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Re: <nettime> notes from the DIEM25 launch
Armin Medosch on Wed, 17 Feb 2016 13:02:23 +0100 (CET)


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Re: <nettime> notes from the DIEM25 launch


dear Alexander,

thanks for your additional explanations. Yes, when I write economy I
also mean political economy. So in fact your explanation brings me
back to the proposal I have made. The separation between fiscal policy
and monetary policy is enshrined in legislation relating to the ECB
(European Central Bank). It means that the ECB is prohibited by law
from giving money directly to governments to invest in social welfare.
What the ECB has been and is doing is buying government bonds from
Investment Banks to the amount of about 60 billion per months, up to a
total of 1,6 trillions. All this money goes only to the biggest
investment banks and 80% of it is used to buy back government bonds.
Why they are doing that is exactly what you mention, the hope that
this would help to curb deflation. The ECB hopes that those investment
banks who get rid of some more risky government bonds will now use
that freed up money to invest into the economy.

However, the past year in Europe, and over a longer period in USA and
UK has shown that they don't. From all that money that is artificially
created by the ECB, or the Federal Reserve very little is actually
going into investment into real business. Most of it ends up in
financial "assets" which can be anything, really.Investment banks keep
creating highly complex and potentially toxic types of assets such as
collateral debt obligations (CDOs) which were partly responsible for
the 2008 crash and are highly back in fashion. Some of that ECB and
Federal Reserve money certainly has found its way into China and other
places with non-democratic governments, low wages and no workers
rights, not even to speak of environmental rights. In other words,
quantitative easing has created a new asset bubble which is right now
falling apart rather noisily if you follow stock exchanges.

In short, this plan with 'quantitative easing' (creating accounting
money and giving it to invstment banks) has not worked. There are even
some extreme free market advocates, especially in Germany, who think
that this bond buying program has infringed on holy free market
principles - the central bank shall not get involved directly into the
economy, the only way it ought to do so is monetary policy (which is a
core neoliberal orthodoxy and the cause of much suffering). There is a
court case and a whole dossier on this (in German) by public TV
https://www.tagesschau.de/wirtschaft/staatsanleihen-ankauf-ezb-101.html

But this idea that the central bank shall not be concerned with the
economy is NOT a law of nature. It is part of a set of key
institutional decisions which together form the institutional system
of neoliberalism. The institutional system of neoliberalsm cannot be a
holy cow for any progressive movement. I thought Varoufakis is such a
great economist. Why does not he address this issue which is staring
one into the face: when the ECB can create 60 billion Euros per month
and give it to investment banks, it can also create that amount of
money and give it to governments for social tasks - for education,
health, pensions, refugees, natural protection and so on and so forth
(not weapons buying and stupid roads building).

I mistyped in my last email: it would not take 60 but only 6 months
for the economies of those states to get going again. Combine that
with all the other good proposals that Alex brought up, such as a 15
Euros per hour minimum wage, deflation would not be an issue any
longer.

Yes to a social Europe, but no to a Europe that behaves like a nation
state with borders on its outside. Europe could be open and social
too, cosmopolitan and globally networked.

But the idea that radical transparency would be the key to a more
democratic Europe strikes me as almost dangerously naive. Transparency
and accountability was the 1997 mantra of Tony Blair. The problem is
not that we don't know that shit is happening but that even when we
point it out, those in power arrogantly ignore it. Those in power
think they can ignore the left and just sit out any protest such as
Occupy without so much as blinking.

Change needs to come from the economic base and not the
superstructure. That's why the ECB should print money (or rather
create accountancy money) and give it to us all.

best
Armin


On Tue, Feb 16, 2016 at 9:09 PM, Alexander Karschnia <alextext {AT} googlemail.com> wrote:

> Dear Armin,
>
> I am afraid that the picture you got from the DiEM meeting was
> incomplete: the second of the three sessions during the day-time
> meeting of the "working group" was about economy.  The DiEM initiative
> seems inspired by the "modest proposal" that Varoufakis made last year
> together with Stuart Holland Galbraith and James K. Galbraith: the
> bottom-line is that the existing institutions and contracts do not
> have to be changed, but just used in a different way. This
> bottom-line-sentence was repeated by Varoufakis during the evening. In
> that respect, the proposed change is not radical, but very pragmatic,
> reformist: a kind of PERESTROIKA of the EU. Combined with GLASNOST:
> radical about DiEM is the unconditional demand for transparency. Thus
> more important than his "modest proposal" was Varoufakis role as
> "megaphone of the whistle-blowers" since his legendary interview about
> "the eurogroup. It is no coincidence that the most pathos that this
> "day generated culminated in the repeated demand: "Asylum for Edward
> "Snowden! Free Julian Assange and Chelsea Manning!"
 <...>

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