FionaK |
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| Yesterday it was announced that the UK banks are to get more money from the Bank of England. It seems that this is to be done it 2 different ways. The first chunk is to be secured by assets and those assets can be anything at all: previously the assets had to be real, at least on the face of it. But now toxic assets are to be treated like good assets for the purpose of giving the banks money. The second chunk is to spefically dedicated for lending to business. So far as I can gather there is no statutory force behind this expectation. Since that was what the banks were supposed to do with the previous chunks of money they got, and they did not, I am not awfully clear why this is different.
This government has taken a machete to our welfare state on the grounds that "you cannot solve a debt crisis by taking on more debt". You dont have to believe that: but they say they do. Yet that is exactly what this is: the banks are in debt and we are increasing their debt. Once again I am asking myself why banks are different.
It seems to me that the government believes that there is a whole lot of demand for debt out there. If only the banks would lend businesses would grow and we would all benefit. As I said before, they believe that they can cut our incomes and our savings through the austerity they are imposing: and at the same time they believe we can increase our spending and indeed wish to do so. It may be I am missing a step and if so I will be very glad to hear what that step is: because on the face of it this seems unlikely.
We are told that the problem is that people have been spending more than they have: on frippery like pensions and welfare and stuff. In the real economy that just can't happen, so far as I can see. We are told that there is debt: well if there is debt someone lent the money. We are told that sovereign debt is owed to the financial institutions: so they must have had the money to lend. We are told that private debt is owed to financial institutions: so they must have had the money to lend for that as well. Where did they get it from? I do not propose to consider theories of value (though they are obviously relevant): my problem is not abstract. However money is generated it is subsequently distributed and how it is distributed is a matter of political choice. However it happened there is this reality: it ended up in the hands of financial institutions. Either they invented it or they appropriated it.
We know that the share of the money in the hands of the very wealthy has been rising: and the share for the rest has been falling. That is a matter of politics alone: and there is no practical reason why it should be so. If we had taken a different decision then a greater proportion of the money would be in different hands: in hands of workers and/or in the hands of governments. That means that neither governments nor ordinary people would be in debt. Or at least not to the same extent.
In any economic system everybody contributes to produce whatever we make. Say the group is 10 people and they grow 100 lbs of potatoes. Say one of those people contributed all the seed potatoes (for this purpose it does not matter where she got it) and the other 9 did all the work. What are we going to do with our 100 lbs of potatoes? Depends on your politics.
We could agree that all the potatoes belong to the person who had the seeds. In that case what we do with them is entirely up to her. She has options
A person needs 5 lbs of potatoes just to survive. So she decides she will keep 55lbs of potatoes for herself and give 45 lbs of potatoes to the rest. That is one possibility.
Or she can decide to keep 64 lbs of potatoes and give 36 lbs of potatoes to the rest. Now the others must borrow 9 lbs of potatoes from her to survive: they owe her. She says that this will mean there is more seed for next year and so there will be more potatoes and they will be able to repay her and have more for themselves. But she still decides next year: and it is possible that she has not actually got as much potato wealth as she feels is enough: so she doesn't actually give them any more next year: she will the year after...but not yet. But they can borrow an extra 9 lbs of potatoes so they have more to eat: so that is ok. And then, she will foreclose and demand her potatoes back. And berate them for living beyond their means. She will let them have the equivalent of 4 lbs of potatoes and they will have to tighten their belts while they repay her.
We could, of course, decide that the potatoes do not all belong to the person with the seeds. We could decide that some of them belong to each person: either equally or in any other proportion we think good. Or we could decide they do all belong to that person, but we are going to impose a levy for the good of the group and any potatoes beyond 5lbs will be taxed so we have some dried potatoes in common to give to anyone who is too ill to work: or to allow someone who is smart to stop working and get an education.
I think we can do that retrospectively, if we choose: we made a mistake. The mistake was in thinking we were a group of 10 with interests in common....
Edited by FionaK - 15/6/2012, 14:18
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