Thursday, 10 May 2012

The Banks Again

The London Review of Books is a rare Ruby of great worth, and once you've sharpened up the cerebrum sufficiently to inbibe the erudition, a thoroughly enjoyable read, amongst the finest of our online resources. In the current edition is a review by Benjamin Kunkel that rivals at least one of the books concerned for length, but bear with it. With impeccable logic he charts his way to the following:
The most striking aspect of the current era is that it emerges as the rare period of virtual money that has so far failed to set up strong protections for debtors, whether in the form of bans on predatory lending or periodic jubilees: ‘Insofar as overarching grand cosmic institutions have been created that might be considered in any way parallel to the divine kings of the ancient Middle East or the religious authorities of the Middle Ages, they have not been created to protect debtors, but to enforce the rights of creditors.’ The IMF is Graeber’s main example, to which the European Central Bank and the Federal Reserve could be added. The response of Western officials to the economic crisis, with its proximate cause in unsustainable consumer debt, has been to ensure that banks suffer as few losses as possible, while relying on the same indebted consumers – in their role as taxpayers – to keep the bankers whole. The Fed and now the ECB have loaned banks money at virtually no cost, encouraging those same banks to purchase government bonds paying much higher rates of interest: a direct subsidy of finance by the public, while millions sink into unemployment and bankruptcy. A far simpler and more effective monetary policy would have been for the government to print a new batch of money, distribute an equal amount to everyone, then sit back and watch as stagnant economies were stirred to life by the spending and debts were paid down and eroded by temporarily higher inflation. The inconceivability of such a policy is a mark not of any impracticability, but of the capture of governments by a financial oligarchy.
Quite. This is exactly the point being made by Simon Jenkins, and which evokes such vehement denial by those in the financial sector. BASEL II is just so much bollocks once you actually decide that it's the financial oligarchy and not the taxpayer that can go to the dogs. 


G. Tingey said...

"What is to be done?"

DD said...

And "Who is going to do it?"

Weekend Yachtsman said...

I am not in the financial sector, but Simon Jenkins is wrong.

He wants more Keynesian "stimulus" - does he think we haven't had enough already?

He thinks we can go on spending more than we earn for ever. Doesn't he realise that we've reached the limit of this?

He wants us to print more money. Has he looked at the value of our currency now compared with (say) fifty years ago?

More of the same, but longer, harder, and deeper will NOT fix this problem.

Only a return to sound money and a very significant shrinkage of the parasite state will get us anywhere, and while the Political Class remains in charge, we've got two hopes of anything like that - and we all know what they are.

G. Tingey said...

How about Keynesian stimulus WITHOUT printing money?
Real infrasructure projects will help enormously.
We already have Crossrail, GW main line, Liverpool-York electrification.
[ Locally to Readwald re-doubling of the Suffolk coast line - makes a difference ]
We now need more of this, and spread around, as well as HS2 complete, and STARTING RIGHT NOW.

Oh, and vitally important.
Re-opening some of the MArples (so-called "Beeching") closures.
Oxford-Cambridge for a start.

Sebastian Weetabix said...

@G Tingey; since we don't have any money, if you want your Keynesian stimulus of infrastructure building it has to be printed. Alternatively we could slash govt spending by 20% - we'd probably have a small tax surplus after that, even allowing for the huge increase in unemployment.

I'm all in favour of creating new money, but instead of giving it for free to Bob Diamond so he can run off to the casino I'd like to see every taxpayer given £20k.