Sunday, July 12, 2015

Financial War

I am not an economist, but I read professors Krugman, and Stiglitz regularly. I am working on the concept of Information Engine. Current economic systems are harder to understand than Steam Engines.

 But Must We Try!

I can use three systems to understand the current attack on the democratically elected government of Greece.  The United States of Mexico, the United States of America (USA), and the European Union (EU).

Let us start with the country where I was born.

Mexico has existed for over ten thousand years, with different names. For my purposes here, I start when corn was domesticated in what is called Mesoamerica, around the Balsas River, where my mother grew up.

The central, and southern parts of Mexico are fertile, and temperate around the volcanoes. Animal and plant diversities, are some of the highest in the world. By 1521, over ten million people lived there. At this point people with other religion, and germs came along, together with a broader community of nations already established in Europe and Asia. The ruler Cuauthémoc, was taken prisoner and eventually assassinated.

Nowadays this country is multi-ethnic, and ruled by European descendants, like myself.  We have properties in the best places, and the defeated Indians inhabit what can be called, Indian Reservations, like in the USA, and Canada. Around ten percent of the population does not speak the country's official language: Spanish.

The people who domesticated corn, live in poverty, and the invaders live better, European descendants like myself,  have more opportunities.

Most Indian populations live in the South; recently forty three teacher students from those Indian groups, were disappeared in Iguala, and the mayor is about to be released, since there are no bodies to link him to those killings, only one body was scientifically identified as one of them, the rest were burned and disposed of.

One sees here, that this diverse country is a failed state. Integration has not worked.

Now let's move to the USA, where I live now.

President Andrew Jackson cleared the land of Indians, in a classic Ethnic Cleansing operation. Instead of this original population, European people took the land, as in an Ethnic Cleansing operation is supposed to happen.

With free cotton seed, developed in Mesoamerica, and stolen by Europeans, free land, stolen from Indians, and free labor, stolen from Africa, the biggest capitalist empire the world has ever known was established. The Empire of Cotton, as Professor Sven Beckert, from Harvard University, calls it.

This Empire, had a financial component, from New York, to London, money came to buy slaves, and transport the cotton to English factories, already powered by steam.

The New York - London Axis won!

There were competitors, in Mexico, Egypt, and India, but none of them were able to get as  big a market share. Maybe consciously, or not, an automatic principle of capitalism, made it very hard to overtake this juggernaut. Professor Thomas Piketty, from  the Paris School of Economics discovered  this regularity. The rate of capital accumulation, is bigger than the rate of growth. One is wealthy, only if there is a head-start, not by working, which in the case I am presenting, the banks of New York, and London had. Free, or very cheap costs, and tremendous profits. You can read William Faulkner, from the slave plantations of the South, and understand the principle in the book, Absalom, Absalom!

This perspective, allows you to understand why so many African Americans are in jail, and only because of the courage of Bree Newsome, the South finally recognized that they lost the Civil War.

Finally let's move on to  the EU, and the recent Coup d'Etat in Greece.

We are in the the 21st Century, and History never repeats itself exactly. The following lines are only presenting an analogy to the USA Civil War, which ended in 1865, a hundred and fifty years ago.

Both Economics Nobel Prize winners, Joseph Stiglitz, and Paul Krugman, have been consistently presenting the views I try to reproduce here, with the eye of a physicist.

There are two important indexes in macroeconomics. Inflation, and unemployment.

First of all, one has to understand that one country, is not a family. This is science, not a morality play. Germans, and Greeks, are as lazy, and hard working as the nationals of any other country.

The EU sets the price of the euro, based on inflation, with no consideration of unemployment, unlike the Federal Reserve of the USA, where both indexes are monitored, and monetary policy is decided on low inflation, and good employment numbers. Say less than 2%, for the first, and less than 10% for the second. The markets are expecting the Chairwoman Janet Yellen, to increase interest rates this year, if the employment figures keep increasing.

Alas, the EU only cares about inflation!

More than 20% of young Greeks are unemployed.

These young people elected one of them, Alexis Tsirpas, to take them out of this financial hole, imposed mainly by Germany, that seems to have only one intention, to recoup the loses of German banks.

Tonight, the EU gave Syriza an offer they cannot accept.

I don't know what will happen tomorrow, but it does not look good for Greece!

I hope I'm wrong, and cooler heads from France, can bring some sanity to what at this hour, seems like a New Kind of War, to me.

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