That is, I am pretty sure why governments have tried not to naityonalize banks even if it means leaving only a tiny couple of percent in private hands.

Golem / Neil,

If banks are nationalised, are they then subject to freedom of information requests?

I think that would be very interesting. Especially in Ireland.

How is it any different to normal creation of fiat by private banks?

Well, bank fiat through private credit creation enters into the real economy where at time to time the velocity of it’s manufacture massively out-strips productive capacity leading to a slump eg. 1974.1987.2008.

QE on the other hand hasn’t even found it’s way into the real economy while M4 is shrinking at 5% PA. Clearly it’s just an accounting dodge to allow banks liquidity to buy UK gilts and bonds but none of the money markets have complained about this ‘sleight of hand’.

Why – because the elites know full well that it is QE which is propping up their phoney over inflated asset prices at the same time. If the markets want to buy British debt they are free to do so – equivalent amounts of QE will then be ‘destroyed’ while UK gilts remain at record low yields. No inflationary effect as far as I can see.

What does this tell us about the nature of money?

“Somebody is determined not to let this crisis go to waste”

Yes, and this is where the politics come in The banks and the corporations need to reverse the improvements made in our living standards. They think that they no longer need the real economy to create wealth so why invest in industry, jobs, welfare, NHS…?

To do their bidding and continue to bail these scammers out, the government has to make a case for cuts in all these things.

Although tbh I don’t think Dave and co are the sharpest tools in the box! They probably believe that public spending is the problem its suits their political agenda to do so.

Indeed. Steve Keen has been consistently highlighting this line for years now. Debunking Economics is essential reading, if a little hard going.

Absolutely thorough but well presented for a lay audience & very broad in scope. 2hrs but worth every minute.

Modern Money & Public Purpose 3 : The Eurozone (crisis)

http://www.youtube.com/watch?v=HpIsZL5FJVs&feature=player_embedded

Probably the best overview I’ve seen so far.

Great one-liner from Yanis:

“It’s what happens when vested interest employs over-simplification to exploit prejudice”

There is no government ‘funding’ problem for all those pensions PFIs etc. UK is issuer of it’s own fiat non-convertible currency. As such it can meet all & every liability, in its own currency, both now & in the future. It is a nonsense for such a currency issuer to ‘save’ money to finance some future liablity.

The real issue is the extent of claims made by that money on the real resources, goods & services, able to be produced at the time. (I would suggest an appropriate tax policy in the future on those dubious claims, such that real resources are fairly distributed according to the democratic process & priorities pertaining at the (future) time.)

This is all according to MMT’s (correct) understanding of the monetary system the UK already has, and the macro policy options that follow from it. These realities are also supported by numerous documents and statements by central banks (& bankers), globally, and also thers including BIS.

If you are not familiar with MMT, doubtless this will appear counter-intuitive. There’s entirely understandable reasons for that. Not least decades of media and economics profession misinformation. The very last thing the thieves of banking want the public to understand is the monetary system & their free lunch in it. Please take time to study the source blogs, Professor Bill Mtchell’s is an excellent place to start.

Golem,

I believe Neil Wilson is right about the (lack of) inflation risk in what he suggests. To make the argument for inflation you have to show where banks’ recognising losses & following an insolvency process & recap actually puts new money (in big lumps) into the real economy. I don’t see it? (Obviously, regulation is needed to prevent lending for speculation on existing assets & the rest of the extractive casino.)

There is a another element to the government debt figures that you haven’t included and that’s all the unfunded liabilities that the government must meet. This includes PFI contracts, future pensions – both public sector and state pensions, future draws on NHS resources as a population bulge heads into their twilight years etc.

In the past, governments kept costs off the books by promising candy in the future. Without very strong economic growth, the government cannot raise enough through taxation to fund these additional costs, so it will probably be debt funded and the market will not take too kindly to that.

However, this is a common problem across most western markets and it’s a problem we’ve known about for many years. We are now having to deal with the consequences of politicians making promises like a drunken sailor. We are now dealing with the consequencs of inept regulators and we’re now dealing with the consequences of politicians not wanting to address major problems that we’ve known about for many years.

The next decade will not be pretty!