Why a pan-European democracy movement?

Submitted by Yanis Varoufakis  –  The Yanis Varoufakis Blog

Yanis Varoufakis speaks to Nick Buxton, and Red Pepper, about why a pan-European movement for democracy is necessary

What do you see as the main threats to democracy today?

The threat to democracy has always been the disdain the establishment has for it. Democracy by its nature is very fragile and the antipathy towards it by the establishment is always extremely pronounced, and the establishment has always sought to undo it.

This story goes to back ancient Athens when the challenge to establish democracy was immense. The idea that the free poor, who were the majority, could be put in control of government was always contested. Plato wrote The Republic as a treatise against democracy, arguing for a government by the experts.

Similarly in the case of American democracy, if you look at the Federalist Papers and Alexander Hamilton you will see it was an attempt to contain democracy, not to bolster it. The idea behind a representative democracy was to have the merchants represent the rest because the plebs weren’t considered up to the task of deciding important matters of state.

The examples are countless. Just look at what happened to the Mossadeq government in Iran in the 1950s or the Allende government in Chile. Whenever the ballot box produces a result the establishment doesn’t like, the democratic process is either overturned or threatened with being overturned.

So if you are asking who are and have always been the enemies of democracy, the answer is the economically powerful.

This year it seems democracy is under attack from entrenched power more than ever. Is that your perception?

This year is special in this regard as we had the experience in Greece where in the elections the majority of Greeks decided to back an anti-establishment party, Syriza, which came to power ‘speaking truth to power’ and challenging the established order in Europe.

When democracy produces what the establishment likes to hear then democracy is not a threat, but when it produces anti-establishment forces and demands, that’s when democracy becomes a threat. We were elected to challenge the Troika of creditors and it was at that point the Troika asserted quite clearly that democracy cannot be allowed to change anything. Continue reading

Apple, FANGS And Monetary Fools

This week the great tree of Apple finally stopped growing towards the sky. During its latest quarter, in fact, i-Pad sales were down 25%, Mac volume came in 4% lower and even the i-Phone barely breached the flat line.

In all, Apple’s mighty machine of double digit growth posted a revenue gain of just 1.7% over prior year, while its net income was essentially flat. The real news, however, was that management is now projecting an actual 11% y/y decline in sales during the current quarter.

Don’t get me wrong. Apple has been the most awesome fount of product invention, global production and supply chain proficiency, logistics and marketing innovation and consumer brand value creation in modern history—-perhaps ever.

Its products—especially the smart phone—did fundamentally transform the daily life of the world. Apple’s installed base of one billion devices is a living testimonial to its fanatical focus on bringing to the consumer a truly transformative digital age experience.

Yet it all happened in well less than 10 years. Indeed, while the tech world was booming in the 1990s, APPL was struggling. Between 1990 and 2004, revenue grew at only 4% per annum and earnings did not increase by one thin dime.

That’s right. Apple’s net income stalled out at $500 million per year for a decade and one half—-or at a level equal to two days profits during the quarter just reported.

That wasn’t much to write home about under any circumstance, but was especially wimpy compared to Microsoft, where sales and net income grew at a 27% CAGR during that period; or Cisco, where sales and earnings soared by 50% annually for 15 years running.

And that brings us to the lunatic valuation of the FANGs (Facebook, Amazon, Netflix and Google), which was also on display again this week. To wit, 100X+ PE multiples are always and everywhere a deformed artifact of central bank driven Bubble Finance, not the emission of an honest capital market.

The fact is, the greatest technology-based businesses of modern times accomplished its dramatic growth spurt in just over 20 quarters between 2011 and 2015. That was after the i-Phone incepted and the i-Pad worked up a serious head of steam.

Now Apple is pancaking or worse, and it is hard to believe that gimmick products like Apple Watch or Oculus can fill the hole from the fast fading i-Pad and the stalling i-Phone. No harm done, of course, and its entirely possible the APPL will have another modest growth run.

But here’s the thing. Apple essentially proves you can’t capitalize anything at 100X except in extremely rare cases because of the terminal growth rate barrier. That is, after a few years of red hot growth almost every large company’s organic growth rate bends toward the single digit path of GDP.


Continue reading

The West Is Reduced To Looting Itself

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Myself, Michael Hudson, John Perkins, and a few others have reported the multi-pronged looting of peoples by Western economic institutions, principally the big New York Banks with the aid of the International Monetary Fund (IMF).

Third World countries were and are looted by being inticed into development plans for electrification or some such purpose. The gullible and trusting governments are told that they can make their countries rich by taking out foreign loans to implement a Western-presented development plan, with the result being sufficient tax revenues from economic development to service the foreign loan.

Seldom, if ever, does this happen. What happens is that the plan results in the country becoming indebted to the limit and beyond of its foreign currency earnings. When the country is unable to service the development loan, the creditors send the IMF to tell the indebted government that the IMF will protect the government’s credit rating by lending it the money to pay its bank creditors. However, the conditions are that the government take necessary austerity measures so that the government can repay the IMF. These measures are to curtail public services and the government sector, reduce public pensions, and sell national resources to foreigners. The money saved by reduced social benefits and raised by selling off the country’s assets to foreigners serves to repay the IMF.

This is the way the West has historically looted Third World countries. If a country’s president is reluctant to enter into such a deal, he is simply paid bribes, as the Greek governments were, to go along with the looting of the country the president pretends to represent.

When this method of looting became exhausted, the West bought up agricultural lands and pushed a policy on Third World countries of abandoning food self-sufficiency and producing one or two crops for export earnings. This policy makes Third World populations dependent on food imports from the West. Typically the export earnings are drained off by corrupt governments or by foreign purchasers who pay little while the foreigners selling food charge much. Thus, self-sufficiency is transformed into indebtedness.

With the entire Third World now exploited to the limits possible, the West has turned to looting its own. Ireland has been looted, and the looting of Greece and Portugal is so severe that it has forced large numbers of young women into prostitution. But this doesn’t bother the Western conscience. Continue reading

China’s Three Dizzying Factors

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

It makes for quite the juxtaposition, though perhaps not so jarring given that global banks are still enormous and disparate operations. On the one hand, Citigroup’s CEO was eminently confident from within the confines of Davos and the status quo:

The market is “adjusting” to a series of headwinds that can be overcome, Citigroup CEO Michael Corbat said Thursday, a day after theS&P 500 fell to its lowest level in nearly two years.
“We view what’s going on really as more a repricing than any big fundamental shift,” he told CNBC’s “Squawk Box” at the World Economic Forum in Davos, Switzerland.

The question is who is the “we” to which he is referring? It was just a year ago that no bank would even contemplate the possibility of recession entering Janet Yellen’s perfect year, especially as it was setup by “unquestionable” growth in the middle of 2014 (best jobs market in decades). This January, however, while Citi’s CEO downplays recent turmoil, the staff inside his very own bank is thinking very much otherwise:

The global economy is on the brink of a recession, with central bank stimulus less forthcoming and growth weakened by the slowdown in China, Citigroup warned on Thursday.
The bank cut its 2016 global growth forecast to 2.7 percent from 2.8 percent and slashed its outlook for the U.S., U.K. and Canada, plus several emerging markets including Russia, South Africa, Brazil and Mexico. [emphasis added]

That’s a lot of slashing in order to be so sanguine. I don’t agree with the premise, namely that this is all or even mostly due to China (the Chinese sell their industrial production to whom?), but the condition of the Chinese economy offers more universal interpretations upon these kinds of circumstances. That starts with the idea that China is slowing but within a more cheering transition to consumer rather than investment-led activity and margins. It is this idea that manufacturing and production matter, but not nearly as much as they used to and thus not enough to make a full recessionary difference right now. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• A Chinese Banker Explains Why There Is No Way Out (ZH)
• China GDP Growth 4.3%, Or Lower, Chinese Professor Says (WSJ)
• Yuan Vs. Yen: How China Figures Into Japan’s Negative Rates (WSJ)
• IPO Market Comes to a Standstill (WSJ)
• Greece’s Lenders To Start Bailout Review On Monday (Reuters)
• Milk Collapse Brings a 45% Pay Cut to England’s Dairy Farmers (BBG)
• ‘Peak Stuff’ And The Search For Happiness (Guardian)
• Merkel Says Refugees Must Return Home Once War Is Over (Reuters)
• 10,000 Refugee Children Are Missing, Says Europol (Observer)
• Aegean Sea Refugee Crossings Rise 35 Fold Year-On-Year In January (Guardian)
• Greeks Worry Threatened Closure Of EU Border ‘Definition Of Dystopia’ (Guar.)
• Europe’s Immigration Bind: Morals vs Votes (Guardian)
• 39 Greece-Bound Refugees Drown Off Turkish Coast (AP)