Saturday, 11 October 2008

The Newt Returns: Nationalise the City

Ken Livingstone calls for the total nationalisation of British banks - at market prices which means, currently, diddly-squat. Glad to see my 1940 analogy is being used by others. His economics advisor, John Ross, offers this analysis of the root cause of the current crisis, which Ken shares:
"The core of the present financial crisis is that the dollar is overvalued compared to the real competitive potential of the US economy, that is compared to any market equilibrium, and has been increasingly overvalued for approximately twenty years. Consequently all assets held in dollars are also overvalued. As those dollar denominated assets eventually begin to adjust downwards towards their real international values this means they no longer counterbalance the weight of debt which has been offset against them – this crisis, of course, logically breaking out in the weakest, that is most clearly overvalued, part of the asset chain, that is sub-prime mortgages. ‘Over indebtedness’ is then created as assets will no longer support the existing weight of debt."

This would seem to imply (a) there's no national solution to this problem, it's international; and (b) there's no international solution which doesn't involve a loss of American power and influence...

Meanwhile another economist popular with the Labour Left reminds that he called for this back at the end of September. (He also said we should get the troops ready to quell disorder and think about opening talks on forming a government of national unity - two proposals which the LRC might not give quite so much prominence as his call for full bank nationalisation...)

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