I. What a difference 200+ days don’t make. It seems like it was only yesterday when Greece was facing bankruptcy; when the European Central Bank was the lender of first, last, and only resort for major European banks; when the sovereign debts of Italy, Spain and Portugal were suspect, contaminated, shunned; when seats on the flight to safety were going, to use the language of the trade, at a premium; the fate of the euro was the latest speculation; when the future of the European Union was the latest, to use the language of the trade, short; when Geithner was urging his counterparts across the Atlantic to do something dramatic, to pull out the “big bazooka;” when the EU was apoplectic, or anaphylactic, or both over the prospects of a referendum in Greece concerning the terms of so-called bailout. Only yesterday.
These 200+ days later? Well, Greece is facing bankruptcy; Greece had a referendum, disguised as a general election and the results were exactly the results expected only yesterday; the ECB is the only lender of any resort for European banks; the sovereign debts are again suspect; the flight to safety has driven certain short term interest rates below zero, which is also the latest line on the future prospects of the European Union. And once again Geithner is urging, hoping, praying for that big bazooka to drop out of the sky, a miracle of another sort in government green. Praise the lord and pass the ammunition.
While we’re at it, remarking as it were on the amazing and the banal, the banality of the “amazing,” the recurrence of the unusual, exceptional with such frequency that unusual becomes the tedious, everyday functioning of this system based upon the aggrandizement and depreciation of human labor……..let’s ask a question. Let’s ask a question that appears to be as tangential to the predicament of irrelevant to the predicament of capital accumulation as a question can be: Is it possible to compare “amazing” “things,”— events, quantities, qualities, effects, non-effects?
Can one amazing event, quality, quantity, effect, non-effect, be more or less amazing than a different amazing…etc?
As we ponder this, and count the number of pinheads dancing on angels too, let’s just slog on with the predicament of capital accumulation, to wit:
It’s really amazing how far a lot, a real lot, of money can’t go these days. And it’s even more, or less, amazing how little time lots and lots of money buys these days. The most amazing, or not, thing of all is that this exchange of money for time, this buying of time exposes, condenses, displays, distills, but most of all narrates the historical trajectory of value production; the once and future prospects of capitalism.
Amazing, isn’t it? Or not.
After all, it was just a few short months ago that the ECB took to the stormy Mediterranean in its rescue vessel, the EUSS Long Term Refinancing Operation, LTRO, to the spread the oil of long-term-low-interest-any-collateral-will-suffice loans on trouble waters of Eurozone bank finances.
That was an undertaking of amazing, even epic, proportions—supplying over one trillion euros—that’s a thousand billion for those of you not hooked up with hedge funds or astronomical observatories—for a term of three years, at rates of 1% or less.
This was not, to be sure, an original undertaking. The ECB was borrowing a page, and a bit of liquidity from the US Federal Reserve, which had borrowed a page from Crazy Eddie of 1980s discount electronics, and TV commercial fame—“prices so low, they’re practically giving it away.” Crazy Eddie, as we all, know, folded, having folded into his own pockets significant amounts of the readies provided through his bank credit lines, and having turned his stores into sources of credit, into mini-banks, financing purchases, and counting the debts as earnings, thus pyramiding downward, reproducing in infinite miniatures, fractals really, the bad assets as bad banks. “I’ve looked in the mirror, and I’ve seen a million little mes.”
While separate and apart from the sovereign “bail outs” engineered by through the EFSF cum ESM, the ECB’s LTRO has the same origin and object as the programs that produced the sovereign debt crises—that is relieving the distress of the European Union private banking system with the application of massive state sponsored liquidity.
That might work, if the banking distress was in fact a liquidity issue. It is not. As the governor of the Bank of England put it, “The crisis in the euro area is one of solvency not liquidity.” And who could possibly know more about chronic, extended, and attenuated insolvency than the guv of the bank of the bourgeoisie of that storied isle, Mervyn God Save the Ring-a-Ding-Ding ? Only Crazy Eddie, for sure.
So anyway, the various “sovereign” governments had tried that, just that old liquidity shuffle [pay no attention to the left hand, watch the right hand], turning their public treasuries into lenders of penultimate resort, into bad banks. The ECB determined it could do no less than repeat the process, since, after all, accumulation of capital, is by origin, definition, and destiny a repetition compulsion, pathology.
The ECB offered its balance sheet as the virgin to be sacrificed at the altar of the great god of non-performing assets. The best laid plans, and hedges, of mice, men, and the recombinant DNA offspring of both called finance ministers, had come to less than zero.
II. Let’s catch up. In September, 2011, the then finance minister of the Spanish government, Elena Salgado, stated, “The banking sector now is prepared to overcome any test it may face in the future.” The fact that she was reading from a text originally written in 2008 by the former finance minister of Ireland in which he claimed that he had provided Irish banks with “the cheapest bailout in the world so far” didn’t do much to convince the international debt markets that the Spanish banking sector was prepared to overcome anything, least of all the e220 billion in non-performing debt on its books.
In December 2011, Mario Draghi, the new chief of the European Central Bank announced that the bank will accept “a wider range of assets as collateral” as security for its lending programs to the eurozone banking center, including corporate bonds, covered bonds and “previously encumbered assets”—i.e. non-performing debts. Happy Christmas.
In the same month, Italian banks borrowed e200 billion from the ECB, equal to 25% of all ECB lending for that month.
In 2012, the Spanish government acknowledged that it would not reach its target for reduction in the government deficit.
Italy’s Banco Monte dei Paschi di Siena suspended payment on bonds issued to the Italian government by the bank to secure the government’s bailout.
Spain announced it was suspending its plan to privatize the airports of Barcelona and Madrid because of a precipitous decline in the valuation of the properties.
Greece too could not privatize assets at anywhere near the numbers, nor the schedule, embodied in the bailout agreement.
The ECB’s balance sheet [loan’s outstanding] reached e3 trillion, an amount equivalent to one-third of the Eurozone’s GDP.
In March 2012, the European Union announced that Spanish banks would not need a bailout.
German banks’ exposure to Spanish debt measured e148 billion including e53 billion in claims against Spanish banks.
The largest EU private banks had deposited e 1.2 trillion with the various central banks in the union, an increase of 66% since 2010.
In May, elections in Greece yielded no government.
Also in May, elections in France installed someone claiming to be “socialist” in the Élysée Palace, a result slightly, but only slightly less appalling to the bourgeoisie, than that of the Greek elections.
III. The news coming from Europe hasn’t been all bad. After the British government revealed that it planned a state funeral, at the cost of sterling 2 million, for Margaret Thatcher upon her demise, the remaining Keynesians in the Labor Party argued that the funeral should be absorbed into an economic stimulus program. Given the dire circumstances of the economy, the Labor Party’s shadow Exchequer proposed that the government not wait for Lady Thatcher’s illnesses to take their natural course, but rather put her to death, painlessly but immediately, as part of the emergency measures for restoring growth. “Markets hate uncertainty,” said the shadow Exchequer, “We must act decisively and boldly.”
If nothing else, the Labor Party Keynesians proved, at least and at last, that they had grasped the substance of Lenin’s tactic of “critical support”— “like the rope supports the hanged man.”
And……..the former head of the Vatican’s Instituto per le Opere di Religione (IOR), Ettore Gotti Tedeschi, under investigation for money-laundering, indicated that he is in fear for his life. Pope Benedict laughed off suggestions that Tedeschi was responding to threats of possible retaliation from the bank if he cooperates with the investigating authorities. Said the pope, “He has nothing to fear. Everyone knows we never molest anyone over 14 years of age.”
IV. This is definitely not a liquidity crisis. This is not a fiscal crisis. This is not a monetary crisis. It is, however, more than a crisis in the reproduction of capital, in the accumulation of capital, in the profitability of capital. It is that moment when the mechanisms of crisis—bankruptcy, unemployment, declining wages—are not enough to restore the profitability of capitalist production. For that reason, the programs, policies, agreements, and disagreements, within, between, among, the institutions, parties, and bourgeoisie of the nations of the EU; and the agreements and disagreements of the EU, or its members, with the United States about policy and program, about big bazookas, super-regulators, Basel 3 capital requirement, eurozone bonds, sovereign debt guarantees are irrelevant, immaterial, and meaningless.
Money, being what it is to the bourgeoisie—church and state, love and lust, god, goddess and dominatrix, mirror and lens, wing and prayer—it’s to be expected that the bourgeoisie see every problem and every solution in terms of money, as problems of finance. However, the problems condensed and expressed in money-capital, in money as capital, as credit, are not amenable by solutions focusing on money as a medium of exchange; money as a means of circulation; money as a universal equivalent; money as a store of value; money as a hoard.
If money is the “ultimate issue” of exchange value, its embodiment, distillation, and abstraction, then credit and credit instruments are the embodiment, distillation, and abstraction of money; they are money’s money. The origin of credit instruments in capitalist production has everything to do with that need of capitalists to buy time—that the time of realization of value need not, does not, cannot correspond with the actual aggrandizement of value. Return on investment cannot be coincident with investment. If return were coincident, there would be no time to expropriate; there would be no distinction between private property and social need; there would be no rate of profit; capital in fact could not exist.
Credit originates in the lags in, between, among the various sectors of capitalist production; in the different rates of turnover of various capitalist enterprises; in the time differentials between investments and profits. Credit bridges those differentials and in that process distributes accumulated values, accumulated profits, according to the same exact laws that govern all exchanges in capital.
There is, in fact, nothing fictitious about the credit instruments of finance capital; or nothing more fictitious about credit instruments than there is about all capital—namely it’s not a thing, it’s a social relation of production and when capital cannot reproduce itself, that social relation, quickly and profitably enough, when capital cannot maintain a rate of self-expansion, it loses its aggrandized corporeality, its life stolen from labor.
The inability to restore the expansion of profitability is what besets capital in the EU, and in the United States. The differences in policies and programs between and among an Obama, a Merkel, a Hollande, a Tsipras (who has promised to keep Greece in the Eurozone; who proclaims only his party can restore stability to capitalism in Greece), even an idiot like Cameron are immaterial and irrelevant to the unity, the totality of capital’s antagonism to labor.
It is sad then to see the comrades of Insurgent Notes giving voice to this notion that there is a substantive conflict among the bourgeoisie regarding policy and program. In an article entitled “Chicken Game: Eurocrisis, Again” (http://insurgentnotes.com/2012/06/chicken-game-eurocrisis-again/) by Raffaele Sciortino, we get the usual list of the usual suspects as working to take advantage of the predicament of the European Union and compel the Union to conform to a new Washington Consensus. The author actually claims that a “financial war” has emerged pitting the dollar against the euro, and that the assault on European banking and sovereign debt is not only part of that war, but a strategic effort by the Washington-Wall Street-US Federal Reserve to reinforce dollar dominance over the euro. Says the author:
In the middle of the year, as the effects of the Fed’s injections of liquidity were being exhausted, underscoring the risk of a double dip in the Unites States, we saw a further surge of speculative funds betting against the European sovereign debts, a surge which pushed Italy and Spain into the highly dangerous grey area between liquidity crisis and insolvency…The crises of public debt issue and the devaluation of the assets of the European banks, left without liquidity from the a simultaneous withdraw of US monies, were circularly reinforce, while the euro itself entered the risk zone.
The double calculus here is to profit from the deterioration of public balance sheets and to give Europe a serious warning, specifically to the ECB and especially to the German government…
What bollocks. What’s next from our comrades at Insurgent Notes? An article claiming that the real reason Bush invaded Iraq is because Hussein threatened to price Iraq’s oil in euros?
The author of this article makes the rookie mistake of confusing the New York Times, and George Soros, as the “voice of Wall Street.” Anyone who has ever worked, or traded, on Wall Street knows that the opinions of Soros and the NYT reflect exactly nothing about the street.
Now regarding the claims of our author—the closing of the US short-term debt markets, the commercial paper money markets to European Union banks did not begin in middle of 2011. The declining market for bank paper, including US bank paper, in the commercial paper money markets has been going on since 2008. It was the major reason that the US FRB and Treasury produced its Asset Backed Commercial Paper Money Market Funding Liquidity Facility, its Money Market Funding Facility, ad almost infinitum. While 2010 did bring some relief to the banks, allowing the Fed to close the ABCPMMFLF, the volume of open market paper issued by US financial institutions declined a cumulative $850 billion in the years from 2007 to 2011.
Total credit market borrowing by US domestic financial corporations declined by more than $3 trillion in 2009, 2010, 2011, as US banks and institutions wrote off or sold assets, both performing and non-performing, raised capital through rights and equity issues, and simply shrank their businesses.
Today, participation in the commercial paper money markets is centered on the purchase and sale of paper with the shortest maturities to the degree that 31% of the portfolios of US Prime money market funds are overnight loans.
The action, and lack thereof, in the CPMMs hardly amounts to “targeting” the EU, or “sending a warning” regarding a policy disagreement. It represents the poor condition of the US and EU banks, the mountains of non-performing assets, and the emptying of the public treasuries to support the insolvent banks.
Moreover, the European Union banks are practicing the very same credit withdrawal against each other. For the 4th quarter 2011, The Bank of International Settlements (that executive committee formed by the Reichsbank in which it would meet with its friendly correspondent banks in belligerent countries during WW2? In order to manage its international holdings and ensure the uninterrupted flow of profits from companies in Latin America, the US, the UK? The very same) reported that interbank lending declined by $637 billion, 60% of which was the result of reduced cross-border lending by European Union banks.
Flogging the dead horse of “fictitious capital,” the author claims:
Behind this confrontation, we see the outlines of an unavoidable next phase: the devalorization of the enormous mass of fictitious capital (Marx) which has accumulated over the cycle of more than 30 years of growth based on debt.
First off, the 30 years of growth in the capitalist economy has not been based on debt. It has been based on reducing wages, shrinking unit labor costs, liquidating pensions and benefits of the workers and taking that liquidation right to the bottom line as profits, and substantial gains in labor productivity. The devaluation that is going on is not the devaluation of “fictitious capital” per se. This process is not confined to credit instruments, debt obligations, but rather involves the very real and very deep devaluation of capital, of the living and accumulated components of capital. Precisely because this is not a liquidity issue, but one of reproduction, the “crisis” is inadequate to that task and capitalism against must and will attempt to drive wages below the cost of the reproduction of labor and destroy the means of production.
The presentation of the last 30 years as one that can be apprehended by the notion of “fictitious capital” has produced its complementary opposite, fictitious Marxism.
The momentary divisions, disagreements of the capitalists are insignificant and irrelevant to the unity, the totality of capital’s opposition to human labor.
S. Artesian, 17 June 2012