Re: <nettime> Nightmare or Opening?

[Keith Hart <keith@thememorybank.co.uk>]

Hi Brian,

For what it's worth, I posted off this chapter to Berlin yesterday for
translation into German. You could call it eurodammerung, but I call it:

Money in the making of world society: lessons from the euro crisis

http://thememorybank.co.uk/2012/06/08/money-in-the-making-of-world-society-lessons-from-the-euro-crisis/

*Europe in the global economic crisis*

I have been writing about the euro for a decade (Hart 2002, 2007a, 2012),
always from a critical perspective, since I have long believed that a
single currency cannot address the needs of a large and diverse region.
Moreover, the European Union’s ambition to transcend national capitalism by
becoming a federal power in the world economy was always compromised by
yoking member states to a system whose logic harks back to the gold
standard. The contradictions of this fixed exchange-rate regime, conceived
of in the euphoria of the “free market’s victory” in the Cold War, were
disguised by the long credit boom. Even the financial crisis brought about
by the fall of Lehman Brothers in September 2008 was at first represented
by Europe’s elites as largely an “Anglo-Saxon” problem. The Italian finance
minister joked that his country’s banks were sound since their managers
didn’t speak English! The French social model, which Sarkozy had been
elected to reform, began to look more attractive overnight. The last three
years have seen one failed half-measure after another as the region’s
leaders consistently underestimated what was needed to fix the growing
sovereign debt crisis in Southern Europe. Germany has become at once a lot
stronger and more isolated in the process.

A brief sketch of the history of the global economic crisis is in order.
The conversion of the whole world to free market capitalism (“neoliberal
globalization”) in the early 1990s coincided with a digital revolution in
communications. Wall Street took the lead in exploiting these new
possibilities. After the dot com boom crashed in 2000, a regime of low
interest rates fuelled speculation in property. American bankers discovered
that there was more to be made from lending to people without any money
(mortgages, credit card debt) than to people who have some, since higher
interest rates could be charged and assets could be seized on default. This
led to the invention of “sub-prime” mortgages, lending to borrowers who
could not hope to repay, then packaging these debts with other sounder
loans for sale in the capital markets with the highest credit ratings
possible (Jorion 2007). The banks also insured against bad loans using new
instruments such as “credit default swaps” and “collateral debt
obligations” (Tett 2010). As the bubble picked up steam, leverage rates
escalated; some banks and especially the insurance group, AIG, became
wildly over-exposed. The expectation that the bubble would last for ever
led to the use of computer models that had no place for a decline in
housing prices. Continue reading ‘Money in the making of world society:
lessons from the euro crisis’
»<http://thememorybank.co.uk/2012/06/08/money-in-the-making-of-world-society-lessons-from-the-euro-crisis/#more-1803>

I deliberately played down the Dr Doom scenarios.

Good luck,

Keith





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