Tomáš Sedláček about the post-crisis economy

guaka's picture
Submitted by guaka on Fri, 06/09/2013 - 13:13

Not that I watch a lot of TV. I don't even own a TV. But a long time ago I watched a lot of VPRO shows. VPRO is a Dutch slightly alternative broadcaster. Recently I bumped into VPRO's Tegenlicht again online. It's still one of my favorite Dutch TV shows. Thus I watched Tomáš Sedláček about the post-crisis economy and the thought process of economists. A great watch, but there's something Tomas did not discuss in his interview as my friend Dante eloquently pointed out:

Unfortunately, in reality, with the Japanese example, which also applies to most of the world, they can not relax, as they have to grow to pay interest. Let me explain : Almost all the money used in circulation is private commercial bank credit, on which there is interest to pay. If there is less growth, what happens is a risk of systemic collapse as there is an absolute need to grow the total monetary mass to avoid a spiral of defaults. In the current monetary architecture monopoly imposed to us, without such growth it is not technically possible to pay back principal plus interest on the debt. ( all money is made out of debt - according to economist Margrit Kennedy, 80 percent of the population pays that cost in the benefit of the 10 percent richest ) At some point, one reaches what some call "Credit Peak", that is when different sectors of the economy can not get more in debt, or more specifically when income is lower then the cost of only the payment of interest on the debt. In Japan, but also in the US and in the Eurozone, they lowered interest rates. The lowering of interest rates at the private central bank is imho mostly in the interest of banks and other corporations that can directly finance themselves on such low interest markets - most actors in the economy take credit with much higher interest rates, credit itself based on fractional reserve on the loans the commercial banks take from the central bank.

Japan has its own currency and owns most of its own debt. The state has over 270 percent of GDP in debt ( high levels of debt needed as the monetary mass need to grow exponentially ) , which is much much higher then even Greece. But the bonds it sells to its own population and companies, yields an income for its own population, or more exactly, for the ones that can afford buying bonds. In other words, the huge debt enables to transfer income ( and also power ? ) to a small minority of the population which has accumulated capital. It is a perfect approach to transfer property and power in the hands of a minority. It is a fantastic tool for a concentration of power. It is political. There may not be much of an interest for the biggest players in the economy to change this. Most of the population needs to stay in the rat race to be able to pay back loans ( often taken on non productive assets such as houses already built , on which there is speculation ) and the interest on such loans. If they do not, they loose their house. And if they do not own the house, they need to rent it, etc

We should be able to relax, but unfortunately if we do not continue playing the current monetary game, we would end up loosing most property, as the system would collapse, and most assets would be transferred to banks or agents in society that in times of crisis have sufficient hoarded money in net value, or can more easily then others get credit to buy a bigger chunk of the economy at a cheap price ( when they all go bankrupt at once )

photo credit: wikicommons

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