| Issue
320 |
|
8th Feb 07 |
front page
The Great Power Rip Off
By Ken Ferguson
PITY
the poor power companies, that’s the almost daily message from
the sharp suited spin doctors as they tearfully tell customers of their
“deep regret” at the latest price hikes.
Of
course there is no question, they assure us, of the power bosses actually
wanting to increase prices - it is all forced on them by those mysterious
creatures, market forces.
Sadly
they point at rising prices for oil, coal, gas and other key factors
in their production costs and patiently explain that such increases
just have to be followed by a rise in the cost of energy.
The
result is that, during January, over 9 million gas and electricity
customers had massive price rises imposed showing the fairy tale
that we live in a competitive market where the customer is king
to be straight from the pages of Harry Potter.
Far
from the fantasy market in which power companies strive to outdo
each other with fierce price cutting and superb service, the customer
is faced with the brutal reality that all sources of electricity
are in the hands of profit hungry private firms.
And
anybody who really believes that this handful of firms are in competition really does need to
take more water with it.
Essentially
almost all
Gathered
among the potted plants in their plush chairs for such highly
secret gathering are top bosses such as David Threlfall, chief
executive of Npower, Ian Peters, chief operating officer of British
Gas, and EDF big cheese Eva Eisen-Schimmel,
whose previous claim to fame was to oversee the launch of Häagen-Dazs ice cream in
Further
reassurance that all is well came from the so called “regulator”
charged with keeping the power firms in line, the government’s
toothless watchdog Ofgem, who soothingly told angry customers there was
no evidence of anti-competitive behaviour and dismissed claims
of price fixing.
However
sceptical campaigners called for an official inquiry into the
“obscene” profits being made by energy firms, claiming that consumers
were being “ripped off.”
The
National Right to Fuel Campaign and public service union Unison
claimed increases in energy charges to consumers were almost £2.5billion
more than the extra costs in producing and selling gas and electricity.
Even
laid back Chancellor Alistair Darling was moved to action. In
a move which will doubtless have the power bosses trembling he
wrote to Sir John Mogg, chairman of Ofgem, asking
him to explain why fuel prices were rising!
However
the truth is that prices are still rising, and the entire machinery
of so called regulation and advice on switching your supplier
stands exposed for the hollow sham it is.
Well
meaning calls to protect the poor are all very well but, twenty years
since it was handed to the fat cats, the entire power supply industry
is revealed as a dripping roast for the power bosses
which prioritises profits over public need.
As
we prepare to see a range of major changes in how power is generated,
the time is now overdue to make sure that the planned wind farms
and wave power don’t result in handing our natural resources to the
profiteers.
If
it was
page two
PCS Strikes Suspended -but workers keep up the pressure
By Richie Venton
THE
strikes threatened by the PCS union in the two giant departments
- Revenue and Customs and the Department of Work and Pensions
- on 31 January have been suspended.
The
central factor behind the union’s suspension of the action
is that in both DWP and HMRC, talks have been conceded
by management - which was one of the union’s main demands.
The bosses have retreated in fear of the impact of industrial
action - especially in the Revenue where 31 January was
the deadline for tax self-assessment.
In
HMRC, far-reaching promises of a moratorium on compulsory redundancies,
unreasonable travel to work times and office closures have
been given whilst talks are held.
Scottish
Socialist Party members in the PCS, including leading branch
officers in both departments, have met, discussed and
welcomed the concession of talks and moratorium - won by the planned
strikes and overtime bans.
However,
they also think this is a decisive time to keep up the pressure
on the bosses and the crisis-ridden Labour government who
are dictating the cuts to pay, jobs, offices, flexi-time and
public services.
In
DWP there initially seemed to be no progress in response to
the solid two-day December strikes, but now talks on pay
have been conceded. Management doubtless feared the impact
of the action planned - which would have clobbered them
through a one-day strike followed by an overtime ban throughout
the month of February.
Members
in the big office factories especially are calling for an
overtime ban as a powerful weapon, given the heavy reliance on
overtime to get services delivered in understaffed offices
in the aftermath of Labour’s job cuts of the past 3 years.
SSP
members and other PCS activists are insistent that talks must
now be held over a very short timescale - and that the union should
warn of new strike dates and overtime ban should they be delayed
or fail to win real concessions on pay.
In
the case of HMRC, talks have been conceded and accompanied by
a moratorium on compulsory redundancies, moves to unreasonable
travel-to-work distances, and office closures.
The
HMRC union Group Executive Committee called off the ballot
the night before the closing deadline.
SSP
members in HMRC have welcomed the talks and moratorium,
and believe this is the result of the threat of united strike action
and an overtime ban.
But
they also feel strongly there is an urgent need for car park/office
meetings of union members to explain the situation, and
to move motions at every meeting that welcomes talks and the
moratorium, but calls on the union to initiate an immediate ballot
for strikes and overtime ban if there are any delays in talks and/or
failure to make real gains on key issues, including vitally important
questions like attacks on flexi working arrangements (as well
as the central ones of jobs, office closures, privatisation).†
John
Davidson, PCS branch vice-president at the East Kilbride Revenue
site told me
“I
have spoken at several members’ meetings over the past few
days. Members are glad there are talks, but sceptical about
how far they can trust management to make real progress,
given our experience of them over issues like LEAN working
practices.
“Members
are vigilant and have agreed overwhelmingly at the meetings
that the union negotiators and PCS Group Executive Committee
must insist on a very tight, short timescale for talks, and that
if management renege on their promises, cause the talks to break down, or fail to come
up with the goods, then we should launch a programme of
industrial action.”
PCS
members need to keep up the pressure on bosses who have already
begun to retreat in fear of strikes and overtime bans.
CONSTRUCTION INDUSTRY DEATHS TOP 50 AS MPS WARNED OF SAFETY WATCHDOG “DUMBING DOWN”
AS
experts from the
The
construction union UCATT pointed out that a variety of factors
have led to an increase in construction deaths in recent years,
including cuts in the Health and Safety Executive, which has
reduced the number of inspections and prosecutions.
The
increasingly casualised nature of the industry has also reduced
effective safety training of workers, it said.
Regional
secretary for
The
union’s concern over safety cuts was echoed by the IOM expert’s
report to the
And
the experts issued the grim warning to the MPs saying that
“the low public and political profile of occupational health
have, we believe contributed to a ‘dumbing down’ of occupational
health and safety particularly health.
They
also warn “HSE seems to be trying to do too much by co-operation
and persuasion, at the expense of its role in giving strong
and clear direction, and in strong enforcement.”
The
reduced enforcement threat means “many companies think HSE
is without teeth,” the submission says.
SSP to stand in Cambuslang
THE
Scottish Socialist Party is standing local community activist
David McClemont as our candidate in the Cambuslang East
council byelection (polling day 6 March).
David
has stood in this seat several times before, and is determined
to offer voters a genuine socialist alternative to the
parties of poverty, poor housing, PFI/privatisation and
the monstrosity of the M74 extension.
The
poor condition of some local housing; the lack of affordable
accommodation for young people; rising rents and mortgages;
and the failure by
The
SSP has a proud record of resisting the obscenity of between
£500million and £1billion being squandered on an extension
to the M74 that will stir up underground pollution in
parts of the town, add to air pollution and asthma, and
which displays both Labour and the SNP’s preference for
this anti-people waste of money over investment in an
extension of decent public transport. We will highlight
the SSP’s demand for free public transport.
Privatisation
of council services and energy suppliers has led to gross
profiteering at public expense. The SSP will use the by-election
to agitate against the horrendous price rises in gas and
electricity, creating bills of over £1,000 a year - feeding
the profit of Scottish Power, Scottish Gas and Shell,
who have just amassed £13 billion in profits.
David
and the SSP are calling for public ownership of gas, electricity
and
page three
What do Wall Street and The City have to do with me ?
Night
after night the news is dominated by news of sliding stock exchanges,
plummeting share values and dire predictions of recession and hard times
to come.
One
of the key ways by which capitalism maintains its dominance is by simply
throwing up a veil of mystification around its work.
For
example the vast majority of people have little knowledge of or probably
interest in the workings of the FT index or the movements of stock markets
from
That’s
why almost everybody from high profile financiers to the Left is predicting
the real prospect of a recession with the resulting cuts in living standards,
job security, house repossessions and soaring prices.
So
what has happened to the economy which only a few short months ago was
supposed to be Prime Minister Brown’s ace card?
Stripping
away the jargon the answer comes down to two very everyday items—houses
and cars.
The
crisis sweeping the stock exchanges started off in the so called “sub
prime” housing loans market in the
But
the snag came when under pressure sub prime borrowers failed to make
their payments and rendered their loans more or less worthless.
However
the real problem is that the duff loans were bundled in what the dealers
term Collaterised Debt Obligations with sound
ones and the banks are keeping quiet on just what amount of problem
loans they have.
In
turn this means that since nobody knows how sound each bank is nobody
is lending money but experts have estimated that the duff loans have
cost the banks more that $1,000 billion.
It
is the resulting block on lending that has sparked the Northern Rock
crisis which has cost
All
this points to a recession in which unemployment is likely to rise and
living standards fall.
Bad
as this is, the other factor, cars, needs to be added to the pile. With
oil at a record $100 a barrel the consequences for a heavily oil dependent
economy is severe.
It
should be remembered that high oil prices helped create the last two
global recessions in the early 1990s and 1980s.
At
the heart of it all is the fact--continually praised by New Labour—that
the
In
the short term their will no doubt be sharp battles ahead to defend
living standards, combat rising prices and defend jobs.
However
as long ago as the 1860s Marx described the crisis ridden nature of
capitalism and despite all that has happened since the core truth of
this view has been demonstrated time and time again.
That’s
why, while it fights to defend jobs, working conditions and living standards
and for houses and health the SSP also demands a new economy.
Such
an economy would start the task of harnessing the stupendous technological
and material resources which already exist to meet the needs of society
rather than the greed of the few.
By Colin Turbett
AFTER
many years of lobbying and grass roots activity the Community
of Arran Seabed Trust (COAST) have at last succeeded in winning
official designation of a small area of Arran’s coastline
around
Years
and years of over-fishing by increasingly sophisticated methods
decimated stocks of commercial fish in the Clyde area (as
in most other coastal areas of
Local
divers noticed that this activity was destroying the seabed
and began to argue that this was unsustainable – leading to
COAST’s formation.
After
initial resistance local “mobile” fishing boat owners have
realised that there would be no future for them to build up
shellfish stocks.
The
same argument applies to other fish stocks and it is hoped
that regeneration will lead to a revival of commercial fishing
in the
“Without
the help from our many friends, the
New Labour Racist On The Rampage
By Colin Turbett
SCOTTISH
Gypsy Travellers have a hard enough time facing prejudice
and discrimination without Members of Parliament jumping on
the bandwagon in clear populist attempts to win local right
wing votes. Central Ayrshire’s Brian Donohoe (Labour) has called, in the local
Although
examples are not given, it seems Donohoe
is upset that Travellers who park their caravans on disused industrial sites
and other waste ground leave a mess.
Well
as we see in
Where
can Ayrshire’s Gypsy Travellers go when the two remaining official
sites are full ? Donohoe
suggests that the two local authorities “can do nothing about the problem”.
What
he really means is that they can do nothing to harass people and
move them on, and states his intention to pursue changes in the
law to allow this.
In
a clear attempt to inflame matters he states that “most of the
travellers (in Ayrshire)…arrive in an area to trash other people’s
property.” Such language is a gift to right wing racists and fascists.
There
has been a suggestion from local activists that the Travellers
Donohoe has long reviled should park
outside his house.
Whilst
we doubt they would want Donohoe as a neighbour, there is little doubt that Gypsy
Travellers, long marginalised, need to renew campaigns to achieve acceptance
and recognition.
This
is a matter over which the SSP should offer every
assistance.
page four
Deforestation Growing In The Amazon
By Roz Paterson
DEFORESTATION
of the Amazon rainforest is accelerating at an unprecedented
rate, due to the rising price of beef and soya.
It
has been officially estimated that, between August and December
2007, at least 3235 square kilometres were cleared, though
the real figure is likely to be much higher. Possibly twice that.
This
news comes as something of a shock given that, over the last
three years, there had been a steady decline in the rate of
Amazon deforestation.
This
decline did not come about through any action of the Brazilian
government, who have failed time and again to lay down any binding
legislation to protect one of the world’s most precious assets.
The
real cause, of course, was the market. Falling beef and soya
prices simply made it less worthwhile to invade regions of rainforest
and tear it all down to put in vast cash crops.
Thus,
the government that lays such store by its supposedly green
credentials, is in fact just sitting back and letting the world
market call the tune.
Says
Paulo Adario, Amazon coordinator of Greenpeace:
“If
President Lula is serious about
A
2006 Greenpeace investigation lifted the lid on soya cartel
Cargill, Bunge and Archer Daniels Midland (ADM), who act as
bankers to Brazilian farmers. But instead of loans, they issue seed
and fertilizer and collect the finished product at harvest time.
Thus,
if soya is what they want, soya is what they get.
This
single cartel controls nearly 60 per cent of soya production
in
An
environmental impact assessment of the soya industry, whose
product is shifted the 7000 miles to
When
it has its roots in the ground, the rainforest is one of the
planet’s most important carbon sinks - that is, it sucks up
massive amounts of CO2, thus preventing it being released into
the atmosphere, where it contributes to global warming.
But
when it’s burnt - the cheapest way to clear land - it belches
vast quantities of stored up CO2 into the air and, ultimately,
onto all of us.
Thus,
Who wants a windmill?
RENEWABLE
energy at any cost?
Perhaps
not.
Though
the British Wind Energy Association insist that the £500million, 181-turbine
farm proposed for the farflung Hebridean
This
hugely important stretch of wetlands, which harbours substantial
numbers of rare breeding birds, including greenshanks and golden
eagles, would be irreversibly damaged by the project.
Windfarms
have a benign image, but those turbines are not supported by modest tines
that you stick in the ground like you would a For Sale sign. They
require substantial concrete bases that, on a peatlands site
like this, would necessitate a great deal of upheaval, including
drainage.
Unfortunately,
windfarm debates are generally characterised as between NIMBY homeowners
who consider turbines to be blots on the landscape and earnest ecoentrepreneurs trying
to save the world.
Yeah,
right.
The
‘windrush’ is being conducted, thanks to our deregulated energy industry, by
private companies who smell big money. Meanwhile, the people living
on or near our last tracts of wilderness are being ignored,
the areas they seek to protect trampled upon, and alternative sites bypassed.
Better
surely to think small and local. Many energy experts, not in the
pay of major corporations, suggest that microgeneration is key
to a sustainable future, where energy is generated and used locally.
A
four turbine development on the shores of the
It’s
time to think smaller and more imaginatively. Trashing our landscape
is no way to save the planet.
page five
LETTERS
The
recent increases in energy costs, coming on top of several years
of double-digit, inflation busting rises, has made it clear that it’s
time the Scottish Government conducted an urgent inquiry into the
feasibility of nationalising
In
the space of four or five years, the cost of energy has nearly doubled.
The
days of energy companies profiting out of the cold and misery of
the Scottish people, particularly the poor and elderly, are numbered
and needs to stop.
The
decision by the Conservative administration of another country, several hundred
miles away some two decades ago to sell out this vital pinnacle of
Red/Green
I
wonder if any others have seen Justin Kenrick’s article in Scottish†
Left Review this month in which he argues for a Red/Green ‘Transitional
Soap
Box
John Miller
The Need For Police Democracy
THERE
are a number of problems that surround the relationship between the
police and the working classes, but many working class people
regard the police as uncaring and arrogant.
This
is not helped by the new paramilitary style uniform code of the working
police officer, but it is more than just that. Many working
people in their experience of contact with police feel that in the
eyes of the police there are only two classes of person. Police and others,
and only police are deserving of respect.
Whether
you are a perpetrator, a witness or a victim, the attitude of the
police is equally offhand, supercilious and arrogant.
The
result of this is that many people offer no co-operation to the police
not because of fear of reprisal but because of the arrogant way the
general public is treated by the officers of the force.
This
means that although they might promote intelligence led policing,
if they can get no information from the general public, the police
are forced to rely on criminal informants.
The
obvious paradox in this is that the crime fighting alliance then
becomes an alliance between the police and the criminal!
In
order to induce these criminals to give information it is necessary
to overlook minor offences, but a minor offence in the eyes of the police
might be a major offence in the eyes of the victim.
By
trading away justice for the small people in their minor issues (and
it is hard to commit a major fraud or theft against the poor since
they have very little) the poorest are denied the right to see
justice done and compensation orders awarded.
This
is supposed to make it easier to secure convictions against major
criminals, but the same arrogance which exists at lower levels also
permeates the higher levels of the force, and how often have we seen
major trials collapse because the police have not observed the
rules of custody or evidence.
The
police present these as trials which have had a perverse result because
of a ‘technicality’ and use it to try to justify increased powers when
in reality it is often the abuse of the powers which they already
have which is the problem.
People
are able to perceive daily the fact that if a poor person is the
victim of a burglary then the police will try to suggest that the
crime is due to the fact that they had inadequate security and
will suggest new improved locks etc.
They
will blame the victim instead of catching the criminal.
The
fact that better locks only displace the burglary to another (poorer)
household with less expensive security is ignored.
The
rich already have better locks, alarm systems and often private security.
Similarly if a car is broken into then often the police will not
turn out at all but only give the victim a crime report number for
insurance purposes.
The
police will of course argue that they have a problem of manpower.
It
is, however, not quite so obvious that they are undermanned when
some homeless person shoplifts a packet of biscuits from a supermarket
because her kids are hungry.
There
always appear to be enough police to send two officers to deal with
her.
We
might speculate that poor people stealing from other powerless poor
people is not a problem for the police, but if poor people are allowed
to steal from the rich and powerful then it challenges the whole
notion of legitimacy of property on which capitalist society
is based, and cannot therefore be tolerated in any form, however
small, by a police force controlled by the rich and powerful.
One
of the problems of manpower is also attributable to the arrogance
of the force. The fact that officers patrol in pairs in
Many of the public, as previously stated, will not be seen to co-operate
with the police, and since the Sheriffs in
The contention that officers are tied up on paperwork when they should
be on the streets is possibly true, but that is because clear procedures
and chains of custody must be fully documented because of a lack
of confidence in police by the courts and the public, subsequent upon
a number of high profile cases where evidence has been manufactured,
manipulated or withheld from the defence resulting in gross miscarriages
of justice.
Were police to be trusted by the courts then they would be able to
double the number of locations where there is a police presence without
a single additional officer.
If the public could be convinced that the police are on their side
then the pressure for ever increasing police budgets could be massively
reduced because corroboration would be easier to find and intelligence
led policing would be able to obtain real untainted intelligence.
If the relationship between the police and the public were improved
then the public would perhaps again be policed by consent instead
of policed according to class interest.
Perhaps part of the solution might lie in direct recruitment into
an officer grade.
The current top echelons of the police service came up through the
ranks.
As in all bureaucracies personnel tend to rise by not rocking the
boat and this can mean turning a blind eye to malpractice.
The memoirs of retired senior police officers are full of ‘comical’
anecdotes of malpractice in the cause of ‘justice’ as defined by
the police on the hoof.
But it is not their job to decide justice, that is for the court,
however flawed that might seem.
Although as previously stated they work always in pairs, when a police
officer is convicted of an offence in connection with his position
it is very rare for his partner to have observed his misconduct and
to be called to give evidence.
I do not believe that this is a coincidence.
The bad apples cannot always be paired together and to believe that
stretches naiveté too far. There is a closing of ranks and a culture
of concealment.
An increase in democratic control of the police is an obvious necessity.
We should be appointing senior police officers by direct democratic
means and have effective democratic mechanisms by which to hold
them accountable and if appropriate remove them.
The current situation whereby the police investigate their own alleged
misconduct is highly unsatisfactory. Everyone knows that self-regulation
is usually self-serving in any sphere and they cannot continue to
be a law unto themselves.
They are institutionally arrogant, and were they effective that might
be excusable, but they are not.
Their arrogance has a direct effect on their effectiveness in terms
of prevention and detection of crime and might account in some small
part for the exceedingly high crime rates and exceedingly low rates
of detection, and it has become so bad that many crimes go unreported
because the public sees it as pointless.
The response of the police service to rising crime and falling detection
rates will inevitably be to try to increase their budgets, increase
their manpower, improve their equipment, and almost certainly to
increase police salaries (ostensibly to attract a better quality
of recruit, and if the quality of recruits is as we have seen on
recent television documentaries it certainly wants improving), but
all of this will be to no avail if the present regime cannot better
control its public perception and performance at the grass roots street
level.
If they continue to see the public as the enemy then they invite
reciprocation.
centre pages
The Market’s Money Madness
As
global stock markets go through a roller coaster ride, there is
talk of a recession and the sub-prime crisis is leading to
billions of dollars of losses for the world’s major investment
banks. Still there is no one to bail out Northern Rock and
the US Federal Reserve suddenly cuts interest rates by 0.75
per cent while a rogue trader losses $7billion pounds.
Raphie
de Santos tries to make sense of it all, drawing the strands together
to show that yet another of capitalism’s ‘golden ages’ is over and
the fight for a socialist economy remains firmly on the agenda.
THE
major falls seen in all the world’s stock markets mark the
end of a long period of capitalist expansion which started
in early 1980s. Stock markets discount the future and they
are discounting major falls in the earnings of corporations
around the world. In other words they are forecasting recession
- two quarters of successive negative gross domestic product
(GDP) growth - and periods of stagnation across all the major
economies.
The
turbulence is far from over and stock markets hate uncertainty
and there is so much of it around. In the weeks ahead
we can expect more dramatic falls and partial recoveries. This
is because nobody knows the full extent of the subprime crisis
and its impact on the world financial system and economy.
While
it widely held view that the
This
led to an inflated housing market and cheap credit, leading
to a big increase in credit in particular to those on
lower incomes. From this policy flowed the sub-prime lending
boom and repackaging of this debt and the seeds of inflation.
Capitalism
is caught between a rock and hard place. On the one hand it
needs to cut interest rates to increase the amount of
money in circulation and ease credit repayments but on the
other hand inflation is on the rise because of the demand
that has been fuelled by years of cheap credit and growing
demand from
Cutting
interest rates has a very limited shelf life as if they run
with the policy for too long then the major developed economies
will start importing inflation because their currencies will
be weaker against the currencies of the countries they
are importing from.
Already
the bond markets are implying that interest rates will have
to go back up within six months to a year to curb inflation.
All
this is combined with end of the benefits of the technological
boom that started in the 1980s - productivity gains are
being offset with lower profit levels as more and more of the
production process is carried out by technology and not
humans meaning a reduction in new value or profits being produced.
In
this article we will take a look at:
*
the
* sub-prime lending
* shift the debt off my books (engineered financial products)
* the kings clothes
*
impact of
* the Soc Gen and market turbulence
* what it all means for ordinary people
And how they are all interrelated and could lead to biggest financial and economic crisis since the 1970s.
US Housing Boom and the FED
The
boom in the
Interest
rates normally increase gradually the longer the loan is for.
The idea is that the longer the time of the loan the more
chance that someone will not be able to repay it.
The
lender is paid a premium for the risk of not being fully repaid.
The Fed cutting rates so aggressively for shortdated loans
that this opened up many new transactions for banks and other financial
institutions.
They
could borrow from each other at low rates for short periods
of time and roll the loans over when they matured. At
the same time they could lend at higher rates for longer dated loans.
There was a fat spread between where they could borrow and
where they could lend.
As
long as interest rates kept low for borrowing for short periods
of time they could carry on making money.
All
sorts of financial products - subprime loans, normal mortgages
without offsetting customer deposits (Northern Rock) and
Collateralised Debt Obligations (CDOs) - were designed around
this strategy.
It
provided capitalism with new pools of credit to fuel its booms
and soften its recessions. We were in a new ‘golden age’
of capitalism where all the old problems of boom and slump
had been eliminated. But this market has, as we will see,
has blown up.
It
has brought the great credit boom, which stated after the Second
World War to an end.
Capitalism
will now find it difficult to find sources of credit to manage
the fluctuations which are inherent in the system making
more frequent and longer recessions likely.
Sub-prime Lending
In
the
This
type of lending spread to other parts of the world - particularly
the
Shift the Debt off My Books
Traditionally
banks and other financial institutions have financed their loans
and mortgages through the deposits they receive from their
customers.
This
limited the amount of credit they would offer.
At
the start of this century they moved to a new model where they
sell on mortgages and loans (personal, car and credit)
onto the bond markets.
This
meant a growth in credit. But at the same time the initial
lenders no longer have the incentive to check if the borrower
is able to repay the loans as they are offloading their risk
onto someone else.
The
business proved extremely profitable for the banks because
of the fat spreads we talked about earlier and they used
loan and mortgage brokers, who took a fee, to aggressively
sell these products to the sub-prime market.
In
the
The Kings Clothes
The
Investment Banks took these sub-prime loans and ‘engineered’
them into complex financial products.
Their
value was not decided like traditionally shares by an open
liquid market place with many buyers and sellers but by
complex models.
They
were valued by the investment banks themselves based on an
assumption about how many people would default on the
loan and the relationship between the borrowers.
The
rate of defaults could be observed but were massively underestimated. The
relationship between borrowers (correlation) could not be observed
and was estimated quite liberally. As the number of defaults
in sub-prime market increased quite rapidly the value of these
instruments fell dramatically.
Defaults
increased as the Fed pushed up short-term rates to curb inflation
and the housing market.
They
did not fully understand the link between property prices,
interest rates, the sub-prime market, these structured
financial products and the financial system.
The
market for these products dried up in the summer of 2007 and
rumours swept the market that major banks were in trouble
that is the losses on these products could cause bankruptcies.
The
inter-bank lending market - were Northern Rock borrowed its
money - dried up as banks stopped lending to each other
as no one knew who might go bankrupt.
So
far the investment banks have reported $100 billion of loses
and this is a conservative number.
As
we mentioned earlier these instruments are based on an estimate
of the relationship between borrowers. Some banks, only
a minority, are using an independent estimate which has seen the
value of these instruments fall by 80 per cent over a year.
If
all banks were to move to this estimate the losses are likely
to be in the region of $500billion to $1000billion with
many likely bankruptcies causing a potential crisis in the
world’s financial system.
Many
of the banks have off loaded these products onto pension funds
and insurance companies which mean the person on the street
could be facing heavy losses as well.
Most
of these write downs have occurred in the last quarter of 2007
and will be reported in the next couple of months.
The
problem is that nobody knows who owns these products and where
the next time bomb will explode.
For
instance, the town of
Many
economic commentators believe that the existence of these markets
and the restoration of capitalism in the former so called
‘socialist states’ will lead to a softening of the recession
and even the possibility that most countries outside the
There
is a double-edged sword with this argument.
One,
these countries demand for raw materials and food have pushed
inflation up globally which limits the scope for interest
rate cuts in the
Three,
a lot of the wealth in these countries is based on the paper
profits of private individuals investing in the local stock
markets. Much of this has been wiped out by recent market falls
and this will reduce consumer confidence and dampen the
economies. Four, recessions in the west will reduce demand
for their products and slow their economies down further.
Finally,
the
Soc Gen and Market Turbulence
Some
parts of the financial markets have tried to blame the market falls
on the
rogue trader at Soc Gen. This is just wish full thinking, trying
to deflect attention away from the real fundamental problems
we have discussed.
The
Fed has stated they had no knowledge of the near $7billion
trading loss at Soc Gen when they made the decision last
week to cut rates by 0.75 per cent.
The
losses meant that the trader had open positions (investments)
worth about $80billion.
It
points to gross ineptitude by the bank’s internal risk management.
They must have had to post $1billion to $4billion a day
to the financial markets (margin payments).
They
to would have been a large percentage of the positions on several European
markets (open interest).
How
this was not picked up was not down to a trader hacking into
internal accounting systems but gross ineptitude as the
margin payments and open interest are derived from each local
financial system and the trader would not have had the
skill and the knowledge to hack into these systems.
Unwinding
the investments may have accounted for some of the losses in
What it All Means for Ordinary People - Capitalism’s Reaction
Falling
profit levels, recession and the credit crunch will see an
all out assault by capitalism on ordinary people in 2008.
We
can expect to see attempted wage cuts, productivity increases,
layoffs and workplace closures. Credit will be harder to
come by and banks will be very tough in dealing with defaults.
We
are likely to see a much higher rate of house repossessions
and personal bankruptcies in 2008. This together with inflation
edging higher, which is lagging the decline in demand, will
mean real cut in living standards and hardship for many
working people in 2008.
We
will also see cuts in public services and rises in council
tax particularly from fiscal year 2008/2009 as government revenues come
in way below government estimates with a declining GDP.
During
2003-2005 in the developing world the world’s major financial
institutions have passed up the opportunity to ease the
grip of their suffocating loans.
As
these institutions seek to put their own houses in order they
will likely tighten the grip on the poor south, leading to more
poverty and death.
Unlike
capitalism’s last major offensive against the poor in the late
1970s, working people’s organisations are much weaker and
the demographics of capitalism have changed dramatically.
But
it does not mean there will not be a fight back.
In
2008 Socialists will have plenty of opportunities to stand
alongside working people and continue the fight for a rationale economy
based on the democratic decided needs of the majority as they stand
up against capitalism’s onslaught.
[1] Raphie de Santos is a former head of equity derivatives research and strategy at Goldman Sachs International and now works in fund management
page eight
Scottish Activists Gather For Palestinian Solidarity
By Allan Armstrong
OVER
120 people attended the very successful day school organised by
the Scottish Palestinian Solidarity Campaign, in the
They
have turned
Now
Palestinians were pulling down the walls and breaking free into
So,
if Mubarak unleashed his much superior armed forces, there would
still be consequences, not least in the seething slums of
This
challenges both those who look to a future two-state (
Joel
Kovel, an American anti- Zionist and ecosocialist, outlined
the historical origins of Judaeophobia in
Ghada
Karmi, a Palestinian writer living in
Ronit
Kardishay is a member of New Profile, a feminist organisation, which
gives support to those young Israelis wishing to avoid the
military draft.
She
outlined the extent of militarization of Israeli society, which
is in a state of permanent war and constant fear-mongering.
The
Western media likes to portray the schooling of young Palestinians
as ‘jihad orientated’.
Ronit
showed the influence of the military penetrates deep into the Israeli
education system, right down to primary level.
Plenty
of time was given to questions and contributions from the floor.
A
wide range of viewpoints was expressed.
The
whole day was very well organised, with excellent food provided.
A financial appeal was made to win support for a number of events
to show solidarity with the Palestinian people at this crucial time.
Helen
and
By Morag Balfour
THE
story is not a new one.
Rampant,
bolshy peace women landing up in a Scottish Courtroom
has somehow become a bit ‘everyday’ for us now.
Helen
John is 69 and Georgina Smith is 77 and they ought to
know better.
These
are powerful women who channel their rage and commit criminal acts
motivated by love.
These
are serious women, kind women and, occasionally, scary
women.
They
spent a good 15 minutes painting
I
bet that Sheriff has never encountered such stubborn folk
in a courtroom.
What
kind of people do that sort of thing though?
These
women are pensioners and their behaviour is far from the
norm.
I
first met Helen John when she was held on remand at Cornton
Vale. I was one of many visitors.
A
good few peacenik women were in Cornton Vale at that time
and they’d organised a protest - a silent one - and the
authorities had clearly overreacted to it.
A
new Trident Sub had been launched on the world and the
occasion had to be marked somehow.
I
was led, unusually, into a wee room with a perspex divider
in its centre. Helen was brought in via another door and
was seated on the other side of the plastic divider.
She
was no threat to anyone but the prison had a point to
make, and we spent a lot of time pouring derision on it
during that visit. I attended the trial that followed in
Helensburgh District Court.
It
was a small thing for me to go and support; yet Helen seemed
moved deeply by the gesture.
I
saw her some months later in
If
on the other hand you meet her in court she is a fearsome
character. This woman is amazing and inspiring.
Georgina
Smith is gentler and more mischievous than Helen.
Her
love of giving false names to the police when under arrest
is legendary. I remember clearly the ‘Laura Norder’ incident.
The
police knew this to be a false name and she was detained
overnight for a court appearance the next day. She stuck
to her guns and maintained that Laura Norder was her name, and
in the end the JP hadn’t the stomach to punish her for
it and threw out the case.
It
lead to the fantastic headline in the following day’s
newspapers - “No room for Laura Norder in Helensburgh
District Court”.
When
I think of
Georgina
bought the land direct from the Ministry of Defence. They
weren’t to know of her Greenham history.
It’s
pretty funny really and has caused the MOD so much grief
over the years.
Both
There’s
also something seriously cathartic about that form of
expression.
Georgina
and Helen are great people who’ve spent decades working
for peace. If they teach one thing it’s that we don’t
have to be dull when we age.
The
nerve of them though - plodding on up to the High Court
of a Sunday morning with paint, a point and an attitude
- you have to love them for that.
The
law matters and breaches of it must be exposed and railed
against.
page nine
Who’s Choice ?
Juno
(12A),
Directed
by Jason Reitman
Out
8 February 2008
by Wullie McGartland
I
must admit I approached this movie with a great deal of apprehension.
Every
review I had read had claimed the film was putting forward
an antiabortion message.
However
after watching Juno, I couldn’t disagree more.
Juno
MacGuff (Ellen Page) is a sixteen year old high school student who
discovers she is pregnant after she decides it’s time to lose
her virginity to her friend Bleeker (Michael Cera) - and
take his while she’s at it.
I
say, she decided, because Juno is a strong, independent, sarcastic,
funny, opinionated young woman who takes charge of the
world around her.
She
finally accepts that she is pregnant after three separate test
on a pregnancy “piss stick” - with the help of a gallon
of Sunny Delight - and sets out to deal with the situation
on her own terms.
She
contacts the local woman’s clinic for an appointment to see
about an abortion. While at the clinic she decides that
this is not what she wants to do, instead she wants to have
the child and put it up for adoption.
This
is were I differ from other critics, who claim her refusal
to have an abortion is from a political pro-life position.
It’s definitely not how I interpreted it, Juno is a strong character,
who weighs up her options and chooses adoption, this being
the important part she chooses.
Juno
then sets out to find a couple to adopt her baby, she duly
finds Mark and Vanessa - a yuppie couple unable to have
a child themselves - in the classifieds of the Penny Saver.
She
starts a friendship with Mark, who she discovers is a musician
with equally leftfield music and movie tastes as herself.
As
the months pass by Juno becomes closer to
In
all the movie is funny, intelligent and at times moving. Ellen
Page is outstanding as Juno, with all the other main actors
- especially Cera - giving top notch support.
Add
to that a brilliant soundtrack including Kimya Dawson, The Mouldy
Peaches and
Festival Time In Weeg
THE
The
festival has grown over the years and is now the third
largest in
The
fact that he met her on the internet and she’s a doll,
makes his friends and family a little anxious.
Add
to this George A Romero’s latest zombie movie Diary of
the Dead, La Sconoscuita (The Unknown) the new film from
Cinema Paradiso director Giuseppe Tornatore, and even
a bit more acting from Eric Cantona in Le Deuxieme Souffle
(The Second Wind) and you’ve got quite an interesting line-up
of movies.
There
will also be a festival of short films running at the
same time in
[1] For full listing and ticket details see: www.glasgowfilmfestival.org.uk
The
Wild Brunch
Keef
Tomkinson
Keef casts his eye across life’s more leisurely pursuits in order to put a wee bit of CULTure into our lives.
My
advice? Generally try and avoid the frustratingly anger inducing
politics of the mainstream media.
But
the other week I got a little mad. First of there was news
that the Countryside Alliance were marching again.
Although
to be fair the reports of 22,500 pigs wandering through
The
answer from a few of experts was tighter wage controls. Only
then could these city slickers garner the wealth to stimulate
my economy. In other words I get less so they can make more.
In
some more other words. The better of I get at the moment the
worse it is for the economy and for me. God Damn Momma Fornicators.
We
really do get totally shafted don’t we?
I
despise this myth of the entrepreneur, the banker, the share
monkey, and the financial adviser who are the big brains behind
our economy and fuel our living standards.
Capitalism
is just a bunch of ideas, opportunities and risks which create
profit and debt, Debt that is profited on. Behind that is me,
you and a whole load of people making these ideas a reality,
making them fit for human consumption.
We’re
working unpaid overtime, busting our ass, set a series of inhumane
target and deadlines. Our reward is stress, uncertainty
and a level recognition which barely beats being shat on.
A
whole host of faceless suits would be nothing without us but
we must feel the pain so they live comfortably enough to imagine
news ways to make me work a 25-hour day.
Am
I being too harsh? Should the Class War not just grow up? Taking
inspiration from my newest political idol, the Vanilla Ice
of Black Politics, Barrack Obama, Should we learn to look to
a better tomorrow but not at the expense of wealth creators
(or donors as he calls them)?
We
could hang out with these people to shed the suit and see the
child or money hungry demon within. Obese teenagers could have
dinner with Douglas Ballantyne in a Wimpy and learn how to
make enough money to join his clubs.
Clinically
stressed out office workers could spend a day with their directors
playing Tetris and Solitaire. Nurses and hospital cleaners
could visit healthboard consultants’ homes to view the slide
shows of the latest skiing trip to
Tommae
Sheridan made a cool £200,000 out of the
page ten
Indonesian Dictator Dies
President Suharto finally goes to hell
By Bill Bonnar
THE
West this week said good-bye to one of its favourite sons as President Suharto,
the Butcher of Jakarta, was buried and despatched to whatever hell would
take him.
Suharto
was everything capitalism wanted from a third world leader; brutal,
corrupt, dependent and completely loyal to the system which rewarded
him well for services rendered.
Suharto’s
rise to power began in 1965 when he became head of
Suharto
staged a military coup, actively supported by the
The
target was the powerful left opposition centred on the Indonesian Communist
Party.
While
the slaughter was going on a secret conference was being held in
On
the one hand a regime of unrelenting brutality and violence which systematically
smashed any opposition no matter from which source.
On
the other, a regime mired in corruption which treated the country
as a personal fiefdom and looted just about everything that
wasn’t nailed down.
Suharto
himself is said to have had a personal fortune of $15billion tucked away
in foreign bank accounts.
Even
the World Bank, used to financing dictators all over the world, had
to confess that that as much as a quarter of
Most
notorious was the invasion and annexation of
Despite
a track record of forced economic growth he left a country ruined
by the economic blizzard which swept the region in 1997/98 and mired by
corruption and scandal at every turn.
Even
today half of all Indonesians live on less than $2 a day while the gap
between rich and poor has never been wider.
No
doubt a glass will be raised in his memory in the boardrooms of multinational companies
and in the White House whose interests he served so well.
For
the rest of humanity and for all those millions who suffered so much under
his rule the only regret is that he died before being held accountable
for his crimes.
German left make advance
JUBILANT
members of the German Left Party are celebrating important advances
in elections for two state parliaments.
In
The
right wing CDU won 36.8 per cent compared with the 36.7 per
cent for the Social Democrats (SPD), leaving them tied on 42
seats each but
The
CDU won 68 seats, the SPD 48, the Free Democrats 13, the Greens
12, and the Left 11 with 7.1 per cent of the vote. And a further
boost for the Left came in
“That
we have achieved this now is a remarkable advance and the other
parties will now have to come to terms with a five-party system,”
party leader Gregor Gysi said. “It is confusing them already.”
page eleven
by
Farooq Tariq,
IT
seems that the reign of General Pervez Musharraf is on its
last legs. Musharraf has become the most detested president
in the history of
Musharraf’s
comments about democracy during his nine-day European
tour that began on January 20 has annoyed democrats inside
and outside
The
Musharraf’s
repeated assurances that nuclear weapons are in safe hands
and the army cannot be defeated by religious fundamentalists
illustrates the concerns of European countries.
His
trip is to address these worries. However, his justification
for imposing a state of emergency, deposing and arresting
the country’s top judges, arresting thousands and curbing
the media will satisfy none.
In
the face of the proposed 18 February general elections there
are two political camps: those participating and those
boycotting.
The
massive turnout at the boycott meeting by All Parties Democratic Movement
on 22 January in Loralai,
The
general perception is that if you are against Mascara, do
not vote for the PML-Q.
Unless
there is an all-out rigging of the election, there is no guarantee
that Musharraf’s supported candidates will win. If PPP
and Pakistan Muslim league- Nawaz (PML-N) candidates gain
a majority in the next parliament, Musharraf will find
it very difficult to repeat what he did following the 2002
election, when he bribed many PML-N and PPP parliamentarians
to join hands with the PML-Q to form a majority government.
At
the time, shortly after the 9/11 terrorist attacks, Musharraf’s military
regime was supported by both US and European governments.
But in 2008 he is isolated. It will be difficult for any parliamentarian
elected on anti- Musharaf feeling to cross over to his
camp.
Boycott
or no boycott, the future scenario seems more and more problematic
for Musharraf. His departure seems written on the front
door of every home. Only another 9/11-like situation could alter
his fate. Students are awakening and so is the trade union movement.
That, combined with the pressure from the lawyers’ movement
and growing participation by civil society, may succeed
in pushing Musharraf from power.
Lets
do it the Nepalese way: with a peaceful massive movement everyone
can get out into the street to insist: ‘Go Musharaf go!’
LPP leader killed in suicide attack
by Farooq Tariq
COMRADE
Abdullah Qureshi (72) is no longer with us. A member of North
West Frontier
One
of the main reasons given by Musharaf dictatorship for the
imposition of emergency on 3 November 2007 was to free
the valley from the religious fanatics.
Abdullah
Qureshi was the pioneer of Left politics in the Swat valley.
Born in 1935, he came from a working class background in the
valley. He organized the first organization Swat Rorwali
(Swat goodwill) in early Fifties. The organization spoke
out against the Nawab of Swat and he was arrested several
times for organizing the people’s resistance against the
king. He was deported from the valley in the early Sixties
and his nationality was revoked. The Nawab of valley
had the ultimate powers in the valley.
He
settled in Gojaranwala in
Hakim
Bahudar, Peasant secretary of the LPP and member of LPP national
committee was a close friend of Abdullah Qureshi.
He
tells us more about Abdullah Qureshi:
“He
had been very much inspired by LPP activities for some time.
He was a regular reader of the Weekly Mazdoor Jeddojuhd (workers
Struggle). After his decision to join LPP, party became very
respected and prestigious in the completely valley. He was the
symbol of Left politics in the valley.”
Abdullah
Qureshi was killed in the suicidal attack near the NangoLai
area check post. He was passing through the area when
the attacker blew himself up resulting in the killing of
several other civilians.
The
incident happened on 9 December 2007. It was the day when
the LPP fourth conference was taking place in
They
did not want the news to be public. The family fears that
it was a targeted attack on him because of his Left ideas.
The family is investigating this aspect and has asked
the LPP NWFP to help in the matter.
Now,
with the permission of the family, LPP is announcing his
death with great pain.
Although
comrade Abdullah Qureshi was only for 16 months in the LPP,
but his whole life was devoted to Left ideas. He worked
in the most difficult circumstances.
He
joined LPP while there was an upsurge of religious fundamentalist
ideas in the valley. He did not care about his life but more of
ideas.
The
LPP will hold memorial meetings all over
page twelve
Climate Of Corruption
By Ken Ferguson
AS
a hard up and bemused public looks on, the list of politicians with
their names linked to sleaze allegations grows ever longer and takes
in each of the so called major parties.
The
variety of politicians involved is only topped by the range
of imaginative explanations that they offer when caught.
From
poor administration and bad memory (Hain) through “inadvertently”
breaking the law (Wendy} to making an “administrative error”
{Tory Derek
How
did we get here?
Corruption,
power and money are never far way from the world of politics
whether it is large scale bribery such as that used to ensure multi-billion
pound arms deals or employing relatives in non-jobs from
parliamentary allowances.
It
is now fashionable to worship money, markets and greed and we are
bombarded daily with messages praising the values and achievements
of the so called business “community”.
This
surely reached a new low this week with the news that the supposedly
Presbyterian pure Prime Minister Brown was giving his personal
blessing to the high priests of fast food McDonalds apparently
issuing educational qualifications.
So
for New Labour a process which began by junking the ideas of
pioneers such as Keir Hardie, then saw the Blair government crawl
to big business and their displays dominate Labour conferences
has now put them knee deep in the shady dealings so familiar
among speculators and business sharks.
A
government which cannot deal with pensioner poverty, despite describing
itself as “Labour” effortlessly finds a massive £55billion
to bale out a grossly mismanaged bank while fending off
demands to nationalise it.
The
Brown regime has rapidly put to the sword any illusions that they
would differ from Blair.
Indeed
if anything they have been even more craven in bending to business
with their tax cave in last week just the latest example.
Indeed
it is some achievement that so bad is the current crew in
And
it goes some way to explain why Wendy ‘superbrain’ Alexander
and her overpaid team of underachievers thought that a donation
of £950 - even if illegal - was small beer.
While
supposed servants of the people from the “mainstream” parties
maintain their cosy relationships with big business and tycoons
like Donald Trump it should be no surprise if a suspicious
public looks at their claims of innocence and concludes,
Victor Meldrew style,
“I
don’t believe it!”
Perthshire Incinerator Plan Draws Local Fire
PLANS
by Sita
Despite
an open invitation, the
As
a former manager of such a plant he spoke authoritatively about
why incinerators are an outdated technology, causing pollution
and ill health, while encouraging overproduction. Christopher
Maltin, an authority on sustainable energy and waste management strategies
underlined the absurdities of burning waste.
Tony
Hitchens of Premier Waste Management gave a presentation on one
of the alternatives to incineration, aerobic digestion. This
process takes unsegregated household waste and converts
the organic waste component into compost which in one example
was used to help turn a brown field site into a coppice woodland for
fuel. This alternative approach has led to a reduction of 85
per cent in waste going to local landfill. Tayside Environmental
Action Group are aware of several such alternatives, some
with even better results.
Finally
toxicologist Peter Rossington, who has campaigned against
other incinerators in the
Campaign
fights council’s
EVER
since
The
council claims to have run an adequate consultation on the proposal
- local opinion says otherwise. Regular park users insist
they just didn’t know about the plan until the consultation period
was over.
Overwhelmingly,
people at the meeting said that they don’t believe the £25
a shot - £20 for kids - private playground is what they
want in one of the last quiet, green spaces in the city.
The
council’s claim that Go Ape in some way fits in with their plans
to tackle childhood obesity has also been ridiculed.
Green
councillor and local activist Danny Alderslowe told Go Ape’s
owner Tristram Mayhew, who had at least turned up for the massive
public meeting:
“In
all fairness, I don’t think you’ve been told what you’re coming
to. You’re coming to a city where recreation and green space
has been sold off.”
However,
despite pleas for the council to re-run the consultation, it
looks unlikely so far that they’ll put the brakes on the Go Ape development.
Councillors
who have supported the plan were bullish at the meeting.
Local
representatives Stephen Curran, Labour, and Colin Deans, SNP,
refused to answer questions put to them.
Council
Executive member for Land and Environment Cllr Ruth Simpson,
on the other hand, was confident enough to heckle the whole
crowd.
“We
have run a full consultation,” she insisted, then shouted
over the jeers, “and you did not respond!”
Mayhew
had left the meeting saying to the audience that he would
go away and think about Go Ape’s application - but a day later
he was telling the Herald that he wished to “let this planning
application go forward and see what the elected representatives
think of it.”
Campaigners,
however, are preparing for a battle. The proposal is due
to go to committee in the next stage of the planning process,
although the timescale is not yet confirmed.
Save
[1] More info at: www.savepollokpark.com