Derivatives: Colonising the Future

Consider this post in reference to the concept of derivatives.

I feel that if anyone wants to attempt any critique of the derivatives market in its entirety, one has to move past any continued emphasis on ‘casino capitalism’, as this is an oft repeated line which, whatever its merits or otherwise, has become an easy reply for those who favour such practices.

I believe one needs to concentrate on debunking the notion of risk management in order to effectively retort.

Many supporters of derivatives would rightly point to their use is not just to speculate with (as in Investment Banking), but as a valid means to manage risk, especially in Insurance, and it is this aspect which deserves further attention in my humble opinion

The above linked post brilliantly draws together the notion of colonising time as an integral commodity, matching any such physical asset, thereby shinning a much needed light on the important and neglected aspects of this discourse of, post colonialism and global racial financialisation.

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Ann Pettifor’s Alternative Monetary System

For anyone not familiar with the work of Ann Pettifor – one of the few to correctly call the coming of the financial crisis a number of years prior to it arriving, and one of the main proponents of the Jubilee 2000 campaign which cancelled a portion of third world debt – please search for her various articles, lectures and opinions online.

Associated with Keynesian economics and the Labour party, her views may be dismissed by some, however upon closer inspection, I was interested in her view on the creation of money, and what this meant for resolving the debt and economic problems facing the developing world.

She is principally part of the PRIME think tank/research group, which has a number of papers on its site proving an alternative voice on economic issues

The above lecture at the LSE discusses her latest book, ‘The Production of Money: How to Break the Power of Bankers’, and gives an insight into her theories.

What I wish to highlight, are the following;

• The issue of commodity money, and how scarce resources should not be used as a basis of any monetary system
• The recognition that a fiat monetary system, can and should be used for the benefit of the population – outside the control of private banks, but in the knowledge that an entirely man-made system should be used to achieve a level of prosperity in all societies
• There are certainly many socialist aspects to these beliefs, such as exerting capital controls and spending money into existence in terms of health, education and social expenditure thus increasing national debt, however interest ideally should not be necessary when such a system is implemented
• There are some similarities with what Positive Money are advocating, but it seems there are specific differences, as this discussion points out…

 

 

Whatever we learnt from the crisis, its not good enough…….

Depending on when you want to mark the start of what has become known as the Financial Crisis or even the Great Recession..(take your pick, or make one up), or as I would refer to it, the shit storm created from the exuberance of one generation thinking they can out do the folly of previous generations and become gods amoung men, see point 25 in the link below

I guess they’re not really the Masters of the Universe, they’re maybe not even smart people, perhaps closer to the opposite despite their highly valued creditials

This month marks a particular 10 year anniversary of one such start date of the crisis…we’ll get another 10 year anniversary next year if you miss this one, that one being the big one – when Lehmans went down.

This link is similar to a number of articles circulating over this period around what went wrong and what has changed since then that will probably make it impossible to happen again….I won’t hold my breath

Whatever has happened, the most fundamental fact that should be lamented is that the world is more indebted than ever…national debts have ballooned, fiat currencies are more debased than ever and emergency interest rates are still prevalent.

This danger is ever present, waiting to fuel the next severe economic breakdown, because the greatest lesson from the fallout is that crashes of this extent will always happen, constantly…it’s just a matter of time and behaviour

Flying Piggy Banks

The extent of discussion around so called Helicopter Money is symptomatic of the wider issue that central bankers are truly at a loss around the issue of secular stagnation and the obsession to inject growth however possible.

Whilst the idea of money printing or quantitative easing is a reality for developed nations, no longer the preserve of failed states (or do we admit the first world is indeed a failed state?), the notion of money being made freely available to the pubic is still more fiction than fact.

However this article is worth a read, as it sets out how such a move could work and the considerations needed. I find it revealing in the workings of some aspects of monetary policy, however it does omit the amount of money creation performed by commercial banks, something which needs to be acknowledged on a wider scale

City AM – Helicopter Money

 

 

 

Central Banks and the Blockchain

Please view this article on Central Banks’ attempts to harness aspects of Bitcoin’s technology for their own means of control

http://www.telegraph.co.uk/business/2016/05/03/central-banks-conspire-to-harvest-bitcoins-revolutionary-technol/

“Ironically, the technology that was meant to liberate money once and for all from the dead hand of the state may end up imprisoning it even further”

 

 

Rickards’ New Case for Gold

Jim Rickards shares his opinions on the current gold market activity in this article;

http://www.telegraph.co.uk/business/2016/04/17/gold-is-the-spectre-haunting-our-monetary-system1/

Some fascinating insights on the way Dollar wealth can be used for geo political means and how it is the currency denomination, rather than the commodity itself which can determine how effective it is from outside influence and control.

LA-RIBA

A few of my previous posts have covered attempts by various parties to introduce their own versions of a financing method closer to what is perceived as genuinely riba-free.

To name a couple, Ansar Finance in the UK, Grameen Bank from Mohammed Younus have made an effort to shed light on alternative models which are closer to interest-free financing, in that an interest derived rate is not charged to the customer.

Ofcourse, the wider context of this should not be forgotten – the money itself, the paper (or digits) we use as a means of transaction – is of interest and IS interest itself. Given this fundamental fact, one cannot escape true defined RIBA in any such method outlined in these endeavors.

However, designing alternative models can expose the wider audience to the weaknesses of the mainstream Islamic Banking practices, which are all in name not in spirit, and I find it refreshing and worthwhile to introduce different forms which may be used as a stepping stone to something widely accessible and equitable in future, Insha Allah.

Contributing to this intiative, are LARIBA, a US based institution who have introduced their own version of what they feel is a RIBA-free mechanism. Judge for yourselves weather you feel their method is actually viable, however this company has been established since the late 1980’s and I favour their understanding of the monetary system, even though they still resolve to make use of it. They too understand and are upfront with their clients about the debt enslavement aspects of interest based loans, and also draw attention to the wider Islamic Banking industry which still uses interest rates in their products.

Their website has a number of worthy materials on related topics which I would also like to recommend.

https://www.lariba.com/sitephp/index.php

Allah (SWT) knows best about their intentions and actions.