1. Money
1.1. Concept, perhaps. Definition, never.
For centuries, money was primarily a physical, fungible, and mobile asset. A gold or silver coin was worth exactly its mass (weight). In the Middle Ages, it became common to store fortunes with the "goldsmith," who kept gold and silver objects in vaults and issued receipts guaranteeing these assets. Such receipts were used for debt payments and negotiations, thus giving rise to paper money. History tells that this goldsmith service was also provided by the Knights Templar, and it was the covetousness for this role that led the French government to accuse them of heresy. Subsequently, governments took over this service. Regarding the intrinsic and extrinsic value of money, read:The minting of gold and silver coins continued for many centuries. The pieces were guaranteed by their intrinsic value, i.e., by the commercial value of the metal used in their production. Thus, a coin containing twenty grams of gold was exchanged for goods of the same value. For many centuries, countries minted their highest value coins in gold and reserved silver and copper for smaller denominations. These systems persisted until the late 19th century when cupronickel and, later, other metal alloys began to be widely used.
The currency began to circulate by its extrinsic value, i.e., by the value engraved on its face, regardless of the metal it contained. (FREITAS, 2004)Nations organized their money individually, seeking to prevent counterfeiting and equalize the relationships between goods (silver and gold) and paper notes. However, this relationship was conflicting, and by the dawn of modernity, a measure known as the Gold Standard was employed. Thus, all money was supposed to be convertible to the amount of gold held in the country's treasury. The first period of this action, according to important authors, was from the 19th century until 1914, when all major countries had the Gold Standard as the measure of their monetary unit.Until this moment, money was defined as "a document representing stored material wealth, a bearer instrument." Banks were obliged to convert deposited values into money whenever requested by those who entrusted them with the care of their fortunes. But this definition would soon change.
In Brazil and other less developed countries, the Gold Standard was adopted very late, as its implementation was hindered even by reserves of assets and indebtedness. Therefore, these countries used the fiat currency system, where the circulation of paper money was done by force of law.Brazil joined the gold standard system with its adhesion to the IMF on July 14, 1948. Brazil's participation corresponded to quotas totaling US$ 150 million. In payment of part of this participation, Brazil remitted 33 tons of gold to the IMF. During the period of the cruzeiro's parity with gold (cruzeiro-ouro), the cruzeiro corresponded to 0.0480363 grams of fine gold. (NÓBREGA, 2004).
World War I (July 1914 to November 1918) marked the conflict of this monetary standard. The world was speeding up its transactions, and without control over the manipulation of goods, producing exorbitant profits from the sale of war materials to Europe, the United States realized that this standard did not satisfy the needs of capitalism and decided to change it. It released more dollars into the market. Initially, its currency had greater value, and this was not a problem.The war ended in late 1918. With that, the reconstruction of Europe yielded enormous gains. The expectation of future profits led companies to issue credit notes to their customers. These credit notes allowed customers to buy goods and pay for services, intending to settle them in the future. Another investment that grew significantly was investments in the Stock Exchange, which gathered the invested money and distributed it in emerging markets as working capital for various companies, and the results were surprising.If an apple and a little flour that cost US$0.30 could produce a pie for US$15.00, the profit was extraordinary. Anyone who invested US$1.00 in the Stock Exchange during World War I received another US$6.00 in a month. Initially, this profit was real, but over time, the vain confidence arose that the War or at least high consumption would continue forever. The market injected more money into itself, but this was not equivalent to a treasury bond, but to fictitious money – credit notes that could be used to purchase other goods and services but were not equivalent to anything tangible. Europe needed food and weapons, and bought everything, and the USA experienced a peak moment. Investments in agricultural products were significant. The production of cereals is a classic example treated by various authors, where farmers produced so many goods that they had to resort to storage and financed this with bank loans.
The War ended, but the destroyed European market needed the American market for a few years. Gold flowed to the United States, which extended more credit to Americans, ignoring that the world was changing. Europe was recovering its economy, and the US did not slow down. The fever of easy gains and little work sickened the population, who, upon seeing Europe's rebuilt economy and fearing a recession, foresaw a devaluation of their investments in companies through the Stock Exchange.
1.2. The lesson the world did not learn: Fall in the New York Stock Exchange.
The well-known Crash of the New York Stock Exchange in 1929 did not happen due to a single factor but several. Among them was the decrease in sales of various products to Europe. Without sales, production ceased, and employees were laid off; employees went to the bank to redeem their investments; Banks, to pay their investors, had to collect from their debtors; debtors no longer had jobs to honor their debts, and companies, unable to pay them, declared bankruptcy without paying the banks, without paying employees. A chain effect. Banks, rural companies, industries, all went bankrupt while people fought to get their investments back. However, there was already confusion about what "money" was. There was no money! What existed was only credit, and this credit suddenly disappeared when the companies that issued it went bankrupt. No less than 12 million Americans lost their jobs in a few days.Suicides became common, North America saw itself decline, and its economic liberalism showed profound flaws. Despair took over daily life, and as a record from AFP, Washington:The current recession may lead to an increase in suicides, fear American health experts, who evoke the ghost of the crisis of the 1930s and its subsequent human dramas. The death on Tuesday of Thierry de la Villehuchet, a French investor who killed himself in New York after being ruined by Bernard Madoff's fraud, has once again generated fear of a wave of suicides on Wall Street as a result of 'Black Thursday,' which, in turn, is more myth than reality. "In periods of recession, the suicide rate tends to increase. This was seen in 1929 and the following years," noted Ron Maris, former director of the Center on Suicides at the University of South Carolina. "SOS Suicide" hotlines have been reinforced in recent months. "We anticipate an increase in the number of calls," said Marshall Ellis of the CrisisLink Association, which covers the Washington region and receives about 2,300 calls per month. In October, shortly after the crisis began due to Lehman Brothers' bankruptcy, the number of calls to CrisisLink increased by 132% compared to October 2007. Over the last five months, the increase reached 81%. "People are distressed by what is happening. They are disconnected (from society) and express their fear," Ellis observes. "Some people say they are afraid of losing their jobs, and others explain that they feel increasingly worse about the low possibility of finding work." "We can suspect that people who have lost a lot of money are at serious risk," he concluded. (AFP, 2009) The critical situation only began to be combatted with President Franklin Roosevelt, who changed the rules of economic intervention, investing in infrastructure, with social welfare actions and unemployment benefits. Over some years, the problems were mitigated, but they were only corrected with the start of the Great War (1939).In 1944, with the experience of the Great Depression past, the international community met at the Mount Washington Hotel in Bretton Woods. The international monetary conference initiated a second phase of the Gold Standard, which was abolished by the US in 1971, opening a new period of economic uncertainty. With a full leadership role in monetary relations, the United States assumed the regulation of the dollar, and countries already used it as a Standard.
1.3. Dollar Standard? Does it exist?
There is no Dollar Standard, as one might easily assume. However, what undeniably happens resembles it. If a country has too many dollars, the dollar's price falls within the country, and the value of the national currency increases. At the same time, if the country's dollars leave, and market reserves are scarce, the dollar's price increases, and the national currency depreciates. In these moments, national Central Banks end up intervening, injecting dollars from their vaults into the market with the aim of lowering the price. The theoretical effect is very similar to what happened with Gold.In the last decades of the 20th century, money was defined by a relationship of trust in a market. The State is no longer solely responsible for a currency. Many countries share the same monetary unit; the Euro is a living example of this. The dollar is used worldwide; several countries use two or three currencies, and money is no longer a representation of wealth but a fiction created based on expectations and trust in a macro-market.Today, more than ever, money's value is the trust of investors, matched by negative and positive speculations in a single, global market. In the eyes of a class of investors, machines immediately start working, and millions of notes are produced. If there is a shortage of notes and goods to be consumed, financial companies conceive credit, and without any effective control, these credits are distributed without concern about whether they can or cannot be honored within the deadlines established in the contracts.Washington, Feb 18 (EFE).- The President of the United States, Barack Obama, presented today a $75 billion plan aimed at helping nine million homeowners threatened by the mortgage crisis.In a speech on the outskirts of Phoenix, Arizona, Obama stated that the project aims to reduce the effects of a crisis that "has never happened on such a large scale.""We are all paying a price for this mortgage crisis. And we will all pay a higher price if we allow this crisis to deepen," emphasized the American leader in one of the regions most affected by foreclosures in the US.The plan, more ambitious than initially imagined when a sum of approximately US$50 billion was discussed, aims to allow up to nine million homeowners affected by the crisis to restructure their mortgages and/or avoid loan foreclosures.According to Obama, a portion will be allocated to assist "responsible homeowners," property owners who wish to modify their mortgage situations to their benefit but currently cannot do so because their homes have depreciated in value.According to the White House, this group would comprise between four and five million people.Another portion would be allocated to assist between three and four million people who, due to the recession, have difficulty paying their monthly mortgage installments but cannot sell their homes because the property has depreciated in value.The fund will help those who commit to paying a reasonable amount to keep their homes, the White House promises. (VIDAL, G1 newspaper, 2009)Thus begins the current crisis, which is nothing more than a reflection of excessive faith in the American Way of Life, in which consumerism and incessant profit were believed to extend for another century. Then, credits were granted, and the dream of homeownership was realized by many. Others mortgaged their own homes to buy other goods, such as cars, world trips, computer accessories, and even perfumes. But the market growth was not enough to balance the books. The only means used to confront non-payment was to increase interest rates. An action aimed at sharing the losses of bad payers with everyone, as well as intimidating those who might think of delaying the payment of any overdue credit note.Useless, people didn't have money. It wasn't a matter of pressuring them with high interest rates. It wasn't long before it was observed that it wasn't one or two people, but a mass, thousands of people in a month couldn't honor their debts, especially in the real estate market, and what was initially called the American Real Estate Crisis caused the dollar's devaluation and strong turbulence in the global market.
2. The servitude proposed by capitalism,
2.1. The myth of the village,
In a village, there was a pottery, a bakery, and a bookstore, utopianly organized. The pottery produced bricks. The bricks were sold, and with the sale money, the workers who gathered, kneaded, and fired the clay were paid. The rest, a profit of 400%, went to the pottery owner. The pottery employees spent 45% on bread, 30% on bricks, and 20% on books, saving 5% for their assets. The bakery produced bread. The bread was sold, and with the sale money, the wheat and the staff who kneaded and baked the dough were paid. The rest, a profit of 300%, went to the bakery owner. The bakery employees spent 45% on bread, 30% on bricks, and 20% on books, saving 5% for their assets. The bookstore sold books. The books were sold, and with the money, the writers and the printing press were paid. The rest, a profit of 200%, went to the bookstore owner. The writers and the printing press staff spent 45% on bread, 30% on bricks, and 20% on books, saving 5% for their assets. 10% of everything produced went to the Mayor, who spent 5% on the city and saved 90% for his assets. Everything would work perfectly if the employees (proletariat) were content with their servile reality. Labor force with meager remuneration, and owners of the means of production with exorbitant gains.
2.2. They are afraid of work
Contrary to what everyone thinks, slavery is very recent. The Golden Law is dated May 13, 1888, making it exactly 121 years old today. The supposed act of benevolence of the white people is already known to everyone; it is nothing more than a capitalist strategy. The slaves did not receive wages, so they could not buy. If they were free, they would work and buy with the money. If they didn't work and didn't buy from the whites, they would die of hunger. No one ever worried about this.
The village is the eternal representation of the means of production. Which historically went through servitude, slavery, up to the modern proletariat. To clarify, proletariat is anyone who has nothing more than their labor power, which should be everything in work, but paradoxically, as Marx registers, it is nothing.Oligarchic elites have lived this reality throughout human history, where profit is easy. And in the face of crises, they are always terrified by the fear that they might one day have to work. And to protect themselves, they resort to an increase in interest rates, prices, justifying everything in waste, but they forget to mention that this waste is made by themselves.The extreme of oligarchic actions is the dismissal of employees and the increase in workload, justifying them as necessary cuts. But they never cut their trips abroad, their airline tickets, they never increase their working hours. And most importantly, the elite cannot accept that "it is impossible to earn so much profit with so little work." Paraphrasing the Portuguese, it can be stated that "Work is necessary."Either they bear their losses by playing with paper money, or they distribute the cost of the crisis's losses to poor countries, leading 100 million people to hunger, as stated by the UN, which was already a problem in 2008.To explain the current crisis, however, it is not possible to elect a specific "villain." According to specialists, many factors culminated in the inflationary scenario that has worsened since the beginning of the year. According to the World Food Programme (WFP) of the United Nations, the food shortage threatens like a "silent tsunami" and could plunge 100 million people into hunger. (GUIMARÃES, G1, 2008)
During the Case Study lecture on the Economic Crisis, it was possible to notice how this moment directly or indirectly affects Civil Rights. Naturally, these are many, real, and often drastic. And the fact that this cannot be quantified a priori, its presence is real, intense, and often drastic.
3. Palpable or Civil Repercussions,
3.1. Housing
Initially, the crisis was called the American Real Estate Crisis due to its main cause: the devaluation of real estate, as reported by O Globo newspaper.Housing prices fall - The excess credit generated a vicious cycle, culminating in the reduction of housing prices in the US due to the volume of new homes offered. Thus, many people found themselves paying debts greater than the value of the asset attached to them, which led to a movement of "giving up" by borrowers. Therefore, the increase in default – which already hovers around 5% in US real estate financing – should lead to the tightening of lending in the country. And this is precisely where the danger lies: without a home, savings, or access to credit, American families may stop buying, affecting the local economy and also the rest of the world. (O Globo, 2008)As the excerpt states, the excess of credit without proper assessment of repayment possibility caused a large number of defaults in the medium term. Unable to pay for their homes, the properties were mortgaged and returned to the sales market to be resold. Since it wasn't one or two, but thousands of families losing their homes, the market became saturated with offers, and naturally, housing prices fell. With low prices, those who had bought their homes at high prices, seeing such low prices, did not want to honor their debts, believing that what they were paying was not in line with the housing prices, and they also stopped paying what they owed. Everything became a big "snowball effect," and the real estate sector went bankrupt.
3.2. Credit
As expected, the "snowball" grew. Defaulting Americans lost their credit, and without it, all commerce was affected. Without credit, there is no buying.To understand this radical and necessary idea, one must understand the so-called "money confusion" that is happening in the world today. For forty years, money has not had a material reference of wealth; it is merely a right to credit granted to someone in exchange for a material good or service rendered.Having money does not necessarily mean having real wealth, as it can depreciate within a given economic framework. Having credit, on the other hand, is indispensable, and losing it means having the right to buy and participate in commercial relations revoked.Similar to what happens in Brazil with Credit Protection Associations (SPC, SERASA,...), but in reverse, the North American and European markets have a credit permission system. Once you are in it, you can make purchases, and if you become a defaulter, you lose this permission and cannot buy on credit.Less credit - One of the main channels of contagion for the international crisis is the lack of credit. With the current crisis, there is less money in the market, and banks worldwide are more cautious, have reduced their loans, and charge more for them. In the opinion of economist Nathan Blanche, from the consultancy Tendências, this is where the greatest danger lies for the Brazilian economy in the medium and long term. "Companies should be able to continue rolling over their debts, but the market is more difficult, and some may even opt not to seek new money," he states. (BBC Brasil, 2009)
Without credit, American consumerism reduces, and the whole world feels the decrease in sales. A fact: without sales, capital and profit decrease. Cuts must be made, and they are. Especially regarding employment.
3.3. Of individuals and legal entities
The great evil that the Crisis can cause is recession, which is the interruption of world growth due to the lack of capital for production, sales, and the continuity of financial flow.
Money is fuel for the Market. It is necessary not only to produce goods but for other people to consume them. Without money, there are no purchases; without purchases, there is no need to produce, and job vacancies decrease. Without work, the essential is not obtained. The unemployed often depend on governmental or philanthropic assistance for their dignity, for the maintenance of food, housing, and health. Many constitutionally guaranteed rights are put at risk because the State is unable to manage so many people who find themselves in a state of idleness.
Layoffs worldwide – The economic recession in the United States and the slowdown in activity in other geographic regions have strongly affected the profits of many companies in recent months of 2008 and in the year as a whole, forcing them to adjust their costs. Heavy machinery manufacturer Caterpillar announced that it will take measures to cut 20,000 jobs due to the current economic situation and bleak forecasts for 2009. Pfizer's pharmaceutical company's results in the last three months of 2008 were also worse than the previous year, reflecting a 90% drop in net profit and a 4.1% decrease in revenue. (MACIEL, 2009)One cannot focus solely on a crisis in the United States, but on a crisis in the largest international market. Job offers, income generation, and dignity are in chaos. Uncertainty reduces investments, halts growth, creates space for pessimistic speculation, causes confusion and panic.There are not a few cases of hostility in labor relations, moral harassment, forced labor, occurrences of violence, and even suicides. Companies are forced to make cuts, if they don't go bankrupt, which is quite common.
Final Considerations
As already seen, crises are cyclical and inherent to the capitalist system. Experience shows that they result from a confident belief that unbridled consumerism will extend for longer than expected, or often from the need for moderate consumerism to be constant.From historical knowledge, it is known that many overdue credit notes will be borne by the creditors and will never be paid. Over time, new credit notes will have to be issued to these "debtors" so they can regain their ability to pay. It is like a collective pardon, after all, they themselves are not to blame for the situation, given that the creation of the note itself was irresponsible by whoever conceived it.Assuming losses and charting a course are requirements. Exiting the crisis is a consequence. The world will survive.
References
AFP News. Washington. Article: As in 1929, the economic crisis may increase the number of suicides. Translated by Yahoo News, published on Thu, Dec 25, available at <<http://br.noticias.yahoo.com/s/afp/081225/economia/finan __as_cri>>, accessed on May 10, 2009.FREITAS, Newton. History of Money, Barter, and Commodity Money. Available at <<http://www.newton.freitas.nom.br/artigos.asp?cod=101>>, accessed on May 09, 2009.GUIMARÃES, Ligia. Understand the global food crisis. G1 Newspaper, Globonews online. São Paulo. Available at <<http://g1.globo.com/Noticias/Economia_ Negoci os/0,,MUL427 246-9356,0 0.html>> accessed on May 10, 2009.NÓBREGA, Adalberto. From currency to financial asset: a legal reading of gold. Brasília: Brasília Jurídica, 2004.VIDAL, Macana. G1 Newspaper, globonews online, article: Obama launches plan to help victims of the real estate crisis. Available at << http://g1.globo.com/Noticias /Mundo/0,,MUL1008155-5602,00>>, accessed on May 9, 2009.BBC. Brazil. Understand how the economic crisis affects Brazil. Available at http://ultimosegundo.ig.com.br/bbc/2008/09/18/entenda_como_a_crise_economica_afeta_o_brasil_1897903.html, accessed on May 15, 2009.GLOBO. Investors fear the 'real estate bubble' will affect consumption in the US. Available at http://g1.globo.com/Noticias/Economia_Negocios/0,, MUL78019-9356,00.html, accessed on May 10, 2009.MACIEL, Daniel. Layoffs worldwide. Jan. 2009. Available at http://coariporcoari.com/2009/01/crise-economica-demissoes-em-todo-o.html, accessed on May 9, 2009.
