Holding the European Empire Together

On 25 January Greece will hold elections. As far as we can read the future it seems likely that Syriza will win those elections and as Syriza have campaigned on an anti-austerity platform the new Greek Government will engage with the European Union in an attempt to persuade the EU to mitigate its austerity policies. If the EU fails to do this then it is likely that Greece will leave the European Union.  Continue reading

Effective medicine tastes badly

Food banks, cuts in services, cuts in defence spending, threats of cuts in welfare benefits and all sort of other economies and yet the deficit still remains and Her Majesty’s government seem unable to reduce it significantly. In order to reduce it properly we need to make massive cuts in government expenditure but the nation has no appetite for such a course of action. What then should be done?

Continue reading

The True Worth of a Government Guarantee about your Bank Deposits

The European Union has 27 member states. Virtually all of them have had economic problems. In virtually all the economies, the economic problems were caused by over spending. Nations in effect bribed the voters with gifts of large pensions and large social security payments which the nations could not afford. Those gifts would be paid for by future generations unless the future amounts of the bribes were curtailed, and thus “austerity” became the solution for most of the economies.

But not all of the economies got into economic difficulty by making large bribes. Certainly Italy, France, Greece, Spain and Portugal did, but certainly Cyprus did not. It got into difficulties by investing its depositors money in Greece and in particular the Cypriot banks lent money to the Greek banks that proceeded to lose the money lent. Continue reading

The Cost of the Olympics and The Recession

Britain is now out of recession and that is good news. Preliminary figures show a third quarter growth of just 1%. Some commentators put the growth down to the Olympic Games ticket sales, but I have no doubt that the tickets sales were of a lesser amount than the lost dales in the retail industry in London and the construction and maintenance industry slow down during the games which was caused by the games taking place in London.

There is other good news; there have been more people in employment and despite the impossibility of small businesses securing finance  from their banks, businesses are managing somehow, although with difficulty.

It is clear that we need to employ people in making things, installing things and servicing things if we are to secure our economic future. It is also clear that we must learn the lessons of the recession, caused by bank and hedge fund speculation. Someone has calculated that people are now £1800 a year worse off than they were in 2008. Most of that money has gone into the pockets of the bankers and hedge fund operators. That is no way to run an economy.

As our economy grows we must ensure that we direct money and therefore growth into the production of things, rather than the production of another giant casino which will impoverish those who are not wealthy. That is the lesson we must learn.

Paying people to dig up holes in the physical and cultural infrastructure of Iraq and Afghanistan

I was thinking about war and prosperity and the many odd relationships between economics and power, between power and destruction and between destruction and war.

I recently met someone who had been to Iraq, having been there before Saddam Hussein was in power and while Saddam Hussein was in power. He was well placed to comment on the effects of the war in Iraq which Mr Blair has said has proved a net benefit to the Iraqi people. Continue reading

Why Banks are Unsafe.

Markets now feel that banks are much less safe. Suddenly, the credit rating agencies have decided what we knew a couple of years ago. Fifteen major banks have had their ratings downgraded so that the relatively position of each to each is more or less unchanged but putting your money in a bank is deemed to be much more risky that it was before.

There are four reasons why bank are unsafe, regardless of their ratings by credit agencies.

1. Banks which need to get support from governments can never be safe becasue governments do not have endless supplies of money to bail out those banks.

2.Banks are unsafe becasue they leverage their customer deposits too much.

3. Banks are unsafe becasue they enter into transactions involing derivatives which no one really understands, gambling hugely on them and for every winner there is a loser.

4. Banks are unsafe because they put our money where their mouth is.

 

Don’t bring me problems bring me solutions

The regular meeting of world leaders at summits has become more and more prevalent. They usually jet off to a beautiful place and talk to each other in luxurious surroundings. Perhaps the increasing frequency with which they meet is a good thing. “Jaw jaw is better than war war”. However it seems to me that if you summarise the discussions of any summit in a few words, it makes you wonder what the purpose of the meeting was.

“World leaders meeting at a G20 summit in Mexico have urged Europe to take all necessary measures to overcome the Eurozone debt crisis” was the headline of the latest summit in Los Cabos in México. It is a statement of the problem but does not help with the solution. What measures are necessary to overcome the Eurozone debt crisis? I am sure that every Eurozone nation and many outside the Eurozone would love to know.