[Marxism] Financial Weapons of Mass Destruction

[Lajany Otum <lajany_otum@xxxxxxxxxxx>]

An economy of buccaneers and fantasists
       Weapons of  mass financial destruction 

By Gabriel Kolko

GLOBAL financial structure is far less transparent now than it has ever been. A 
few decades ago daily payments for foreign exchange transactions were roughly 
equivalent to the capital stock of a major United States bank; today they 
exceed the combined capital of the top 100 US banks. Financial adventurers 
constantly create new products that defy nation states and international banks. 
This May the International Monetary Fund?s (IMF) managing director, Rodrigo de 
Rato, deplored these new risks, which the weakness of the US dollar and the 
US?s mounting trade deficits have greatly magnified.
  His fears reflect the fact that the IMF has been in both structural and 
intellectual crisis. Structurally, its outstanding credit and loans have 
declined sharply since 2003, from over $70bn to a little over $20bn, leaving it 
with far less leverage over the economic policies of developing nations, and a 
smaller income than its expensive operations require. The IMF admits it has 
been ?quantitatively marginalised? (1). Many of its problems are due to the 
doubling since 2003 of world prices for all the commodities (oil, copper, 
silver, zinc, nickel, etc) which are traditionally exported by developing 
nations. So developing nations have been able to bring forward repayment of 
their debts, further reducing IMF resources.
  Higher prices for raw materials are likely to continue because rapid economic 
growth in China, India and elsewhere has created burgeoning demand that did not 
exist before, when the balance of trade systematic- ally favoured rich nations. 
The US has seen its net foreign asset position fall, whereas Japan, emerging 
Asia and oil-exporting nations have become far more powerful over the past 
decade and have become creditors to the US. As US deficits mount, with imports 
far greater than exports, the value of the dollar has declined, falling by 28% 
against the euro between 2001 and 2005.
  The IMF and World Bank were also severely chastened by the 1997-2000 
financial meltdowns in East Asia, Russia and elsewhere. Many of their leaders 
lost faith in the anarchic premises, inherited from classical laissez-faire 
economic thought, which had guided their policy advice until then. 
Intellectually both institutions are now far more defensive and concede that 
the premises that led to their creation in 1944 are hardly relevant to the way 
the real world now operates. Our ?knowledge of economic growth is extremely 
incomplete,? many in the IMF now admit, and it now needs ?more humility?. The 
IMF concedes that the international economy has been transformed dramatically 
si nce then and, as Stephen Roach of bankers Morgan Stanley has warned, the 
world ?has done little to prepare itself for what could well be the next 
crisis? (2).
  The nature of the global financial system has changed radically in ways that 
have nothing to do with virtuous national economic policies that follow IMF 
advice. The investment managers of private equity funds and major banks have 
displaced national banks and international bodies such as the IMF. In many 
investment banks, buccaneering traders have taken over from more cautious and 
traditional bankers and owners. Buying and selling shares, bonds and 
derivatives now generate higher profits, and taking far greater risks is now 
the rule among what was once a fairly conservative branch of finance.
Extracted from:

http://mondediplo.com/2006/10/02finance

 
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