July 4, 2022

Large bank profits in the rest of the world resulting from pandemic-era, extremely cheap, government-subsidized lending rates shifting to high interest rates have not been highlighted. In Europe however, where bank profits are more of a concern to average citizens, the European Central Bank is looking at ways to say it doesn't like them.

The ECB’s governing council is due to discuss how it could curb the extra margin that hundreds of banks will be able to earn from its subsidised loans by simply placing them back on deposit at the central bank, according to three people familiar with the plans.

The people said it would be politically unacceptable for the ECB to provide banks with a taxpayer-backed profit while it is raising borrowing costs for households and businesses and most commercial lenders are paying bonuses to staff and distributing dividends to investors.

It is a key talking point, but does not line-up with the reality of artificial cheap lending and then planned rate rises leading to windfall profits for banks. It is kind of the point of the program:

• Morgan Stanley said: €4bn and €24bn of extra profit could be made across the sector in the next two years.

The ECB defended its cheap loans to banks, saying: “Without them the pandemic would have hit the real economy much harder.” It declined to comment on how it could stop lenders making windfall gains.

Problems with using monetary processes as the main defender of the economy—because of the private nature of banking and production—is that the private banks make out like bandits no matter what is going on.

This is government-subsidized profits that has lead to inflation that the rest of us are paying for now. It is beyond belief that that central banks around the world who work for the private banking system are interested in not maximizing profits for those private banks.

Capitalism in Japan has been in crisis for a couple of decades and is not getting any better. Demands for wage adjustments are going unheeded—largely because of the lack of any wage bargaining in Japan—and demographics have been working against workers for a while.

Inflation is at a similar pace as the rest of the world, but the Japanese economy is tied tightly to the USA's monetary position. Japan's currency has fallen fast in relation to the USA dollar and other currencies because of low profitability and production. Bad internal monetary policies from "Abenomics"—the printing of money and giving it to middle class consumers—to an over-reliance of foreign private investment means there is little room for the capital-minded government.

The only way to save Japan's economy is for a large public expansion and focus on a care economy, local needed production, and usurping some of the high-end production profits for the public. None of which are on the agenda for the ruling Liberal Democrats.

Looks like Argentina is heading for a deeper debt crisis as their negotiations with the IMF fall off the rails. Peronist finance minister Martín Guzmán has quit in the middle of negations with the IMF to restructure their $44bn of debt.

The Peronist party of President Alberto Fernández is not doing well in public support as the economy struggles.

Paying their debt is difficult as issuing new debt is not paying for old debt and their currency lags the USA dollar significantly. Import costs are also fueling a withdrawal of private finance leading to outflows.

Guzmán is up against a political coalition that is split between those who want a debt restructuring and those who want to spend money on social programs to help Argentinians who are facing economic hardships, job losses, high energy costs, and run-away inflation.

Elections are in 2023 which makes a final negotiation in the face of political positioning next to impossible.

The meetings were during the previous weeks of major decision makers in the private and public sectors. NATO in Madrid, G7 in Germany, and the central bankers in Portugal.

All were supposed to be focused on the economy, none of them focused on how to pay for the current crisis and war.

NATO was all about a show of unity—barely believable except their unity on not wanting to be seen as not unified. The NATO meeting was not, as one might expect, about sharing the cost of the current war in Ukraine, it was about making sure there was enough money to pay for (read: start) the next war.

• The focus of the NATO meeting was getting Germany to double its war spending.

The G7 was also all about unity between government officials who are not supposed to get along. Indeed, none of them do get along and all have either low approval ratings or high approval ratings from their population for exactly opposite reasons. Again, the focus was ostensibly for solidarity against Ukraine and dealing with inflation/increased costs (rather related at this point). However, absent was any discussion about how to pay for the current mess more equally between countries or more equitably within countries.

• The focus of the G7 meeting was to align government policy talking point to continue to blame budget deficits for economic drag and inflation.

The central bank meeting was also about a show of unity. Much easier to do given that they all speak from the same playbook with the same ideology and only have one lever to push.

• The central bankers continue to blame workers for everything wrong about "the economy" and for getting in the way of fixing "the economy". The economy here being capitalist profits.

A real great list of international meetings doing nothing to help the real crises around the world which include:

• climate change
• covid-19 pandemics
• additional pandemics of monkey pox, anti-biotic/anti-fungal resistance, polio, flu, etc.
• inflation
• supply chain collapse
• war
• fake wars that turn into real wars with China

Instead, the leaders were discussing how to make the world less safe. Super.

Where is the UN in all this?

• The UN is focusing on things that we need focusing on (climate, oceans, cooperatives (July 2 was international cooperative day), children in conflict zones, sexual violence in conflict zones, women in work, children's education.

Too bad none of the rich countries of the world want to talk about funding all those things and actually avoiding war, eh?