Jamal D Harwood London UK jamalharwood Financial Crisis of 2008 and today The greatest crisis since 1929 5 Years after growth poor and much slower recovery than 1929 Jobless recovery built on debt ID: 754164
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The Collapse of Global Capitalism: What can we learn from the Global Financial Crisis
Jamal D. Harwood
London, UK
@
jamal_harwoodSlide3
Financial Crisis of 2008 and today...
The greatest crisis since 1929
5 Years after growth poor and much slower
recovery than 1929
Jobless recovery – built on debtConfidence precariousGovernments using media to generate confidence
Unhealthy relationship with media and bankingSlide4
Causes of the crisis in 2008...
Enormous debt bubble
Repeal of Glass Steagall act in the US opened up market to high risk trading
Unprecedented fiat money creation
Housing bubble via easy creditNew exotic derivatives and mortgage backed securities poorly understood risk profileSlide5
Cause for pessimism – search for alternatives?
Growth has not returned and is being over-stated
Joblessness is growing and is being under stated
Inflation is growing fast and is being under stated
Swingeing cuts to social and public services
Risk still at record levels – derivatives little or no control over it
Corruption in financial circles endemic and not being tackled – fines not prison
Growing indebtedness, more asset bubbles (stock and bond marketSlide6
Three inherent crises apparent in Capitalism
Weakness in and adherence to the rule of law
Growth/Profit obsession and excessive risk taking
Corruption in the highest levels of governmentSlide7
Overall Income inequality
continues to deteriorate…Slide8
Rule of law
Repeal of Glass Steagall act in late 1990‘s
Ignoring the evils of interest
Money creation to feed the demand for interest payments
Leverage of financial assets beyond comprehension
Federal Reserve and other central banks working for the interests of the banking cabals, not the publicSlide9
Growth/Profit Obsession
Misplaced understanding of derivatives with respect to risk vs gambling
Derivatives 17 times the size of the world‘s economy
New notion of - Too big to Fail – encouraging greater risk taking
Banking interests forcing government to bailout losses with public moneys
Concentration in markets opening them up to distortionSlide10
Illegal Market Manipulation
now common
Libor interest rate fixing scandal (several banks)
Drug money laundering (HSBC)
Multi trillion dollar foreign exchange market – front running client orders (multiple banks)
Mortgage bonds and securities mis pricing, mis selling and confiscations
Precious metal (gold, silver) market direct manipulation (bullion banks)Slide11
Corrupt relationships in Government
Federal Reserve bank privately owned by banks
Too big to fail banks provide most senior government financial officers – executive and legal
Quantitative easing programme placing $85 billion monthly into markets including $40 billion of mortgage securities
Major banks 30 and 35 times leveraged and new Dodd Frank laws not applied
March 2009 FASB changed mark to market to (mark to model!)
Exchange stabilisation fund routinely intervenes in marketsSlide12
Derivatives market as large as ever…Slide13
It looks like we have a recovery in growth… butSlide14
Adjusted for real rates of inflation and growth is really flat…Slide15
Despite continued interventions bust and boom cycles dominate…
Monetary and Fiscal policy are interventions to smooth the business cycle. Are they effective?Slide16
Governments continue to overspend to attract votersSlide17
The US leads the world in developing debtSlide18
For an economy that is supposed to be in recovery this is not normalSlide19
But growing debt is a global problemSlide20
The reality is that the Capitalist world is addicted to debt – 8%
CAGr
(1980 – 2013)Slide21
The policy is to print more and more money from nothing…Slide22
The more money printed the greater likelihood it will get out of control…
FMQ = Total Check deposits, M1 currency, Savings deposits, and Reserves balances less vault cash Slide23
The cost of out of control debt (money creation) is consistent and high inflationSlide24
And after numerous changes to the way it is calculated real inflation is really higher Slide25
Many of the figures are “managed” real growth is much lower than reportedSlide26
Manipulation of unemployment
figures is probably the worstSlide27
Numbers relying on food stamps
steadily increasing despite claims unemployment downSlide28
Massive quantitative easing (money creation)
benefiting the stock marketSlide29
Increased money and productivity
not trickling down to real wagesSlide30
Wages not keeping pace even with inflation
over the past 30 yearsSlide31
The only age group in the US increasing
employment is over 55’s!Slide32
Non Interest economy
Gold/Silver based currency
No hoarding of wealth
Radical taxation policy
Prohibition of gambling
Land reform
Distinctive regulatory framework and true financial reform
Social welfare reform
The Islamic
ImperativeSlide33
No ruling party
No electioneering based on material interests
No political patronage
No political lobbying based on business interests
No 3, 4 or 5 year election cycles to stifle decision making
No election cycle pushing politicians to make popular spending decisions
Central authority with
decentralised
management of the needs of the people
Caliph does not face constant election
/re-election decisions and appoints key
economic and administrative appointees
independently
Political
StabilitySlide34
Low
cost equity/partnership based
investment model without banking
intermediaries
Debt based creation of money is out of control and grossly destabilising
Perversely
Central Banks effectively moving to zero interest rate
policies with their QE and suppression of interest (to banks) now close to zero rates
Despite high cost of interest to society banks also received bailouts costing taxpayers 100’s of billions
Perpetual growth to pay interest is impossible and leads to crashes and asset seizures
All Interest is
forbiddenSlide35
Currency stability over
millenia
and a level playing field between
Nations
Relatively mild instances of deflation and inflation compared to fiat money
No counterparty risk, with manageable growth in
currency
Gold/Silver the only currency and treated as a true medium of exchange
Universally
accepted, promotes sound and low cost trade
policies
Advantages of
Gold/Silver
currency can only function with non-interest
system
Gold/
s
ilver
as
currencySlide36
Key to circulation of wealth – connected with explicit textual
evidences
Compare with the banking system which withdraws capital during
downturns
Direct Investment, charitable giving, consumer spending – all positive outcomes
Business
cycle downturns work against investment and spending
Hoarding
prohibitedSlide37
Radical Taxation
approach
Zakat (2.5% on non-
utilised
wealth) Kharaj/Ushr on capacity of land, Jizyah
No Income, Consumption, Business, Rates, Council, Transport taxes
Wealth taxes are proportionate to wealth – fair on all (natural redistribution)
Strong incentive for investment and spending and full employmentSlide38
All gambling including most derivative contracts
forbidden (incl. short selling, forward contracts)
Derivatives are increasing
volatility in markets at higher risk
levelsGambling in all forms take wealth out of circulation/trade
Unacceptable
losses to society via moral hazard
All Gambling is
prohibitedSlide39
Use it or lose it (3 years
)
Revival of dead, unused lands promotes widest ownership among
masses
No leasing of agricultural land
Land
tax
encourages
full
utilisation
Laws
against price
fixing
Land
ReformSlide40
No state bailouts of private companies
No monopoly, strong anti-fraud provisions
Stable regulatory environment – laws consistent over 1400 years
Lobbying unlawful
Distinctive regulatory
environment
and
financial reformSlide41
Individualism stifling society
One third to one half of US/UK citizens depending on social welfare payments for survival
Breakdown of the family unit
Family unit vital in support of the individual
The State as a final help for the basic needs when the family unit is unable to
Social
Welfare reformSlide42
2008 a massive warning to us all – but little done to change the situation
Unprecedented opportunity for Muslims to lead the way with true reform
Must be holistic – Islamic solutions individually will fail when not applied comprehensively (Gold/Silver as currency cannot operate with interest)
“
And so judge between them by that which Allah has revealed and follow not their vain desires, but beware of them lest they turn you away from even just some part of that which Allah has revealed to you” [Quran 5:49
]
Concluding
CommentsSlide43
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