job allocations is fluent. This also includes the abolition of cash, supported by Christine Lagarde.
  3. Such a development was often legitimised by emergency rule, for example by a war, with a state command economy and food ration coupons.

We do not know whether and who is dealing with such scenarios in government agencies or at international level and whether meaningful preparations are being made.

What to do?

Of course, one can still hope that what has worked for eleven years now will continue to work for the next years. One can also feel that considerations of this kind are burdensome and hope for a “solution” from a different side. Another possibility, which corresponds more to us as forward-thinking and planning beings, is to think about the future.

Cooperation

Similar to natural disasters, of which one does not know if and when they will occur, every individual, every family or every larger group can take precautions.
Since life in a crisis requires increased cooperation in the wider environment, it is important to consider this before an emergency occurs. Cooperation in the neighbourhood, in the community or in association with other communities will make sense. Personal contacts play an important role in this. Some already exist, they can be intensified or new relationships can be established. Human misunderstandings and conflicts should be clarified or left aside.
Rural areas are often at an advantage when it comes to cooperation, as people there have often learned to work more closely together. We know from various crises, such as the Argentine currency crisis of 2001 in Buenos Aires, that this is also possible readily in cities.

Economic issues

Considerations on alternative payment systems (e.g. Wörgl 1934 or Chiemgauer) have existed for quite some time. It may be necessary to fall back on them. Here you can also find various current examples.
A return to self-sufficiency in food is important and should never disappear from view (urban gardening, allotment gardens). Here, too, broad cooperation is necessary. Here it is possible to draw on historical experiences without wanting to transfer them one to one (“Plan Wahlen”).
In addition to the supply situation and an emergency currency, practicable voluntary economic forms of cooperation must be considered, which make a quick “reset” possible. Appropriated cooperatives with broad membership offer an approach to larger projects. They are already enjoying increasing popularity.
The rich wealth of experience in areas such as civil protection, food sovereignty and self-help in the country must be consciously strengthened. The question of how, for example, to protect sick and elderly people should also be reflected in advance on a larger scale.

Direct democracy

If the self-determination (sovereignty) of the citizens is threatened to be lost through negligent or deliberately brought about crises, then it is necessary to enforce the basic democratic rights and to secure them for the future.
Current wrong political and economic decisions, as we can now observe in many areas, are often due to a retreat of direct democracy with respect to power and manipulation. Increasingly, decisions are no longer made where the consequences are to be borne (e.g. financial, immigration or electricity market policy), but at “intermediate” or “higher” levels.
It is precisely at such levels that wrong decisions are made, for example in the financial sector, which ultimately affect millions of individual fates without people ever having been questioned about them.    •