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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

lifting the lid « Previous | |Next »
September 28, 2011

Alessio Rastani, a financial trader in London, gives us an insight into how finance capitalism operates from the perspective of the gambler or speculator. He says:

For most traders, we don't really care that much how they're going to fix the economy, how they're going to fix the whole situation, our job is to make money from it. The governments don't rule the world. Goldman Sachs rules the world. Goldman Sachs does not care about this rescue package, neither does the big funds. This economic crisis is like a cancer, if you just wait and wait hoping it is going to go away, just like a cancer it is going to grow and it will be too late.

The trader has lifted the lid on what The City, or Wall Street, actually thinks. The crisis in Europe may be scaring the world, but for Wall Street and the City it is an opportunity to make money in a downward market.

What has happened to Greece is happening to Italy. The austerity measures imposed by the Troika"---the European Commission, European Central Bank (ECB) and the International Monetary Fund (IMF) ---causes the economy to slow budget targets get more difficult to meet, and then interest rates on Italian bonds rise, increasing the government's budget deficit. Bondholders and speculators then sell or short the country's bonds, driving interest rates up further and reducing the value of the bonds held by European banks. The traders make money by pushing up the yields on the bonds.

The interviewer thanked the trader for his candour but told him that "jaws had dropped" around the BBC newsroom", which indicates that the BBC news team either have no idea what is going on in the trading sector or they are pretending they don't. It's more likely the former.

The context is of this is that we’re still in the aftermath of 2008. Today it is debt deflation that is becoming the distinguishing phenomenon of the current time in the US and Europe. The signs are reduced consumption, shrinking markets, companies not investing, stores closing, “for rent” signs spreading on the main streets, and local tax revenues falling. So companies will lay off their employees and the economy will shrink more. Life will get harder.

The worldview of financial capital is that no matter what happens, the banks have to stay solvent for the economy to operate. So the loss is shifted onto the public. According to this view the role of the government is defend the interests of financial capital vis-à-vis the rest of the economy. This view shrinks the economy keeping the debts in place, so that is the basic internal contradiction at work.

| Posted by Gary Sauer-Thompson at 8:43 AM | | Comments (13)
Comments

Comments

I love the way the US is now implying that current world economic/financial difficulties are the EU's fault. Never mind what happened in 2008.

About 10 years ago Ulrich Beck pointed out that globalised capital was way more powerful than nations. It would take one decent sized corporation to pull its cash out of a country, and the others would follow, thinking the first one must know something. And that nation's economy would collapse.

That's not exactly the scenario we're seeing, but the end point is the same. The economy of production, distribution and consumption is the one where states still have some sway, but it's become a tiny fraction of the bigger picture. Capital isn't attached to tangible reality any more.

Lyn says

About 10 years ago Ulrich Beck pointed out that globalised capital was way more powerful than nations. It would take one decent sized corporation to pull its cash out of a country, and the others would follow, thinking the first one must know something. And that nation's economy would collapse.

They threaten to leave--eg., the Big Mining companies or the trade exposed industries re the carbon tax. They--the multinationals--- play on fear and they use blackmail tactics to get their own way.

This is nothing new. I recall seeing similar interviews with traders before - nothing changed.

Could this story just be an elaborate hoax?

http://www.cnbc.com/id/44684976

bet he's got some huge short positions

The political reality that is not mentioned by Alessio Rastani, the financial trader in London, is that anks, investors and speculators rely on governments to bail out their bad bets.

This relies on a self-defeating business plan to load economies down with debt and extract the entire economic surplus as debt service – and then foreclose and get one’s capital back via privatization sell-offs.

the other economic reality not mentioned by the Alessio Rastani is that Goldman Sachs and others American banks have gambled that Greece and other countries can pay, and written default insurance.

So one possible outcome is that if these U.S. banks lose the bets that they’ve made, they’ll go under and Washington will have to bail them out. So the US Treasury is telling Europeans to sacrifice their economies so that U.S. financial casino gamblers won’t take a loss.

Bankers rule. Rastani is right on that point.

The casino always wins – and today’s casino is Wall Street.And on Wall Street the big fish eat the little fish.

mars08
I understand that the BBC is in trouble because it let Rastani on to the television without vetting him properly first. He presented himself as a successful trader, when there is no sign that he is. He's operating freelance from his girlfriend's semi in Bexleyheath, and regretful that he did not, in fact, make "a fortune" out of the crash.

"Markets rule the world". The only thing markets like is is things that make them rich. So they--the fast buck financial economy don't like taxes. Nor regulations. What is good is living in a bubble made out of debt because debt is what the financial systems sells.

Their idea of a free market is to let gangsters and speculators be part of the economy.

"Goldman Sachs rules the world. "

This makes you think of the way that this company helped to create the global economic crisis by selling sub-prime mortgage debt; and how that company made even more money by betting on a collapse in the sub-prime market; and of how it made money by underwriting bonds; and later advised other clients to short those bonds.

Ed Miliband the leader of the opposition Labour party in the UK gave a keynote speech to the 2011 Labour conference. In it he attacked the predatory asset-strippers" and the "fast-buck" culture and said:

We foolishly put ourselves in the hands of markets that didn't care about the wellbeing of individuals and communities. We won't be making that mistake again.

It might be too late to correct that mistake. It's now normal that the market's measure of value is above every other consideration.