Greece,
Puerto Rico and Detroit have something else in common apart from the
default
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A brutal
command launched a few days ago by the holders of government bonds to
a government which had issued these bonds: proceed in layoffs and
sell off public property to pay us. This command reminds us
something, not because it concerns Greece, but because the brutal
principals are largely the same people who took advantage of the
Greek debt and used invariant commands to maximize their profit.
The
government which received this command is Puerto Rico and the holders
of the bonds is a group of hedge funds. Among the victims of the
speculative greed of this group in the past were included Argentina,
Greece, and even the indebted state of Detroit in the US. The only
substantial difference between the Greek and other cases is that the
orders and the pressures against Greece were expressed through the
"institutions" [European Commission, ECB, IMF and lately
ESM] and not directly by the hedge funds.
But what
exactly are the hedge funds; Officially are designated as
"compensatory hedge funds." Simply put, they are investment
organizations seeking high-risk investments and high returns. The
funds come from large investors, who contribute significant amounts
of money. The hedge funds operate with restrictions much smaller than
those facing the banks and other financial companies. In fact, they
are investment vultures lurking to take advantage of easy money
opportunities.
Worldwide,
the hedge funds have at their disposal more than 2 trillion USD: 2/3
of this sum is held by US investors. Overall, funds of hedge funds
are comparable to the GDP of countries such as Britain, France,
Italy, India, Russia and Canada, and four times the GDP of Argentina,
or, ten times the GDP of Greece.
A common and
relatively easy target of hedge funds is governments that have large
debt. And that's because the market value of bonds and other
financial products - through which the indebted governments are
forced to seek money in the markets to meet their needs - is reduced
when debt repayment chances diminish. But the nominal value of the
bonds remains the same. Buying 'cheap' bonds and exerting suffocating
pressure to be repurchased at prices much higher than the initial
investment, the hedge funds achieve substantial profits.
For these
reasons, a key target of hedge funds is the financial "junk",
ie those whose market value has depreciated considerably, eg
government bonds of countries that are on the verge of bankruptcy.
And of course, a diabolic coincidence is that many managers of hedge
funds are specialized in insolvency and bankruptcy cases.
Speculative
attacks almost always follow the same tactics. An example is the
recent attack on Puerto Rico, of which the economic situation has
many similarities to that of Greece. The debt amounts to 72 billion
dollars, with an additional 40 billion dollar pension obligations and
other debts not paid: total debts amounting to about 110% of the GDP.
The government is seeking the suspension of payments of government
bonds, has already made significant cost cuts, and designed an
economic plan in order to achieve a primary surplus in 2017.
But the
vultures-investors are not interested in economic reconstruction
plans, and are not touched by the increasing poverty of the
population, but are aimed at direct and largest profit as possible -
because this is the only reason for their existence. They require the
imposition of austerity measures to collect the funds necessary to
repay bonds in their possession.
Behind these
speculative moves we find frequently the same "usual suspects."
A total of 35 hedge funds exploit the debt of Puerto Rico: 15 of them
have also exploited the debt of Argentina, 13 the debt of Greece and
7 the debt of the state of Detroit. These investors made great
fortunes by exploiting state crisis and some of them vehemently
fought every effort to restructure the Greek debt in 2012.
But why the
governments of the developed economies have not made substantial
moves to restrict the operation of speculative hedge funds; The
Economist has estimated that in the UK alone, the hedge funds have
donated 15 million dollars to the Conservative Party in the last five
years. Similar donations of significant amounts have been made in the
US, where in 2014 the Supreme Court reaffirmed its earlier decision
that the donation money to parties for election campaigns is a kind
of "freedom of speech".
In other
words, those who are able may finance political parties, to ensure
(through the funded freedom of speech) the protection of their
interests. For the rest remains a "democratic" election
process, through which they have the opportunity to vote for those
who express the already properly configured "free speech."
To prevent perpetuation of predatory speculators in such a rigged
scene, the awakening of society and the information about the methods
used, is immediately necessary.
Source:
Former IMF Official commenting on Puerto Rico: "The more the economy tanks, the less tax they collect, and the more they have to tighten. It is crazy,” he said."
ReplyDeleteYes, it is. Pay attention to this ultimate lesson in economics. Government is only POSSIBLE because the people produce. When the priority for resources is government, at the expense of productive INDIVIDUALS, the system FAILS.
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