Monday, 19 January 2009

Sailing Slowly to Sweden via Brussels?

Ken's utterly unambiguous: the new bail out won't work and it's time to go for full bank nationalisation. Well, we'll see if he's right on the first point - it really is only susceptible to an empirical answer as I don't really think we've been this way before in global economic terms. (Just because, as an old Leftie, I want it to be true that things short of full nationalisation won't work doesn't mean that it is so.)

Looking back at my previous posts (e.g.) I see I rather airily dismissed the ideological problems in getting mainstream politicians to go fully Swedish - that is to say, to temporarily nationalise the banks in order to fatten them up and then, eventually, sell them back to the private sector. There is clearly resistance to this idea in its full blown form and almost everything else is being tried first. Part of the problem - and this at least I do think I got right - is that the banks themselves are hugely opposed to any such move. Partly also it is that it may well be that Brown and Darling agree that it is hard to see how any such move can possibly be temporary - something Mason first alerted me to back at the beginning of October. But ideology also plays its part, and I can see, at a human level, how difficult it might be for New Labour to abandon it's basic economic world view.

There is one other factor that is beginning to interest me politically. The point of nationalisation is to put the guarantee of the nation behind any enterprise. But London's banks aren't 'nation-sized' : they're a continental sized off shoot of Wall Street, the key component of it's 'shadow banking system'. So even nationalisation may not be enough of a guarantee.

That, it seems to me, is the implication of much of the weekend's chatter about the difference ('6 months plus membership of the Euro') between the Icelandic and Irish situations - Ireland has the authority of the ECB, a continental sized guarantee, behind it. Iceland doesn't. So will Britain be driven into the Euro?

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