Spain

Finally the day has come. It was foreseeable for so long. It was negated for as long as it was foreseeable. Both Spanish government and banks repeated and repeated over and over again "we have the safest and healthiest banks in Europe", "there is no risk", "we will not need any bail-out money", ... Yesterday it was finally official: Spain took €100 billion in bailout money.

It is always the same pattern. We have seen it at least 3 times in the last 3 years: Iceland, Ireland, Greece, ... 1) denial and refusal, misinformation and lies by governments and banks, 2) accepting the bailout, 3) shifting the debts and risks from the private sector to the public sector, 4) as the rescue and bailout money runs out quickly soon we repeat with step (1).

What was slightly different in the bailout of Spain is the time the euphoria lasted. Usually once the rescue funds are injected there is a month or so of euphoria and (false) optimism. Not so with the Spanish bailout. Just 24 hours later there were mostly negative press. Mainstream media like the WSJ reported in its article "Bulls Retreat on Spain Bailout Plan": ..., bailout doesn't help Spain repair its tattered economy, ... Spain's capital injections entail a transfer of risk from the private to the public sector, ... Spain is likely to need more external help going forward. The Huffington Post put it even more bluntly: Spain Bank Bailout 'Not Going To Work'. Same at the Guardian "Hurried Spanish banking bailout fails to calm market nerves".

Next up for bailout: Italy. Just watch and see steps 1 through 4 being executed there.

Spain the next country to collapse?

Iceland, Ireland, Portugal and Greece all have gone through crash-and-rescue operation. The storm over Spain is brewing for a long time already. The PIIGS (Portugal, Italy, Ireland Greece and Spain) have been in the news for more than a year. Spain's job less rate is officially over 20% already, unofficially it is assumed to be even higher. Some cities, e.g. Cadiz, have an official jobless rate of 33%+. The biggest problem is the real-estate market, the past real-estate boom, the still inflated real-estate prices and the real-estate loans banks signed in the past 30 years. This is not something that can be corrected in a single year. The loans are bad and will eternally remain bad. The price adjustment of real-estate could be fast. The bubble could burst and instead of the 10% decline over the last 3 years, prices might go down 30% or more.

Here is an article that argues that the Spanish collapse is imminent. All other collapses (from Iceland to Greece) have been controlled collapses through IMF and ECB injections of freshly printed paper money. Will Spain also be a controlled collapse and will it be a rougher ride this time around? And how far will the rumbling be felt? Read this "Spain is About to Enter a Full-Scale Collapse".

Debt Simplified

These are some numbers from the US, but one can easily replace it with numbers from Greece, Italy, Spain, Zimbabwe, ... It is pretty clear that we are not addressing the problem, we are not even grasping it. (The $38.5 trillion number budget cut figure seems to refer to the budget cut deal that averted a US government shutdown in April 2011.)  (Source)

Some stats about the US government:

• U.S. Tax revenue: $2,170,000,000,000 
• Fed budget: $3,820,000,000,000 
• New debt: $ 1,650,000,000,000 
• National debt: $14,271,000,000,000 
• Recent budget cuts: $ 38,500,000,000 

Now, remove 8 zeroes and pretend it’s a household budget:

• Annual family income: $21,700 
• Money the family spent: $38,200 
• New debt on the credit card: $16,500 
• Outstanding balance on the credit card: $142,710 
• Total budget cuts: $385

Any questions?

Economics of Happiness

Helena Norberg-Hodge produced another documentary. This full-length documentary is entitled "The Economics of Happiness". Another maybe even more appropriate title for this film might have been "How to achieve sustainability through localization". The film talks a lot about globalization, what it has brought us and where it failed. It recommends localization to achieve sustainability and more personal happiness. In the USA happiness peaked in 1956, every years since then the percentage of Americans that considers themselves as happy declined. We are clearly not on the right track. Helena Norberg-Hodge also brings some of her experience from Ladakh and from her previous documentary Ancient Futures into this film. Anyone who wants to be happy should watch the film.

Urgent Warning

This 5-min video appropriately summarizes the state we are in and the direction we should be roughly heading for. Have a look at Ron Paul's urgent warning.

Visualization of US Debt

This is the best graphical and visual representation of 1 million dollar, one billion dollars, 1 trillion dollars and the US debt. Have a look at these images to get an idea of the size of the US debt. No doubt, one picture says more than a thousand words.

ECB and Trust

The European Wall Street Journal published this on July 4, 2011:

Some of the European Central Bank's (ECB) notable policy shifts.

• Jan 2010: ECB President Jean Claude Trichet said that the ECB wouldn't change its collateral rules for the sake of any particular country. In May 2010 it suspends these rules for Greek government bonds.
• 
  
• Mar 2010: Mr. Trichet said it wouldn't be appropriate for the IMF to supply assistance for Greece. The IMF later became a a major part of the Greek rescue operation.
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• May 2010: Mr. Trichet said the ECB in its monthly meeting did not discuss whether to buy Greek bonds. Four days later the ECB anounced it would purchase Greek bonds.

It is always the same story. The politicians and political institutions that should stabilize a country change their opinion on a whim and worse, they deny and hide truths up to the moment when it explodes. The WSJ picked the ECB in this example. But I also vividly remember when on a given Friday all Irish politicians denied any rumors of any bankruptcy or collapse, claiming everything is fine, just to announce the following day or the Sunday that the banking system has failed and that they already brokered a deal with the ECB and IMF for a bail out package! How can one play the game if the rules keep changing all the time?

Greece

Today is a special day. The Greek government is deciding on whether to accept the austerity conditions demanded by the ECB (European Central Bank) and IMF for receiving the next slice of the bailout credit. I am fortunate to be in Greece and see and "feel" the situation in person. General strikes have been called for yesterday and today. In one city and one town I have seen permanent tent cities in public squares to protest. These tent cities are similar to the ones found in Madrid and Barcelona, Spain. There, in Spanish, the protesters are called "Los Indignados", the indignants, the angry ones. These groups across various European countries have united under the motto "Direct Democracy Now" or "Real Democracy Now". The site of the Greek branch of this European wide movement is www.real-democracy.gr/en.

Graffiti is on the walls in many places and flyers posted on many shop windows. They are expressing the feelings of the average people of the street. Where I have been the general strike was a partial one. I had no problem with the public transport and many shops, if not most, were open. One store used the term "Crisis Prices" instead of "Sales" to attract customers. A Greek friend commented that his salary was lowered 20% and that the politicians are discussing to lower it by 20% for a second time. Gas prices have gone from €0.80 to €1.75, i.e. they have more than doubled in a single year. To be truthful I have to say that I was nervous about the decision of the Greek government. I favored a rejection of the credit conditions, but that in turn could be the trigger to a domino effect across nations and economies.

A Greek friend expressed his view as follows. He sees this as a giant battle between banks and governments. Not only on a Greek scale, but on a global scale. In my mind a picture emerged like a Greek tragedy with elements from the Greek mythology; in my head a picture of two snakes formed, one representing a few elite world bankers, the other snake representing the world's governments. He continued to explain that he sees it as a fight between financial power and the political system. Furthermore he sees it as a sort of pilot project. If the banks win over democracy then they will take the Greek case study and rubber stamp it on other nations worldwide. He sees it as a reference case that will be repeated and replicated in the near future in other countries.

At the end of the day the Greek government accepted the bailout conditions and in my friend's view the political system gave in to the financial powers. My friend was disappointed with the decision. The political system and the Greek people are no more than slaves to the banking system. With the acceptance of the credit slice the problem is not averted, and certainly not solved. Everybody knows that it is just delayed by exactly 3 months until September when the next credit payment is due. So, the whole Greek tragedy will repeat itself shortly. Each time it will be worse. The only question I have is: How often will it repeat itself?

Beyond Greece

The New York Times as well as the National Herald posted an article entitled "It's Not About Greece Anymore". The content of this article is not surprising and nothing new. The article identifies the fears of the European politicians to let Greece go into bankruptcy as it might cause a bank run in similarly positioned countries like Spain, Portugal, etc. In short, afraid of a melt-down of the European currency or the European Union (several nations have threatened to revert back to their own independent currencies) EU politicians are willing to do about anything to rescue Greece. As always politicians are trying to save their own hide more than anything else and any solution for Greece is only a temporary one.

The article goes on with the authors' suggestion that the Euro must be devalued drastically and then a dramatic political change must take place in order to survive.

What is surprising is the frankness of the article and that it was published in the NYT and National Herald. The writing is not just on the wall. It is in plain view, published by major mainstream newspapers.

Both US and Europe have overspent, gone into massive debts, and despite the crisis since 2008 nobody wants to face the music. We don't want to see and we pretend not to see the root causes and all we do is apply patchwork fixes here and there, billion dollar band aids that will fall off anytime we shake ourselves. What we need is radio and chemotherapy to get rid of the cancer of our times: the bankers and the politicians they have bought.

Resource Economy vs. Freedom

Freedom Force International makes an analysis of the Zeitgeist movies. This analysis boils down to identifying the resource based economy suggested by the Zeitgeist movement as a collective or communist system that is in contrast to the individual freedom. It sees two opposing forces that cannot be unified: resource based economy and freedom. As Freedom Force International is a strict defender of freedom it rejects the Zeitgeist approach.

I am bit like Dustin who wrote a comment on the analysis. I like both freedom and the Zeitgeist vision. Dustin chose the title "The profit motive has to go" (source). The freedom concept is easy to understand. Most people like freedom. Most freedom and libertarian definitions include a phrase like "I have a right to protect myself from harm" (source). The difficult part is being able to see and agree on what actions harm others. My freedom ends where the freedom of the other begins. In order to preserve freedom one must not harm others. In today's world:

• What happens to the individual who pollutes the air? It could be the neighbor with his lawn mower or a corporation like Shell burning off millions of tons of gases in places like Nigeria.
• What happens to the individual who pollutes the water? It could be the neighbor who throws a plastic bag into the ocean or a corporation like BP who spills millions of gallons of oil into the ocean.
• What happens to nuclear reactors? There are clearly risks and many people get harmed (Tokio kids drinking tab water). What happens to the corporations that build and run them?
• What happens to the corporation who genetically pollute? What happens to genetically modified seeds of corn, soy, wheat, etc. that spread out of control? I have the right not to buy GM food. Fine. But the problem is that GM seeds are carried by wind, birds, trucks, and many other means from place to place and after more than a decade of use of GM seeds, GM seeds show up where one does not suspect them. Ecological farmers have found them on the land. GM corn seeds have been found in far away and insulated valleys in Mexico. Organic food is polluted and tainted by GM crops. Who protects the organic farmer and the consumer of their products from harm?

In the definition of freedom Freedom Force Intl says "one of the primary functions of a just state is to protect each individual from the greed and passion of the majority". I feel that today the vast majority of people needs protection from a few greedy individuals/corporations. Millions get exploited and live in unhealthy conditions exclusively because of the greed of a few driven by the insatiable profit and hoarding motive. Billions of people are being harmed by polluted water, by polluted soil, and by polluted air. This includes all the "developed" world countries like the US and Europe. Just to give an example: We all have plastic molecules in our blood. Pesticides are found in the breast milk in many countries around the globe.

Where is my freedom on all these issues? How do I protect myself from being harmed in respect to these issues?

I believe that many corporations in today's government controlled society have far too many "freedoms". Their "freedom" infringes on my individual freedoms and harms me. Deep sea oil exploration, nuclear energy and GM food all have one thing in common: They carry a very high risk, an unnecessary risk as their output can be achieved through safer means (e.g. energy savings, reduced energy consumption, alternative energy sources, conventional or organic food). They have done and will do harm to people and hence violate personal freedoms. Why are these projects being implemented then? I'd say because of the profit thinking. They exist because of the greed of a few and for the profit of a few.

I see some common ground between freedom and the resource-based economy. I can use both to justify the elimination of pollution (air, water, soil, food, ...). I also see that both "ideologies" are basing themselves on equality. One of the three commandments of freedom is "equality under law" (source). The basic promise of communism (including the Zeitgeist Movement) is equality. Often I feel that special interest groups (governments, corporations) have more rights than I. Both, the implementation of true freedom as well as the resource based economy would eliminate (or at least try to eliminate) these special interest groups.

The governments would look quite differently according to the two systems. The freedom movement would reduce the government to a minimum, to only the freedom-protection functions. The Zeitgeist movement would on one hand reduce government, but on the other hand take on new massive roles like resource management and resource distribution.

Ownership also plays a big role. Who is the owner of what? Zeitgeist takes a communist approach. We are one world, one planet, one people, we should use the resources for the good of all, for the good of the common. The freedom movement also talks clearly about ownership and property. But what happens to the resources. Oil created through millenniums is found under the ground of some country whose existence is defined by some lines drawn on a map. That country might only exist for a few decades as political borders have changed frequently in the last century. Does that make the government of this country owner of the oil? I am not so sure. What about an underground lake of oil that stretched into two bordering countries? Who is the owner of the oil? The country who pumps it faster? Who is the owner of the rain water? The owner of the wind? Clouds form over the ocean. The oil was in existence way before countries were created and populated. So, who's the owner? Doesn't it make sense that we are all the owners? Shouldn't we strive for a common solution and a common use?

But what is the bottom line? What's better? Freedom or a resource-based economy? Can we have both? Are they mutually exclusive? I believe that in a complete implementation both movements are incompatible and mutually exclusive. In a society where freedom overrides everything we will not be able to build a resource based economy. The same on the other side. In a society where the common good of the resource based economy overrides everything we will not find full individual freedom. There are some common grounds between these two though as I have indicated above. Both also share some objectives. Both systems want to eliminate the current control held over us by financial institutions, corrupt governments, and industrial exploitation of people around the globe. Since we cannot have both, shall we look for a compromise? But the core values of both movements are unshakable and hence uncompromisable. Sounds like a compromise is out of the question, at least for the hard core defenders of these two "ideologies".

On an emotional level, I feel that the profit thinking often (but not always) goes against the good of the common. I feel that we should seek and would benefit immensely from common solutions. I am also a believer in freedom and choices. Yet, I wonder if in a purely freedom-based system we wouldn't come to a grinding and halting deadlock. Nearly any action we perform does harm to someone. At least in today's world. If you drive a car who harm someone due to air pollution or noise. Nearly all manufacturing processes pollute either air, water or soil. Certainly all agroindustry today pollutes soil and food and thereby harms people and generations to come. In short, all production (energy, food, consumer goods) and all distribution do some harm to someone. In a pure extreme freedom system they would all have to be outlawed. They would all have to be pollution free. Who defines pollution free? How about noise pollution, light pollution, visual impacts and so forth? Oversimplified, when one builds a nuclear facility across the road from my home, it harms me and (according to the freedom laws) I should be able to defend myself from these harms and the governments role should be to defend me as an individual. How does the freedom system avoid this complete system shut down because everything does some harm to someone? I don't know. In reality, countries then used the excuse "for the common good" to allow certain polluting corporations, violating the freedom rules.

The resource based economy would take away our freedom. And the freedom system would shut most of current infrastructure and production facilities down. We are in a dilemma. Neither system is perfect, both systems have their problems. Maybe a compromise is still in order? We use a little bit of this and a little bit of that? Or maybe we implement both systems in parallel and give the people the choice. Do you want to join a) the freedom system or b) the resource-based economy? Of course, the compromise as well as the parallel implementation of both lead to new problems and even more questions. More thinking is needed. Certainly for me.

12 Countries to Go Belly-Up

AdvisorAnalyst.com has released a ranking of the countries most likely to go belly up according to financial risk. Here is the article. Fascinating reading.

Here are the top 12:

• Italy (1)
• Belgium (2)
• France (3)
• Sweden (4)
• Germany (5)
• Hungary (6)
• Denmark (7)
• Austria (8)
• Japan (9)
• United Kingdom (10)
• Finland (11)
• Greece (12)

Notably Spain and Portugal, the PIIGS countries, are not in the Top 12, while Germany - the strongest European motor - is.

Zeitgeist 3

The third documentary of the Zeitgeist series has been released. At the current rhythm director and activist Peter Joseph is producing one every year. Zeitgeist - Moving Forward is available freely. It is revising all the same topics of the previous Zeitgeist movies, with less emphasis on religion and spirituality. The goal remains a bias-less, science-founded, money free society that is using a resource-based economy. Certain individual freedoms will be compromised to accomplish this sustainable planet. But we have heavy restrictions on our freedoms today in the capitalistic society (and others). The 1% of the super-rich can bypass some of the restrictions on freedom, but the middle class and lower have no escape route. I belief that absolute personal freedom is illusionary and unfair. Since freedom ends where injustice begins, it is acceptable to me to seek a society that balances sustainability (isn't sustainability nothing else than the freedom of the future generations?) with current freedoms. Oversimplified, if we want to give future generations the freedom to use some oil, we have to reduce our oil consumption today. It is worth watching. Just like the in previous Zeitgeist documentaries, I remain somewhat sceptical about the dependence on high technology. I believe it to be risky and it as well needs to balances with "low technology", even if it just as an insurance policy. Placing all eggs in the same "hi-tech" basket, is not a wise choice for the basis of the whole planet. Watch it, form your own opinion.

PS: Here is a good critique, or a warning, about the Zeitgeist thoughts by James Corbett called The last Word on Utopia.

Money

Money is such a crucial resource in our lives, yet nobody teaches us about money. There are no classes in high school. Most people have no true understanding where money is coming from. An expert on teaching about money is Bill Still. In 1995 he produced the classic documentary on money entitled "The Money Masters". This video is available here and here. He just released for free his updated version published in 2009 entitled "The Secrets of Oz". A must-watch video for anyone. Have a look at Bill's channel.

Collaborative Consumption

The term "Collaborative Consumption" was coind in 2007 and in 2010 pushed by Rachel Botsman and Roo Rogers. It is about shared owning, owning access but not the product, and community ownership. This leads to community consumption. Rachel and Roo have written a book "What's Mine Is Yours: The Rise of Collaborative Consumption" and created the matching website www.collaborativeconsumption.com. It gives some good ideas on how collaborative technology (internet and its services) enabled new concepts of sharing (car sharing, ride sharing, real-estate sharing, etc.) and reuse (swapping and donating products). If you are more into audio and moving pictures, have a look here at collaborative consumption videos.

European State of Affairs

European state of affair is very gloomy. First Iceland. Then Greece. Now Ireland. Next is Portugal. And the prediction is that Spain will follow. Thereafter maybe Italy. Many people have predicted it. It did happen just as predicted. Only the governments said it would never happen. Take Ireland, up to the very last day, the government of Ireland was denying any problems and talks to the IMF and the EU about a rescue plan. The next day it was all official. How can anyone lie so blatantly?

About Spain? Some say the the European Financial Stability Facility will be out of funds to rescue Spain. Will they increment the fund? Where would the money come from? EU printing presses? US printing presses? Currently the Euro/US$ exchange rate is approaching 1.50. The Euro is very strong and the EU economy is suffering under it. This seems a good opportunity to print Euros, rather taking a $-based credit from the US (IMF or similar). Printing Euros would weaken the Euro currency and remove pressure from EU companies, but it would be against US wishes as the only interest of the US is to flood the whole world with printed US dollars. The gain for the US of sending $-based credits to the EU would be 3-fold: more dependency of the whole world on the US currency, weakening the US dollar even more thereby strengthening US companies, and profiting from future interest payments. So, will the political strength of the US be powerful enough to force the EU to take a US credit rather than print its own Euro money?

Will Spain be rescued? I am sure about it, the question is only how, i.e. by whom.

Economy

This phrase taken from Tim Jackson's talk "An Economic Reality Check" at TED (time 7:00) sums it up pretty well. No additional comment needs to be added: The world we live in is an economy in which we the people are "being persuaded to spend money we don't have on things we don't need, to create impressions that don't last, on people we don't care about."

ParEcon

ParEcon is short for Participatory Economy. ParEcon is a social economic model trying to achieve: equity, solidarity, diversity, and self-management. Equity is defined here as "a condition in which each person gets what they deserve for what they have done, and no one gets more (or less) than that". A key site publishing information on ParEcon is at Z Communications, a company adhering to the parecon principles.

A good starting point might be reading the Capitalism vs. ParEcon comparison sections. The full book "ParEcon - Life after Capitalism" published in 2003 gives additional details.

For those who prefer videos of textual info, have a look at this short intro video clip.

The ParEcon model is certainly strong on equalities, justice and democracy. The resulting economy will be stronger in terms of sustainability and social interaction. It has the ingredients for more happiness and promises to reduced materialism. Its criticism is primarily in the area of efficiency. Capitalism as we have it today has certainly failed as it has failed to serve 80% of the population. We need a new model and studying ParEcon is worth the effort of a few hours of reading.

We Feed the World 2

I re-watched the "We Feed the World" video. This 96-minute documentary produced by Austrian Erwin Wagenhofer in 2005 shows the relations between small farmers and fishers and big agro-industry and the effects the global food trade has on individuals, at a personal level. Even the second viewing was interesting. It is the little details that will get stuck in your mind: Austrian farmers today have to work 6 times the size of land to produce the same living standard as their farming parents. ... Every day the largest city of Austria Vienna throws away the amount of bread from overproduction that the second largest city of Austria Granz consumes. ... In the largest vegetable and fruit market in Dakar, Africa, one can find subsidized Spanish vegetables. Subsidized vegetables from European agro-business sell for one third less than local products causing the irreversive death of African farms. ... European governments pay large amounts of subsidies to European farmers to produce wheat and corn. Europe then burns subsidized wheat and corn to fire electric power plant, i.e. wheat and corn are used to produce electricity. Europe then imports soy for feeding its animals, mostly from Brasil. The world's biggest soy exporter is Brasil. Despite being the world's largest soy exporter and one of the world's largest food producing nation people starve in Brasil. ... The global web of interconnections becomes clear. What we eat and how we produce food not only affects us but many people around the world.

World Economy and Global Trade

One line in the 2002 PBS documentary "Commanding Heights - The Battle for the World Economy - Part 3" subtitled "The New Rules of the Game" (19m49s) stuck out: Global Trade consists of a) $8 trillion in trade in goods and services and b) $288 trillion in trade in currencies. That told me something. Global trade and globalization is much more about moving big money around in split seconds and about multi-national financial speculation than it is about actual trading of goods and services. We should keep this in mind when we hear proposals from the WTO. And since currency trading is a zero-sum game, wherever there is a winner there is a loser. We can assume with near certainty that the big winners in the currency trade are the big financial institutions, while the losers are the millions of average income or poor people that hold a little bit of savings or just have enough cash for the day's food purchase. Global trade has been presented for decades in a false light and above all it is measured by false parameters. It is measured by trade volumes. Just like GDP is not an appropriate measure of the health, progress or wellbeing of a nation, trade volume is not an appropriate measure for economic, social or national health, progress or wellbeing. Countries that have seen explosions of trade volume have seen neither an explosion of national health services, nor of national or social progress. Trade in Mexico has grown 700% in 6 years after the enactment of the NAFTA and yet workers are as poor as before. Global trade should be measured by the benefit for the people: Do people have access to more goods at a reasonable price? How did prices of goods and services develop that were dominating the local eceonomy before the new trade agreement? How did the workers income develop? How did workers rights develop? How about environmental impact of the new trade and production? Is it increasing or decreasing national or global divides? These and similar factors combined would form a better multi-facetted indicator to tell us if increased trade was positive on the whole. Just because we grow soy now in Brasil and ship it to the US and Europe instead of growing it locally does not make the trade a positive thing. In contrary, we increase transport, CO2 emissions and place the burden of mono-culture dependency on Brasil while destroying the rainforest for ever greater soy fields. Is it a good thing that 90% of product X are now produced in country Y and then shipped around the world? Is this positive trade? You may replace placeholder X with product like palm oil, T-shirts, sneakers, television sets and place holder Y with countries like China, Indonesia, or Mexico. The goal of trade should be to enrich people financially, socially and culturally and not to add additional power to a few already powerful banks and corporations. We need high-quality trade, not high-volume trade.

On the official PBS site one can find everything, all videos and all transcripts. A subset is on YouTube.

IMF and Indonesia

There are many examples of the wrong-doings of epic scale of the IMF and the World Bank. Here is the example of the rape of the nation of Indonesia by the IMF. The 53-min video documentary was produced by John Pilger for British television in 2001 and entitled "The new Rulers of the World". After highlighting Indonesia as a case study of the IMF processes at a detailed level, the documentary concludes in the last minutes that the newest ruler of the world is the WTO (World Trade Organization) and that the WTO has been created by a few as an unelected embryonic world government above all nations and responsible only to the world's richest corporations. The last sentences is "Why not abolish the IMF, the World Bank, the WTO and replace them with genuine trade institudions that are democratically acountable? ... Why should we accept this? Why should our children have to face these visions and dangers? None of them is god-given, all of them can be changed."