Beppe Grillo's Blog

Crunch, crunch

There’s a monster going around the banks. It’s got really strong claws that can crush any company. Crunch, crunch. It absorbs money like a magnet and it doesn’t give it back except at a really high price. It’s the “Credit Crunch”. A term that will become as familiar as “spread”. “Credit Crunch” means that no one gets credit, that the liquidity in circulation is becoming like water in the desert. The overdraft that covered the handling costs of companies while they’re waiting for payment from clients has become a mirage. The company has to make upfront payments for salaries, sales tax, taxes on presumed income for the next year and every form of commodity. As long as the owners and the shareholders manage to put their hands in their wallets, it’s OK, then it crashes.
Often the banks have more debts than they have money and they cannot lend out the debts. They can however issue them onto the market in the form of bonds. The game works until the bank bonds that are sold are equivalent to those that are paid back. Then the bank can go under. The European banks have sold 413 billion dollars worth of bonds in 2011. They have had to pay back 654 billion that fell due. What’s left is a black hole of 241 billion dollars of lack of availability (*). The banks are no longer able to buy public bonds to save the States and they cannot even sell their own bonds.
Which will collapse first? The banks or the States? Or both? Meanwhile, the companies are dying in tens of thousands because of a lack of oxygen. The debt of the companies is like a chain letter. The first company in the chain that goes into financial asphyxia strangles the second that In turn strangles the third and so it goes on. The State asks for advance payments, the banks reject loan applications or they offer loans at usurious interest rates or with a mortgage on the company. But if the companies die who will pay the enormous costs of the State machinery and the salaries of the bankers? The debt cannot be eaten.
In the last few years, mortgages have been granted at variable rates for homes even for 90% of the capital. Very many families that have taken these mortgages can no longer pay for them. The homes get auctioned off or go to the banks. Who will live in these homes? A bank bond or a share? And the people evicted that have lost not just their apartment but also the percentage of the capital they have paid, what will happen to them? In response to the Credit Crunch, you cannot react with a Taxation Crunch like the government is getting ready to do. Every organism has its point of collapse and Italy already has a strong tachycardia. We need a moratorium on the mortgages for the first home, the immediate abolition of paying the sales tax in advance and the company taxes on presumed income for the next year. Italy needs breathing space. They will never give up (but is it in their interests?). Neither will we.

(*) source Dealogic/Ft

Siamo in guerra, {We are at War}, by Beppe Grillo and Gianroberto Casaleggio.
La Rete contro i partiti, per una nuova politica {the Internet against the parties, for a new sort of politics}
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Comments

It's worth saying again that "loans" are the creation of new dollars that didn't exist before. It's an often disturbing reality for those in debt. It might be worth thinking of changing to someone has a surplus and another wants to loan until such time as a penny or cent makes more sense as a consumer currency ... Anti-monopolia media Berlu. We don't want WW3 so Berlusconi can be as rich and powerful in his new incarnation.

Posted by: Cures Riches | December 6, 2011 10:31 PM

If you're vexed about jobs being exported to China, now you have to worry about robots and computers coming to displace you from your work. The just released e-book "Race Against The Machine" by economists Andrew McAfee and Eric Brynjoltsson of the Massachussets Institute of Technology, is about the speed and the range of robotization and automation taking place in society. If the issues are familiar, "Race against the Machine" makes them astounding. They are for me.

Perhaps it's because back in the mid-sixties, when I was a machine operator machining air brake parts for trains, I witnessed the early application of robots and computers on metal-cutting machines. The speed, precision and the huge quantity of work turned out was astonishing. The new technology produced in one hour what I produced in one eight-hour shift. The death knell for many of our jobs had sounded. Nevertheless, I was witnessing a turning point in the history of mankind; production of goods was no longer a problem. Man could finaly produce enough to stave off world hunger. It didn't happen. I had overestimated man's generosity.

One interesting point the book makes is the speed by which technological innovations advanced, and are advancing, in most realms of work. Case in point. It was only six years ago that no one thought cars could drive themselves. Well today, like magic, we have self-driving, self-parking cars, voice recognition and many more other functions. Today, the speed of improvements, thanks to the knowledge we accumulated in the last fifty years, is twice as fast, if not more, since then. Many dream of the day when robots and computers will produce all the things we need and make our lives one long holiday. Wishful thinking, I think. Others think that all this will only lead us to high unemployment and rampant poverty. While others believe new drudgeless jobs will be created.

Whatever the outcome, new things worry us. Over a century ago the Luddites smashed the new machines that killed their jobs. Little did they know that the technology they opposed would create new jobs for them. In the twenties and thirties mechanization displaced thousands of farm workers sending them to assembly lines, blast furnaces and cotton mills. But today that's not the case. If the jobless recovery is any indication, the future looks bleak. After all, the writing is on the wall: production is increasing, jobs decreasing, the rich get richer, the poor get poorer.

The repetitive jobs of assembly lines, factory jobs, routine office work, tellers, cashiers or any work that doesn't require creative thinking, are most at risk. So called smart robots lack intuition and creative thoughts can't be programmed into them like we can chess games or quiz games. And this makes one wonder the kind of jobs that will be available in the future. Today it's still possible to find a job with a high school diploma, but after those jobs are robotasized and computarized, a BA is the least education necessary for a decent income in the future.

For more than a decent income much higher education than a BA is needed. If education is a must in today's world, tomorrow not only will it be crucial but it will have to become a life-long activity. And even then we might not be able to keep pace with the speed of innovations. Will that mean technological innovations could make humanity obsolete? If that's ever the case the life-long holiday we dreamed about was just that... a dream.

Posted by: Louis Pacella | November 30, 2011 05:01 PM