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Osborne’s Plan A (Beta v.4.021)

June 16, 2012

Feeling confused about the Chancellor’s economic policy? You’re probably not clever enough.

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Thursday evening saw the Chancellor’s joint announcement with Mervyn King of two more stimulus packages worth over £100b, aimed at encouraging banks to lend money to small businesses and individuals. This is in addition to already deployed Quantitative Easing measures. This is not “Plan B”, you understand. It is “Plan A, Beta v.4.023”. In 2009 Osborne described Quantitative Easing as “the last resort of desperate governments when all other policies have failed.”

I am no expert, so perhaps someone could explain to me, why every measure announced by a Chancellor whose catchphrase seems to be “We cannot borrow our way out of a debt crisis” is focused on lending. The only rational answer is that while debt in general is bad, private debt Osborne can live with. This blog explained a while ago how a big part of the government’s policy for debt reduction was the simple conversion of public debt into private debt. Half a trillion worth of it. It is a simple and effective way for them to claim success at the end of their term, while you and I actually end up a lot poorer.

On Friday morning figures emerged (figures which would have been available to Osborne on Thursday evening when he made his speech) which showed that the Construction sector plummeted a staggering further 13% compared to the month before. The ONS attributed this fall to public cuts and the cancellation of infrastructure projects. And yet, as recession deepens while the Chancellor boasts about record-low borrowing rates, his choice is not to borrow some money and pump it into infrastructure projects. It is to borrow money and make it available to Banks, to lend to private businesses. With no risk, since the loans are effectively underwritten by the taxpayer. And, of course, at a healthy profit.

A shark tank bursting in a Kuwait science centre, provides an eloquent pictorial of Gideon’s economic policy

In any case, there is no guarantee that banks will heed the government’s request to lend more. Many experts predict that it will be used to shore up their capital balances. There is every chance that this latest scheme will be another “Project Merlin” – which largely consisted of the Chancellor waving a wand at the public debt while incanting Expelliarmus!

If only there were a solution to this conundrum. If only we had a safe conduit for these loans. If only, say, the taxpayer owned one of the largest banks…

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7 Comments leave one →
  1. Kay Fabe permalink
    June 16, 2012 12:59 pm

    Let’s let the banks divest themselves of any debts they have (including all the off-balance-sheet horrors) before we consider owning them. Let’s start up a new one, capitalise it with important-sounding hot air (rather in the manner of the Rentenmark which was backed by the mortgage value of Germany – say wha?) and we’ll trade with the currency it creates electronically. Speaking of which, a bank doesn’t have to be a physical location these days. It used to have to be as when you stored your wonga it took up a fair bit of physical room. You needed a building to put it in, and a secure one at that.These days money/credit/whatever isn’t folding green any more, it’s bits and bytes, and they could live in your watch if it had the right gubbins in it. Plug it in to the web once a month a la thin client and all your principal banking needs could be taken care of. Actual money creation (which the high street banks now perform in secret, pretending any such to be, ahem, ‘loans’) can be carried out by appointed officials at the town hall, or wherever. Backups of your watch could be done in a dedicated cloud. Banking as we know it could easily and simply cease to be. And why not?

  2. June 16, 2012 5:52 pm

    Despite the Chancellor’s spin, I don’t think these latest measures have anything to do with stimulating the economy. They are a thinly-disguised firewall for banks that are overexposed to fragile economies in the Eurozone and are facing serious losses when the whole thing collapses, which it will very shortly. So it’s a bank bailout, really. Again.

  3. Jonault permalink
    June 16, 2012 8:44 pm

    Will the banks lend the money or just buy Government bonds thereby borrowing from us tax payers at 0.5% then lending the money to our Government at several percent higher! Money for nothing and we tax payers get to pick up the tab.

    • Kay Fabe permalink
      June 16, 2012 11:36 pm

      Glad to hear from someone who knows how it works🙂 The banks have no place in this equation at all yet there’s no discussion at all of getting them out from there.

  4. June 17, 2012 8:54 pm

    Certainly the proposal will do little to stimulate the UK economy. Private debt is already much too high and households and companies are not spending as they struggle to service and repay their existing loans. The last thing the private sector needs is more debt and Osborne must know this. The proposal does look as if it is a pre-emptive bank bailout to head off the gathering storm.

  5. June 18, 2012 3:54 pm

    Were the banks being disingenuous when thy said plastic would create the moneyless society?

    Or were their intentions always to cover their true intentions by a tsunami of bullmerde in order to commit the bewildered herd to a lifetime of apathetic debt peonage?

    Debt kills -but surreal debt created by manipulation to prop up and maintain failure is a crime against humanity and those who adopt the mantle of humanity’s governance and have allowed this surreality dominance are equally guilty as those who have perpetrated or profited from the crime.

    Ask yourself one question -if these governors of the world cannot get to grips and handle a crises created by such an abstract concept as money, how well would they handle a real crises of nature -throw money at it?

  6. Micah Boron permalink
    February 21, 2013 7:32 pm

    Critical to any society is maintaining good health care for all. Imagine a society where illness is rampant. The cost to government for negligently ignoring the sick, dying and those who will become ill due to lack of proper health care will necessarily be borne by taxpayers in one form or another. Originally, health care was provided in the US by employers because many workplace environments were dangerous. Employers worried about lawsuits from improper adherence to worker safety. .

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