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A new state in Africa: South Sudan

In 2011, the South Sudanese people voted on the question of independence for their region, which is about two and a half times the area of the UK. Chances were that the people would vote for an independent state – and they did. They did so, even though the citizens of the new state are neither united by the same language, nor by the same religion nor were they ever called ‘South Sudanese people’ (by themselves or others) beforehand. In fact, they were identified as Dinka, Nuer, Shilluk, Azande, Acholi and so on. Hence, those characteristics are missing that nationalists worldwide think of as crucial with regard to the founding of a state. Their common ground is merely negative. They have never been the ideal national citizens the various regimes of the (north-) Sudanese state propagated since its formation: neither were they Arab-speaking nor followers of Islam.

Kittens #3

We released the fourth issue of kittens – the English speaking journal of Gruppen gegen Kapital und Nation. It is available here as a PDF and around London.

Insane my Arse, Muammar Gaddafi - a Historical Sketch of his National Project

Already during his lifetime public opinion in the West had been in agreement about the deceased Libyan dictator: “insane” was the most frequent description of him. However, putting aside fashion faux-pas and focussing instead on his political career, the former ruler shows up in a rather different light. So who was Muammar Gaddafi?

Sovereign debt and the crisis in the Eurozone - All Parts

Here is a nicer PDF which collects all four parts of "Sovereign debt and the crisis in the Eurozone".

Those are independently available as:

Sovereign debt and the crisis in the Eurozone - Part 4 of 4

The sovereign debt crisis in the Eurozone

Since late 2009, Greece has been facing a debt crisis. It has not been able to find enough investors willing to lend it money to service old debt under the previous conditions that is. Therefore, in order to get money at all, Greece has been forced to offer higher interest rates to its creditors. The financial markets did not greet this news with joy and queue to collect higher returns, but rather as a result they became even more cautious about Greek debt. For if Greece already had problems, then how would it be able to repay even higher obligations in the future. This raised interest rates on Greek debt even further which Greece would have had to offer on new loans if the Euro Community and the IMF had not intervened in early 2010.

The figure below shows interest rates that various countries of the Eurozone had to pay in the past. What is striking about it is that with the introduction of the Euro, interest rates began to align (Greece joined the Euro in 2001) and then with the financial crisis in 2007 interest rates diverge again.  

Sovereign debt and the crisis in the Eurozone - Part 3 of 4

Credit replaces money – credit cannot be replaced by money

In almost all economically successful states the accumulated debt has reached a level where it is unthinkable for it to be repaid through taxes this would be, and has been for several decades now, impossible.

This situation has come about on the back of the financial industry’s certainty that debt and interest would be serviced on time; which is to say, through credit they themselves will have granted at a future date. This propitious circle must be continuous if the symbiosis of state and financial capital is to be carried out successfully. A bank that has invested in state securities, and which is now waiting for its money, should immediately reinvest in new state securities so that it can then be paid with this (here: its own) newly invested money. In this fashion banks are able to hold on to a permanent stock of, say, British state bonds despite the maturation of given bonds after a few years. If a bank wants to reduce its holdings of state securities, then it demands payment without granting any new credit to the state. For this to work, other banks must be willing to increase their engagement in these securities.

Sovereign debt and the crisis in the Eurozone - Part 2 of 4

Who are the lenders and what makes state bonds so interesting for them?

The main lenders come from the financial industry. Banks, insurance companies and mutual funds buy the bonds of their own state or other states. The second major creditor group consists of other states or their central banks. The German state, Japan and China, for instance, have considerable holdings of U.S. Treasury bonds. Thirdly, states attempt to harness their own population to finance sovereign debt. With bonds tailored towards this clientle states encourage the people to grant the state credit for interest in return.

Sovereign debt and the crisis in the Eurozone - Part 1 of 4

What this text wants1

In our text “Financial Crisis 2008ff.” we tried to explain how a financial crisis such as that of summer 2008 results from the normal course of business and not from mistakes or mismanagement. Towards the end of the text we briefly touched on how states attempted to rescue the financial markets and that as a result sovereign debt itself becomes subject to the practical critique of these markets.2 In the last two years these policies seem to have been successful, insofar as the financial markets have, again, started to make a profit; however, as a result of the measures taken many states have now become lodged in a debt crisis of their own, which, again, is affecting the financial industry.

In our later text “Public debt makes the state go round” we then tried to explain how modern credit money and sovereign debt are related. However, there too, questions such as how states contract debt and why, who their creditors are and why, what the relation is between the GDP (gross domestic product) and sovereign debt and what the particularities of the Eurozone are, were only very briefly touched upon or not discussed at all. In this text we attempt to fill this gap. First, we want to explain the standard and common practice of sovereign debt in general, as well as providing a critique of the most prevalent explanations for the current crisis. And secondly, we would like to consider the particularities of the crisis in the Eurozone.

Too much sovereign debt as reason for the crisis?

One way to explain the Greek problems is to remark that Greece simply took on too much debt. In fact, sometimes newspaper articles claim that Greece has the largest amount of debt in the EU. This is de facto wrong.3

Public debt makes the state go round

The implications of the budget deficit and the public debt reach far beyond the state's ability to pay for its undertakings such as killing people in Afghanistan and maintaining the miserable existence of workers in the UK. The public debt weakens the national currency. Since many groceries etc. are imported from the eurozone, this drives up prices for many people. Even prices for goods produced in the UK rise; a development well known as inflation.