The Metaphor At Platform 10 Will Be Departing in 2 Minutes..

It’s a Bulletin train adapted to British conditions. They call it the Javelin. Neat, isn’t it? Sleek, stylish, modern and all ready to whisk people from Kings Cross/St.Pancras to the 2012 Olympics in 7 minutes.

That would be the Olympics at Stratford, built on a site which used to make locomotives when the Olympics were last here in 1948 according to Jonathan Glancey.

Glancey implies that we don't make trains any more so these ones were imported from Japan*. Never mind, I'm sure someone in the City of London arranged the financing deal, insured it and offset the risk with some clever derivative instrument.

But now the City's buggered, might it just be an idea to have an industrial policy which worked to turn that situation around, so we could build more stuff like this? Or even, somewhat more to the point, stuff like Vestas wind turbines? Go look at the Vestas 2008 order book at the bottom of this page: not one order from Britain. 240 wind turbines ordered by China.

P.S. I see the workers occupying Vestas on the Isle of Wight now have their own blog. (via). Is it too late to organise a write in campaign to get this in the top ten political blogs?

*I'm told this is not so - see comments from John B

Balance Sheet Recessions

Via, I learn of the concept of 'balance sheet recessions' at Vox. These, apparently, aren't like normal recessions. Oh no: in a normal, 'textbook', recession capital and labour gradually trickle our of unprofitable sectors of enterprise and reassemble in new areas of endeavour where profits can once again be made. Not so in a balance sheet recession:

The financial crisis has put much of the banking system on the edge – or beyond -- of insolvency. Large segments of the business sector are saddled with much short-term debt that is difficult or impossible to roll over in the current market....

The holes that have opened up in the balance sheets of the private sector are very large and still growing. A recent estimate by Jan Hatzius and Andrew Tilton of Goldman Sachs totes up capital losses of $2.1 trillion; Nouriel Roubini thinks the total is likely to be $3 trillion. About half of these losses belong to financial institutions which means that more banks are insolvent – or nearly so – than has been publicly recognised so far.

So the private sector as a whole is bent on reducing debt. Businesses will use depreciation charges and sell off inventories to do so. Households are trying once more to save. Less investment and more saving spell declining incomes. The cash flows supporting the servicing of debts are dwindling. This is a destabilising process but one that works relatively slowly. The efforts by financial firms to deleverage are the more dangerous because they can trigger a rapid avalanche of defaults...deficit spending will be absorbed into the financial sinkholes in private sector balance sheets and will not become effective until those holes have been filled. During the years that national income fails to respond, tax receipts will be lower so that the national debt is likely to end up larger than if the banking sector’s losses had been “nationalised” at the outset."

In other words, those people piously worrying about public sector economic stimuli 'crowding out' private sector investment are in cloud cookoo land. & even if he asks nicely Alistair Darling is unlikely to get the banks to move very much on lending to the 'real' economy: their first priority is to get back all the money they've lost and they'll do that by absorbing public spending onto their balance sheets until they're looking healthy again. Which took absolutely years in Japan.

This, I believe, is sometimes called rewarding successful risk management in line with market conditions. Me, I'm a simple minded soul, and I call it old fashioned class struggle. But with only one side fighting.

Zombie Ideas

John Quiggin, a social democratically inclined Aussie academic economist, is writing a book including a chapter on the Efficient Market Hypothesis (and other 'zombie' idea): he's trying out rough drafts of bits of the chapter over at Crooked Timber. It's all worth a read, but I like this bit:

"Once the EMH is accepted, there is no need to worry about imbalances in savings and consumption. International capital movements can be seen as the aggregate of a large number of transactions between ‘consenting adults’, buying and selling financial assets in markets which, according to the EMH, have already taken into account all available information about future risks. If a national government has better information, the appropriate response is not to act on it, but to release the information to the markets.

On the traditional, income-based view, by contrast, asset-based arguments are misleading and dangerous. By the time sentiment shifts in asset markets, the opportunity for an orderly adjustment will already have been lost. Advocates of the traditional view pointed to episodes of contagious panic in financial markets..."

Well, quite.

A Question of Theory?

I'm working my way through this book; it's not a great choice for a non economist like me, and some of it is a bit above my head. Moreover, some professionals seem to confirm my inexpert feeling that it's a bit of a curate's egg as well. But given the title I thought I had to give it a go. Well, the title plus the fact he wrote a couple of smashing Spokesman pamphlets thirty years ago: Socialism and Parliamentary Democracy and Trotsky and Fatalistic Marxism. Both of those influenced me a lot as a teenager...but he's changed his view of the world it seems to me, though I'm cautious about judging the theoretical development of people whose theories I don't fully understand.

What I will take away from the book, however, is this rather striking set of phrases:

The...standard core of utility theory is non falsifiable. ...Boland (1981) asks if any conceivable evidence would refute the standard assumption of maximising behaviour. He shows that such an attempt at falsification could never work. Any claim that a person was is not maximising anything can always be countered by the response that the person is in fact maximising something else. Given that we can never in principle demonstrate that 'something else' is not being maximised, the theory is invulnerable to empirical attack...

The problem with the maximisation argument are doubly severe when it assumes utility is being maximised. There is no experimental or other phenomenon that cannot in principle be 'explained' within a utility maximising framework...No evidence can, in principle, falsify the assumption that behaviour results from individuals or households maximising their utility.....by encompassing all possible arrangements and interconnections, the important relationships and connections are lost in a sea of universal possibilities. Accordingly, the universality of a theory does not necessarily mean it is useful or informative...

A chapter of carefully phrased caveats and examples follow. But my interest remains with this broad opening claim. Does it imply that the model of 'rational' behaviour which underpins mainstream economics is actually unprovable? & isn't this the very complaint that Popper raised against Marxism all those years ago?

No So Much An African Grey, More A Govan Bluenose..

I really should be above this sort of thing, but this makes me laugh at all sorts of levels. The clue as to why is probably in the surname I use on this blog...

"Jim Watt, from Horizon Housing Association, confirmed a complaint had been received from another tenant but said Linda and Rio had been cleared of the bigotry claims.

He said: "We spoke to the tenant with the pet as well as other neighbouring tenants. We took the view that there had not been anti-social behaviour which would include sectarian behaviour.""

Via Slugger

Open Left? Let's Have An Open Hearted One...

The whole Open Left thing is a tacit acknowledgment that the New Labour government is about to go down to defeat. I’ve come across the idea of ‘getting your retaliation in first’ before but this may be the first time I've stumbled on the idea of getting your ‘post-defeat soul searching in first’. This is perhaps one reason why it’s all such an unsatisfying slurry of words and vaguely defined dangling questions.

I'd advise all these angst ridden wannabe 21st Century lefties to go read Orwell:

The inability of mankind to imagine happiness except in the form of relief, either from effort or pain, presents Socialists with a serious problem. Dickens can describe a poverty-stricken family tucking into a roast goose, and can make them appear happy; on the other hand, the inhabitants of perfect universes seem to have no spontaneous gaiety and are usually somewhat repulsive into the bargain......The Socialist objective is not a society where everything comes right in the end, because kind old gentlemen give away turkeys. ..... We want a world where Scrooge, with his dividends, and Tiny Tim, with his tuberculous leg, would both be unthinkable. But does that mean we are aiming at some painless, effortless Utopia? At the risk of saying something which the editors of Tribune may not endorse, I suggest that the real objective of Socialism is not happiness. Happiness hitherto has been a by-product, and for all we know it may always remain so. The real objective of Socialism is human brotherhood.

I've always taken this to imply several things things:

1. Socialism doesn't depend on some idealistic concept of the perfectibility of human kind;
2. Socialism won't bring universal happiness (though there is no reason to imagine people will, on average, be any less happy than under capitalism);
3. The specific and distinctive policy objectives of 20th Century socialism - the predominantly social ownership of the means of production, distribution and exchange; or significant resource distribution between individuals on the basis of need, not effort -were, in fact, only a means to an end: the end being what Orwell called 'human brotherhood', but what we might now describe as social solidarity or community inclusiveness, the lack of which is the key sickness at the heart of our society.

We need a 21st Century equivalent vision. I don't care whether it's called 'socialism' or not any more.

Total Bankers Redux

Dunc wanted to know where all the anger's gone a couple of days ago.

Look Duncan, the anger's over here, waving and shouting "coooee" at us:

"...Goldman last year, after it converted to bank holding company status, announced that it was “taking steps to reduce leverage.” But what’s happened since then is that Goldman has actually been emboldened by all its state backing to borrow more and gamble more than ever. This is the equivalent of a regular casino gambler who hears that the house has doubled down on his credit line and decides to stay up at the tables all night, instead of going home and sobering up. Just look at Goldman’s VaR, or Value at Risk, which measures the amount of money the bank puts at risk on any given day: it’s soared since last year.

Taken altogether, what all of this means is that Goldman’s profit announcement is a giant “fuck you” to the rest of the country. It is a statement of supreme privilege, an announcement that it feels no shame in taking subsidies and funneling them directly into their pockets, and moreover feels no fear of any public response. It knows that it’s untouchable and it’s not going to change its behavior for anyone. And it doesn’t matter who knows it.

There are going to be some people who say that some of this stuff isn’t government subsidy so much as ordinary government contracting. After all, do we criticize Boeing for making airplanes or Electric Boat for making submarines during a war? If we don’t do that, then why should we be pissed about Goldman making a profit underwriting TARP repayment stock issuances, or Treasuries?

The difference is that Boeing and Electric Boat didn’t start the war. But these guys on Wall Street causesd this crisis, and now they’re raking in money on the infrastructure their buddies in government have devised to bail them out. It’s a self-fulfilling cycle — beautiful, in a way, but at the same time sort of uniquely disgusting. That they’re going to get away with it is bad enough — that they’re getting praised for it, for being such smart guys, is damn near intolerable."

.

Socialised Medicine: May Contain A Worse Threat Than MRSA....

Slugger led me to a long, long debate on American Healthcare Reform over at Reddit. My favourite comment is about 1000 down, from a Canadian coming to terms with the US system now he's living south of the border:

If you're American and have grown up used to the idea of a private health-care system, try picturing this: Imagine going to a new country and finding out that to call the police was for-profit, and you had a variety of options for licensed police services. If you paid for a good plan, you'd get sub-5-minute response times, you'd get detectives assigned if your car was stolen, and you'd have a cop patrolling your neighborhood on a somewhat regular basis. If you were on a budget, you'd only get a 10-minute response time, and no detectives assigned for major threats or patrols

Well, yes, most of you might think. But as another poster warned, there can be hidden dangers to thinking this way:

But aren't you glad that the government didn't tell you what doctor you had to go see? Like they don't do in any socialized medicare country that I know of? Haven't you considered the various imaginary problems that socialized medicine could cause? You know even talking about it could turn you communist like every other western nation. I'm a Canadian and I've seen people come out of hospitals drop to the ground and suddenly become communists, happens all the time.

Update: Sean at The Soul Of Man under Capitalism has a brilliant Fox TV clip where they seriously discuss the idea that socialised medicine encourages jihadist doctors...

Who Is Your Top Political Blogger?

As various people have noted, its voting time for the Total Politics Top 100 Political Blogs.You're not suppose to publicise who you've voted for in case a pattern of 'voting by slate' emerges. Which is sort of fair enough if it stops the net libertarians all piling in behind Guido Fawkes, but I suspect it won't. & Paul is right to point out it is largely unenforceable. The blogs have to be 'based in the UK, run by UK residents are eligible or based on UK politics'.

Anyway, this has provoked me to reflect on what exactly is it that I value in other people's blogs. It's certainly not ideological conformity or confirming my ideas: I voted for people who are considerably to both my Left and to my Right, though I drew the line at voting for purely academic sites or anyone associated with the Tories or LibDems. So what criteria did I use?

Firstly, the ability to not shout. This is rarer than it might seem on the internet. The default mode at CIF, for example, is shouting - and this is replicated in discussions at Harry's Place and Socialist Unity. Bloggers can't be blamed for the 'rats in a sack' attitude of people who comment on their posts of course, but they can set a tone I think. & I'm just too old to take any notice if the tone is shouty.

My second pre-requisite is a two parter: good blogs must know what they're talking about, but also know the limits of their expertise. This combination is more uncommon than you might imagine. The blogosphere is full of sites which 'own a hammer and therefore think every problem is a nail' as it were. Avoiding this is perfectly compatible with political commitment and ideological fervour. It's really about having a curiosity about the world as opposed to just a preset plan to reshape it.

Because I've become fascinated by economic issues since last autumn's economic crisis I regularly enjoy a variety of blogs dealing with matters of political economy, from the austere but rewarding Willem Buiter on the establishment wing,through the gifted Paul Mason to the wonderfully eccentric unorthodox Troskyist Boffy. John Ross is always readable, be it on his own site or Ken's. But my current favourites are the Left-Labourish Duncan and, pre-eminently, Stumbling and Mumbling, both of whom have a commitment to opening up complex economic debates to us non-specialists. Tom at Labour and Capital deserves a mention for his sheer 'stickability' on a very narrow brief (or so it seems to we non experts) - and for the best single political comment in less than 200 words on the economic crisis I've read anywhere. & Anne Pettifor is a routinely worthwhile reference point over at Debtonation. Bubbly Alice lets me peek at the economic world as the Right see it - a strangely fascinating experience if one takes it with a sense of moderation.

But I also like folk who know stuff I don't know that much about - people like parliamentary insider Hopi, the gorgeously phrased writing of Fat Man On A Keyboard and that foreign policy specialising far left humourist, Blood and Treasure. Splinty is also well informed on foreign policy, amongst other things, and regularly funny; he should be considered a national treasure for one or other of the national traditions he reports on from Belfast, and perhaps for both of them. Jim at the Daily (Maybe) is my gateway to greenery, while Flipchart Rick prowls along the other side of the politics-management border from me.

Lastly, there are two people I regularly read who know about stuff I once knew about but have forgotten. A Very Public Sociologist reassures me that the subject matter of my 30 year old undergraduate degree hasn't changed that much, whilst Potlatch convinces me it has. They're both good writers with a hinterland of interests I find fascinating.

That's 16 people, none of whom I've ever met and none of whom know my real name. Go vote and keep them all in mind in choosing your ten. Remember: anyone but Guido...

Of Fool's Gold, Belatedly

I've only just finished the book: and it is what everyone says it is, a sparkling good read. It is beautifully written with a clarity which most financial commentators can only aspire to. At a personal level I found her authorial 'voice' deeply humane. But it is told as a morality tale of small group psychology: the unstated implication throughout is that if only everyone was as sensible as the JP Morgan gang she foregrounds then things wouldn't have gone so wrong. History only make an appearance in the book in the form of hallowed company traditions; power structures are only 'the regulators'. Despite her clear understanding of the way in which the selling and reselling of increasingly complex derivatives let to a chain of unquantifiable risk linking the big institutions and national economies together she doesn't really present capitalist finance as a system. The best short assessment I've come across is a review by a commentator called Brigg57 on the Red Pepper discussion boards of all places.

I suspect the book is good enough to become the default 'popular' (i.e. used by the non specialist media) account of the origins of the credit crunch, a sort of Galbraith's Great Crash of 1929 in miniature. But it's not a critical account in any structural sense whereas Galbraith's book drips with contempt for the main players of 1929 and their methods. Which might be why Donald McKenzie in the LRB found so much in the Tett book to agree with.

So we still await an influential view on the current crisis which might politically resonate with the the deep if often inchoate unease at what the financial sector has actually done to our economy, society and state finances.

Total Bankers

Fictitious capital: that’s what Marx called "money that is thrown into circulation as capital without any material basis in commodities or productive activity” (the quote is from David Harvey). You can’t knock ol’ Karl’s gift for phrase making, can you? Even now, I’d hazard a guess that the label – if not the content of Marx’s idea - conjures up something very important about popular understanding, or lack of it, of the financial markets. Many of us think they’re just playing silly games with pretend money.

Now this isn’t quite right of course. & every now and again one of the Masters of the Universe will descend from Mt. Olympus to haughtily explain to us that it isn’t like that at all, it’s about the most efficient allocation of capital and of risk which is A Very Complex Matter, & Probably Beyond The Ken Of We Mere Mortals. But Gillian Tett ends the very readable Fool’s Gold with this observation,

“In many ways the craft of finance is not so very different from that of the water industry: both exist in order to push a commodity around the economy for the benefit of others. If those pipes are wildly inefficient, leaky or costly, then everyone suffers.”

In any case, a rather basic question does suggest itself: efficient allocation of capital and risk for what? On this subject, it seems to me, theorists of financial markets are very largely silent. Or they just snort with derision at such a silly question. Risk is the risk of gaining or losing money. Efficient allocation of capital is making sure that that risk ends up in the hands of those most prepared to entertain the possibility extremes of winning or losing. Or so the theory has it.

But that’s not reality. Those with wealth but the wrong balance of capital ‘risk’ may sometimes lose on the market, but those without substantial capital assets, or whose few capital assets have effective ownership rights exercised by others of a different class (cf most pension funds), always lose in comparative terms. That's why inequality has been been growing at such a rate for the last generation.

And what if, actually, inequality made us ill? Or more likely to go mad? Or less likely to trust each other? Or just simply fucked up our kids? Would that suggest that capital wasn't being 'efficiently' allocated?

Marx spoke of 'fictitious' capital. But, having read Tett, what I'm left with is a sense the cleverest people in the the financial markets have developed a range of 'fictitious' risk avoidance techniques, akin to the image I've illustrated this post with (note the small text at the bottom). Yes, CDOs and all the rest of the architecture can, if not used to extreme, moderate the risk of losing money. Yes, those who argue in favour of 'financial innovation' and 'not throwing the baby out with the bathwater' have a (slender) point.

But this is not the issue. The issue is capital is being used to fuck most of us up, most of the time. It's got to stop. That 'risk' has to be controlled for. Let's start with with bankers 'wages'.

To be Candide about it, perhaps it is time we should shoot some of them to encourage the others. Failing that, if it is status they're worried about, can we organise a national laugh-in at these overgrown Pru salesmen? Can we just make it seem ridiculous that people who ensure a continual supply of water, and guard against the risk of water failure, get normal wages whilst bankers get paid fortunes?

Please God, Let It Be Photoshop.

(Via)

This is so wrong I feel dirty.

And not in a good way.

This is the name of the man who said,

‘The challenge of modernity is to live without illusions and without becoming disillusioned.’ On a numberplate in Berkeley.

The San Andreas Default?

The State of California is paying people with IOUs, because it is broke. Well, perhaps not broke (Willem Buiter points out its debt levels are comparatively trivial) but stuck with a broken political system. Like a lot of US States it lives under a formal constitutional requirement of having to balance the budget. But since its' political representatives can neither agree the formal definition of a balanced budget nor, especially, agree a budget which requires a 2/3rds majority in each of their two State houses, it is paying people with what Buiter calls 'funny money'.

Paul Solman summarises the impasse:

"California is desperate. Like so many of us, it lived beyond its means, or taxed below its spending, or both. Three classes are now resisting the reckoning: those who "spent" the money and owe the shortfall (taxpayers); those on whom the money was spent (employees, vendors, other recipients of state funds); and those who loaned the state money (bondholders). Understandably, no class wants to take the hit, or take the hit first. For political reasons at least, the Obama administration is reluctant to come to the rescue...."

Buiter reckons the only way out is direct rule from Washington, though the comment on his blog suggests he has a bit of a tin ear for American constitutional niceties and, ahem, 'States Rights' to coin an unfortunate phrase. (Which doesn't mean he can't still be right on this point). He says,

"When the banks stop accepting the IOUs except possibly at massive discounts, which will happen soon unless an early resolution of the budgetary stalemate is achieved, the state of California will close down for business. Municipalities and counties dependent on state funds will follow suit. Before long the teachers won’t teach, the fire fighters won’t fight fires, the police won’t maintain law and order and neither garbage nor taxes will get collected. It will be a grand Hobbesian experiment."

Hence his expectation of federal intervention.

But the really interesting question, at least for a saddo like me, is whether these IOUs constitute money. Mark Thoma discusses this point, and the comments on his post educate this Brit on one of the less well known passages of the US Constitution,

"Article I, Section 10 of the US Constitution:

Powers prohibited of States

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit*; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility." (my emphasis)

So, on one reading, there's no need to wait for Willem Buiter's 'grand Hobbesian experiment': California has already declared Independence and it's time for Obama to send in the troops and restore the Union.

But British Capital Is Pants!

I’ve been silent on the blogging front for a couple of weeks simply because I have had nothing to say. Or nothing even I found interesting anyway.

But I see Rick over at Flip Chart Fairy Tales has waded into a discussion of that James Heartfield piece that so impressed me, and this has sparked a number of thoughts.

Firstly, just to clear some ground, let me say I simply didn’t know that Heartfield was an ex-RCP/Institute of Ideas/Furedi groupie/Astroturf merchant type when I first read the piece. Generally, I find their analysis a bit ...well, silly, in its single minded downplaying of climate change risks and bigging up of technological ‘progress’ as an unqualified good. But even if, as a commentator on my initial post said, it is just a case of a stopped clock being right twice a day I did find lots to agree with in his post. In particular it exposed the whole ‘public sector bad private sector good’ type arguments for what they are: ideology. A large part of the British public sector spending is actually a form of outdoor relief for the private sector, and quite a lot of the New Labour programme of public sector ‘modernisation’ (consumer ‘choice’ , contestability, marketisation and so forth)has actually been a way of shifting resources from delivery to people – however well or poorly done - into propping up this system of private sector relief.

One part of Heartfield’s explanation for this is, essentially, that British Capital is basically pants. It has lost the will to innovate. It expresses all its strategies in terms of risk, and especially risk minimisation – a language borrowed, in essence, from finance. The bastard off spring of actuaries who price the ‘lifespan’ of profit now rule the roost. The hero-innovators of Marx’s day – those who constantly remade the world - are long gone; their great grandchildren need the succour of a State which appears ever less separate from their own interests. They’ve lost their will to do big things, so they need the rest of the world to be remade in their own image by statutory decree.

Rick sees things differently. But then, to be fair, he’s a manager, not a politico, so he would. He sees the problem as one of public sector managers being more hidebound than their private sector counterparts, and much more trapped in rule bound systems of employee relations. So the public sector needs to call in the private sector for help. I think he just means that unions are stronger in the public than the private sector – though, of course, they’re pale shadows of what they were when Rick and I were growing up.

Of course there are difficult employees. But you can’t change the world on the basis that all employees are difficult. You have to give the people you work for and with something to believe in. And this is where a purely managerial perspective will never penetrate. The greatest weapon – at an operational managerial level – that social democracy ever had was the idea of public service, which grew out of the political ideas of community and mutuality and solidarity. What we’ve got in its place, in my view, bears a passing resemblance to the ‘Old Corruption’ of the eighteenth century : endless initiatives and restructurings and cost cutting done by ‘consultants’, a euphemism, in general, for large multinational firms. A teat which constantly feeds the private sector. No wonder there is workforce resistance.

& now the establishment call for cuts to be made – and to an extent they’re right, even if they exaggerate the immediacy of the necessary decisions, ignore the potential for offsetting tax rises and embellish the potential for ‘protecting frontline services’ whilst doing so. But nowhere, or almost nowhere, is there an alternative vision. If I had to generalise, I'd say it is this blindness which the public sector has imported from the private sector, not 'efficiency'.

Classics of Marketing Education

You can't sell either the sizzle or the steak if the meat is tainted. No, not even with one of the most powerful marketing arms on the face of the planet.

"Them Good Ol' Boys Were Drinking Whiskey & Rye..."

& also knocking back the burgers by the look of it. So this might well '...be the day that they die'.

The map is from my current obsession: Sociological Images.

Do check out some of the French and German anti-AIDS adverts on the site. & I defy anyone to make sense of this French Orangina advert:

"The sexual availability of the female…um…wildlife, all of whom are sexy and sexualized and dancing with the one male, the bottles of Orangina erupting from between the female zebras’ legs, and the female octopus squeezing Orangina out of her boobs…there’s a lot to work with."

A Non-Economist Asks...

Anne Pettifor says bank money is not a commodity.

....most assume that credit = savings, and that only by mobilising savings or surpluses (generated by production of one sort or another) is it possible for banks or financial institutions to lend money to finance economic activity. In other words, that money (deposits/savings/credit) exists only as the result of economic activity; and those deposits/savings/credit then create economic activity.

On the contrary: it is bank money/credit that creates economic activity - and only then are deposits, surpluses and savings generated. And not the other way around.....

.....we do not have to beg powerful barons - or even rich country taxpayers - to hand over a portion of their savings. We simply have to “use the computer to mark up the size of the account” held by that poor country.

This is what banks were doing for their favoured private clients, and for the less-favoured sub-primers - with the active support of that great credit bubble-blower, Governor Alan Greenspan of the Federal Reserve. It explains why effortless and effectively costless credit creation has to be so carefully regulated. So that it is directed towards productive economic activity - not the kind of lazy, rentier ponzi finance capitalism of this past era when bankers lifted not a single productive finger but effortlessly grew richer and richer by the hour….

When you understand how easily credit/bank money is created, you realize that, unlike oil, or gold or Dutch Tulips, bank money is not a commodity.

Its a human construct, and all it requires to make a loan is for a man or woman to enter a number into a ledger/computer, and to check the loan against collateral and a potential repayment stream. As such there need never be any limit to the creation of bank money/credit."

Now in what sense is this true? Even bank money has a use value and an exchange value (interest rate), or so it seems to me. Help me out here people...and whilst you're doing so perhaps you might link your explanation into Willem Buiter's formidably technical exposition of the precise mechanisms by which the European Central Bank is propping up the big banks of the Eurozone. He appears - at least to my untrained eye - to be saying the banks have captured the 'State' (if the Eurozone can be thought of as a State which it isn't, quite) and that the 'human construct' of credit is simply being used to prop up the system as exists, at the expense of the people who live in it:

"...ECB’s enhanced credit support is mainly a slow and inefficient mechanism for recapitalising the banks - the ECB recently estimated short-term capital needs in the banking system of the Euro Area at about €280bn - without giving the taxpayers and other citizens of the Eurozone a claim on the banks in exchange, it turns the ECB into an agent of the banks (or more precisely of those in control of the banks and of the banks’ unsecured creditors) rather than of the 340 million citizens of the Euro Area."