Monopolistic high interest as the dynamic of crisis

Published 14.02.2018 01:32 Modified 14.02.2018 01:32

U.S. President Donald Trump recently said all U.S. economic data is good, and there is no reason for deterioration in the indices, noting that it is hard to understand stock market sales. Of course, what Trump sees is quite different from what is happening. Some think that the danger of recession, which has gradually increased after the outbreak of the global financial crisis in the U.S. in 2008, is disappearing with rising wages and budging inflation, but we think they are barking up the wrong tree. This is because the monopolistic economy and the lack of market-friendly competition in the global economy, which are the main sources of the crisis, are increasingly deepening. This monopolistic situation applies to the U.S. economy the most. The upward movement of inflation in developed countries, especially in the U.S., will not be enough for healthy growth to the extent that competitive market dynamics in the global economy lack.

On the contrary, coupled with rising inflation, monopolistic tendencies in the global financial system will further push up long-term global interest rates above inflation, which will be followed by both recession and excessive inflation, i.e., a stagflation process.

As you know, the London Interbank Offered Rate (Libor) scandal that broke out in 2012 exposed that global interest rates were contractually determined by the oligopolistic financial capital on the table.

Libor is not only the price of the banks' short-term money exchange, but also a mainstay that determines daily interest rates in money markets and derivative products all over the world, or rather, that directs the global money market.

There should not be a frame-up here. If it is money markets that constitute the heart of the economy, it cannot be a market in the real sense anymore and interest rates are unwholesomely determined by market dynamics. In fact, the scandal that emerged in 2012 exposed that this unwholesome and non-market situation had existed for years, that there was no market in the real sense and monopolistic interest rates were the essence of the matter. Now, the emergence of global inflation will push up interest rates higher than necessary through monopolistic, speculative pricing.

So, the flow of capital to developing countries in particular will shrink, and interest rates will rise speculatively in these countries. Therefore, we must ask the questions: How are interest rates determined in developed and developing countries for both demanded money (deposits) and supplied money (loans)? Do these interest rates emerge as a result of a competitive market? For instance, what market sets interest rates in Brazil, South Africa or Turkey? Everyone knows the answer to these questions. In all parts of the world, interest rates are determined by the banking system under oligopolistic conditions instead of under competitive ones, that is, under a frame-up. So, you can consider it to be a continuous state of the 2012 Libor scandal.

In fact, distortion and the monopolistic situation in the financial and banking system are also present in the leading sectors of the real economy, where industrial capital and bank capital are intertwined. Solving the monopolistic situation in the economy and ensuring the sturdy functioning of the market also come to mean a crisis-free economy. That is why states strive to make anti-monopoly regulations in all major crisis outbreaks. Of course, the permanence of these regulations - in the sense of systemic change - is a purely political choice. The political movements and leaders who have made this political choice have always been targeted by global financial capital. In other words, demanding a fall in interest rates means demanding a competitive and functioning economy in the real sense.

Today, supporting small and medium-sized enterprises (SMEs) and technology-based areas and running the market soundly are the only prescription for overcoming the crisis. However, a sturdily running market is possible with the knowledge coming out of the control of monopolies and spreading without any obstacles through anti-monopoly laws and regulations. To this end, financial capital must be deprived of high interest rates, which is the biggest tool and weapon of capital concentration.

When this happens, competitive market will dominate finance as well as all the areas of economy, and all the disorder caused by the monopolistic high interest cycle, from inflation to high chronic unemployment, will be eliminated.

All this also shows how to break this cycle of high interest rates, high inflation and chronic unemployment in Turkey. First of all, it is necessary to carry out strong reforms to break the monopolistic and oligopolistic structure that generates high interest rates in the financial system.

It is necessary to create competitive capital markets and the depth of these markets as an alternative to monopolistic money markets.

Other than the morbid oligopolistic market of the banking system, public banks need to put forward competitive pricing and abandon high monopolistic profits. Also, the state must support competitive venture capital and high value-added economy on all levels and in all areas, protect them against monopolistic pricing and open market inflows for small players in the economy.

Those who say interests cannot fall on the table are making a high-interest monopoly on the table and refuse the market. The "interest rate lobby" President Recep Tayyip Erdoğan mentions is the sum of this understanding.

Today, the crisis cannot be overcome without making anti-monopoly regulations in all countries and the global economy. The chance of introducing these regulations and anti-monopoly reforms and succeeding in them is much higher in developing countries. This is because the source of the monopolistic crisis economy is developed countries.

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