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The ten years of crisis - winners and losers

Ten years later, the only things neoliberal measures have to show
for are a fragile financial system and a budding new speculative
bubble; and the consecrated GDP growth remains anemic, based
on low wages and on the Chinese performance. Keynesians also
are not a shiny alternative.

The political classes execute the orders for the continuing

meekness of the plebs, feeding nationalisms, xenophobia and,
soon, assumed fascisms; benefiting from the absence of an up-to-
date leftist thinking.

In the US, Trump proposed changing the Defense budget from

$582,000 M to $636,000 M but the Senate found it too little and
increased it to $696,000 M, with the only rejections coming from
Bernie Sanders and four Democrats. Where will the next wars be?

The planet becomes a dangerous place to live. Where is the



1 - Who keeps the financial system afloat?

2 - A stalled and politically unopposed system
3- The dominant neoliberal logic
4 - What does the economist scholastic say?

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1 - Who keeps the financial system afloat?

In August 2007, it became clear that subprime mortgages, with initially low interest rates –
launched as a means of overcoming the crisis arising from the dotcom sinking in 2001 and the

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September 11 attacks of the same year – were creating a housing bubble which busted when a
large number of insolvent families emerged at its base. As these credits had been securitized,
i.e. embedded in successive issues of securities, their holders had two options: to sell them at
a loss or to keep them in portfolio, at the risk of a higher loss.

Thus, the recession was not anchored by a drop in demand. At the time, public spending was
increasing in most economies, and even the subprime beneficiaries saw their wages grow and
trigger temptations of greater consumption. But, still in 2006, in the United States, there was a
fall in profits as a result of an excessive accumulation of capital – there was not enough bread
for so many chorizos, as they say in Spain; and in a context of low profitability, investment is
unattractive, leaving behind negative impacts on the so-called "real economy", demand,
employment, and incomes. This immediately affected a large group of poor workers, who had
been instilled with the idea that their real estate, in appreciation, would allow them to
guarantee greater indebtedness... new car, house repairs, travel... The financial crisis which, in
the meantime, had started, contracted credit, stopped investment projects, generated
unemployment, and only then did this huge mass of people, ruined, drastically reduced their

As the financial system is a single, border-free love affair, contagion of European banks was
immediate, and European real estate bubbles also collapsed, with the cessation of payments
to banks. Those, with the accumulation of credits granted without repayment, still in August
2007, appealed to the good ECB which, thinking that it was a simple liquidity crisis that had
flooded the so-called market, made €203,700 M available to banks; compared to the current
monthly €30,000 M of Draghi’s dropper it is an enormity. In the US, meanwhile, the Fed
absorbed $600,000 M in securities, in November of 2008, $750,000 in March of the following
year, as well as issuing $300,000 M of treasury bonds, in addition to placing money in the
market at rates close to 0% in October of 2008, followed by other actions. The Bank of
England, for its part, initiated similar interventions in 2009 with £165,000 M, followed the next
year by an additional £175,000 M, besides further actions.

Despite such a worthy effort, the real estate under construction ceased to have bank financing,
the builders went bankrupt, increasing the mischief in the banks and firing en masse. Among
the millions of unemployed and low-paid workers, there were many cases of inability to pay
housing allowances (and consumer credit), resulting in evictions and large increases in public
spending and social security as unemployment and other social support benefits; in addition to
the destructive psychological effects and self-esteem of those affected.

In Europe, the gloomy avatars in Brussels or Frankfurt demanded... support for the
unfortunate bankers [1] and a squeeze in social spending, as well as massive privatizations to
combat the... public deficits resulting therefrom; on the one hand, nothing in this menu raises
any doubts to a neoliberal and, on the other hand, the same being clearly antisocial, this
demonstrates to satiety whom do they serve and what is the purpose of the political classes.

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I partiti politici si dividono in grandi e piccoli. I grandi mentono
e rubano. I piccoli desiderano soprattutto di crescere.

Political parties are divided into big and small. The big ones lie and
steal. The small ones desire, desperately, to grow.
Emanuele de Straznik

Also, in order to fill in the accounts’ imbalances, States have increased resorting to public debt
issuing, which the financial capital has quickly subscribed since the states do not go bankrupt
and those bonds serve as a guarantee for the banks' financing with the ECB, in the case of the
euro zone. On the other hand, the rating agencies, with their superior knowledge, are stingy
with recommendations for public bonds, which favor the demand for high interest rates, as
befits a financial system in difficulties; although this is not in the best interest of States... in

All this use of the States as a vehicle to transfer resources from the population to the financial
system and to capital, in general, is part of a well-woven plot that we have recently discussed
[2], in which the right-wing parties with a government vocation, as well as the left-wing parties
that humbly ask for debt restructurings, as they were in a typical business relationship, are
involved; refusing, therefore, to call into question the whole logic of capital and the permanent
puncture, usually exercised upon the peoples, for their capture through the state’s

According to the neo-liberals, the state is guilty of absorbing the resources that investors lack
in order to stimulate the demand relaunch, which is nothing more than propaganda to justify
the social spending compression policies and the concentration of capital and income in and by
the richest.

Debt problems are not unique to the so-called developed countries. In Africa, for example,
according to The Jubilee Debt Campaign, there were by the end of 2017 28 countries at risk of
default and 11 with low risk, as compared with 15 and 24, respectively, in 2013; and there are
cases where debt is paid through surreptitious procedures, such as rising export prices, taking
advantage of China's strong demand for raw materials.

2 - A stalled and politically unopposed system

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Legends: 1 –Financial markets before the crisis 2 - Financial markets after the crisis 3 -
Financial markets after the states and central banks interventions

The joys and sorrows of financial markets can be more formally presented as in the following
chart, where we see the increase in the number and wealth of billionaires... since being a
millionaire has become a situation... too common and irrelevant.

Source: Michael Roberts Blog

The so-called investors are essentially engaged in the reproduction and accumulation of
unproductive capital, and it is because of this and the current situation that they produce
goods or services, hiring wage earners and buying equipment, or engaging in speculation, as is
evident in the following chart.

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Primary source: http://money.visualcapitalist.com/ Calculation Oct / 2017 (1 B = 1000 000 M)

Although infamous, it is curious that banks act on a global level when they derive benefits from
it, and when the crisis arises and assets vanish in uncollectible and worthless debt, they
demand the nationalization of the damage and transfer it to the population, in terms of
austerity, unemployment, cuts in social responsibilities, privatizations (energy, airports, postal
services, for instance, in Portugal), redemptions (assumption of bank losses), nationalization,
formal or covert (BPN, BES, for instance, in Portugal) [3]; and these transfers have the high
sponsorship of institutions such as the IMF, the ECB, the European Commission and the
cosmetic national parliaments. A philosophy of theft, privatization of benefits, socialization of

In the euro zone, bad credit is more than 2.5 times higher than in 2007; and the countries with
the most dangerous indices are, at the end of 2016, Greece (45.9% of total credit), Cyprus
(45%), Portugal (19.5%) and Italy (15.3%) [4], values which are substantially higher than the
countries of the Western and Northern Europe. In an economic zone that is intended to be
integrated and with homogeneous policies, solidarity manifests itself in the distribution of
losses... amongst the poorest.

The table below summarizes elements of an illusory exit from the crisis that began in 2008,
which, in turn, amplified the fall in 2001 of the technological bubble that many considered the
beginning of eternal bliss, the end of History, after the implosion of the Soviet “Evil Empire”.
An Internet site was then considered sufficient for the inclusion in a new economy with high
Nasdaq growth [5]; in the end, this delirium died in its childhood. Today we no longer speak of
a new economy but of hordes of start-ups, which overwhelmingly drown in the bars of the
Lisbon night, during the Websummit era and the parochial government euphoria; with some
having dinner in the... Pantheon, dreaming of turning start-ups into unicorns [6].

Evolution of GDP capitation (2008 prices)

Var. annual
2008 2016
average (%)

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Germany (€) 31719 34982 1.29
Spain (€) 24275 22291 -1.02
France (€) 31028 31010 -0.01
Great Britain (£) 25435 25129 -0.15
Netherlands (€) 38879 36742 -0.69
Italy (€) 27551 25213 -1.06
Portugal (€) 16942 16550 -0.29
Switzerland (Fr S) 78180 80341 0.35
USA ($) 48330 51646 0.86
Japan (Yen) 62
4180205 0.35

Primary source: OECD

On the subject of technological delusion, the Portuguese parish rejoiced with Amazon’s –
which is the largest company in the world with its CEO, Bezos, being the richest human –
installation in Oporto. But what does Amazon do? It receives orders over the Internet – a bit of
everything – and seeks suppliers, subsequently forwarding the products to the ordering party;
with paid in advance purchases, of course. Thus, Amazon is simultaneously a financial
company and a global retailer of goods that it does not produce and that it delivers to the
customer's door – a large supermarket with no stores. Imagine many thousands of people
directing incoming orders and many more in the arduous task of logistics, which includes the
reception of large quantities and varieties of orders at ports and airports, the fare for
warehouses, grouping and ungrouping practices, truck loading and driving until the retail
network is reached and ending in the direct delivery to the buyer. For those who work in
logistics, in addition to the pressure to fight against time, in order to avoid penalties, it is a
painful job (14 hours a day), very poorly paid (€ 1200 gross per month in Germany in 2013) and
which can’t be held for more than a few years, given its strenuous character that can reach
deliveries in 130 locations per day [7]. When it comes to technology companies, the media and
the political class always present the image of creative and well-paid work for highly qualified
staff; but they do not say that these jobs are always a small minority. Why do governments
talk so much about magnificent investments that they will create many "jobs", while hiding the
real qualifications and low wages that the vast majority of those precariously employed will

Resuming the line of thought about the non-stepping out of the crisis, it can be seen that the
neoliberal measures neither are able to raise the real level of the fetish GDP, nor do they
reduce inequalities or increase security and tranquility in vast areas of the planet; on the
contrary, by creating unpaid labor obligations (overwork hours, traineeships, work grants for
subsidies), a return to the medieval corvées is becoming commonplace. Against the neoliberal
model, the Keynesian school’s competition is week clinging to the already dead and gone time
of the 30 glorious years.

As a whole, neoliberalism tries to apply technical measures to "markets" so that they function
and GDP grows, in the sense that the human mole remains passive, imbibed and drunk on
consumption and debt. This convenient conservatism is well expressed in the slogan for Davos-
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2018, "Creating a shared future in a fractured world". The custodians of this sharing (the rich,
of course) like this fractured world, whose fractures and inequalities (they, the capitalists)
reproduce every minute. To sweeten (eternizing) fractures, Davos proposed a qualitative
easing suggested as a way of standing apart from the gray central bankers’ practice of
quantitative easing; a proposal for a "greener, fairer, more respectful of diversity and
especially gender parity" world, a politically correct discourse that should delight the cream of
the political class and the business world, in attendance at Davos.

On the other hand, global trade is far from joyful and already raises protectionist measures
with the Trump administration, without more expeditious ways of avoiding China's
forthcoming world leadership - revealed at the Davos 2017 session where Xi Jiping was the star
– by assuming itself as the engine of the global economy and the great climate champion.

It remains to be seen whether China will avoid its own real estate bubble and the high levels of
debt held, singled out as a gray rhinoceros which no one should approach; and whether the
Fed and the ECB will be able to withstand the next financial system crisis since, according to
Kenneth Rogoff, central banks “do not even have an A plan to deal with it”.

Source: Michael Roberts Blog

At the political level, market democracies are routines that do not even excite the voters, as
shown by the political classes’ teeth grinding in face of the high abstention levels; this model of
adulterated representation generates products such as the Trumps, Orbáns, Kaczinskys or the
aseptic Macron... Nationalism reappears following the failure of the integration policies, turns
into xenophobia in the face of the arrival of millions of migrants running from misery and war,
and will tend to be assumed as fascism in the near future. Worse, and contrarily to recent past
times, there are no leftists with an up-to-date understanding of reality, nor project or
mobilizing capability, siding with the referral of the neoliberalism victims to the routine vote,
for a false choice between right-most or less-right formations.

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3 - The dominant neoliberal logic

The neoliberals see the crisis dragging on as a result of the central bank's delay in lowering the
interest rate and applying the quantitative easing (QE) that has been making a celebrity out of

It will not be exactly so for two reasons. One, given the continuity of the bank’s lending
program that ECB has been executing for more than three years, always implicitly letting it be
known that it will not be eternal; and second, because the ECB, still in 2007, flooded the banks
with a money injection, as we mentioned in point 1 of this text. This monetary financing, which
has been promoting very low and even negative interest rates [8], should theoretically favor
investment – which has not happened. Even if in the EU in 2016 there are 25% less banks and
14% less in assets as compared to 2008, it cannot be said that the concession of credit goes
through a great euphoria.

The ECB has been waiting for inflation to rise as evidence of the "warming" of the economy, to
then end the quantitative easing; which seems to be a caricature of Article 127 (1) (on
monetary policy) of the Treaty of Lisbon which states that "The primary objective of the
European System of Central Banks, hereinafter referred to as the" ESCB", is to maintain price
stability"; that is, to counter inflation.

On the other hand, the last mentioned source indicates that the assets of the investment funds
grew 160% in the period 2008/16, in a reaffirmation that the metier of those funds is the real
estate and stock speculation; no business involving the production of goods or services can
achieve, for eight straight years, recovery rates of 20% per year. At the sound of the first signs
of an upcoming bubble blast they will be liable to sell their bonds with the minimum losses and
then prepare to purchase the "fat chicken for little money", the squandered assets. In
Portugal, the troika forced the sale of the State’s enterprises and stakes; in the case of the
nationalized BPN, the same was sold for € 40 M, after the state has concentrated the losses
and waste in a vehicle or bad bank called Parvalorem. In this case, what was sold was not a
chicken, fat or lean but ... the feathers.

The function of the regulators, particularly the ECB, is not to prevent the next bubble from
bursting but to maximize the delay of the bursting moment. It is with this concern that the
"market" and central banks yearn for a self-sustaining economic activity, for businesses and
families to get into debt, thus feeding the cascades of securities, embedded in each other,
through securitization mechanisms. However, growth... does not happen, as has been shown
above; if China, the great animator of the world economy, with its GDP growing 6.9% last year,
catches a cold, where will the pneumonia manifest itself? Trump cautiously opted to increase
armament internal orders, as we mention in the epigraph, a move which is anything but

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In the debt chapter, neoliberals say that governments should reduce it so that there is no lack
of credit for the investing activity; and, complementarily, push for the reduction of public
spending in the health, wages, education, and pensions areas (the word austerity, meanwhile,
has left the scene). The multinationals and the financial system naturally prefer that tax money
be used for public investment in infrastructure in support of regional development so that
entrepreneurship can be seen in the form of a capitalism that misers its own capital but is
thirsty for subsidies, incentives, exemptions, guarantees, pardons, and prescribed debts to the
State and Social Security. And, even in meeting public needs, they are sufficiently inventive to
foster public-private partnerships, where public services are awarded to private individuals
(motorways and health services, education, services or transportation), paid to "investors"
with high profitability, ensured through tax money transfers; stolen by the political class,
collective holder of the pot’s key. What would become of the Lusoponte, Brisa, CUF, Luz-Saúde
and the Catholic church if the flow of public funds addressed to them were to be ended? These
partnerships are risk-free partnerships between businesses and governments, with politicians
on both sides of the table and dirty money moving underneath it.

All this happens while wisely taking advantage of the absence of an European left capable of
generating contestation; and, additionally, with the cordial presence of the unions’
bureaucrats in social agreement with the scent of corporatism, a kind of trinity, with a father
who governs, a mother who manages the house and a challenging, but obedient, son.

They conceal, of course, that in the public debt increase the banks’ redemption or the
absorption of its ill-fated credit had a decisive weight. As it is known, in Portugal, in the BPN,
BES, Banif, and the state-owned CGD cases, according to the Bank of Portugal, the Portuguese
banking system lost € 50,000 M (about 27% of the GDP in 2016!); and much of that loss was
transferred to the state, deducted from the income of the tax paying population. As it is also
known, Ireland submitted, in order to be intervened by the troika, a deficit of... 32% resulting
from the absorption of the Anglo Irish Bank losses; and the Spanish state has restructured its
banking system (as we referred to in 1), compromising the income and lives of millions of
unemployed and with hundreds of thousands of people stripped of their homes.

4 - What does the economist scholastic say? [9]

Olivier Blanchard is high ranking IMF officer who in May 2017 was in Portugal to indoctrinate
the Portuguese political and financial elites, on the neoliberal doxa. In his learned opinion, the
break-up of the financial bubble in 2007/8 had nothing inherent to the capitalist system but
"was the result of the financial imprudence of several unregulated banks" or of "financial
panic" [10]; the wild attitude of rancid sheep, a misfortune, as such. Eugene Fama, a recent
Nobel laureate in Economy, is more modest: "We do not know what causes recessions" and
"economic theory is not very good when it comes to explaining the swings in economic
activity”. Such assertions exemplify the petrified thinking of people that are so integrated into
the capitalist system they are not capable of subjecting it to criticism, seeming to adopt the
ahistorical position that capitalism is immutable, has a cosmic character, inscribed in the stars.
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One of the cardinals of Keynesianism, Krugman, in May 2016 while being in Portugal, after
approving other government measures, considered that "the minimum wage seems to be
higher than the country can afford" and "I think it can be a stopper on the economy"... The set
of those living of a total wage volume of 44% of the global GDP can certainly accommodate
modest increases in the minimum wage. If those unable to accommodate it are a real social
minority - the patronage - it is because they are not competitive and must change their lives,
to follow Krugman’s reasoning, who certainly defends the rules of the market. Krugman must
strive for an approach towards the workers of Bangladesh or Vietnam, as the wages paid in
Portugal and Greece are already at the Chinese’s level.

As we have learned from the "nobel" Krugman, being competitive requires the sacrifice of a
population, poor and harassed by years of austerity, and that the multinationals would be
grateful if this leveling would be made at the expense of the underdogs. The same Krugman, in
tune with fellow neoliberal Fama also points out in his book on the crisis "End this Depression
Now" that there is no need to explain the recession but there is need to adopt policies to get
out of it. Very practical and unscientific and Krugman, without knowing it, subscribes to a well-
known Portuguese saying "all together now and faith in God"; or, if you’d like, the liberal faith
on the invisible hand...

Keynesian technocrats do not deepen the analysis of crises and the limitations of economic
policy followed by state or multinational institutions because, as conservatives, they do not
want to confront capitalism in its exhausted reality. They seek refuge in macroeconomic
models with hundreds of variables, in the search of harmonious growth, with the hypocritical
equity reflected in the above mentioned recent Davos forum (see paragraph 2). Any ideology
or religion carries in its genes the refusal of facts and realities that can question it... or even
the ostracizing or persecuting of the unbelievers. We recall here a hilarious and disastrous
attitude of Portuguese Keynesians, defending that the Passos government – the diligent troika
official and big public debt subscriber – would do... an auditing of the public debt.

The early economists, with Adam Smith, Ricardo and Marx at their head, took political
economy as a discipline to analyze the nature of capitalism as an economic, social, and political
system. Later, with Jean-Baptiste Say, the marginalists, Alfred Marshall and the heavyweights
of neoliberalism, economy abandoned its "political" complement to become a mere
calculation, applied to a reality disjoint from historical time; the stupid attitude of those who
want to adapt reality to their ideological prejudices.

In that context, reactionaries - Keynesian or neoliberal - stopped analyzing capitalism, its

effects on social life, taking the economy as a set of management techniques [11] as a set of
technical coefficients integrated in econometric calculations. The poverty of the current
economic analysis in the face of the crisis that has been dragging since 2008 is integrated into
the continuity of the neoliberal approach, and a new formula for the management of
capitalism does not arise in the sense of replacing neoliberal prejudice, as happened in the

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1970s when it overcame the reigning Keynesianism; which, in turn, had been imposed as a
resolution of the crisis of 1929/33, for which liberalism had proved impotent.

This and other texts in:




[1] In Spain, the government, first Zapatero’s then Rajoy’s, made the population face a banks’ aid invoice of
€122,000 M http://fleed.pt/dinheiro/reestruturacao-da-banca-espanhola-ja-custou-122-milhoes-de-euros. In turn,
the Oliver - Wyman assessment “Beyond Restructuring: The New Agenda - European Banking 2017” shows a
diagram of the mergers that led to a large concentration of the banking system in the Spanish state.
[2] http://www.slideshare.net/durgarrai/como--financial-system-capture-humanity-travel-of-life
[3] http://grazia-tanta.blogspot.pt/2016/07/bail-in-ou-bail-out-o-mesmo-baile-outra.html
[4] Oliver Wyman - Beyond Restructuring: The New Agenda - European Banking 2017
[5] At the time we released the phrase "Do not behave like a basbaque, apply money on the Nasdaq!"
[6] A start-up that quickly reaches a value of $1,000M
[7] "Behind the orders, an army of invisible men" (Courier International, May / 2013)
[8] For zero or negative rates, the acronyms ZIRP - Zero interest rate policy and NIRP - Negative interest rate policy,
respectively, are used.
[9] About economicism:
[10] This and other situations on this matter can be found in "The Long Depression" by Michael Roberts
[11] We approached the theme here about current business schools

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