Trading for Power

City commentators, the market makers of those who earn their cash in the casino economy, are torn during these days of high-level political negotiations. At no other time can the illusion of our democracy have been clearer. We will not be allowed to have a government of which the markets do not approve.

But which government should the market men go for? At first blush, you might think they would favour the fiscal probity and pro-City inclination of the Conservatives. The top line of their rhetoric is usually about the need for stability and a strong pound. This is the cover story, for in reality the city can make far more money from turbulent times. In the words of a friend whose main target is political corruption: 'The disgusting sight of the bond markets opening during the night to speculate at our expense demonstrates starkly what we are up against: the return of the casino economy backed by a neoliberal coalition government.'

The traders who speculated against Greek bonds until they - and the country they represened - was destroyed, were able to profit vastly from this sport. As they gradually reduced the 'credit rating' with one hand, with the other they were able to extract higher interest-rate payments for holding those bonds. The working people of Greece must pay that interest - and suffer the disastrous social consequences of the battle over the corpse of their country's economy.

In the UK, even greater profits can be made, since speculation can be against both the glinting gilts of the Treasury bonds and the pound. If currencies maintain stable values against each other then the scope for buying cheap and selling dear is automatically reduced. The volatility in the currency markets is an opportunity for currency traders to thrive.

Even at a superficial level, the easy way in which young men from the City pass judgement on negotiations about the future of what we like to think of as our democracy is disturbing. Beneath this lies the disturbing truth that a summer of civil unrest and union activity might be exactly what they want. Such turbulence can offer them the opportunity to feed once again off the working people of this country. Tweet

One law for the rich

There is so much to learn from the present tumult on world financial markets - make sure that you are saying clearly what you know and think on the bus and in the local shop. This is a great opportunity for radicalisation that should not be missed. It must be increasingly obvious to those who do not usually share our scepticism about the way our economy is organised that, far from being a uniquely powerful and 'efficient' system, capitalism is in fact an impressively attired version of various low-level financial scams.

A question that is being asked increasingly is: where can the governments get the money from to 'inject' into the financial markets? There are two possible answers to this question. The first is that they put it onto the national debt, leaving it to be paid back by ourselves and our children through losing a share of the value we create via taxation.

The other is that they simply make it up. This is fraud on an epic scale - but if it is in the national interest why should we worry? I think the answer is that we will still have to pay. Just like the national debt, it is a way of forcing the poor to subsidise the rich. The debt created while the banks were booming may not be real money but it was still used to buy real stuff. So by creating non-existent money and swapping it for worthless assets the government is colluding in this fraudulent creation of value by the rich.

Another question I would like to add is: do we need stock markets? What function do they actually serve? Is the buying and selling of bits of companies of any real value? It is now generally known that stocks and shares are actually just alternative vehicles for gambling to horses or dogs. How about serious financial regulation that required investors to stay with the company they had chosen for a minimum time period of, say, a year. That might lead to stock markets that supported rather than undermined the real economy.

As Evan Davies rightly stated on Today this morning, capitalism is a roller-coaster, but one that, rather than choosing to ride, we are born onto. For those who are beginning to grow a little sick and tired might I suggest moving your assets and consumption into the alternative, mutual parts of the economy? Tweet

Buying at Rock Bottom, Darling?

In the industrial era the slogan was 'Where there's muck there's brass'. For the post-modernist entrepreneur this slogan has been replaced by 'Where there's risk there's brass'. For such a person Northern Rock is seeming increasingly interesting. This was the appeal for Philip Richards, who bought shares in the ailing bank at the bottom, sensing that the value of the stock would be determined by politics and not by the market.

Richards is Chief Executive of Hedge Fund RAB capital. This has a hugely profitable Special Situations Fund which Richards manages. The fund almost doubled in size during 2005 and by the spring of 2006 controlled more than $1bn. Richards identified a very special situation at Northern Rock and moved in for the kill.

He has now emerged into the media to exert political muscle. Unlike most of us he has the power to be able to produce a comment piece in the Observer and to have a chat with the BBC's business editor on the Today programme. His view that shareholders should have their investments underwritten by the government to allow the bank to continue as a going concern is in reality a request that we should pay him for an opportunistic business investment.

He argues that if shareholders are abandoned then 'the most important role of banking' which he defines as 'to take short-term deposits and lending and turn it into long-term capital and finance' would no longer be attractive because it would not yield sufficient secure returns. In other words, the government should use our money to prop up a financial system that works against our interests and those of the planet; if it does not, the credit/debt that is the lifeblood of a capitalist economy will drain away.

The affair of Northern Rock is becoming an object lesson in how financial value is fought over in a capitalist economy, a process that is usually concealed behind scenic drapery. As with most companies, the citizens of the UK are 'stakeholders' in Northern Rock, some of us as depositors and mortgage-holders. Unusually in this case many more of us (all those who pay taxes) because we have each loaned an average of nearly £1000 to the Bank. Without handy media contacts we have to rely on our elected representatives to ensure that we receive a fair share of the value we have invested.

The affair also makes clear that, in spite of all the rhetoric privileging the market above all institutions, in a democracy power still lies with politicians. When the shit hits the fan it is the job of politicians to make choices and, no matter how large the tent, somebody will be disappointed by those decisions. That is what politics means: either/or not and. Vince Cable for the Lib Dems has suggested nationalisation; in another blog I propose a mutual solution, but it is the Chancellor's job to decide which side his political bread is buttered.

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