It’s the banks, Stupid!

The slow motion train wreck that is the collapse of the financial
system gets more Orwellian every day.  In the Guardian I read that
Alister Darling, the Chancellor of the Exchequer which is the UK’s
Minister of Finance has sent a letter to G20 finance ministers…

“The key to retaining faith in financial markets is to establish and
maintain a consensus within the G20 and elsewhere as to the importance
of open capital markets. We need to have a fuller explanation of the
benefits of the financial system, and of financial globalisation in
particular.”

I would of thought that the “benefits of the financial system” (which
are clear to those of us who like to spend money) are separate from
“…the importance of open capital markets”.

It seams that the British government is determined to silence calls
for “root and branch overhaul” of the financial system (as the
Guardian puts it).

I enjoy being able to spend money, I think it is appropriate that
wages and bills get paid, so I agree that the financial system needed
to be saved.

But with bank failures, share collapses and nationalisations spreading
across the globe surly even Gordon Brown and Alister Darling can see
that now is exactly the time for route and branch reforms?

Since most of the banks receiving the trillions in bailouts (trillions
that incidentally have not been available for public schools or
hospitals) are insolvent without the bailouts, their shares should be
cancelled, the top executives fired and rehired as public servants.
The banks should be nationalised.

I know the worshippers of Hayek will wail and moan about the inability
of governments to manage businesses, but (a) could they do worse and
(b) where is the money coming from?  No and from the state/taxpayer.

So Darling wants us to have confidence in a failed system, rather than
create a system that we can have confidence in.

peace
W

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3 thoughts on “It’s the banks, Stupid!

  1. Actually, I’m in favour of the banks getting to find out just how responsible they are for this mess, by not getting bailed out by the governments of the globe.

    Hideous credit arrangements, creating an ever-deepening debt spiral, have ruled the past two decades; if wisdom of ages is ever to take effect, surely some ‘looking back in anger’ is required, especially for those of us who prudently disentangled ourselves from the debt-web some time in the past ten years, and don’t have a household debt the size of Alaska. (size including the inflated ego of one Ms Palin …)

    Wise up, guys – if you really can’t pay for it, then don’t get into debt beyond your annual income to pay for it!!!
    It’s just that simple: sustainable economics.

    And now a plug: Deirdre Kent has written a super book on this subject, called Healthy Money, Healthy Planet., which I have read, referred to in my 300-level papers in Feminist Economics at VUW, and reviewed, referred and raved about, since I bought a copy at the 2006 Green Party AGM.
    It is an excellent, clear review of what’s wrong with the monetary system so beloved of the Chicago School of Economics, who got the USA (and the rest of us) into this fine mess in which we now flounder.

    You can get it from her at Living Economies, http://www.le.org.nz, or c/o Helen Dew, 12 Costley St, Carterton.

  2. Actually, I’m in favour of the banks getting to find out just how responsible they are for this mess, by not getting bailed out by the governments of the globe.

    That is what the right wing extremists say too! And I have a lot of sympathy with that view.

    But we do need the banks and the financial system. Otherwise no one will be paid and the *real* economy will collapse. Mass unemployment (and starvation in many places) is not worth any positive change that may ensue.

    And now a plug: Deirdre Kent has written a super book on this subject, called Healthy Money, Healthy Planet., which I have read, referred to in my 300-level papers in Feminist Economics at VUW, and reviewed, referred and raved about, since I bought a copy at the 2006 Green Party AGM.

    I do not recommend this book. Deirdre Kent does not understand how the money system works.

    From the wikipedia page http://en.wikipedia.org/wiki/Healthy_Money,_Healthy_Planet

    Kent argues that much of the relentless pressure for global economic growth, which results in so much environmental and social damage, is due to our money system. She explains how most of our money is created by private banks, out of thin air as interest-bearing debt. This, it is argued, has led to a massive and crippling increase in debt world-wide, and a subsequent concentration of wealth and power in a small percentage of the population.

    These are false arguments. It is not surprise that credit is part of money creation, and the good thing about banks is they are (or should be) good at it, are transparent in that we know who they are and we can make them follow rules.

    I would recommend any thing by Joseph Stiglitz, especially “Globalisation and it’s Discontents” http://en.wikipedia.org/wiki/Globalization_and_Its_Discontents (although it is a little dated now).

    I have just read ” Adam’s Fallacy” http://www.hup.harvard.edu/catalog/FOLADA.html which is a very good intorduction to economic history and the dominant thinkers and theorists.

    peace
    W

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