Tuesday, 4 November 2008

What Are Banks for (part 3)?

They're there, or should be there, to direct capital to the most efficient enterprises, allow economic development and facilitate home ownership in sensible circumstances.

What we now have in the UK, it seems, is a system for re-founding the very banking system that almost collapsed and ruined us all only a few weeks ago. UK Financial Investments Limited – run by a banker – will hold the government's interests in banks, and press them to make profits 'sustainably', whist still lending. The idea is that we'll get everything back to normal quite quickly and then the government will sell its shares on the refloated open market. Richard Murphy is going bonkers, and even Peston raises a discreet eyebrow. It's the economics of, ahem, optimism to put it mildly: putting public money at risk by steering policy to re-create the problem that caused all the hoo-ha in the first place.

It won't work. We're Swedish now, and we're going to be for a long time. We need to direct investment in different parts of the economy, perhaps partly through a Green New Deal, which leaves this country better off because it is less exposed to the vagaries of finance capital. But steadfast in their conviction that the City is a Good Thing, Brown and Darling boldly set off towards another disaster...


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