The UK’s austerity policy is ideologically driven and is aimed at diverting finance from the poor to the rich under the pretext of the economic crisis, writer John Wight told RT.

Britain's Chancellor of the Exchequer George Osborne is announcing billions more in the government spending cuts while austerity measures are already biting for many people across the UK.
Osborne claimed that British economy is “out of intensive care.” RT asked Wight if he thinks that is really the case.

John Wight: Only in a fine world of the Tory party would that be the case. The country’s seen 1.1 percent growth in the last three years – the worst level of growth in this country’s economy over the last 100 years. That can by no means be considered a success. 

RT: Who's going to be the most affected by these latest cuts?

JW: Clearly the poor are going to be hit harder as a continuation of the mass experiment in human despair, which this coalition government has cheated to describe as an economic policy. It is ideologically driven and we see economics of the madhouse. And it is done with the objective of affecting the transference of wealth from the poor to the rich under the pretext of an economic crisis – not reason, it’s a pre-text. The economic crisis which hit this country in 2007 was their economic 9/11.

RT: Official figures show the deficit has been growing last year, despite previous cuts. So is there any point to them?

JW: Well, that’s what I’ve just said: this is ideologically driven. If you are considering these policies on the basis of economics, then clearly it is completely irrational. The US economist Paul Krugman lately described it as “a medieval doctor draining a patient’s blood,” and when that doesn’t work, draining more blood from the patient. This is entirely appropriate to describe this economic policy, this austerity. Austerity historically has been discredited. It doesn’t work in times of recession. At a time of recession the government needs to spend more to reintroduce the man which is contracted as profits stumble. And you must place this along the fact that the Office of Financial Statistics, the government’s own body set up to monitor these things, came up with a figure in April which stated that in the final quarter of last year UK businesses, excluding banks, were sitting on 318 billion pounds of surplus. And that money is money we need in the economy. They are not investing, they spend all the inducements from the government by the way of tax subsidies and tax cuts for the rich that the government has given to the rich over the last three years. 

RT: What do you think is the best way that the government can fight the deficit?

JW: It has to start investing in the real economy. It has to start directing banks to lend rather than pleading with banks, especially banks in which we own a majority share, such as RBS. The government should take over RBS’s operations and start lending in the interest of the real economy. The economy needs it. We have a housing crisis in the country, it’s the worst in the world, it’s a scandal. And we need to start investing in affordable homes. Rather than punishing the poor for being poor we should start actually diverting money from the rich to the poor, as befitting a civilized society. 

RT: Osborne announced cuts to the police budget. Do you think that will affect the crime rate?

JW: Well, not really, because based on what we know now a lot of criminals are actually in the police. They are also sitting in the boardrooms and in the House of Lords. It may have an effect. But I think they’ve consolidated the police and taken away the regional power from the police. It is yet to be seen. But as I say the cuts in the police budget are minimal compared to the cuts for the poor in terms of benefit cuts and so on.

Mixed sentiment on global floors, uncertainty in the Asia-Pacific region over the Chinese credit crunch and falling oil prices looked likely to drag Russian stocks down on Wednesday’s opening. However the floors started off the day with slight gains.

Tuesday’s trading session took Russian indicators higher with the MICEX having added 0.57 percent to 1297.59, and the RTS finishing up 0.9 percent at 1244.16.

Russian floors are also likely to react to Tuesday’s good news from the US in Wednesday’s trade. Tuesday's US data showed strong gains in business spending plans. Also US home prices posted record gains, indicating that recovery may be on track in the key sector of economy.

Europe's main stock markets have rebounded on Tuesday. London's FTSE 100 index of leading shares advanced 1.21 percent to close at 6,101.91 points, Frankfurt's DAX 30 index climbed 1.55 percent to 7,811.30 points, while in Paris the CAC 40 gained 1.51 per cent to 3,649.82 points.

The data took US stocks up, with the Dow Jones Industrial Average adding 0.69 percent to 14,760.31.The S&P 500 added 0.95 percent closing at 1,588.03, while the NASDAQ rose 0.82 percent to 3,347.89.

Asian stocks were mixed on Wednesday as investors in the region’s key markets Japan and Mainland China continued to worry about a liquidity crisis spurring in the world’s second-largest economy, despite reassurance from China's central bank.

Moody's ratings agency said a prolonged credit crunch endangers Chinese companies, “especially those in the private sector with weak credit quality, because it heightens the risk that banks will scale back lending to those companies.”

The Shanghai Composite Index fell 1.2 percent to 1,937.17. Japan's Nikkei 225 fell 0.9 percent to 12,904.01. In Hong Kong, the Hang Seng gained 0.8 percent to 20,022.30. South Korea's Kospi dropped 0.1 percent to 1,778.26. Australia's S&P/ASX 200 gained 1.3 percent to 4,714.40.

Oil is currently trading lower with Brent losing 0.5 percent to $100.70, and WTI down 0.9 percent to $94.40.

Mario Tama/Getty Images/AFP

 Russian stock market has opened on the positive territory on Tuesday, rebounding after Monday’s drop.

Investors however expect stocks to fall later in the day, as oil prices are declining and the international outlook remains negative on China liquidity crisis and concerns over Fed’s stimulus.

Russian stocks ended Monday with losses. The MICEX slipped 0.66 percent to the 1290.26 mark, while the RTS lost 1.02 percent to 1233.04. Equities of KAMAZ, Novatek, InterRAO, Rosneft and E.On Russia kept Russian market trade afloat with gains.

Major European stock markets also slumped Monday, reacting to worries over the Chinese liquidity crisis and the withdrawal of US Federal Reserve stimulus.

London's FTSE 100 index of leading shares slid 1.42 percent to 6,029.10, while Frankfurt's DAX 30 fell 1.24 percent to 7,692.45 points. In Paris the CAC 40 dropped 1.71 percent to 3,595.63 points.

Stocks in Spain and Italy also fell on rising Italian and Spanish state borrowing costs on the bond market.

US stocks ended Monday’s roller coaster trade with steep declines. Benchmark stock indices demonstrated a steep fall after the opening bell.

The Dow Jones Industrial Average had been down as much as 250 points on Monday ending down 139.84 points, or 0.9 percent, at 14,659.56.

The S&P 500 finished down 19.34 points, or 1.2 percent, at 1,573.09, with all of its 10 major sectors in negative terrain. The NASDAQ closed down 36.49 points, or 1.1 percent at 3,320.76, following an intraday low of 3,294.95 and a session high of 3,344.66.

Tuesday’s news from Europe will include the UK’s industry data on mortgage approvals, reflecting the demand in the housing sector. Bank of England policymakers are to testify on inflation and the economic outlook before the parliamentary treasury committee, Investing.com reports.

Also on Tuesday Italy is to hold an auction of 10-year government bonds.

The US is to publish official data on durable goods orders and closely watched reports on consumer confidence and new home sales later in the day.

Asian stocks were struck by worries over problems in the Chinese banking system. Mainland Chinese stocks fell sharply for a second straight day on Tuesday. Losses hit markets in other Asian regions as well.

The Shanghai Composite lost 3.8 percent to 1,888.69 and Hong Kong's Hang Seng dropped 1.4 percent to 19,533.05. Japan's Nikkei 225 shed 1.6 percent to 12,848.96. South Korea's Kospi slid 1 percent to 1,780.81 and Australia's S&P/ASX 200 declined 0.5 percent to 4,645. Stocks in Taiwan and the Philippines also fell.

Brent oil is currently trading at $101.35, while WTI is up 0.17 percent, trading at $95.30.

Along with exposing widespread international surveillance, Edward Snowden has revealed how exactly the US is financing its military ambitions, according to Max Keiser.

RT: Surely not even you can make any kind of link between the Snowden saga and the US economy?

Max Keiser: The American economy runs on the confidence, confidence that the world accepts the US dollar as world reserve currency, confidence that the US bond market will remain the standard. And what we are seeing is a sell-off in a bond market and a sell-off in the stock market, because confidence in the US and its ability to maintain a global empire through interest rates and the Central Bank policy is crumbling before the world’s very eyes. What’s interesting is that Edward Snowden worked for Booz Allen. Booz Allen allegedly along with a few other companies are the masterminds behind LIBOR market rigging, energy market rigging, FOREX market rigging. And this is really the fuel that keeps the American military empire going, because the American economy itself cannot support its military ambitions so they’ve resorted to market manipulation and the kind of intelligence that Edward Snowden is able to aggregate is key to manipulating markets in ways that make Booz Allen, allegedly, the channel for billions and billions of dollars into America’s military campaigns. And this is really about money, markets and manipulations. It’s not about security.  It’s not to do with anything that the White House says. Remember, the White House is a puppet of Wall Street, Booz Allen, the hedge funds and the financial interests of the corrupt bankers.        

RT: Can you also give us an idea of how some of those big companies like Google, or Facebook could actually benefit from this surveillance program PRISM? Is there financial a financial gain from them? 

MK: Absolutely, because all of the manipulation involves rigging the indexes. And the indexes are all data-sensitive. So, if you can manipulate the data, you can manipulate the indexes and you manipulate the markets. And if you have advanced knowledge of that inside information you can make billions of dollars of front-running, high-frequency trading, algorithmic trading. And, of course, all the banks on the Wall Street are in on this and all the banks in the UK. It’s very telling that the foreign minister of Ecuador said that, look “you are talking about us extraditing Edward Snowden, what about bringing back those bankers we asked you to bring back to Ecuador who we caught rigging and terrorizing our market?” What about the Icelandic bankers that have been asked by the government of Iceland to be extradited back to Iceland that are being held in the UK? What about these other instances where banking terrorists are being sheltered in the US and the UK? They’re not responding to extradition agreements. So this’s all about financial legerdemain, unfortunately, Americans don’t have enough money to fight their wars anymore so they have to resort to snooping, data-gathering, and market manipulation. 

RT: What about the diplomatic fallout? We’ve seen tensions between China and Washington but that of course leads to economic tension. Could that impact trade between the two? 

MK: I hope Russia, China, and Ecuador stand up to the financial terrorists in America and Britain. Stay the course. Don’t give in and don’t appease the financial terrorists on Wall Street. 

RT: But how could a small country like Ecuador stand up to a giant like America, where there is indeed trade between the two? 

MK: What Edward Snowden has proved is that if you live a principled life and stay true to your convictions then you can change the world. 

RT: Are we going to see financial fallout between China and the US? 

MK: Well China has got a fantastic card to play, one trillion US dollars that they can dump on the market anytime and jack interest rates up five or six points, which would throw the real estate market back into collapse. China is pulling the strings here and China has all the cards to play. America is the biggest debtor nation in the world. Look at the bond market today, it’s selling off spectacularly all over the world because confidence in the American hologram of finance is collapsing. They flipped the switch. They see that the emperor has clothes. They see that there’s no underlying economic activity to support the military and financial occupations emanating from the US. It’s game over!

"The committee currently anticipates that it will be appropriate to moderate the monthly pace of purchases later this year, and if the subsequent data remain broadly aligned with our current expectations for the economy, we will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year," Bernanke said.

Investors’ fears have come true, as the news sent stocks and bonds sharply lower, pushing benchmark Treasury yields to a 15-month high, Reuters reports. The uncertainty on when exactly the Fed will start scaling back the stimulus still looms.

The US central bankers believe that moderate growth will bring further improvement to the labour market. The number of unemployed people in the US is expected to slip to 7 percent from the current 7.6 percent by the time the Fed ends bond buying. The Fed expects the unemployment rate in 2013, 2014, and 2015 to be lower than previously forecast. Bernanke added that in case the optimistic forecasts do not come true, the Central Bank could resume bond purchases.

Ben Bernanke also said the Fed expects inflation to climb towards the 2 percent target mark. The US central bank’s forecast for 2013 GDP growth was updated to a slightly lower reading, however the outlook for 2014 was upgraded.

"The committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall," FOMC said.

In fact not much new was said on Wednesday since the FOMC last released the minutes of its previous meeting in May. Then Bernanke spoke of the possibility of pulling out of the huge bond buying if the labor market shows “substantial improvement.” However there has been no “substantial improvement” yet, says David Williams, director at Strategic Gold Corporation who spoke to IBTimes TV.

“They are not going to change anything because it hasn’t improved substantially, so that’s just giving us more time, at least until the end of the year even not after that,” he said. “I think things will stay generally the same.”

According to a Reuters poll of 17 top Wall Street bond dealers, 16 of them expect the scaling back the bond purchases will begin with September’s FOMC meeting.

Stocks, bonds and commodity markets in Europe and Asia sold off sharply on the news from the Fed.

Gold tumbled to a 2 and a half year low also reacting to the news from the US. Bullion prices fell below $1,300 an ounce in London, exceeding April’s drop into a bear market, Bloomberg says. In 2013 the precious metal has already lost 22 percent, as investors sold off gold becoming less confident in it as a hedge from inflation. This year’s drop may well become the biggest annual decline in more than three decades.

Silver also slid significantly, diving to the lowest price since 2010.