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The Collapse of Global Capitalism: What can we learn from the Global Financial Crisis Jamal D. Harwood London,

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Presentation on theme: "The Collapse of Global Capitalism: What can we learn from the Global Financial Crisis Jamal D. Harwood London,"— Presentation transcript:


2 The Collapse of Global Capitalism: What can we learn from the Global Financial Crisis Jamal D. Harwood London, UK @jamal_harwood

3 Financial Crisis of 2008 and today... The greatest crisis since 1929 5 Years after growth poor and much slower recovery than 1929 Jobless recovery – built on debt Confidence precarious Governments using media to generate confidence Unhealthy relationship with media and banking

4 Causes of the crisis in 2008... Enormous debt bubble Repeal of Glass Steagall act in the US opened up market to high risk trading Unprecedented fiat money creation Housing bubble via easy credit New exotic derivatives and mortgage backed securities poorly understood risk profile

5 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 Growing indebtedness, more asset bubbles (stock and bond market

6 Three inherent crises apparent in Capitalism Weakness in and adherence to the rule of law Growth/Profit obsession and excessive risk taking Corruption in the highest levels of government

7 Overall Income inequality continues to deteriorate…

8 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

9 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

10 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 manipulation (bullion banks)

11 Corrupt relationships in Government Federal Reserve bank privately owned by banks Too big to fail banks provide most senior government financial officers – 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 intervenes in markets

12 Derivatives market as large as ever…

13 It looks like we have a recovery in growth… but

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

15 Despite continued interventions bust and boom cycles dominate… Monetary and Fiscal policy are interventions to smooth the business cycle. Are they effective?

16 Governments continue to overspend to attract voters

17 The US leads the world in developing debt

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

19 But growing debt is a global problem

20 The reality is that the Capitalist world is addicted to debt – 8% CAGr (1980 – 2013)

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

22 The more money printed the greater likelihood it will get out of control… FMQ = Total Check deposits, M1 currency, Savings deposits, and Reserves balances less vault cash

23 The cost of out of control debt (money creation) is consistent and high inflation

24 And after numerous changes to the way it is calculated real inflation is really higher

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

26 Manipulation of unemployment figures is probably the worst

27 Numbers relying on food stamps steadily increasing despite claims unemployment down

28 Massive quantitative easing (money creation) benefiting the stock market

29 Increased money and productivity not trickling down to real wages

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

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

32 Non Interest economy Gold/Silver based currency No hoarding of wealth Radical taxation policy Prohibition of gambling Land reform Distinctive regulatory framework and true financial reform Social welfare reform The Islamic Imperative

33 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 /re-election decisions and appoints key economic and administrative appointees independently Political Stability

34  Low cost equity/partnership based investment model without banking intermediaries  Debt based creation of money is out of control and grossly destabilising  Perversely Central Banks effectively 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 costing taxpayers 100’s of billions  Perpetual growth to pay interest is impossible and leads to crashes and asset seizures All Interest is forbidden

35 Currency stability over millenia and a level playing field between Nations Relatively mild instances of deflation and inflation compared to fiat 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 only function with non-interest system Gold/silver as currency

36  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 outcomes  Business cycle downturns work against investment and spending Hoarding prohibited

37 Radical Taxation approach Zakat (2.5% on non- utilised wealth) Kharaj/Ushr on capacity of land, Jizyah No Income, Consumption, Business, Rates, Council, Transport taxes Wealth taxes are proportionate to wealth – fair on all (natural redistribution) Strong incentive for investment and spending and full employment

38  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 via moral hazard All Gambling is prohibited

39  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  Laws against price fixing Land Reform

40 No state bailouts of private companies No monopoly, strong anti-fraud provisions Stable regulatory environment – laws consistent over 1400 years Lobbying unlawful Distinctive regulatory environment and financial reform

41 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 final help for the basic needs when the family unit is unable to Social Welfare reform

42  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 away from even just some part of that which Allah has revealed to you” [Quran 5:49] Concluding Comments

43 We need you to work for this change. Work with us…

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