You can’t use the phrase ‘perfect storm’ these days. It is a cliché. But how do you express, with sufficient clarity, the phenomenon of a financial tsunami and a financial hurricane happening at the same time?
Because we need to start asking how we might cope if the very worst happens – as well it might – and both the US government and key European nations default on their burgeoning debts at the same time?
The euro has been rescued by the latest bail-out, but an American default would unravel that and cause a second banking crisis, far more ferocious than the first – and on a scale that makes it quite impossible to bail out just by borrowing more money as we did before.
Going further into debt to tackle a global debt conflagration would also be like throwing petrol on the flames.
The danger is that, within a few hours of the crisis hitting, the world’s cycle of speculation, the $3 trillion a day that pours through the world’s wires, will unravel like Tinkerbell when nobody claps.
The question is urgent and of course the debates about what should be done have to be done quietly. We can only hope they are taking place, but – since financial regulation seems to have progressed little further than hoping for the best – it is a good bet that they are not.
Let’s not be under any illusions about the risk. Our economies are now interdependent, and our food and energy so interconnected by related just-in time delivery systems, that a major economic crisis on that scale and immediacy threatens us with serious social disruption. Possibly even mass starvation.
During the Far Eastern debt crisis in 1997, we saw TV pictures of hospital patients thrown onto the street at bayonet point as the health services shut down. Nearly a decade and a half later, we could witness scenes far more terrifying and closer to home.
So what might be done? It might hasten that moment of catastrophic loss of belief if our leaders were to start talking publicly about what they might do. But it makes sense for the rest of us to start making plans – and debating them too.
So here are the top three things we ought perhaps to decide now if the worst happens:
- Create the money necessary to pay off the debts – and to create emergency liquidity in the system. This is not quantitative easing, which was simply snaffled by the banks, as it was when the same thing was done in Japan a decade ago. It is the modern equivalent of the Treasury bills printed by David Lloyd George to stave off a banking collapse in July 1914. This would work best by international agreement, so that the money is created by International Drawing Rights and credited to governments to pay off the debts, but it could also be done country by country.
- Create emergency mediums of payment, as they have in places like Brazil and Uruguay – very low interest and no-interest currencies that can support local economies in the absence of national currency, issued through local government and other institutions. These will emerge anyway, as people turn to internet systems like bitcoin, but it makes sense for central and local government to provide more reliable local alternatives.
- Create the social networks capable of supporting people to live their lives, and do so through existing public services – so that every surgery, police station, hospital and housing estate gets their own manned time bank (virtual infrastructure is not what is needed here, and will only benefit the articulate middle classes) to provide mutual support during and after the crisis.
But there is one thing that needs to happen now, above all else. We need to establish one central unambiguous truth: the future of humanity, the future of our communities, and of civilized human life, comes before the integrity of the banking system.
If the banking system collapses, because of the weight of debt, then the money must be created – as we know it can be – by the world’s central banks to settle the ruinous debts and to start again. That must happen even if it makes a mockery of the financial system we have built, and even if it risks inflation later.
That has got to be our slogan: life before banks. If that creates moral hazard, then it is better than complete moral collapse.
David Boyle is a fellow of the New Economics Foundation and the co-author of Eminent Corporations.
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32 Comments
Mass starvation. Really ?
The US isn’t going to default on its bonds, because the Treasury Secretary isn’t insane enough to destroy the world economy single-handedly. They’ll just suspend wages of federal employees, cut Social Security…
The effect will be similar to the government shutdowns of the 90s – not a catastrophic global collapse.
Ironically the seemingly inevitable ratings downgrade ( to AA – hardly to a Greek level ) might encourage investors to buy up undervalued Treasury bonds – this is a political crisis, and the US economy remains more than solvent enough to cover its international obligations.
Even if you assume there will be no agreement on Capitol Hill, the USA isn’t going to run out of money next week, it will just run out of “overdraft”. Government will still receive money from taxes, it just won’t be able to top that up with borrowings. They will have to spend less. That doesn’t equate to a full scale collapse of the world economic system, just that a few bills will be paid late until an agreement is made.
“The euro has been rescued by the latest bail-out,”
Lol, that is a brave statement to make!
*sound of can being kicked down road yet again*
To quote Jacques Cailloux and his team at RBS (hat-tip FT Alphaville):
1. Greece Bail Out II now detailed, rolling crisis still likely: The Euro Summit was first and foremost a summit aiming at concluding the negotiations surrounding Greece Bail Out II. This is now done. The political will of some countries to get PSI at any cost won the day which will have a number of negative side effects (rating downgrade for Greece and potentially other countries, ECB requirement for additional guarantees for Greek collateral, market perception that PSI might be a template for other countries) while not bringing substantial economic benefits. Indeed, after almost 3 months of negotiations and effort, the Greek debt load will be at best reduced by 10 to 20 percentage points of GDP to what will still be seen as an unsustainably high level. Overall, this will have been an expensive political decision. In the end, Greece will likely continue facing a rolling crisis around IMF quarterly reviews. Doubts about the trajectory of the economy and the ability to raise privatisation receipts anywhere near the targets will persist.
2. Toolkit to respond to euro area contagion rushed out: The statement clearly gives the impression that euro area policy makers are increasingly ‘getting the message’, with 3 new tools being created: a precautionary programme, a lending facility for non programme countries to recapitalise banks and a bond buying programme in the secondary market. However, the level of detail provided is low, making it hard at this stage to really tell how the new tools will work in practice and how efficient they will end up being. In particular, there is insufficient information available to tell how preventive those tools will end up being deployed and this is related to the lack of clarity surrounding the so called “appropriate conditionality” that will be imposed on member countries accessing these new help mechanisms.
3. Nice tools but no firing power: In our view a key limitation of the announcement is that it did not address the size of the EFSF. We have recently argued that a prerequisite to increase the flexibility of the EFSF was to increase very significantly its size with a view of ultimately having a lending capacity of around Eur2trn. Indeed, under the amended EFSF which will aim at having a lending capacity of Eur440bn, and given current and likely commitments, the EFSF will be left with a little more than Eur300bn of lending and or buying capacity – a too small amount to restore investor’s confidence that the euro area has once and for all dealt with its sovereign crisis. The crisis will in our view linger with markets likely to test the EFSF firepower.
I would like to critique this piece but I’m afraid I have no idea what most of it means.
“We need to establish one central unambiguous truth: the future of humanity, the future of our communities, and of civilized human life, comes before the integrity of the banking system.”
er yes, but the US debt problem is nothing to do with banks, except in so far as they have been complicit in facilitating the US spending vastly more money each year than they earn.
The authors speaks of debt as though it is something impersonal and not linked to real people. Government debt is our savings and pensions , if it is reneged on it will have real effects.
“The euro has been rescued by the latest bail-out” – can you possibly actually believe that. It is what was said last time Greece was rescued. One currency covering so many countries with different economic cycles is fundementally unsustainable. Not to mention that is depends on very large transfers from the German and French taxpayer to Greece etc which seems unlikley to continue.
All a bit apocalyptic. Not entirely the fault of the author. He didn’t invent headless chickens like the Tea Party. However, talking up survivalism and emergency doesn’t help. It is a dangerous kind of mindset, as the Norwegians have found out.
True, financially driven catastrophes do happen. But panic makes them worse, not better. “The only thing we have to fear is fear itself.”
Several things.
Firstly, the Euro crisis is not resolved, the can has merely been kicked a little down the road. Greece after the latest “rescue” has a higher debt/GDP ratio than when the crisis started so it’s going to implode. Only Germany has the financial strength to rescue the PIIGS (the EFSF mearely puts a different sticker on the front – contirbutions from Spain and Italy are meaningless when it to rescuing, err, Spain and Italy.) but the problem is German electors will never support rescuing the PIIGS. Delaying the inevitable only makes it worse in the end.
Secondly, whatever happens with the US debt ceiling, it’s looking pretty bad and the rule of law in big finance has effectively been suspended to the point where the big banks have been forging mortgage documents wholesale (unbelievable but true) that they ‘lost’ during the rush to securitization. Even if some agreement is reached on the debt celing the result will be a huge and abrupt cut in Federal spending which will crash the US economy. I just don’t see it ending well.
So multiple flashpoints and an important question. What do we do?
1) Distinguish private and public debt. This crisis is sprimarily one of private debt therefore the govt should NOT, repeat NOT bail the banks again. They should fail per capitalism 101. To bail out private speculators would be intolerable.
2) There is a problem in that I understand that bondholders and depositors have equal standing in the event of a bankruptcy. This is wrong. Bondholders should loose right after shareholders and UK depositors should be guaranteed. That is where any new govt credit should be applied if necessary. If peoples’ savings are preserved the economy can reboot more easily. A law reordering standing in banruptcy should be passed forthwith (this week for preference)! Govt should also use its credit to support the economy through the crisis to recovery as far as possible.
3) Unlimited personal liability (triggered by any govt support whatsoever) should be introduced for banks’ main board directors and directors of retail banking subsidiaries. To concentrate their minds! Plus the move to ringfence retail operations should be done ASAP.
4) Ban Credit Default Swops (CDSs) as being against the public interest. They are insurance thinly disguised to fool insurance regulators and in a crisis will act as inflammable kindling piled high where there ought to be fire-breaks. Total global outstanding is said to be around $600 trillion (yes, $600 thousand billion) which no govt can cover. Although most are supposed to be netted off against each other to give a far smaller net exposure the “netting” would fail as individial banks or insurers collapsed spreading the crisis round the world. (That is why AIG, an insurance company, was ground zero for the mayhem that ensued when Lehmans collapsed).
5) Rework regulation to clean up finance. The last few years have seen a race to the bottom in standards on the basis that “if we don’t someone else will”. It’s time to invert this thinking and make London is the home of quality banking where clients are not treated as “marks” to be ripped off. It’s strange that no-one has though of this; it says a lot, and none of it good, about the state of governance in this country in recent years.
“That has got to be our slogan: life before banks. ”
It is best to be careful about dissing banks if a) you need to borrow lots of money, like the British government, or b) you need to save money in a bank account, savings vehicle etc.
But it is true that banks would not be needed if no one needed to save, borrow or transfer ownership of anything.
The US won’t default, but part of me wishes it would. Coz, personally, I’m a bit fed up of watching governments screwing their citizens over to prop up a banking system run by incompetents and borderline crooks.
“Mass starvation. Really?”
Depends where you look. Have you looked at the Horn of Africa lately?
Western markets may be sneezing, but millions are catching famine already. Does it have anything to do with food prices and the ability of those countries to access finance sustainably to cover production shortfalls and interruptions to distribution networks to give sufficient provision for their populations? You tell me.
I think it has now become clear that the Republicans primary purpose is to hamper Obama’s chances of gaining a second term as President – although they do wish to cut, particularly, Medicare and pensions to reduce the nation’s deficit,
It seems that an agreement will be reached, but it will be a game of ‘who blinks first’ – what the Republicans want most is that Obama does not have enough funds to last throughout his term in office, but has to return to Capitol Hill to start the process, again, during his campaign for re-election.
It seems that Boehner is a steady pair of hands, unlike some of the ‘Tea Party’ representatives whose support he needs – so it looks like we will avoid Armageddon for the time being.
Having seen that Boris Johnson is pressing for Osborne to cut the 50p tax rate, can we start referring to the Tories as Neocons? It seems that they are as heartless as the Republicans with regard to the weakest in society with no concern for the desperate plight of many who rely on benefit.
Anyone who saw ‘Poor Kids’ on BBC3 last night must be haunted by the end comment of the little girl who said she did not want to grow up – she saw adult life as just a continual misery
If you missed t it is available on BBC iPlayer – I only caught the last half hour – which was enough.
http://www.bbc.co.uk/programmes/b011vnls
“Having seen that Boris Johnson is pressing for Osborne to cut the 50p tax rate, can we start referring to the Tories as Neocons? It seems that they are as heartless as the Republicans with regard to the weakest in society with no concern for the desperate plight of many who rely on benefit.”
Seeing as it generates the exchequer very little revenue that statement is very foolish!
The 50p tax rate does very little indeed to help the poorest, and we all know that the main reason it was implemented was as a political manoeuvre to grab votes from people who felt that bankers got paid to much.
It is nothing more than chippy class resentment combined with the idiocy of those who feel that rich people should be made poorer on principle, rather than to pay a fair share of society’s costs. If the 50p tax rate could be said to generate any useful revenue the latter might not be true, but it doesn’t and is thus nothing more than punitive.
I felt a little confused reading the comments. On the one hand there seemed almost unanimity that the US will not default. That is probably correct, but it would be brave to take no precautions against that eventuality. On the other hand there seemed almost unanimity that the euro is not saved. That is probably true too. But we should not underestimate the impact of the euro unravelling at the same time as the US seems in danger of default.
Experience in the Far East and in Latin America suggests that the financial markets can unravel extremely fast, and far faster than they did in 1929 – and with our current dependence on them, that is extremely dangerous.
So when I say ‘people before banks’, I am talking about the moment of crisis – for which we need to be prepared. If the choice is between creating the money to repay the debts (as well as the other proposals put forward above by Liberal Eye), and letting our support systems unravel in order to protect the integrity of the debts, then I for one will put civilisation before debts any day. Since we can create the money we need, then – in extremis – I suggest that we should be prepared to do so.
I would prefer that scenario to being swept away in a tide of unrepayable debt. That seems to me to be the Liberal position too: people before systems.
@jedibeeftrix: it may be symbolic and not raise much tax, however, it is the concept of the highest paid paying more tax to help the most needy that is at the root of the US budget dispute.
Whilst the symbol remains, here, it provides agreement to the concept which might help Vince Cable to take the concept further in his drive to limit excess pay – where else can additional funds to help the most desperate be found?
http://www.guardian.co.uk/uk/2011/jul/28/tory-lib-dems-clash-on-policy
Yes, David, there is the question of level of risk and extent of insurance which people are comfortable in dealing with when it comes to paying a premium against their house catching fire, for example. But the problem is that ordinary Joe has no idea just how quickly contemporary (complex) society would unravel, and nobody but nobody understands the system well enough to know what event or sequence of events would combine to trigger a collapse.
You say “the debates about what should be done have to be done quietly. We can only hope they are taking place” and this intrigues me. I agree with the former in the sense of not stampeding the horses, or instigating panic; and yet it seems hugely irresponsible that the authorities should not inform people of what might be about to take place. In fact, I have sufficient doubts about the wisdom of government to suspect that your hopes in the latter part of the statement I quote would be forlorn!
When Argentina went belly-up in 2002 local currencies quickly established themselves to support the continued functioning of local economies in the face of national economic collapse. And there is a school of thought that there’s no need to act in advance setting up such things because they will evolve as needs arise. Seems to me it’s as well to be aware of the options available in advance and ready to initiate them… a small premium on risk?
Kurt Cobb writes well via energybulletin.net on these matters, here’s one example: http://bit.ly/qS74UG
“it may be symbolic and not raise much tax, however, it is the concept of the highest paid paying more tax to help the most needy that is at the root of the US budget dispute.”
i’m afraid that is not true, for we already hold to the principle of a progressive taxation system, so the 50p rate is not that at all. worse, it fails the fourth of adam smith’s four maxims of taxation; efficiency, i.e. it generates very little more revenue then it costs to administer so it cannot be result in any useful net benefit to the public good. in short it is a punitive tax, and i’m not sure i want to live in a country where we can arbitrarily decide to disadvantage sectors of society for no good reason.
taxation is for the provision of public services, not a weapon for social engineering.
“taxation is for the provision of public services, not a weapon for social engineering”
Nonsense. It’s both; always has been. Even the Romans knew that.
@jedibeeftrix: I suppose it does depend on what side of the great divide you fall. One of the most distressing features of :
http://www.bbc.co.uk/programmes/b011vnls
was that the children were most conscience of the fact that the income of their parents did not allow them to have and do the many things that their school friends had and did so they felt divorced from life when, not a great deal more, would make the difference far less noticable to them and higher taxes for the better off would reduce this difference.
Yes it is a form of social engineering that will not find the approval of many of the higher paid, particularly in this extremely materialistic world. Before Thatcher and Murdoch, the concept that ‘getting and spending’ was the primary purpose of life there was, generally, a different attitude – one of greater compassion for the poorest in society.
This article tackles the issue on a broader scale and points to the likelihood of a ballot box revolution. However, this firstly needs their to be a party which represents this view.
http://millenniumthree.blogspot.com/2011/05/rich-get-richer.html
Jedibeeftrix
I think indirect taxation is more punitive than a 50p rate for higher earners. Actually, flat rate tax is relatively recent and in conjunction with other free market fundamentalists small government hobby-horses hasn’t delivered. Fact the countries that pulled out of the recession quickest and strongest were either emerging economies or the western economies with stronger labour laws, more social cohesion,and more progressive taxation. France,and Germany, even Iceland isn’t doing as badly as everyone thought it would..
As for your assertion that Tax is not a tool for social engineering. Utter nonsense. It has always been a tool of social engineering from the notion of democratic representation down to public libaries. And what exactly is wrong with social engineering? We don’t live in caves, hunt and gather, die of dysentery. In fact the biggest disgrace in politics is that we’ve adopted a sort myopic Doctor Pangloss “all is for the best in this the best of all possible worlds” attitude to social policy unless involves stiffing disabled and poor people, coz we are now intent going backwards in that area,
“…it generates very little more revenue than it costs to administer…” You may well have a better understanding of the taxation system than I have, but as someone who fills in self-assessment tax returns and deals with PAYE I find it difficult to see how one level of income tax can be more expensive to administer than another, and as the income tax system quite clearly generates massively more income than it costs to administer I don’t understand how the 50p tax level can be so uniquely expensive.
This video certainly does not pull it punches with regard to bankers and globalization – the real cause of the poverty of our nation.
http://www.realzionistnews.com/?p=645
Interestingly it refers to the Dominique Strauss-Kahn affair as a set-up. I must admit that it did come at an extraordinarily convenient time for those who did not want him to continue as the head of IMF or challenging for the French Presidency and his treatment was particularly harsh for an’ innocent until proved guilty’. I wonder if he was against the current EU solution or something the globalists wanted?
The US may survive its brush with default brinkmanship – or it may topple over the edge it’s flirting with. But where else can the big money go? There isn’t anywhere else so, if there is a default, the big money may just have to live with it. At a guess they will console themselves by cranking up the interest rate to screw the US taxpayers even more and at a cost to the public more than any likely savings.
But default or not there is a big problem in that Obama, having won as a Democrat, is governing as a right wing Republican. He appears just as committed to cutting social security and Medicare as the GOP – a fact that is only slowly becoming understood in America and hardly at all understood over here. For instance Prof Michael Hudson (one of the Good Guys in my estimation) argues:
“Mr. Obama has come to bury Social Security, Medicare and Medicaid, not to save them. This was clear from the outset of his administration when he appointed his Deficit Reduction Commission, headed by avowed enemies of Social Security Republican Senator Alan Simpson of Wyoming, and President Clinton’s Rubinomics chief of staff Erskine Bowles.”
and
“Democrats express shock at the giveaway being threatened. Many say, “Where is the real Obama?” But it seems that the real Obama turns out to be a Republican Wall Street imposter in Democratic clothing. That is what the Democratic Leadership Committee basically is: Wall Street Democrats.”
http://michael-hudson.com/2011/07/debt-ceiling-for-progressive-repealing/
So we face the near certainty of a catastrophe for ordinary people just when they need most help. And the macroeconomic damage will be incalculable as cuts will crash the economy and lengthen dole queues even more. The richest 1% may succeed in piling up more dollars but will surely find that they are thoroughly devalued. When democratic law and govt have broken down to be replaced by plutarchy, how long can it then be before the shooting starts? There is no shortage of guns.
So, I agree with David’s thesis that we need to prepare for a financial meltdown.
But public debts are NOT the problem in this country. It’s private ones that are. The banks have been running a complex and disguised Ponzi scheme for years and we have mistaken it for economic growth (I have argued elsewhere that, for all practical purposes, LDs don’t really “do” economics so we never noticed.) So, instead of bailing out the banks (or equivalently allowing them to earn their way out of insolvency by stuffing them with hidden subsidies at public expense which is what is happening now) they should be allowed to fail with the govt catching the falling wreckage as far as possible to mitigate the effects on the wider economy.
For those that owe money to the banks or anyone else that means that unpayable debts should be written off to reset the economy. The banks will cry foul but then many debts should never have been created in the first place. Bankster greed not be allowed to trap ordinary people into debt bondage.
Naturally, the banks will say they are only a little illiquid, not insolvent. The truth would be very difficult to find out from their books but fortunately there is an easy way to discover it. It is to follow Victorian constitutionalist Walter Bagehot’s advice and lend whatever they want, but ONLY against good security (which in the case of property means valued at, say, half the current market value as prices will fall) and at HIGH interest rates. A bank that is genuinely only illiquid will survive chastened; an insolvent one will fail.
It’s entirely feasible – likely even – that problems will spread from the financial sector into the real economy. One of the unacknowledged side effects of globalisation and outsourcing is that supply chains have become a lot more fragile. From the always excellent Matt Stoller:
http://www.thenation.com/article/162317/how-america-could-collapse
@ Glenn,
“Borderline crooks”
Sadly, there’s nothing borderline about bankers’ activities in the USA. It’s crime on a scale that would make the mafia blush.
http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20110511
@John Roffey
There are far better sources then that racist diatribe.
“children were most conscience of the fact that the income of their parents did not allow them to have and do the many things that their school friends had and did so they felt divorced from life”
the problem is that this won’t make a difference to the poor children of britain, it raises very little revenue and thus fails the a fundamental test of a good tax; efficiency. it is therefore punitive, and nothing more.
“As for your assertion that Tax is not a tool for social engineering. Utter nonsense. It has always been a tool of social engineering from the notion of democratic representation down to public libaries.”
Apologies if i was unclear, i was talking about social engineering in the negative sense of punitive taxation, punishing a sector of society for arbitrary reasons, not in the positive sense of paying for government services to aid the countries citizens, such as providing welfare and libraries.
“as someone who fills in self-assessment tax returns and deals with PAYE I find it difficult to see how one level of income tax can be more expensive to administer than another”
I have done that too, but this doesn’t change the fact that it is not an efficient taxation as it raises very little revenue with which the government can make a useful contribution to the benefit of its other citizens, and yet it is very punitive towards those few that have to pay it. While it will cost more to administer, the objection surrounds its uselessness, therefore you are taxing those people because you want to tax them, not because it will be of benefit to the less fortunate. That is, quite frankly, illiberal.
@ liberal eye: I do, basically, agree with your comment in this case, but there does appear to be a cult of intellectualism within the Lib/Dems that has the power to understand but not to act – just a passive comprehension. It is passion that creates movement and although the video is over-the-top, it is what is needed to create action.
From the comments I have read on LDV it is clear that many in the Party know, without a shadow of doubt, that the direction the leadership is taking will lead it to oblivion, but because too many are satisfied with understanding no one appears to be prepared to take action.
May I suggest that understanding is starkly inferior to taking action to put right that that has gone wrong.
Liberal Eye – there are some good suggestions in there. I would like to add in, reform of hedge funds, which as far as I can see is nothing but a more complex pyramid triangle where risk is continually sliced so that people are able to draw out their profit on a complicated mathematical equation that barely any of those trading in could explain.
Vince Cable is absolutely correct on those Tea Party nutters who are bringing the world to the edge of ruin on false right wing free market dogmatic and ideological policies.
Dogmatic and ideological right wing free market policies do not work and will lead us all to ruin.
“Dogmatic and ideological right wing free market policies do not work and will lead us all to ruin.”
That is for americans to decide my dear jack, and whether you like it or not they have a different conception about the size and role of the state, and hence the level of taxation needed to support it.
You must grin and bear your disappointment, through gritted teeth if necessary, because at the end of the day it’s none of our business.
It is a connected world. If the Americans default then the world economy may tip into really serious trouble. Greater than the flat lining and recession heading economy state that Osbourne has forced on us * with Liberal Democrat assistance.
I think I was also alluding to the Conservative free market chicago school economic dogma of Cameron and Osbourne, that details that it is necessary to privatise everything. This dogma is one that the Orange Book section of the Liberal Democratic leadership seem to agree with; and with the coalition agreement again set loose on the country (without an explicit democratic mandate). Of course from rail, electricity, gas and health provision in the states there is no evidence that privatisation does anything but enrich shareholders at the consumers expense.
But you got that really didn’t didn’t you Jedibeeftrix ? What the American example does provide is how badly wrong things go, with an unfettered freemarket. Again, health care in particular provides a terrific example.
I don’t want to live in the USA where free market rules and mass inequality reigns. Why is their free market policies being forced on the country here ? Jedibeeftrix, please don’t tell me that the electorate voted for it in a free and fair election because they didn’t.
“What the American example does provide is how badly wrong things go, with an unfettered freemarket. Again, health care in particular provides a terrific example. ”
What I see is that free market ideology turned a few destitute immigrants scratching out a living on the east coast into the worlds economic hyperpower in less than two hundred years. I do, however, agree that their healthcare system is a disaster that costs far more per-capita and generates worse health outcomes.
“Why is their free market policies being forced on the country here ? Jedibeeftrix, please don’t tell me that the electorate voted for it in a free and fair election because they didn’t.”
Well I want those free market policies, even if you don’t. And while the electorate may not have voted for them, given our coalition government, it was a free and fair election and i’ll brook no suggestion otherwise.
Well I want those free market policies, even if you don’t. And while the electorate may not have voted for them, given our coalition government, it was a free and fair election and i’ll brook no suggestion otherwise.
Hmm, it seems Jedibeeftrix that you are admitting that the electorate did not vote for the Conservative Coalition free market privatisation of everything policy. The statement above is a contradiction – people are getting what they didn’t vote for but it was free and fair election ? How can be getting something that you didn’t vote for be free and fair ? It is a misrepresentation of views and election won on a largely false platform.
It is shameful that this privatise everything, free market rules everything can only be enacted under false auspices and misleading the electorate. You may want it JBT, shame there was dishonesty in the way it was achieved. The record of many privatisation has delivered profits for shareholders and poorer more expensive service. I am not sure why you are supporting that ?
I am glad that you can see the disaster of the NHS bill. The amendments don’t fundamentally change the privatisation and fragmentation of the NHS. It must be stopped to avoid replicating the disaster that is US style health care. Safe in Tory hands ? I don’t think so.
Jack, we operate an indirect democracy were a party is elected on a manifesto mandate and then held to account four years later on whether it did what it said it would and whether it succeeded.
Yes, I quite clearly said that the electorate did not vote for tory led neo-liberalism everywhere, but, they are not getting it, and that in no way invalidates our electoral process which was indeed free and fair.
Re privatisations; like BA? However, regardless of successes or failures I hold to the belief that the British state cannot underwrite perfect success in public services, there is no such thing, and trying to do so will bankrupt the country’s future and leave our children with a steeply reduced standard of living. Even by 2015 we will still be spending 40% of GDP on public services, a rate above which is accepted to seriously damage long-term growth potential, and this at what will presumably be the height of the cycle. In 2010 the Bank of International Settlements calculated that Britain was on course, even with manifesto announced spending pledges, to have a public debt equal to 400% of GDP by 2040 whereupon we would spend 27% of government revenue on debt interest. We must live within our means, and that demands that the government do less. It is that simple.
Re health care, you are putting words in my mouth. I clearly said that i recognised the failings of the American system, where health care is not free at the point of use and purely based on private insurance. It costs a huge amount and does not generate good outcomes, largely because cost is shifted from preventative medicine to emergency care. I made no mention of the NHS and you are wrong to imply as much.
So you are saying it is completely OK to misrepresent your platform and your policies and mislead the electorate then.
I don’t understand your view that this is an acceptable way to behave.
http://www.guardian.co.uk/business/2011/aug/04/debt-crisis-economics
Another fantastic day for the unregulated free market.
What a disastrous mess the US financial and Thatcherite free market deregulation has left us with. Gambling, short selling and pyramid hedge fund triangles dressed up in fancy titles and complicated equations that not even those selling them could explain or understand.
Your free market JBF is a real marvel.
Oh Jack, this has very little to do with free markets and everything to do with foolish politicians attempting to ignore economic and social reality when building political institutions. If the EU wanted a federal europe it should have said so, and built slowly from a small northern core. But no, the ambition was unwanted by the peoples of europe, so it had to apply to everybody in order that there be no ‘bad’ examples which other nations might be tempted to follow, and it had to be done in a thousand minor salami-slices in order that there was no single act that people could point to.
This is a core problem for europe, there is no market certainty because the economic rules changes whenever they don’t fit the political mould.
Do i invest in country X?
How many times have they defaulted on their debts in the last 100 years?
How many times have they nationalised their economies in the last 100 years?
How many times have they created temporary punitive taxes in the last 100 years?
Hell no, I’ll put my money elsewhere and they can whistle for foreign direct investment!
So yes, they can and probably will tear up the rule-book (AGAIN, AND AGAIN, AND AGAIN), but they will pay a price.
And remember, this regulatory and legislative uncertainty, with the
economic price that comes attached, is only inevitable because the EU is a retarded construct predicated on the belief that political will can trump economic and social reality.
Why would germans pay for greeks?
Why would germans pay for greeks, knowing what it costs as they are still paying for (east) germans?
Why would germans pay for greeks, knowing that it will only lead to them paying for spaniards and italians?
Why would markets believe that germans will pay to prevent greek default when greek debt is reduced by only 15% rather than the 70% necessary?
Why would markets believe that germans will pay to prevent greek default when there isn’t even agreement on how and when the rescue tools can be used?
Why would markets believe that germans will pay to prevent greek default when the economic firepower of the EFSF is one quarter of what it needs to be?
Remember, if YOU supported warm cuddly concepts like ever-deeper-union and thus provided cover for politicians to act in ways inimical to the interests of broader society then YOU share part of the blame for the ensuing disaster!
This is an indirect representative democracy, and it means you accept, in part, responsibility for the actions taken in your name.
So, you can continue to blame ratings agencies and hedge funds as the eurozone melts but that is all rather beside the point.