Update: Some Solutions – Debt Commission, Targeted Public Spending, Banking Utilities, Eurobonds… Leave the Euro

  • David Malone / Golem XIV – A Debt Commision for the publically owned Banks like RBS: I personally, as a tax payer, was taken into a vastly costly deal blindfolded. I want the blind fold removed. Don’t tell me ‘experts’ have looked at it for me. I do not believe those ‘experts’ have any concern for me or mine. I think they are working for interests other than mine and I do not thin., thereofer, their opinions are worth anything to me.We own the vast majority of RBS. I think the only reason we don’t own it all is because if we did it would be liable to Freedom of Information Requests. But nevertheless we own it and we therefore have both a moral and legal right to know what it is we were forced in to buying and also forced into insuring. We have a right to demand a publicly conducted Debt Commission.
  • Key Trends in GlobalisationWhat lies behind the renewed international economic crisis – and what policies are required to deal with it?: The effect of the policies pursued after 2008 has been to nationalize large part of the debt that originated in the private sector. Therefore, in most cases, and in particular in the US, even if the crisis reappears around state finances the actual origins of the problem lay in the private sector debt.
    The strategic failure to overcome the debt crisis creates strong pressure to a renewed crisis of the banking system.
    The debt crisis transmits itself into the real economy above all though a collapse in investment – taking the G7, the entire decline in GDP is due to the fall in fixed investment.
    In the short term it is necessary to deal with the crisis by continuing to run budget deficits, and countries that have not done so may well need to introduce budget deficit spending. China is an exception because its economic structure allows it to run large stimulus packages without budget deficits due to its ability to directly stimulate investment. Only a handful of other countries, however, have a state sector large enough to fund and run such investment programmes and therefore other economies will have to run budget deficits in the short/medium term. However while budget deficits are necessary to avoid sharp economic decline the experience of the last three years has shown that the economic crisis is too deep for budget deficits by themselves to stimulate significant growth because they do target the core of the recession, the investment decline.
    Very low interest rates must be maintained in order to lighten the burden of interest payments on the overextended debt, and to remove an obstacle to investment. However, once again the experience of the last three years has shown that the economic crisis is too deep for low interest rates themselves to relaunch investment and substantial economic growth.
    China possesses the advantage that it can directly stimulate investment. In other countries there is also a growing realisation that the core transmission of the economic problem lies in investment falls. But without a sufficiently large state sector most other countries do not have the means to directly launch investment. Therefore indirect methods such as tax incentives for investment and similar measures are being proposed. It remains to be seen in practice, if these are introduced, whether they are effective. Given the depth of the crisis the probability is that even if such measures are introduced they will not be enough to sufficiently overcome the low investment level. Consequently growth will continue to be very slow in the US and Europe even if a new recession can be avoided.
  • David McWilliamsBanks that think they’re casinos put us all at risk: Think about what banking depends on: unlike other complex industries, like the car industry, banking depends on just one commodity, legal tender. We, the people — in our name — issue this commodity. We control the raw material of banking. And in contrast to other industries like the car industry, banking doesn’t depend on ever more sophisticated technologies or better scientists to create a better product.Thus, all that banking requires is the human component. It calls for judgment; it is more of an art than a science, which is why the great bankers of the past were the ones with the best personal relations, the ones who could assess risk and not take such big gambles and obviously the ones who protect wealth first, rather than squandered it. Many of the finest bankers were Italian Renaissance men, gifted in arts and culture. Therefore, good banking comes down to good people taking in some people’s money for safe-keeping and using that money to finance investments of others who want to build new companies or seek out new investments. It really isn’t that complex.To the extent that there are innovations in banking, these innovations, like innovations in any industry, should make money safer. But in many cases innovations in recent finance have made money less safe. Think about normal engineering. In, let’s say, aeronautical engineering, innovation makes planes safer. In financial engineering, the engineering — such as subprime mortgages — makes money more risky, not more safe. The finance industry is the only industry where so-called “engineers” make the basic product less safe, not more safe.
    The world economy will therefore see a further period in which China’s economy will grow rapidly while the US and Europe remain at best relatively stagnant.
  • Yanis VaroufakisThe Modest Proposal’s Most Controversial Recommendation Foreshadowed in the FT; plus Gordon Brown (former UK PM) and Sigmar Gabriel (SPD Chairman) adopting its main principles: … the most controversial part of the Modest Proposal is now openly discussed. Let me remind you that we have been strongly criticised for even daring to imagine that the ECB could ever issue its own bonds. The argument against the Modest Proposal has been, for a year now, that Central Banks do not issue bonds. Period. Our retort (see this recent post) has been that the ECB is not a Central Bank like all the others. It is exceptional, in that it has no counterparty in a European Treasury. And since a proper European Treasury (with the powers to spend, tax and borrow) is pie in the sky, ECB-issued bonds (the purpose of which ought to be the parallel transfer of the servicing of the Maastricht-compliant part of member-states’ debt to the ECB) are the only thing that stands between the eurozone and the cliff’s edge. Now, for the first time ever, someone else, other than us, dares make this suggestion.
  • “Ireland needs to leave” EurozoneProf. Kinsella, Smurfit Graduate School of Business:     “The economic forecasts on which Ireland’s budgetary policies – and the bailout – have been constructed have now been shown to be wholly wrong.    “So, too, have the policies. They simply aren’t working. All there is to show for the sacrifices are a sovereign debt rating of junk status, a shrinkage of employment of 15 percent and ‘closed’ and ‘for sale’ notices across the country.

        “This is not leadership. It borders on the wilful to adhere to policies that are demonstrably not working and that have mired the Eurozone in a crisis from which it is seemingly incapable of escaping. Ireland needs to leave.”

This entry was posted in Accountability, Auditing Committee, Bankers' Bailout, Budget, ECB/IMF, Economy, EU, Euro / Sovereign Money, Geopolitics, Greece, Housing Bubble, ireland, Solutions and tagged , , . Bookmark the permalink.

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