Monday 18 April 2011

Bailouts & Sovereign debt

How the World Works: Part 1 - Bailouts &  Sovereign debt

The global banking elite squander trillions of pounds on bad investments then run squealing to democratic governments for bailouts. The governments and national banks bend over backwards to save the banking sector with free money, de-facto nationalisations, quantitative easing (printing money for the banks) and secretive multi billion low interest loans from the Federal Reserve. Despite all of this assistance the democratic authorities impose no real austerity measures on the banks and carefully avoid bringing in any serious reforms to prevent the bankers from crashing the global ecnomy again. The banking sector are allowed to carry on paying themselves billions in bonuses despite having brought the global economy to it's knees through their greed and stupidity.

A couple of years down the line the global banking elite decide that the cost of the bailouts has to be paid for by someone, so they set about downgrading the credit ratings of whole countries in order to impose severe austerity measures so that the costs can be extracted from the poor, the sick, the elderly, the disabled, the unemployed and from ordinary working people.

Governments like the Tory party are more than happy to go along with this bailouts for the super rich and cuts for the poor strategy because more than half of their donations come from their super rich banker mates. It is also in accordance with their party motto of "Take from the poor to give to the rich".

 If you enjoyed this post, maybe you could buy me a beer? £1 would get me a can of cheap lager whilst £3 would get me a lovely pint of real ale.


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George CA Talbot said...

Several times I have tried to post a 400 word comment on this site, via Google and with my Name, but nothing appears. If this appears, it must be my post. It is polite and pertinent and removing the italic tags and the internet links did not help.

George CA Talbot said...

This is the first half of my comment.

How come an article on bailouts and sovereign debt says nothing about savers and borrowers? Customarily, borrowers are blamed for getting into debt and should consider whether they can service their loans before accepting them. But to understand indebtedness, we should note that when some save part of their income, demand is reduced and that to restore it, others must borrow the savings and spend them. Next we should ask whether these loans can be serviced. This depends on demand. If enough can, a virtuous cycle could develop. But if many cannot, a malign one may result. This is wont to crash when credit limits are reached especially if new loans have been used to service old ones. Blaming banks and borrowers is easier than blaming savers but all are party to a folly that has repeatedly wrecked lives and societies since the beginning of recorded history.

I believe religion recognised the threat from savers when it forbade paying any interest as the Catholic Church did up to the middle of the 18th century and as Islam still does. The ancient Jubilee year released debtors and ended hope of repayment. And Plato’s Laws repeatedly forbids usury and once denies lenders the legal right to recover loans!

But modern laws privilege lenders in various ways and allow usury. I blame these more than banks seeking profits from usurious finance in competition with others. And I deplore the global capital markets that have become wild casinos where the best traders make massive profits that justify their huge pay and bonuses. Gambling undermines the work ethic and is deplored by religion.

George CA Talbot said...

This is the second half of my comment.

During World War Two, Keynes tried to introduce a World Bank and global currency. But the US vetoed his Clearing Union. In March 2009, Zhou Xiaochuan, governor of The People’s Bank of China, wrote “The collapse of the Bretton Woods system, which was based on the White approach, indicates that the Keynesian approach may have been more farsighted.”!* This allows governments to restrain international capital so together they can set exchange rates that balance current accounts. Then international debts do not build up. And each nation has enough autonomy to maintain low inflation and full employment. Although Keynes allowed interest on nations in debt to his Clearing Union, he wanted to tax creditors.

See also George Monbiot’s Keynes is innocent: the toxic spawn of Bretton Woods was no plan of his and the first of my posts under Michael White’s How to save the economy.

* Reform the International Monetary System Website Submit Date: 23rd March 2009