Sunday, 27 February 2011

Modern Day Tyrants

Democracy is the equilibrium position for a society which accepts some form of central governing, since no power base can persist without the support of its subjects. The old European monarchs learnt this lesson harshly, or otherwise, in last hundred and fifty years or so. Today a new phase in this education of tyrants has begun. Curtailing democratic freedoms in the remainder of the world has relied on enforced ignorance through either the purdah of religion or the control of the media. The internet over the last ten years of so, sophisticated firewalls excluded, has increasingly circumvented this enforced ignorance.

The revolutions sweeping through the MENA region and continuing to ignite elsewhere, including more recently in places such as China, are as much about perceived economic injustices as they are about actual political freedoms. The driving force for being able to elect governments is the intrinsic pact with the government that they will seek to improve your collective lot. Corruption, cronyism, concentration of priveleges and wealth are most pronounced in states run by tyrants but they don't have a monopoly on them. Modern democracy is distorted by those factors too.

Over the last two or three decades, almost without exception, wealth has become increasingly polarised in fewer hands, and income inequality, has increased across the world . This is the same whether you take the example of the oligarchs of BRIC nations or private equity managers and investment bankers in the Western world. The primary mechanism by which the rich have managed to extend their lead over the middle classes, and the poor, has been the expanding leverage which is supported by the progressive and permanent expansion of central banks' balance sheets, led by the Fed, at the earliest sign of asset turbulence. The financial crisis in fact narrowed this gap, but QE has made it once again wider than ever. The majority of non-billionaires remain sceptical of central banks' stated mandate to serve the interests of the majority.

It is increasingly accepted that the current asset and proxy-asset market levels remain artificially elevated by the latest round of Fed balance sheet expansion and money which possesses no yield. Particularly in the case of financial commodities where the investment return relies entirely on capital appreciation. Therein lies the rub. Not only have the policies of the Fed protected the wealthy but they have made basics of food and energy unaffordable to the poor. And this makes the divisions even deeper and more unjust than they were prior to the financial crisis.

According to Wikipedia, 'in common usage, the word "tyrant" carries connotations of a harsh and cruel ruler who places his or her own interests or the interests of a small oligarchy over the best interests of the general population'. By that definition Ben Bernanke has all the makings of a modern day global tyrant.

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