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by Harald Schumann
Wednesday, May. 12, 2010 at 11:23 AM
The private indebtedness brought about by unscrupulous financial managers mainly in the US was almost completely transferred to state budgets.
EMERGENCY BRAKE FOR SPECULATORS
German President Horst Koehler admits politics fails because of the financial lobby. No one reacts. That is frightening.
By Harald Schumann
[This article published 5/4/2010 in: DIE ZEIT is translated from the German on the Internet, http://www.zeit.de/politik/2010-05/notbremse-fuer-spekulanten,]
German President Horst Koehler has been strikingly radical regarding the financial industry. In 2008 he described the global capital market as a “monster.” Now he even speaks of “dominant finance capitalism.” Profits are increased without regard for the well-being of nations. “A few had profits but the general public had to bear the losses.” At the same time he admits politics’ failure before the power of the financial lobby – but no one reacts.
This is frightening. German chancellor Merkel and her troop could not document this better since they still always deny the true dimension of the crisis. The continuous incorrect operation of the financial system deeply violates our sense of justice and undermines the fundamentals of our democracy. In year two after Lehman, the cardinal error of “bailing out” the financial system is now manifest. The private indebtedness brought about by unscrupulous financial managers mainly in the US was almost completely transferred to state budgets. The creditors, those who made available the money for the misguided speculations, and the organizers of the credit bubble in the investment banks did not have to take over one cent.
As a result, the crisis states have now accumulated such massive debts that these now become a trouble spot. Greece is only the beginning. Measured by its deficit, the US is hardly in a better position. But the government always refuses the insight that both sides – debtors and creditors – are responsible for every debt overload. Instead of negotiating in time with banks and insurance companies that pocket good risk-premiums in Athens through deferring payments and reducing the debt burden, Merkel and her EU colleagues postpone the problem until nothing is left than to transfer triple-digit billions in risks to the taxpayers to avert possible chaos in the Euro-zone. Thus speculators are invited to bet on the next ransom program. This is bound to go wrong.
Therefore applying the emergency brake is vital. First of all, the Euro-governments could prohibit trade with unprotected credit default swaps. That would take away the most important instrument from currency speculators. A procedure for an orderly state insolvency to deter further debt overload is necessary. What has been common in the rest of the economy since time immemorial – a transactions tax – must be prescribed to the financial branch. If financial transactions were taxed at only 0.05 percent, an urgently necessary 200 billion euro would come annually to the state treasury in the EU.
However the financial lobby warns the money business would then move to other regions. Without global agreements, the project would be useless. That is nonsense. Banks need accounts with the European Central Bank for business in the euro. If they evaded the EU laws abroad, the Euro-states could simply withdraw their licenses. No international bank could afford exclusion from the world’s largest domestic market. If the German chancellor wanted to enforce the often invoked “primacy of politics,” she could actually accomplish this together with France’s president Nicholas Sarkozy. The applause of the voters would be certain.
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