I read recently two things I thought I might respond to.
First was that thanks to the prompt intervention of our glorious leaders to stimulate a la Keynes we have dealt with and escaped the deflationary spiral.
Two things about this. First what stimulating did we do? We certainly gave a lot of money to the banks but we also know for a fact that hardly any of it came back into the rest of the economy as lending. Therefor that money did very little stimulating. It was therefore not what Keynes had in mind. He, and I am not advocating or decrying merely reporting, was talking about spending to stimulate actual growth of economic activity and job creation. This we have not done.
Second. Where is the evidence that we have escaped the deflationary spiral? Bank assets are not only not regaining any value they continue to lose that value. They are firmly swirling to the centre of a distinctly deflationary whirl pool. Those assets have been and continue to be the focus of our whole crisis and also of all our policy interventions. Thus our measures have NOT stopped the deflationary spiral in the cause of the crisis or in the broader economy. Not only that but the cost of the so far failed policy has been so vast we are now at risk of sovereign credit downgrades and having to slash and burn everything.
The second thing I read was that bloggers are just people who carp from the side lines about other people’s heroic efforts but never have any solutions themselves. There have been, from the start of this crisis, clearly articulated alternative policies offered not only by people like me and many better informed than me, but also by ‘insiders’.
I and they have argued from the start that because this is a crisis of solvency rather than liquidity, the ONLY way to solve the problem is for the debts to be cleared. We advocated those who made the bad debts being the ones who should suffer their consequences.
We suggested that the insolvent banks could be and should be wound down, their assets marked to market in stages. The money we have wasted on try to keep these undead monstrosities going would have been much better spent capitalizing new banks. One of which could have been based on the Post Office for example. Debt free banks WOULD have been able to led. Because they would not be hoarding cash to protect themselves from further losses. We gave the money to banks who were never gong to lend. We could have set up clean banks who would have lent, and given the money to them.
Why didn’t we? Why did we ‘chose’ to give it to dead banks? Who advised us?
Everyone runs around like headless quickens crying about how everyone would lose their money, their houses, their pensions. Without offering any evidence. Most people would NOT have lost their money. The government guarantees it to 30K. Do you have more than 30K in the bank? Most people do not. No one would lose their house if their bank goes down. Another bank buys up the mortgage and life goes on. Your pensions would have lost value AS THEY ARE DOING. Only difference would have been that by now we would be rebuilding on a firm, debt free foundation. Are we doing that with our present policies?
The ATM network would NOT have st oped working.
Had we forced the insolvent to eat their own debts the main losers would have been the banks investors and bond holders. As it should be. It’s there in the contracts they were all happy to sign in the good times.
We, on the other hand would NOT have borrowed and spent on bankers over a trillion. Which addresses the other often heard shriek of terror – but wouldn’t there have been millions more unemployed?
If we had not borrowed half a trillion and more to bail out the banks , imagine what real stimulus for jobs and investment in productive enterprises we could have been doing right from the start? Had we set up clean banks and funded them there would have been lending and a stimulus. The government could have bought corporate debt direct to fund major and important industries. But we didn’t. Why not. Who advised?
There was a very clear alternative policy. People like me, many people, were not carping from the sidelines. Our views were were not heard because they were excluded from debate.
Why do you think that was?
The best I was able to do as an ordinary citizen, was to write almost every single day on the Guardian web pages arguing and explaining my views. The paper never invited those who advocated views at odds with the bankers and politicians consensus view, to put their case. I never heard or read a word of discussion in the papers on the television, let alone in parliament.
Why not?
Update addition:
Someone recently also suggested that I was somewhat like the Tories in that I was suggesting we ‘do nothing‘ about the banks and that we had to cut our debt.
First let me reiterate that if the main parties came to my door near to death from starvation, I would not give any of them so much as the steam off my dinner.
The Labour policy was to bail out the banks and then keep spending.
The Tory policy was and is to bail out the banks and then stop spending and achieve, through austerity, what they never quite achieved with Mrs Thatcher.
The LibDem’s policy was to ignore Vince Cable and fag for whoever, but preferably the Tories.
My ‘policy’ was and is to NOT bail out the banks and then spend on direct stimulus using money I had NOT wasted on the failed banks.
The point is Labour and Tory were and are closely related in their central idiocy and cravenpandering to the banks. Mine is quite differnt from BOTH.
Completely DIFFERENT policies.
I have never advocated doing nothing. I did vociferously advocate NOT doing the stupid and craven things we have done. Labour did not spend to stimulate. The wasted bailing our dead banks and rich bankers. This paved the way perfectly for the Tories to then say, “Labour are spend spend spend idiots”, what we must have is cut backs because we are bankrupt.
But see if the Tories cut back on support for the banks.
There has only been one party in power – the Bank Party. It just so happens the Bank Party owns two front companies, one called NewLab the other Tory.
We got to chose between them. Lucky us.
Democracy? Where?
the number of times I write something and Google account just crashes……..
Can't remember all I wrote, but I want to support your efforts:
…good men do nothing…
I reckoned the bank nationalisation option, or takeover and placement of outsiders into management was the way to go when the whole festering mess became too big to hide.
I wasn't fearful of the ATM meltdown, but I did fear that these useless banks would liquidate every manufacturing company just out of stupidity. So many clients of mine had their overdrafts cut as soon as they paid in funds.
We are still owed money by (barely) solvent clients for eighteen months now. It now takes well more than double the old average time to get paid than it used to.
The banking sector -particularly in the UK, has never been in the risk business. Lemmng business yes, esp. when BofS started lending money to any muppet in a suit and a BMW and every other stupd bank followed suit.) The old saying -they'll only lend to you if you don't need the money- was so true.
Now we expect them to lend to industry. It just won't happen. Perhaps the new community banks might have done so, or perhaps they would have been more of the same.
I wrote a long time ago about the idea that life only evolved to the exotic sophistication (?) that we have done on this planet, was because of the continual upheaval and change. A cracked planet with huge continental movements, ice-ages, meteor impacts (no KT extinction was not a meteor, it was one of our moons), forced all life forms to adapt, evolve, and survive. Today is no different. We need ongoing revolution and change. Any time someone has too much dominance, you get trouble.
The financial players had well over a century of complete power. They were never challenged, and invented ever more complicated ways to keep the secrets of their success and the ear of fools in government.
Of course, now that they have nearly run out of ways to steal our money and our profit on our labour (yep they will steal your pension and your taxes), their greed and laziness can perhaps be challenged.
But who, you say, can foment the resistance. It certainly isn't the mainstream media, bizarre as that must seem to any sentient being.
And there isn't a thriving alternative financial system ready to step in with a better way.
We have two hopes.
One, the people will figure it out, and see the fraud being prepetrated against them. They will abandon a respect for (or fear of) the law. They will withold their taxes, and pull out their cash. The system would fall in days.
Two, China will force the issue, convert all their dollars into commodities, gold and land. The US dollar will collapse, and take UK & all of Europe except Germany's friends with it.
Three, we grow to not mind the slavery………
I cannot believe the way the past couple of years have gone. I certainly knew that feeding the financial market with my pension money was never going to pan out right. I also knew that I should buy the right properties at the right times. I also know to buy gold now (or last year).
Everything else (short of leaving the country -and I have a couple of plans for that too-) I haven't had the time to sit calmly and work out.
I just have the tiniest thought that Mervyn King might actually know how to navigate around his QE, bank insolvency and hyper inflation risks. Problem is, limping through to the other side wouldn't do us any good.
The blood-letting is very important, and has to happen.
Keep writing, stunning stuff.
I can't keep up with all the info. on so many websites. Wait 'til they try a full court press on our freedoms in the blogosphere.
Of course, business won't borrow unless there is more consumer demand, which isn't happening because people are losing or fearful of losing their jobs, not to mention all those debts, and they either can't spend or are justifiably afraid to spend.
Injecting money at ground level makes money circulate through the real economy and keep it healthy. Injecting it at Penthouse level just makes a big pile of stagnant money overburdening at the top and making the economy stagger and teeter even more.
Austerity programs such as Cameron is promising will starve the economy even more. The only answer is for government to find ways to put money into the hands of ordinary working stiffs, the unemployed, the underemployed, and poor people so they have it to spend.
One way to do that (after forgiving the debts that so many people were defrauded into taking on) is for the government to create jobs itself and hire directly. Social spending creates more jobs for the pound than anything the private sector is prepared to spend on.
That's for the kick-start, but the next step would be changing the law to force corporations to prioritize honest dealing with consumers, employees, and the health of the company and the community, over investors' and CEOs' personal wealth.
Job insecurity is destructive to the economy. Therefore, the conservatives who create job insecurity should be treat as what they are: vandals, criminals, and traitors.
Nice to hear from you Avedon,
Thank you for commenting. As hyou say, pumping monery into penthouses helps no one. But if we want to spend more we will now fave problems because of the size of our borrowiungs and the amount we have already printed. We can do a little more of both but it will have consequences.
The answer in my mind is not therefore to say, sorry no spending on ordinary people, now we must cut everything – the answer is to take back what we have given the banks. For example we could close the asset insurance sceme, sell government shares, mark bank 'assets' to market and once the banks are valued at zero, step in and purchse the lot for the nation at the going price…of very little indeed.
Then we would have some money to spend.
We cannot get out of this without a show down.
as a friend of mine likes to point out, flooding the ground with money sounds good, but doesn't work even that well in the short to medium term, as large corporations are such an evil cabal of control these days, they would instantly react with predatory inflation in the sectors most americans (and brits i assume) would be spending the money in- energy, credit/finance/mortgage, auto, etc. this is the end part of capitalism's natural cycle, in which it becomes 'the merging of state and corporate control and interests' or fascism. it's sort of inevitable. we can talk about regulating one industry at a time and that's "practical," but the truth is the kleptocrats have us in a death grip, and there's only one way this will go down. i'm morbidly interested because it will be the first truly global war, with people fighting on virtual as well as actual fronts everywhere, and asymmetry the rule of the hour. still, they just broke the ocean and maybe the planet, so we may not even get that far. -ChiDy
Fantastic comments from all that I really cannot improve on. I think as ChiDy says we are in the grip of the multi-nationals as I see it. They have no roots in any one country, move money and labour around to minimise tax and governments are completely beholden to them. All this has been written here before but it is worth repeating.
Oh yes, as the profromdover says, I also think the authorities will wake up one day (they are way behind the curve but will catch up – one day!) to the power of the blogs to mobilise alternative views (at the very least). This may be our last chance, a golden age of free communication before heavy handed anti-terrorism laws are used to block sites.
theprofromdover worries:
>>>>…China will force the issue, convert all their dollars into commodities, gold and land. The US dollar will collapse, and take UK & all of Europe except Germany's friends with it.<<<<<
We in the U.S. should be so lucky. Back in February the American economist Dean Baker wrote:
>>>>>By pushing up the value of the dollar against the yuan, China makes U.S. produced goods less competitive both within the United States and internationally. This is a major cause of the U.S. trade deficit. In addition, because it increases the trade deficit and lowers GDP, China's currency policy also raises the U.S. budget deficit.<<<<<
Ultimately, the value of the dollar is supported by the United States economy. Our economy, over here, is not going to thrive until we dramatically reduce our annual trade deficits. (And don't get us, we friends of Avedon, started on the failure of the doctrine of "comparative advantage" in the modern world.)
Hello chicago dyke and CMike,
Nice to hear from you as well.
Sorry I haven't joined in th e discussion till now. One of my children gave me a splendid summer cold and I have been feeling as if my head were stuffed with cotton wool and bees.
I would like to agree with you whole heartedly about the sheer idiocy and dishonesty of "comparative advantage". Few doctrines have done so much harm. There it lies like a curse at the heart of globalisation.
I am glad you mentioned it. It is one of my pet hates. I was also just this last couple of days, thinking of writing something on it in the context of how it is long past time when we have to oppose globalization.
Perhpas now you bring it up it will spur me to get it written.
So thank you for posting your thoughts and joining in.