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Unmissable interview with Franck Biancheri

by Luis de Sousa Wed Dec 17th, 2008 at 04:09:43 AM EST

Jorge Nascimento Rodrigues published yesterday an interview with Franck Biancheri, the leader of the Newropeans party and the coordinator of the Global Europe Anticipation Bulletin (GEAB).

Frank Biancheri  and GEAB  developed the concept of "systemic crisis" some years ago to describe the unprecedented economic environment the World was stepping into; as the crisis hit this term eventually got popularized. In this interview Frank explains what "systemic" means, and how this crisis promises to completely change the economic and financial worlds as once we knew it.

This unmissable interview is one of the most important pieces of text I've read in the last few years.

For now I haven't anything to add to Franck's words, I'm still pretty much in the digestive process of these ideas. Following are some annotated highlights of the text.

From February 15th 2006 on, when we coined the expression "global systemic crisis" in our bulletin (the GEAB N°2), we defined this concept as a general break down of world governance as we knew it in the past decades (essentially since WW II).

Capitalism itself is not dying:

In our opinion, this crisis has nothing to do with the end of capitalism or even a crisis of capitalism. It has on the contrary everything to do with the end of a political era which saw the overall global supremacy of one country, the USA; and which has been marked, since the 1970s and Bretton Woods II, by an increasing number of aberrations and excesses in the financial and monetary spheres, due to the diminishing ability of the USA to fulfill its role of global pillar.

This won't be a reprise of the 1930s:

In 2007, we called the starting crisis in the USA, the `Very Great US Depression'. So this crisis indeed is different from the 1930s one in many ways. First, today's world is far more integrated than in the 1930s so this crisis is definitely the first ever truly `global crisis'. The 1930s one was essentially limited to the USA and Europe. Second, our societies depend much more on the financial sphere than 80 years ago, so the impact of the financial meltdown is going to affect more deeply and more durably our societies. Third, the USA, which is the epicenter of the current global crisis, was an ascendant world power in the 1930s when now it is a decaying one.

The lucky Eurozone:

The major difference is going to be between the USA and the Eurozone. EU member states outside the Eurozone will be affected more severely than Eurozone ones. And some of them more integrated to the US economic and strategic sphere such as UK for instance, will be at least as affected as the USA if not more.

Although it is still lacking proper institutions:

There is an obvious need for regular meetings of the Eurozone summit now that it was gathered once last November. It should take place the day before every EU summit (every 4 months). There is a need for a kind of Secretariat of the Eurozone which will coordinate economic policies and serve as the daily interlocutor to the ECB on the one hand (in charge of monetary matters) and with the EU Commission & Parliament (in charge of the whole EU area).

As Jérôme has been saying, nationalization is the only effective way to fight the fractional reserve system crisis:

The distressed assets buyout is only pushing towards the state (and ultimately the taxpayer) the cost of getting out of the mess. And not entering the bank's board is only making more probable that in a few months, because banks are not delivering the loan increase to the economy they promised, the very same banks will have to be fully nationalized.

Our big asset:

The existence of a developed social system is the big asset of Europe compared to the USA or Asia which don't have them and will be faced by the emergency of having to build them from almost scratch, or face social unrest on a large scale.

Message to the deflationistas:

We are seeing a transitory deflation of asset prices which skyrocketed for speculative reasons. But the amazing money creation, especially in the US which is printing money like never before, or the major use of debt to pay their way out of the crisis, again in the USA and also in UK, will result into strong inflation in these countries.

Can the Euro takes the Dollar's role as the de facto international reserve currency?

[...] the instability created by a reference currency controlled by a single political entity as it is the case for the US Dollar clearly makes the case against any attempt for the Euro to play such a role.  We think that the coming years will see the emergence of a global reserve currency (which could be called the "Global").

Obama is no change:

The new US administration is facing a task of historic proportion, but I am very afraid that Barak Obama and his team still belong to the `old political class'. When looking at his team of economic advisers or officials, you can only notice that they all come from yesterday. People like Laurence Summers have been directly responsible of the big Wall Street mess of the past decade (when they orchestrated in 1999 the suppression of Great Depression regulations preventing the banks to behave as they just did these past years). And Timothy Geithner is one of the three major decision-makers (together with Paulson and Bernanke) of the failed interventions of the past year.

I stress the forecast of stagflation for Europe, something now out of the cards for many people. For now I have two main questions: a) will in fact Europe be able to continue avoiding a hard recession? and b) will it be possible for the G20 to enact a new world paper currency? In this last question I especially doubt the current status quo on the dollar will last until next Summer.

I strongly recommend the complete read of this interview.

European Tribune - Comments - Unmissable interview with Franck Biancheri
As Jérôme has been saying, nationalization is the only effective way to fight the fractional reserve system crisis:

Nationalisation of banks serves only to stem the bleeding from one wound. It does nothing to stem the bleeding from the shadow banking system wounds, and the ongoing collapse of that sector, of which Madoff is only the most egregious (Galbraith's "Bezzle" to a "t").

I believe that there is a simple and straightforward quasi Equity "Peer to Peer investment" alternative to secured debt and public debt, and that is "Unitisation" of, and direct investment in, productive assets, particularly distressed housing.

Even if the wounds are stemmed, we still need a transfusion of new credit, and here I would see a simple alternative "Peer to Peer" mutualised credit architecture.

Indeed, we are fast approaching this state of affairs - whereby all unsecured credit originates with the backing of a popular guarantee (initally the government) and banks act as service providers.

 European Tribune - Comments - Unmissable interview with Franck Biancheri

We think that the coming years will see the emergence of a global reserve currency (which could be called the "Global").

I agree with this, but point out that this will be unsustainable using a conventional centralised "World Bank" style architecture.

Keynes identified the missing element for a sustainable system in his International Clearing Union/ Bancor proposal in 1944, and that is that it is necessary to charge "interest" on both positive and negative trade balances, which adopts Gesellian thinking re "demurrage".

However, in my view, such an approach - attractive though it might be to elites used to top down solutions - would be obsolete before it began, since I believe that a networked and disintermediated "Clearing Union" will have evolved long before the politicians have got half way through the arguments as to control etc of a top down solution.

It's a fine interview, though.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Dec 17th, 2008 at 08:07:32 AM EST
Great interview indeed.

Been  reading LEAP/e2020 for some time-

There are many events that are at least moderately likely that could severely trash such projections. The key to extracting value from futurologists and such risky predictive analyses is to, in my view, find the elements that could bugger up the picture, and then try to look at the other possible paths that might result as a result. If you do this, you find that the whole thing just explodes into chaotic complexity- that's why futurologists tend to either speak in broad generalities, or have short careers.

The first fly in the ointment I see is the tendency of authoritarian or authority-dependent nation states like the US and the UK to drift-or leap- into authoritarian fascism when really bad shit happens. Let's not pick apart the definition of "Fascism"--the point that strikes me right away is how much of a cult of personality Obama represents,--and, unless his economic team gets into heresy fast, how unlikely they are to be able to cope. A 50% cut in military spending, closing lots of bases? I've said sweveral times that the temptation to retain power with the nuke will be great. I think that with Obama's inauguration that danger will recede, but not disappear.
Major social unrest in the US knocks the whole thing into a hat.

Second, Capitalism may not be dying, but what will emerge may be called "Capitalism" for political reasons, but will probably be very different. The New Order will unavoidably have to deal with the inherent contradictions of our current iteration of capitalism. The Marxist dialog and others rightly identified some of them (even if it's solutions turned out to be often unworkable), but current events are emphasizing the need for a new perspective.

Third, the whole thing gives short shrift to the fact that the new world players that will emerge- China, Brazil, India, etc--will have their own agendas, and the US will be largely unable to derail them as in the past.
I'm not sure he's right about the Euro- the EU is not as monolithic a political entity as the US, and by it's own need to accommodate many points of view the Euro may yet emerge as the world standard reserve currency.

Great link. Thanks.

Capitalism searches out the darkest corners of human potential, and mainlines them.

by geezer in Paris (risico at wanadoo(flypoop)fr) on Thu Dec 18th, 2008 at 03:31:14 AM EST

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