Regulation or deregulation can be used as the controlling power sees fit, and for free market capitalists and Keynesian leftists and progressives (really interventionists) to act like the solution to the economic problems are some legislation, is naive. The IMF shock doctrine is one that is predicated on deregulation that allows the implosion of third world nations’ economies. It is essentially a restructuring of those economies by the global mega-banks and corporations that are done by deregulation, allowing them to enter those nations (such as NAFTA), and then in turn those international interests using regulations to shut down any competition and control resources.
This is how the global economy works, and it’s all bundled into a massive ball of toxic derivatives assets that are then backed up by the governments, who are forced to sign on to bailing the speculative hedge funds that use derivatives as weapons of mass destruction. credit default swaps and derivatives are now a huge portion of the global economy.
People in general are not aware of the existence of derivatives and the consequences of having governments sign on to bailing out megabanks who are liable to go under from losing. The argument is made that the entity going under is so large, that for it to fail, the national or global economy would suffer as a result. This was the purpose of the 2008 Banker Bailout. The system is layered to create confusing, but isn’t that difficult to grasp. The banks and hedge funds are made to go under, so that the real assets of the national economies can be signed on to back up the non-existent digital derivative debts, which are more or less leveraged to infinity. The name of the game is simply consolidation of power. As Nomi Prins explains in It Takes a Pillage, “The acquisition of power comes through the consolidation of money on Wall Street.”
This basic strategy was explained in the IMF-leaked documents that were sent to Greg Palast of the BBC. Palast writes that, according to the confirmation of Dr. Joseph Stiglitz, former chief economist of the World Bank. It describes the steps taken to take over an economy and consolidate the assets:
“Step One is Privatization – which Stiglitz said could more accurately be called, ‘Briberization.’ Rather than object to the sell-offs of state industries, he said national leaders – using the World Bank’s demands to silence local critics – happily flogged their electricity and water companies. “You could see their eyes widen” at the prospect of 10% commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets.”
This is my point about privatization versus common good as being somewhat irrelevant. That was a relevant debate when economies were smaller and more localized. Now, with global corporations and mega-banks having GDPs greater than many nations, regulation and deregulation can be alternately utilized, depending on the strategic need for full spectrum dominance. Note as well that control of resources and assets is the crucial locus of real power: not “money,” so to speak.
“Step Two of the IMF/World Bank one-size-fits-all rescue-your-economy plan is ‘Capital Market Liberalization.’ In theory, capital market deregulation allows investment capital to flow in and out. Unfortunately, as in Indonesia and Brazil, the money simply flowed out and out. Stiglitz calls this the “Hot Money” cycle. Cash comes in for speculation in real estate and currency, then flees at the first whiff of trouble. A nation’s reserves can drain in days, hours. And when that happens, to seduce speculators into returning a nation’s own capital funds, the IMF demands these nations raise interest rates to 30%, 50% and 80%.”
Step two involves the speculative aspect mentioned above. Classical liberal free marketeering comes into play as an apologetic tactic when necessary for tactical praxis, not because of any commitment to some Austrian school. The cash flows out before the economy is imploded, leading to:
“Step Three: Market-Based Pricing, a fancy term for raising prices on food, water and cooking gas. This leads, predictably, to Step-Three-and-a-Half: what Stiglitz calls, “The IMF riot.” The IMF riots we see in the Euro nations are operating on this same pattern. And this pattern works. It is crucial to note that when control of resources has been seized, they can be shut off, leading to the planned riots. The riot stage is a brilliant step in the plan, leading to an atmosphere of economics trepidation and fear, and the result is “panicked flights of capital.” When the economy has thus been liquidated, it’s a fire sale: real assets go for pennies on the dollar, because the fiat currencies are worthless, and there is a massive transfer of wealth.
In regard to dropping market fundamentalism when needed, Palast (Stiglitz) explains:
“Stiglitz notes that the IMF and World Bank are not heartless adherents to market economics. At the same time the IMF stopped Indonesia ‘subsidizing’ food purchases, “when the banks need a bail-out, intervention (in the market) is welcome.” The IMF scrounged up tens of billions of dollars to save Indonesia’s financiers and, by extension, the US and European banks from which they had borrowed.” Government intervention is welcomed, especially when the speculative betting proves a failure. Step four then involves regulations and trade laws imposed on the host nation through a NAFTA-style deal, labelled “free trade:”
“Now we arrive at Step Four of what the IMF and World Bank call their “poverty reduction strategy”: Free Trade. This is free trade by the rules of the World Trade Organization and World Bank, Stiglitz the insider likens free trade WTO-style to the Opium Wars. “That too was about opening markets,” he said. As in the 19th century, Europeans and Americans today are kicking down the barriers to sales in Asia, Latin American and Africa, while barricading our own markets against Third World agriculture. In the Opium Wars, the West used military blockades to force open markets for their unbalanced trade. Today, the World Bank can order a financial blockade just as effective – and sometimes just as deadly.”
That is why Chairman Bernanke makes the point that the Depression came under a period of deregulation, as did the 2008 bailout.