Sunday, 18 December 2011

The 'Occupy' Movement

I rode past the 'Occupy Birmingham' camp on the way into the university. A notice at the camp talked of the movement representing the 99% and standing up to the 1% that control the bulk of the wealth. The occupy movement say that the 1% don't care about those who will struggle for survival during the recessions.

I have mixed feelings about the movement. They have identified that there is a problem and that it isn't those who created it who are suffering in the attempts to put it right. Maybe some who were involved in the banking decisions would say they are now suffering but is it the same suffering as those who no longer have employment or who were already below the poverty line?

As I look at the financial crisis, the process seems to be a transfer of private debt from banks to public debt which the government then seeks to rebalance by spending cuts. This transfers the burden back to private debt but not to those who created it. Rather it is transferred to those at the bottom of the heap who do not have the resources to pay for the debt. In other words, the debt has been transferred from the wealthy to the poor. Doesn't exactly sound fair or equitable.

The sign at the occupy camp seems to imply that there is only 1% who don't care. In reality, there is a middle group who have reasonable income security who are also indifferent to what is happening. I would argue that this middle group actually represent the largest grouping and are possibly the majority. Possibly a major portion of this group agree with the action being taken by governments. Like the government, they will argue that the government has to balance its books and live within its means (i.e. spend no more than what it receives in through taxes).

The problem is that this does not take into consideration how money is created as debt and how the banking system largely controls the money creation. I would contend that this is highlighted by what is happening in the European Community. A BBC journalist said that the national reserve banks are being funded by loans from the European Central Bank. Since they have a shared currency, there needs to be a central issuing authority but since these are multiple countries involved, it has to distribute the new money to the countries as needed. This is done through loans (i.e. creating more debt for these countries when they are already struggling to cover the payments on these debts).

The European Central Bank is creating these new funds, according to the article, by borrowing from the privately owned US Federal reserve. It doesn't matter that the US government also has a debt crisis and is also borrowing from the Federal Reserve. The debt mountain continues to grow with no one seeing the stupidity of the system.

The next report talked of the UK possibly being asked to contribute more funds to the International Monetary Fund. Where would the UK get those funds from? Of course, since the government is already struggling to cover its debts and expenditure, they will have to increase its borrowing or pass the deficit to the general public possibly through increased taxes. My conclusion is that the problems are getting worse and nothing is being solved.

Does the occupy movement understand what is happening in this process? Are they simply asking that the 1% contribute more to the balancing of the books?

Yes, I object to the 1% or banks being protected but I also understand the argument that if the banks collapse then the depositors land up losing the funds. This is likely to be primarily the central majority although it may possibly have some impact on the 1%.

The solution has to see the general public protected while the system is dismantled and reconstructed to remove the debt hole.