The Collapse of Global Capitalism: What can we learn from the Global Financial Crisis (Dr. Jamal D. Harwood)

  

The Collapse of Global

Capitalism: What can we

learn from the Global

Financial Crisis

  Jamal D. Harwood London, UK @jamal_harwood

Financial Crisis of 2008 and today..

• 5 Years after growth poor and much slower

  The greatest crisis since 1929

• recovery than 1929
• Jobless recovery – built on debt
• Confidence precarious
• Governments using media to generate confidence
• Unhealthy relationship with media and banking

Causes of the crisis in 2008..

• Repeal of Glass Steagall act in the US opened up market to high risk trading Unprecedented fiat money creation

  Enormous debt bubble

• Housing bubble via easy credit
• New exotic derivatives and mortgage backed securities poorly understood risk profile

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

Three inherent crises apparent in Capitalism

  Weakness in and adherence Growth/ Proft obsession Corruption in the highest

  Overall Income inequality continues to deteriorate…

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 public

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 distortion

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

Corrupt relationships in Government

• • Federal Reserve bank privately owned by banks

• Too big to fail banks provide most senior

  government financial ofcers – 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

  Derivatives market as large as ever…

  It looks like we have a recovery in growth… but

  Adjusted for real rates of inflation and growth is really flat…

  smooth the business cycle. Are they efective?

  Despite continued interventions bust and boom

cycles dominate…

• Monetary and Fiscal policy are interventions to

  Governments continue to overspend to attract voters

  The US leads the world in developing debt

  For an economy that is supposed to be in recovery this is not normal

  But growing debt is a global problem

  

The reality is that the Capitalist world

is addicted to debt – 8% CAGr (1980 –

2013)

  The policy is to print more and more money from nothing…

  The more money printed the greater likelihood it will get out of control…

  

The cost of out of control

debt (money creation) is

consistent and high inflation

  

And after numerous changes to the way it

is calculated real inflation is really higher

  Many of the fgures are “managed” real growth is much lower than reported

  Manipulation of unemployment

fgures is probably the

worst

  

Numbers relying on food stamps

steadily increasing despite claims

unemployment down

  

Massive quantitative easing

(money creation) benefting the stock market

  Increased money and productivity

not trickling down to real

wages

  Wages not keeping pace even with inflation over the past 30 years

  The only age group in the US increasing employment is over 55’s!

  The Islamic Imperative

• Non Interest economy
• Gold/Silver based currency
• No hoarding of wealth
• Radical taxation policy
• Prohibition of gambling
• Land reform
• Distinctive regulatory framework and true fnancial reform
• Social welfare reform

Political Stability

• 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

All Interest is forbidden

   investment model without banking intermediaries Debt based creation of money is out

  Low cost equity/partnership based

   of control and grossly destabilising Perversely Central Banks efectively

   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

Gold/silver as currency

• Currency stability over millenia and a

  level playing feld between Nations
• Relatively mild instances of deflation and inflation compared to fat 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

Hoarding prohibited

   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

Radical Taxation approach Zakat (2.5% on No Income, Wealth taxes Strong non-utilised Consumptio are incentive for wealth) n, Business, proportionate investment

  Kharaj/Ushr on Rates, to wealth – and

capacity of Council, fair on all spending

All Gambling is prohibited

   All gambling including most derivative contracts forbidden (incl. short selling, forward contracts)

   Derivatives are increasing volatility in markets at higher risk levels

   Gambling in all forms take wealth out of circulation/trade

   Unacceptable losses to society

Land Reform

  

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

Distinctive regulatory environment and fnancial reform

• No state bailouts of private companies
• No monopoly, strong anti- fraud provisions
• Stable regulatory environment – laws consistent over 1400

Social Welfare reform

  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 fnal help for the basic needs when the family unit is unable to

Concluding Comments

   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

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