James Cumes
“We are at the edge of a financial and economic abyss…”

”We need only a relatively gentle nudge now and we will plunge over the edge and be confronted with political, social and strategic catastrophe”. Full stop, Sir!

The diagnosis is precise but your medicines are wishful thinking.

No leader who, like you, realizes the dept of misery in which we have plunged, can induce anyone to shed their wealth, not even at the time of death.

The author insists that a bad situation is far worse than it is, and to improve things we should more enthusiastically embrace the trends that got us there in the first place..

Right! The author does not seem to understand what happened with the original crisis, or why governments behaved the way they did. What banks were saved? Nor does he seem to understand the present crisis or give any useful solution.

The real problem, in retrospect, was to make the European Union so large, and take in countries with weak political systems unable to refuse rent seekers (including unions among many others), and weak fiscal disciplines.

A partial moratorium on debts! For which country?

The author should get use to being completely ignored.

The article seems to me to well summarise the existing situation, although perhaps a bit pessimestic. We have a media that takes delight in playing up disaster, and a great unwashed public that takes a similar delight in reading about it. Even so, concerted action is clearly overdue.
I especially like to reference to a Ponzi scheme - the western economy en toto took on the Ponzi characteristics from the day that the international monetary standard became intangible - ie the American dollar - literally a licence for the USA to print money. The dollar is supposedly backed by tangible assets, but who guards the guard?

“Resolution of the crisis must include putting an end to the sort of Ponzi and related schemes, policies and practices which are at the heart of the crisis.”

Putting an end to the Ponzi and related schemes is *technically* easy.

The problem is that
a) there are enormous vested interests in the Ponzi schemes, the first of which is government itself. Then there are the banks, who without government’s licence, would be limited to issuing credit on whatever backing the depositing public would accept, and going broke if they went too far. Then there are all the other vested interests who benefit from the official diversion of the river of capital from the productive owners to the politically-favoured handoutees of both left and right wing.
b) But the real limiting factor is the underlying popularity of *ideas*- immune to rational disproof - that government is a kind of Santa Claus which can make society better off by what are, in effect, Ponzi schemes.

The author then goes to show that he is fairly and squarely in the camp that favours the Ponzi institutions. Does he propose abolishing central banks and their addiction to inflationary finance, which have caused the problem he is concerned about, distorting the entire production structure, by favouring debtors over creditors, consumption over savings, speculation over work, and political-connected spivs over workers and savers? No.

On the contrary, he finds necessary – wait for it – the IMF and World Bank – those paragons of financial probity, as well as giving a generous hand-up for various UN bureaucracies. He wants to end Ponzi schemes by ... postponing repayment of creditors on terms that governments give unearnt handouts to everyone else! He hopes that by increasing power in the hands of governmental central planners – you know, the ones who licensed the Ponzi schemes in the first place? – we will “rebirth” the global economy.

This is a kind of “government-as-midwife-to-a-troublesome-obstetric-patient” theory of economics.

In the end, the author’s conclusion is inconsistent with his premises and he only demonstrates the magic-pudding mentality that he presumes to counsel.

A common sense article; some good points made James.

I think you are right that the main problem has been speculation or rather the many 'instruments' that have been allowed to evolve unchecked to encourage that activity e.g.
-Property market speculation, fueled by negative gearing, low capital gains tax etc.
-The many stock market 'derivatives' allowing on-selling of bad debt. In the good old days you simply owned shares in companies and too the risk.
-Unregulated behaviour of banks from low SRD ratio requirements to allowing lending to those who cant afford to pay.

The list goes on but today's real bludgers are those that have made a lot of money unproductively in these areas - that includes a lot of us to some degree but some have made a career out of it.

Your point about productivity is a good one - wage and salary earners, trades people, resource producers, even retailers generally have to produce something to get paid. The more successful of the 'speculator bludgers' don't- money keeps coming in regardless and as you say this is the 'tyranny of the rich'. About time Governments started to do something for the other 95% of us.

A final point, I think corporate and government wages have simply got too high; most do not really earn what they get here in Australia. It costs the earth merely for governments to maintain basic services; perhaps if all took a few percent real wage cut it would turn things around.

Curmdgeon, Peter Hume, and Roses1.

From the quality, style and dept of his contributions to this journal, one can only derive that Mr. James Cumes, in his working days, has competently and honorably served the most dishonorable of masters, the State of his country.

Born and cradled within the confines of an empire and, patently, a wealthy childhood, he has had little if any chance of knowing that Empire and its State are at odds with Democracy and Justice.

In the previous comment I mentioned that the greed of man is as ingrained in his being as to make him reluctant to let go of his privileges and possessions at his death.

The ‘Will’ is in fact a direction, an order from the grave, to dispose of possessions according to the past wishes of a person presently dead.

Empire, in its skeletal essence is ‘The oppression of a man by another man’ while the State is ‘The Apparatus that enforces that oppression’.

Until we fix these points in our minds we’ll not have sufficient clarity for any discourse about Democracy and Justice and we will wallow in a sea of presumptions instead of diagnosis and tentative prognosis.

What, in our arrogance, we have failed to note at our arrival to this Continent, is that its original inhabitant had no fences and no possessions save their tools for survival, and a belief that the Land was their mother and goddess.

They cannot return to that stage, neither we can gear into a democratic mode of administering the resource of this planet for a long time to come, but we can start on our way there by analyzing the nature of Human power and taking care that our power is not entrusted to anyone without strict conditions and guaranties. Charlatans or politicians have nothing to offer us as guaranties.

All told, wee must see that privilege is not accorded to the undeserving, as Primo Levi warned.

Great article James very sensible and well thought out. I hope our leaders finally start listening to what you have been saying.