Tuesday, April 29, 2008

Days Like These No 3. Will You Promise To Keep Paying The Bankers On Demand?

Guest blogger Gerry Fitzpatrick

What was it they used to say about trade Unionists and the New Labour Party? - something about there being ‘no more beer and sandwiches’ for them in Downing Street any more. What that phrase meant was that there would be an end to any cosy relationship and assumptions about improving pay and conditions.

Today it has just been announced that the chiefs of the biggest five banks‑mortgage lenders have completed a two day visit to Downing Street. This ended with the Treasury agreeing another £50 billion of public money would be given to those bankers to ‘boost their confidence’. Trade Union leaders have not been heard on the airways on the subject of this new cosy relationship, which involves the exchange of bad debts for government bonds that can be then traded on the open market. Only the venerable Vince - Mr Cable of the Liberal Democrats - was given an audience by BBC to object to this. He pointed out that government have asked for nothing in return - no agreement on future regulation, no guarantees that the behaviour the bankers themselves agreed caused the chaos in the first place - would be moderated.

The problem with the Governments’ and Mr Cable’s approach, as one commentator pointed out, was that it had a built-in flaw. Because, as she explained, the £50 billion of Government subsidy to the banks would not be enough to keep the bankers confident in their own market this year and that the whole operation could carry on indefinitely year on year.

Nationalisation of bank debts has now the only dependable source of private Bank profit as they in effect become government bond dealers. No matter this is still a short term solution that will in turn cause the value of the bonds to fall. Why? Because the government got rid of its assets 20 years ago that could have been used to halt a fall in their value on the open market. Now it has only the tax payer and arms industry left to depend on and their own borrowing.

After the debacle over the abolition of the 10p rate of tax and the fate of the Aljamai Saudi arms deal the government will itself have to borrow yet more money. That money will not be supplied by the central (American) banks. The government, like the other governments of the world, will take their place in the Beijing Dole queue to avail themselves of Communist China’s Social Security Scheme for Capitalist Ruling Classes. China will be happy to wait until land prices in Britain and the world fall by 30% and then they plan to start buying as the Japanese security houses did in the 1970s.

That might be in a year from now but by that time Chinese peasants will already have begun to die from hunger due to the doubling and trebling in the price of rice. Who then can say what will happen to the Chinese government?

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