A Crisis-Prone and Fragile Financial System

Written on December 9th, 2016 in politics Comments Off

Published on WEA Pedagogy Blog, by Asad Zaman, Dec 7, 2016.

Prior to the Global Financial Crisis (GFC 2007), many senior economists and policy makers expressed confidence that they had finally solved the problem of business cycles, booms and busts, that plagues capitalism. Because of this over-confidence, early warnings of a looming crisis by Nouriel Roubini, Ann Pettifor, Peter Schiff, Steven Keen, Dean Baker, and Raghuram Rajan, were ridiculed and dismissed … //

… There are two central elements which lie at the core of the fragility of the financial system. The first problem is credit-creation by banks. This means that when banks give loans, they create credit out of thin air. This ability enables corporate raiders to buy multi-billion dollar corporations without any money in their pockets using financial gimmicks. The second problem, closely related to the first one, is the use of interest instead of equity in the lending process. This means that banks can lend for mega-projects designed to fail, because they are guaranteed a return of their money regardless of outcomes. Bankers have successfully created the illusion that they are necessary, so that when borrowers can’t pay back outrageously risky loans, the government re-imburses the banks for their losses. Both of these problems at the heart of the financial system can be fixed, but the ability of high finance to create huge amounts of money at will gives the financiers ample resources to block any attempts at solving the problems. The 1% who benefit from this financial system have created a robust and resilient multidimensional system of defense to protect, preserve, and sustain the current fragile and crisis prone financial architecture. Using billions of dollars of funding, many different institutions, which include academia, media, think tanks, policy makers, regulators, politicians, and the military-corporate-industrial complex, have been co-opted by high finance. In an article entitled “It Takes a Village to Maintain a Dangerous Financial System,” Stanford professor Anat Admati describes how these different institutions work together to maintain and perpetuate the current financial system. In this article, I focus on the how economic theory itself has been captured by the top 1% and changed to serve their interests … //

… Originally published in Express Tribune, Dec 4, 2016. Related materials on the Global Financial Crisis. My author page on LinkedIn Index to my writings: AZPROJECTS. Closely related: Unlearning Economics. My personal webpage: Transforming Knowledge.

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Links:

We’ve spent $6 trillion in the Middle East, and our roads have potholes – Trump, on The Duran, by Alex Christoforou, Dec 7, 2016: the US is going to stop promoting regime change in countries around the world;

#DrainTheSwamp, 5.17 min, uploaded by Truth Channel News, Dec 1, 2016;

Canada: Victory – City Forced to End HSF Discrimination, on Ontario Coalition Against Poverty OCAP, Dec 1, 2016, von Freie Propaganda 2.0 am 27. Nov 2016;

Financing recovery and fairness by going where the money is, on Economic Policy Institute, by Josh Bivens and Hunter Blair, Nov 15, 2016: Progressive revenue increases are key to meeting nation’s fiscal challenges;

Book – Title: Anarchism: From Theory to Practice, Author: Daniel Guérin, on The Anarchist Library … click on links for each chapter (Topics: class struggle, history, Russian Revolution, Spain 1936);
Source: Retrieved on October 26, 2009 from Yahoo! GeoCities; /External Links; /External Links/Camerons World.net … web collage of archived GeoCities content);
(see also: The Anarchist Library/November 2016 announcement, and latest entries);

Top 10 Poorest European Countries, 2.22 min, uploaded by Pog X, Jan 11, 2016;

THE FIRST COWBOYS, 43.27 min, uploaded by Wild West History;

… and this:

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