Archive for the ‘Banking and financial services’ Category

October 24, 2007: Merrill Lynch goes down

by Michael Roberts

It is exactly 10 years since the global financial crash began with the news that the French bank, BNP, had suspended its sub-prime mortgage funds because of “an evaporation of liquidity”.1

Within six months, credit tightened and inter-bank interest rates rocketed. Banks across the globe began to experience huge losses on the derivative funds set up to profit from the housing boom that had taken off in the US, but had started to falter. And the US and the world entered what was later called the great recession – the worst slump in world production and trade since the 1930s.

Ten years later, it is worth reminding ourselves of some of the lessons and implications of that economic earthquake.2 First, the official institutions and mainstream economists never saw (more…)

The paperback version of The City: London and the Global Power of Finance, is released today. This edition contains a sixteen-page Afterword on the following topics:

  • Brexit and imperial power
  • The City, Brexit and world developments
  • Immigration and nationalism
  • Trump and the US hegemon
  • Shifting tectonic plates

These develop and update points raised before.

With a cover price of £10.99 and US$16.95 in the global book market, the paperback version of The City is currently available at the following prices:

Verso, £7.69

Amazon.co.uk, £9.98

Amazon.com, $11.52

An eBook is also available.

Do your own arbitrage!

by Tony Norfield

Apple Inc is the world’s largest company by market capitalisation, with a value of nearly $800bn on 19 May 2017. It does not produce most of the world’s smart phones, coming in a poor second behind Korea’s Samsung, and it is not that far ahead of China’s Huawei in terms of market share. Neither is it necessarily the biggest player in other consumer electronics markets. But so far it has managed to corner the premium section of these markets, managing to get enough loyalty from customers who will pay a lot more for a product that is not so different from the (much) cheaper ones that are not quite so ‘cool’.

That is principally why Apple, with fewer than 120,000 staff and itself producing very little of the final product that it sells to consumers, can be worth in capitalist markets so much more than Foxconn. Also known as Hon Hai Precision Industry Co, the latter Taiwan-based company is its main assembler, employing more than one million workers, and is currently valued at a relatively minuscule $60bn in terms of market capitalisation. In 2016, Apple’s operating income was $60bn compared to some $4bn at Foxconn, endorsing the market valuation ratio ($800/$60bn).

These points are another sign of the distortion of social value by imperialism, and another day I may write more about the social and economic mechanisms behind this. For now, though, I want to focus on the financial aspects of Apple’s business, mainly using information from its latest annual report.

Most radical, critical commentaries on Apple focus, reasonably enough, on how it uses cheap labour in Asia to boost its profits. What I want to deal with instead are the details in (more…)

Below is an article submitted to Redline by Alec Abbott written 18 April 2017

1. A quintessentially liberal cycle: from smugness to despair, from despair to hope and from hope to smugness

The initial blow

Trump’s election victory left the liberals reeling with shock and incomprehension. Detached from the poverty and discontent around them, and supremely confident in the Democratic Party’s electoral machine, they saw Hillary Clinton as unassailable. Her defeat did little to diminish their disdain for ordinary working people, or to improve their grasp of US realities.download

Rather than consider the socio-economic forces that brought Trump into office, the liberals focused almost exclusively on his personality, his egocentric greed for power, money and fame. Some went so far as to detect the sinister hand of Moscow at work. When asked how he viewed Trump’s relationship with Russia, Bernie Sanders, always hovering between radical liberalism and mild social-democracy, replied:

‘The American people are astounded that when you have an authoritarian like Putin who is moving Russia more and more towards an authoritarian society, President Trump has only positive things to say about this authoritarian figure. What hold does Russia have over the President? We know that Russian oligarchs lent Trump and his associates money. Does that have anything to do with Trump’s relationship with Russia?’ (CNN News, 30/3/2017)

From the start of the election campaign, liberals viewed Trump as an impulsive maverick, a right-wing bigot who has little regard for civilized norms of behaviour. Only by pandering to the worst prejudices of disaffected Americans, they maintained, would he succeed in capturing the presidency. The great unknown was how this relative new-comer to politics would behave once in office. Would he adapt his election pledges to political reality or would he pursue his outlandish agenda to the bitter end? That was the question on the minds of liberal commentators as Trump assumed the position of the 45th president of the US.

In no time at all the liberals gave vent to their despair. Maggie Lake, CNN commentator and political analyst, bewailed: ‘He hasn’t changed. There was the expectation that the office changes the man but we have not seen this with Donald Trump.’ (CNN News, 23/3/2017) Not long after, The Los Angeles Times, a prominent liberal organ, delivered the following lamentation:

‘Like millions of other Americans, we clung to a slim hope that the new president would turn out to be all noise and bluster, or that the people around him in the White House would act as a check on his worst instincts, or that he would be sobered and transformed by the awesome responsibilities of office. Instead … it is increasingly clear that those hopes were misplaced.’ (4/4/2017) (more…)

Tony Norfield will be giving a lecture next week at King’s College, London, on Wednesday 8 February.

The session is from 6pm to 8pm, and is part of a series of seminars at King’s on Contemporary Marxist Theory.

The seminars are open to the public, but arrive in time to get signed in if you want to attend.

Venue details:
342N Norfolk Building (entrance on Surrey St)
King’s College London, Strand, London WC2R 2LS

Summary:
This paper discusses how the financial system both expresses and reinforces the power of major countries. Developing Marx’s theory by examining bank credit creation, bond and equity markets, the paper shows how what Marx called the ‘law of value’ is modified by the evolution of finance. To understand imperialism today, one has to recognise how financial markets help the centralisation of ownership and control of the world economy. They are also an important way in which the US and the UK siphon off the world’s resources. The question of Brexit and the City of London is also discussed.

downloadExcellent interview/podcast by Tom O’Brien with Tony Norfield, here.

Tom’s Alpha and Omega site, where the interview also appears, is here.  There’s also an excellent interview there with Michael Roberts.

Our interview with Tony is here.

imagesby Michael Roberts

Pete Green has now taken up the cudgels in the debate that Jim Kincaid and I have begun over the causes of regular and recurrent crises in capitalist production and in particular the Great Recession.  He makes a welcome and considered critique of my views, as expressed in my book, The Long Depression and in recent discussions at the Historical Materialism conference in London earlier this month.  I think he raises some new and important points in his critique, which, as he says, will require further debate and research.

Like Pete, I cannot deal with all arguments in this short reply on my blog but I’ll do my best to take up some key ones, but it still makes this post long enough!

The data is actually clear

Pete starts by saying he is not going to dispute the data on the rate of profit that I have presented, mainly for the US, but also for other economies.  But apparently he “shares Jim Kincaid’s scepticism about reliance on US national income accounts as source for corporate profitability”.  Actually, I am not sure Jim is sceptical of the official data.  Indeed, he has said that I have used the data accurately and as Pete says, “there is no adequate alternative available for those engaged in empirical investigation”.

And that is what the bulk of my research is: engaging in empirical investigation to verify or otherwise particular theories or laws.  In my view, too many Marxist economists have ignored empirical work and concentrated on interpreting (and re-interpreting) Marx’s writings and ‘what he meant’, rather testing his laws of motion of capitalism to see if they best fit the facts.

Luckily, I am not alone in doing empirical investigations – Andrew Kliman has done prodigious analysis, Anwar Shaikh’s new book is a gold mine of empirical studies, G Carchedi has also tested Marx’s law with the evidence.  And there is a host of new young scholars internationally doing such work.  Carchedi and I will be (more…)