Κυριακή, 28 Αυγούστου 2011

Eurobond/FTT, a solution for deficit crisis, Marx and Financial Capitalism…

The Munich based iFo thing tank estimates the cost of Eurobonds for Germany, according to this report "What Eurobonds will cost?" , in these hard times, will reach the amount of 47Bilion euro’s annually.

The Financial Transaction Tax (FTT) is the proposed innovative financing solution that EU Parliament has voted in this resolution "Innovative financing at a global and European level" .

According to the above resolution the income of that tax could be in the range of 200 Billion euro’s annually for EU 27:

14.  Emphasises the current revenue estimates for a low-rate FTT, which could, with its large tax base, yield nearly EUR 200 billion per year at EU level and $650 billion at global level; considers that this could constitute a substantial contribution by the financial sector to the cost of the crisis and to public finance sustainability

The 2010 EuroZone 17 members contribution to EU27 GDP was 9.2 trillions euro’s and the EU27 GDP contribution of the rest of EU27 members was about 3 trillions euro’s.

What if we create a mechanism that will issue Eurobonds and compensate the extra cost’s of the combined interest with funds coming from a proportion of the implementation of FTT in relation to EuroZone contribution in EU27 GDP?

The 50% of the 200bilions can balance the 47bilions extra cost for German economy and additionally leave enough headroom to combat future extremes...

That will create a high leverage balancing feedback mechanism against the financial system extreme speculation, which will automatically balance the effects of the EuroZone state debt, those providing long term stability in the system without the need of direct ECB interventions in debt markets.

If that novel mechanism, issues Eurobonds, which can be used mainly and freely, without ceiling, for real economy investments towards growth and on the same time have an algorithm which will set an allowance limit for typical state debt bonds directly related to state deficit level, in a way that will enable a not very strict and central Economic Governance of EuroZone those easier to implement, our problem will be solved.

A mechanism like that will change the level of markets speculation interference to real economy, with the implementation of a high leverage upwards growth spiral.

Our systemic financial problem's are directly related to the lack of returns to the real economy. Our financial institutions are draining liquidity from real economy because most of their earnings are coming from "not productive origin", since their profits are coming from turning around money without producing real tangible value like, food, equipment, houses etc. value that consequently employ's labor, create income and spreads growth.  

Its idicative the follwing quote from the above EU Parliament resolution about FTT:

C.  whereas the spectacular rise in the volume of financial transactions in the global economy within the last decade – a volume which in 2007 reached a level 73.5 times higher than nominal world GDP, mainly owing to the boom on the derivatives market - illustrates the growing disconnection between financial transactions and the needs of the real economy,

As an immediate systemic consequence of that fact that adds up with the multitrillion bank bailout packages, which twist's the essence of risk and subsequent loss towards to wrong doings of the financial monster investment banks, creates a constantly and fiercely move of wealth from many poor people and middle class population, towards to a sum of very-very few people around the globe which hold wealth proportionally huge when compared to their real needs, even when these needs are extremely heavily exaggerated.

Don’t get me wrong, I’m not suggesting to revolute and go to the other side and seize their wealth... I'm not even close to be a Communist…

But this extreme imbalance and constant dry out of capital in the mid-low level population of our economies has made leading economists like Nouriel Roubini to state to Wall Street Journal few days ago:

Karl Marx had it right.  At some point, Capitalism can destroy itself.  You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand.  That's what has happened.  We thought that markets worked.  They're not working.  The individual can be rational.  The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else's income and consumption.  That's why it's a self-destructive process.

So ECB and Germany must agree and allow a Eurobond combined with FTT that will also finance real economy, along with a mechanism that will finance start-ups in order to create a massive innovation movement, which will break that death spiral that we live today and save Capitalism from extinction.

I propose to counteract and balance, this systemic problem, (constant shift of income towards to super rich) with massive entrepreneurship and NOT with a revolution… Entrepreneurship needs funds, current economic climate in Europe, with deficits and the lack of interbank trust, have made start-up capital in form of loan or equity to be almost in extinction… which means that we have to act fast...

So first we have to solve the debt crisis and then apply the appropriate instruments , which will be financed with a very small proportion of taxes (FTT, Eurobond's etc.), in order to create this massive entrepreneurship movement, which will force wealth to return to people, not with a violent proletarian revolution, but instead with entrepreneurship, merit and heavy competition against multinational’s, a revolution which will at the end, increase the number of producers and subsequently increese the offering of goods, lower living costs and give jobs to all.

What I’m really proposing is to turn Financial Capitalism that we live today, back to the good old Entrepreneurial Capitalism (a bit upgraded and more open though...), that was dominant back in the 60’s and 70’s… 

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