Time for a Real Jubilee

I am not sure whether the coincidence of the next critical phase in the global credit crisis with the celebration of the Queen's jubilee is ironic or tragic, but it certainly gives me an opportunity to explore the real roots of the concept of jubilee, a concept whose real meaning could not be further from the spectacle of disempowered British citizens, burdened with the debts of their unaccountable elite, paying homage to the figurehead of the system of unequal power and property relations that oppresses them.

A jubilee is not an arbitrary celebration of any feature of civil society that has simply lasted a certain number of years, rather it is a distinct legal requirement introduced by the ancient Jewish community to ensure that the ownership of land and property did not become too concentrated. In the ancient world, as in ours, bad luck or bad character could mean that some fell into debt slavery, but the inherent spiritual offensiveness of such a status required the possibility of release, and this was realised in the jubilee that occurred every 7 x 7 years.

I am not an aficionado of the Jewish bible so I am relying on the interpretation of the German theologian Ulrich Duchrow whose book Property for People not Profit explores these writings as a prescription for a world of economic justice. His interpretation of the writings of prophets such as Isaiah and Micah was that they were critical of the devastating consequences for the Jewish people of social and economic injustice. The jubilee - the freeing of slaves, the returning of land to its original owners, and the cancellation of debts - was proposed to ensure the stable functioning of Jewish society:

'To sum up, according to the Book of the Covenant, in view of God's solidarity with all his creatures, the needs of real life, including freedom from oppression, write the economic rules.' (p. 18)

I had always assumed that Jesus, who was clearly either a communist or a hippy or some combination of the two, could be called in to support my opinions regarding economic emancipation, but now it seems that he was merely reviving ancient wisdom that had been lost in the decadence of the Roman world.

I have been posting for some time about the contemporary proposal for a debt jubilee, a process that begins with a campaign for a Citizens' Audit. I have now finished a full paper on this proposal, including detail about its origins in international law. You can find the paper on the Social Science Research Network, and I would be grateful if you could use the opportunity of the jubilee to share it with your friends.

So, enjoy your bank holiday. Although many radicals criticise the Windsors for being out of touch, I credit them with enough understanding of working people to know that giving us holidays from labour is a useful way to reach our hearts. It seems unlikely that the members of the elite we have bizarrely elected to run our country would have increased the number of days when we are allowed the freedom to do what we really enjoy: chatting, resting, and drinking. But wherever you are, please use the opportunity of the unusual occurrence of the word 'jubilee' in everyday speech to remind people of what it was really for. If we could resuscitate the concept of jubilee in everyday understanding we would no longer need to rely on the magnanimity of an unelected elite to enjoy a well earned rest from work.
. Tweet

The Eurozone Crisis: A Warning from History

I am thinking of creating my own derivative, called a political default swap. This is how it works. We each choose a country and bet against the length of survival of its government as it tries to introduce enough austerity measures to keep the markets happy. It works like a sort of insurance policy, where the riskier the country, in this case the less able its politicians are to bear down on its people and extort their work to pay bankers' debts, the higher the cost of betting on it.

The manoeuvres by EU finance ministers in Brussels today conceal as much as they reveal and demonstrate that power is balanced between politicians and financiers. This is seen most clearly in the negotiation over the extent to which those who made risky investments in Greek debt will lose their shirts (or their hair). The risk seems to be approaching 50:50.

Harder to agree is how the effects of this on Europe's banks will be accommodated. If the banks take the full hit, the financiers argue, they will become bankrupt, leading to Credit Crunch II: Return of Debtonator. So the bank welfare fund has to be massively increased. We have grown tired of billions, yawn the financiers, we need to move into the zone of trillions.

But where is this money to be found? The devastated citizens of Europe, their bodies already straining beyond breaking point to keep the capitalist wheels turning, can offer no more. Eyes turn to the European Central Bank - can it be asked to create money from thin air, the sort of money bankers like best - power without responsibility? The Germans, with their historical fear of inflation, will not accept this option. The most likely outcome is a solution dreamed up by the very 'quants' who created this disastrous situation: a solution that uses a combination of mathematics and conjuring to make the money disappear through time, emerging at some future date enormously swollen in value.

In his masterpiece The Great Transformation, written in 1944 and reflecting on the last great capitalist disaster, Karl Polanyi describes the contortions that Europe's politicians went through in the 1930s to save the Gold Standard. They seem eerily similar to what we are witnessing today. The system must be saved, no matter what the sacrifice in terms of human lives and political stability.

In the 1920s financiers inflated a bubble which burst in 1929, but through the 1930s the economists defended the position of laissez-faire capitalism whose social costs were unacceptable to the people of Europe. The result was political polarisation, economic chaos and the rise of fascism. This crisis has already provoked the collapse of the Slovakian government, the government of Iceland, and the government in Ireland, and the Italian government could soon follow. Somehow the political system is still holding in Greece, but the massive civil unrest leaves it vulnerable. So, will you take my offer of a punt? Which country's political system would you bet on surviving this financial turmoil intact?
. Tweet

George Makes King Mad

Proof that the economic crisis is still, fundamentally, a monetary crisis came during the Chancellor's speech to the conference yesterday, when he announced that he would be experimenting with another novel policy, which the policy advisors have decided to call 'credit easing'. This represents a worrying incursion by the Treasury into the realms of monetary policy traditionally reserved for the Bank of England.

You may have noticed the media pressure in recent weeks from 'financial commentators' attempting to force Mervyn King, governer of said bank and therefore the chap in charge of the nation's monetary policy, to resort to another round of quantitative easing, a policy that the media usually refer to as 'printing money' but which has actually consisted of the bank buying up a lot of corporate debt, thus making it easier for the corporates to take on more debt. Since that is the way that this form of capitalism considers appropriate to create money it is a novel but predictable response to a squeeze on credit.

It seems that King and his eight wise men of the Monetary Policy Committee (for such they are - no sign of skirt in the room when such decisions are made) have refused to put more money into the economy in this way, and so the Chancellor has found a way around this block by inventing a system of government guarantees of corporate IOUs, allowing them to issue bonds and get the liquidity flowing. Few details have been given yet, but it appears that the process of creating money through issue bonds is being privatised, with corporations now being allowed to create money in this way.

The Treasury will guarantee this process, which appears to mean the we, as taxpayers, will become entangled in the securitisation corporate debts that was the process that led to the credit crunch in the first place. With bank debts looking so dodgey, only debt backed by our obligation to work is acceptable. The problem is we have no say over who is allowed to create this debt, how they bundle and sell it, and what it is invested in. These deeply political decisions have been privatised and devolved to corporates.
.

I must confess that the arcane niceties of what is referred to in textbooks as 'open market operations' baffles my mind, but the political economy of this seems clear: the debt crisis has resulted in the sucking of money - liquidity - out of the economy at all levels. Everybody is clamouring for investment, whether in hospitals or from the corporate sector: it is a political decision that money will be allowed to be created in the private sector while the public sector will continue to be starved of cash.
. Tweet

What is a collateralized debt obligation?

You might like to watch this 11-minute film, which is an illustrated example of lots of the terms that have been bandied around in the past couple of years, like collateralised debt obligations and credit-default swaps. It doesn't go into the politics of money or the way banks create money, but it does manage to make the technical stuff quite fun. Tweet