To download the MP3 of the podcasts to your ipod/mp3 player, go to the SSP Campsie podcasts archive HERE
The views expressed are the speaker’s own and not those of any other individual or organisation.
Showing posts with label raphie de santos. Show all posts
Showing posts with label raphie de santos. Show all posts
Tuesday, 15 March 2011
The cuts - a local SSP response (podcasts)
These three podcasts where the result of a public meeting in Kirkintilloch on March 12th 2011. They include the opinions of Left Banker, Raphie de Santos, SSP Councillor and West of Scotland top of Scottish Parliament Elections List candidate, Jim Bollan and local activist and Union representative, Willie Telfer (Click on their names to access the podcasts). Details of music and musicians on individual posts.
Sunday, 13 March 2011
The Left Banker in Kirkintilloch (Podcast)
The views expressed are the speaker’s own and not those of any other individual or organisation.
Left Banker, Raphie de Santos explains the economic crisis and gives his alternative. This is part one of three podcasts.
Music Featured (click the links to find out more about the acts): Captain Ska, "Liar Liar"; Ryan Harvey, "Economic Homicide" (details HERE);Thee Faction, "Social Inclusion Through Marxism" (Details HERE ); The Kara Sea, "Oh if Only". (details HERE )
Left Banker, Raphie de Santos explains the economic crisis and gives his alternative. This is part one of three podcasts.
Wednesday, 9 February 2011
Left Banker on BBC Radio 2
THE LEFT BANKER was on the Jeremy Vine show on Radio 2 yesterday. He was up against ex-Apprentice loser and right wing self publicist, James Max, whose argument, "the bankers should no longer be blamed for the financial crisis" went no further than "because I say so."Judge for yourself. The conversation begins at 7 minutes, 26 seconds into the programme.
Click HERE to listen
Sunday, 26 September 2010
Leftbanker - Do We Need the Rich?
by Raphie de Santos
However, the top 7.7% of earners take home 26% of the total wage pot. Would increasing their taxes make them all leave the country? This is very doubtful as there would not be sufficient jobs, there are 193,000 of them, which pay this level of these wages in other countries. These people have family and cultural ties that would make them not want to leave Scotland on this scale. The other interesting thing about this table is that the top 20,000 of earners take home about £4 billion before tax a year. Yet the richest 100 Scots have a personal wealth of over £16 billion.
The cry that goes out whenever a fair tax redistribution system is suggested that if one was implemented the rich would leave the country in droves. The implication being that we either could not function without them and that our economy and our society would crumble. Is this really the case? The facts would point to a completely different picture.
Figures derived from the HM Revenues & Customs report show that the majority earn most of the wages in Scotland.
Income Earners | % total Earners | % total Income | No of earners |
|---|---|---|---|
£5k – £20k | 52.3% | 26% | 1,312,000 |
£20k – £30k | 22.5% | 22% | 568,000 |
£30k – £50k | 17.4% | 26% | 439,000 |
£50k – £70k | 4.1% | 9% | 103,000 |
More than £70k | 3.6% | 17% | 91,000 |
However, the top 7.7% of earners take home 26% of the total wage pot. Would increasing their taxes make them all leave the country? This is very doubtful as there would not be sufficient jobs, there are 193,000 of them, which pay this level of these wages in other countries. These people have family and cultural ties that would make them not want to leave Scotland on this scale. The other interesting thing about this table is that the top 20,000 of earners take home about £4 billion before tax a year. Yet the richest 100 Scots have a personal wealth of over £16 billion.
This rich elite are contributing very little to the country through earnings and taxation. It would be them that had the financial ability and incentive to up sticks and leave but losing them would be no real financial loss to the country. But we would want to hit them with a one off 10% tax on their wealth before they could scarper. They have benefited from a massive redistribution of wealth over the last thirty years that has seen the liquid wealth of the bottom 50% of society fall from 12% to 1% while the top 0.01% have seen their incomes go up by 500% in the same period. This income inequality goes much deeper with the top 20% of households earning 15 times the bottom 20% of households (£73,800 to £5,000). The rise of credit over the last three decades that resulted in the great credit bubble is largely down to this redistribution of wealth. How else could we pay for anything?
But where would our industry be without the investment of the very rich? Figures published by the office of national statistics show a very different picture. Most of the investment in UK companies comes about to provide working people in the UK and overseas with their retirement and to protect them against future unknown risks through their pension and insurance funds. 68% of the ownership of UK shares in the hands of UK and overseas and pensions and insurance funds. Only 10% of UK shares is held by private individuals. The bulk of this 10% has not come from the rich ploughing money into companies but from companies giving shares as part of a bonus package to their senior personnel within these companies. It is part of the transmission belt of the redistribution of wealth we have seen over the last thirty years.
Finally, we are faced with a public debt of £935 billion, £305 billion has to be renewed in the next five years, which the government is forecasting will grow by £535 billion over the next five years despite the cuts and on top of that interest repayments of £250bn over the same period. How are we going to pay for this? Is it the rich who have benefited from the credit bubble economy or the majority of us?Well it will be largely us. UK pension funds own 33% of UK public debt while the Bank of England (BOE) holds another25% and foreign central banks hold 28%. The BOE of is owned by people of the UK and acts as its’ central bank by being the UK government’s bank. No rich individuals are stumping up any sizeable chunks of their money to pay for the public debt. Debt that was and is largely being run up by the financial crisis and the resultant recession which the rich had a big hand in causing.
Do we need the rich?
The answer is no but they clearly need us!
The answer is no but they clearly need us!
Monday, 26 April 2010
The Rich Get Richer while we pay for the Crisis
The Sunday Times Rich List
by Raphie de Santos
The publication of the Sunday Times Rich List today was a very striking event. What struck us was how much wealth the richest 1000 people in the UK had. A staggering £335 billion which was just under half our national debt and about the same amount of money that we have given the banking system to bail them out of the crisis.
The second striking fact is their obscene fortunes have increased by £77 billion in 2009 while the majority of us have faced job losses, wage cuts and cuts in public services. This in a year when the economy was in recession for nine months and has only just limped out of it.
The third striking fact is where this wealth comes from. It’s come from us. The vast majority of the rich list run companies or have sold companies that they have owned. And they have made this wealth by giving us even less of the wealth we make for them. This has been a trend that has been happening over the last forty years. In 1976 the bottom 50% of the UK population had 12% of the liquid wealth in the UK. By 2003 this had fallen to 1%. Over the same period the wealthiest 0.01% of the UK population, the rich, have seen their income rise by 500%. No wonder they had to create so much debt otherwise we would not have been able to buy the products we make for the rich companies.
The fourth striking fact about this report is that wealth has gown only because of a more than 50% rise in the stock market in 2009 from lit low point in March of that year. Over the last thirty years the rich have increasingly paid themselves in shares in the companies which they run or sold on the stock market. Ironically around 75% of these shares are bought by us indirectly through our pension and insurance policies.
The dramatic stock market rise would not have happened without the massive bailouts of the banks and the governments’ stimulus programmes that stopped the world economy from going into global depression. Of course the money to do that came from us. Now the governments are asking us to pay for it through cuts in services, pay and jobs.
Taxing the rich would be a good starting point as an alternative. An annual 10% tax on the rich 1000 would fund 2 million apprenticeships a year for example. But dealing with the super rich is just the tip of the iceberg.
The UK is more unequal at any time since records started to be collected on inequality over 50 years ago. Under New Labour the shift from poor to wealthy has continued to increase. In financial year 2007/2008 the Office of National Statistics calculated that the bottom 20% of households brought in on average £4,600 per year in income – before taxes and benefits. The top 20% of households took an equivalent of £72,500 per year. Since the Tories came to power the top rate of tax has been cut from 83% to 40%. Restoring a progressive taxation system would raise an extra £75billion a year.
Corporations are amongst the rich and they have seen there tax rates on profits cut from around 50% to 28%. They also avoid tax by using offshore tax havens which are estimated to loose the UK £130 billion a year in revenues. Increasing their taxes back to 50% and closing down the tax havens would raise another £200 billion pounds year.
UK Banks are the richest of all the corporations yet we have given them £375 billion pounds to bail them out. Taking them under common ownership and control would release immediately £560 bn of what is really our cash and put at our disposal £5 trillion of their assets. The socially useful jobs and projects that could be created in a national Peoples Bank that could result from such an approach would wipe out the public sector deficit, unemployment and social hardship at a stroke.
Yes the rich and wealthy have got richer and wealthier at out expense and the final striking feature of all this is how easy and rational it would be to share the wealth out and create a just and fair society without any suffering that meets all human needs.
by Raphie de Santos
The publication of the Sunday Times Rich List today was a very striking event. What struck us was how much wealth the richest 1000 people in the UK had. A staggering £335 billion which was just under half our national debt and about the same amount of money that we have given the banking system to bail them out of the crisis.
The second striking fact is their obscene fortunes have increased by £77 billion in 2009 while the majority of us have faced job losses, wage cuts and cuts in public services. This in a year when the economy was in recession for nine months and has only just limped out of it.
The third striking fact is where this wealth comes from. It’s come from us. The vast majority of the rich list run companies or have sold companies that they have owned. And they have made this wealth by giving us even less of the wealth we make for them. This has been a trend that has been happening over the last forty years. In 1976 the bottom 50% of the UK population had 12% of the liquid wealth in the UK. By 2003 this had fallen to 1%. Over the same period the wealthiest 0.01% of the UK population, the rich, have seen their income rise by 500%. No wonder they had to create so much debt otherwise we would not have been able to buy the products we make for the rich companies.
The fourth striking fact about this report is that wealth has gown only because of a more than 50% rise in the stock market in 2009 from lit low point in March of that year. Over the last thirty years the rich have increasingly paid themselves in shares in the companies which they run or sold on the stock market. Ironically around 75% of these shares are bought by us indirectly through our pension and insurance policies.
The dramatic stock market rise would not have happened without the massive bailouts of the banks and the governments’ stimulus programmes that stopped the world economy from going into global depression. Of course the money to do that came from us. Now the governments are asking us to pay for it through cuts in services, pay and jobs.
Taxing the rich would be a good starting point as an alternative. An annual 10% tax on the rich 1000 would fund 2 million apprenticeships a year for example. But dealing with the super rich is just the tip of the iceberg.
The UK is more unequal at any time since records started to be collected on inequality over 50 years ago. Under New Labour the shift from poor to wealthy has continued to increase. In financial year 2007/2008 the Office of National Statistics calculated that the bottom 20% of households brought in on average £4,600 per year in income – before taxes and benefits. The top 20% of households took an equivalent of £72,500 per year. Since the Tories came to power the top rate of tax has been cut from 83% to 40%. Restoring a progressive taxation system would raise an extra £75billion a year.
Corporations are amongst the rich and they have seen there tax rates on profits cut from around 50% to 28%. They also avoid tax by using offshore tax havens which are estimated to loose the UK £130 billion a year in revenues. Increasing their taxes back to 50% and closing down the tax havens would raise another £200 billion pounds year.
UK Banks are the richest of all the corporations yet we have given them £375 billion pounds to bail them out. Taking them under common ownership and control would release immediately £560 bn of what is really our cash and put at our disposal £5 trillion of their assets. The socially useful jobs and projects that could be created in a national Peoples Bank that could result from such an approach would wipe out the public sector deficit, unemployment and social hardship at a stroke.
Yes the rich and wealthy have got richer and wealthier at out expense and the final striking feature of all this is how easy and rational it would be to share the wealth out and create a just and fair society without any suffering that meets all human needs.
Sunday, 11 October 2009
Cuts in Services, Jobs, Wages and Pensions to Pay for Their Crisis
by Raphie de Santos
Cuts: that’s what all the major parties - Labour, SNP, Conservatives and Liberal Democrats - are arguing about. But not if there is an alternative to the cuts but who would be the best at making the cuts. But let’s be clear we are bailing them out of the complete mismanagement of their economic and financial systems.
Bring on the Clowns
Governments led by Thatcher, Blair, Brown, McConnell and Salmond have supported the changes to the running of the financial and economic system that have led to the greatest crisis since the 1930s. They have overseen the deregulation of financial markets and institutions and the liberal use of interest rates that created a huge speculative bubble in every type of debt and a mountain of 700 trillion US dollars of unregulated derivatives. They bailed these systems out with hundreds of billions of pounds of borrowed money which they are asking us to pay back through cuts.
Having all cheered from the sidelines patting each other on the back for their wonderful creation they now blame everyone but themselves for the mess and are asking us to pick up the bill for their reckless folly.
Bailouts
The shortfall in money has come from a bailout of the crisis ridden financial system and a deep UK recession caused by the resultant collapse of consumer credit. So far the government has spent about £150 billion (bn) bailing out the banks and another £150bn on quantitative easing (QE) – where they print money and buy back government and other debt from financial institutions. They are going to spend another £25bn on QE and are prepared to underwrite another £700bn of the banks bad debts. Practically none of the money spent so far has found its way into the real economy - about £2bn has gone into mortgage lending helping to temporarily stop the fall in house prices. Most of the bailout money is being horded by the banks to pay off losses and to have for any future potential losses. So far the money spent amounts to 25% of what we produce (gross domestic product) annually.
At the same time central government revenues are falling because of the recession they have caused. Rising unemployment has a double edged sword of reducing tax revenues and increasing benefits payments for central and local government. In August of this year there was a £17bn deficit in the UK budget from this trend.
One way to pay for the shortfalls is borrow money on the international financial markets through issuing UK government debt – called gilts. Then pay it back over several years with increased revenues from a growing economy. The average that was raised in the five years prior to 2009 by the UK government in this way was £47 bn per year. In 2009 the estimate is £146bn and in 2010 the forecast is £180bn. The problem with this model is two fold: one the economy will not recover (if at all) sufficiently to create extra tax revenue to make these payments; second the UK economy is so fundamentally weak that Bank of England interest rates will have to remain at very low levels which means a weak currency and therefore nobody – domestic or international – will want to buy these UK government bonds.
That is why all the plans put forward to make cuts by the major parties are so vague: nobody knows how much will have to be cut to cover the unknown developing black hole in the UK’s finances. That is why there is a general message of we are all going to have “bear the pain over several years” to sort out their mess.
But if we are correct about the prospects for the UK economy – years of stagnation or decline – then the cuts will be on a massive scale year after year with the dire social consequences that will bring for the majority of the working class.
The SNP
These cuts will affect central and local spending. Local spending by councils is financed by a block grant from central government making up about 75% of the local budget – the rest comes from council tax. Similarly the Scottish government receives a block payment from central government to finance services such as heath and education. The SNP minority government are in effect administering the cuts from London whether Tory or Labour. They have made matters worse for local councils by freezing council tax and refusing to implement a progressive local or national income tax. Even if such a proposal was defeated by the other parties in Holyrood it would have the effect of galvanising a campaign amongst Scottish voters for a commitment for such future tax changes from the next Holyrood election. It would also have strengthened the argument for independence for Scotland.
But the SNP did not want to rock capitalism’s boat and instead be quite happy to implement the cuts and makes some noises that it is all London’s fault.
Alternative
There is an alternative to the bank bailouts and cuts.
• take all the banks under full ownership and control turning their toxic loans into social rents and social projects and cancelling their destructive derivative contracts;
• a redistributive tax – a one off greed tax would repair the damage already done to our public services and a permanent progressive tax could generate an extra 33% to the total Scottish budget; and
• scrap the expenditure on nuclear weapons, withdraw from the wars in Afghanistan and Iraq and reduce our armed forces to one for defence not invasion.
This is the alternative the Scottish Socialist Party is fighting for in the Glasgow North-East by election and the forthcoming UK and Scottish elections. It is the rationale alternatives to what the major parties are offering us - that we pay for their crisis. It is the start of the building of a society that operates in the interests of the majority instead of the few.
Cuts: that’s what all the major parties - Labour, SNP, Conservatives and Liberal Democrats - are arguing about. But not if there is an alternative to the cuts but who would be the best at making the cuts. But let’s be clear we are bailing them out of the complete mismanagement of their economic and financial systems.
Bring on the Clowns
Governments led by Thatcher, Blair, Brown, McConnell and Salmond have supported the changes to the running of the financial and economic system that have led to the greatest crisis since the 1930s. They have overseen the deregulation of financial markets and institutions and the liberal use of interest rates that created a huge speculative bubble in every type of debt and a mountain of 700 trillion US dollars of unregulated derivatives. They bailed these systems out with hundreds of billions of pounds of borrowed money which they are asking us to pay back through cuts.
Having all cheered from the sidelines patting each other on the back for their wonderful creation they now blame everyone but themselves for the mess and are asking us to pick up the bill for their reckless folly.
Bailouts
The shortfall in money has come from a bailout of the crisis ridden financial system and a deep UK recession caused by the resultant collapse of consumer credit. So far the government has spent about £150 billion (bn) bailing out the banks and another £150bn on quantitative easing (QE) – where they print money and buy back government and other debt from financial institutions. They are going to spend another £25bn on QE and are prepared to underwrite another £700bn of the banks bad debts. Practically none of the money spent so far has found its way into the real economy - about £2bn has gone into mortgage lending helping to temporarily stop the fall in house prices. Most of the bailout money is being horded by the banks to pay off losses and to have for any future potential losses. So far the money spent amounts to 25% of what we produce (gross domestic product) annually.
At the same time central government revenues are falling because of the recession they have caused. Rising unemployment has a double edged sword of reducing tax revenues and increasing benefits payments for central and local government. In August of this year there was a £17bn deficit in the UK budget from this trend.
One way to pay for the shortfalls is borrow money on the international financial markets through issuing UK government debt – called gilts. Then pay it back over several years with increased revenues from a growing economy. The average that was raised in the five years prior to 2009 by the UK government in this way was £47 bn per year. In 2009 the estimate is £146bn and in 2010 the forecast is £180bn. The problem with this model is two fold: one the economy will not recover (if at all) sufficiently to create extra tax revenue to make these payments; second the UK economy is so fundamentally weak that Bank of England interest rates will have to remain at very low levels which means a weak currency and therefore nobody – domestic or international – will want to buy these UK government bonds.
That is why all the plans put forward to make cuts by the major parties are so vague: nobody knows how much will have to be cut to cover the unknown developing black hole in the UK’s finances. That is why there is a general message of we are all going to have “bear the pain over several years” to sort out their mess.
But if we are correct about the prospects for the UK economy – years of stagnation or decline – then the cuts will be on a massive scale year after year with the dire social consequences that will bring for the majority of the working class.
The SNP
These cuts will affect central and local spending. Local spending by councils is financed by a block grant from central government making up about 75% of the local budget – the rest comes from council tax. Similarly the Scottish government receives a block payment from central government to finance services such as heath and education. The SNP minority government are in effect administering the cuts from London whether Tory or Labour. They have made matters worse for local councils by freezing council tax and refusing to implement a progressive local or national income tax. Even if such a proposal was defeated by the other parties in Holyrood it would have the effect of galvanising a campaign amongst Scottish voters for a commitment for such future tax changes from the next Holyrood election. It would also have strengthened the argument for independence for Scotland.
But the SNP did not want to rock capitalism’s boat and instead be quite happy to implement the cuts and makes some noises that it is all London’s fault.
Alternative
There is an alternative to the bank bailouts and cuts.
• take all the banks under full ownership and control turning their toxic loans into social rents and social projects and cancelling their destructive derivative contracts;
• a redistributive tax – a one off greed tax would repair the damage already done to our public services and a permanent progressive tax could generate an extra 33% to the total Scottish budget; and
• scrap the expenditure on nuclear weapons, withdraw from the wars in Afghanistan and Iraq and reduce our armed forces to one for defence not invasion.
This is the alternative the Scottish Socialist Party is fighting for in the Glasgow North-East by election and the forthcoming UK and Scottish elections. It is the rationale alternatives to what the major parties are offering us - that we pay for their crisis. It is the start of the building of a society that operates in the interests of the majority instead of the few.
Sunday, 16 August 2009
The Banks, the Stock Market, the Bank of England and the Economy:
by Raphie de Santos
Is The Crisis Over?
Over the last two weeks there has been lots of telling economic and financial data from which some commentators have drawn the conclusion that the worst of the economic and financial crisis is over. We set out here to examine this data and determine if these commentators are right by looking at the banks, stock markets, the Bank of England and global economies.
The Banks
The four major banks and the wholly state owned Northern Rock reported their results, which were described as mixed, during the business week ending the 7 August 2009. We show these in the table below - all the figures are in billions of pounds sterling.
Barclays HSBC Lloyds RBS* Nthn Rock
Pre Tax Profits 3.0 3.5 -4.0 0.2 -0.7
Write-downs -4.6 -9.6 -13.4 -7.5 -0.5
Investment
Banking Profits 1.0 4.2 0.0 5.1 0..0
Profits ex 2.0 -0.7 -4.0 -4.9 -0.7
Investment
Banking
*RBS Suffered a post-tax loss of £1bn
The points of interest are: only Barclays made a profit when investment banking revenues are excluded; and the revenues from investment banking are a one off. Stock markets have rallied by nearly 50% from their March 2009 lows and the price fluctuations – called volatility – of financial assets have fallen making derivatives easier to trade and reducing daily profit and loss moves. In the credit markets the cost of buying insurance against bankruptcy has also fallen. All these factors have combined to create bumper investment banking profits. Normally stock markets would move no more than 10% over such a time span. But as we show later the sharp rally we have just seen is common in stock market crashes. In the past these have proved to be false dawns – often called sucker rallies - with the market falling again to levels below the previous lows.
The write downs in six months are nearly £36 billion. This money was lost as the value of assets the banks hold and loans to individuals and companies were written off. These losses are not paper losses but have to be matched from the banks capital. These are the losses from the banks exposure to the recession. They will continue dripping losses of this magnitude while the recession lasts and house prices continue to drop. If you add a major market fall and an increase in asset volatility, then on top of these losses will be potentially huge daily losses from derivatives – banks globally have a $700 trillion exposure to these assets. Such a scenario would lead to a similar financial meltdown as we experienced September 2008.
Even without a market correction the banks are likely to all return losses in the second half of 2009. The write-downs are probably underestimated as new rules give the banks leeway in accounting for “difficult to value assets”.
The Stock Markets
Stock markets around the world have risen by over 50% (to week ending 7/8/2009) from their low point in March 2009. Stock markets are where companies’ ordinary share capital (shares) is traded. They are usually seen as a leading indicator of what is happing in the economy. So does this rally mean that the worst is over for the economy and the banks in particular?
If one looks at the history of severe economic recessions a pattern emerges: after a sharp fall in share values over several months, shares make a partial recovery in the hope that the worst is over only to be disappointed and fall again to reach new lows.
In the 1930s depression shares fell from a high of 380 on the US Dow Jones Average (DJA) to a first low of 199 over two and a half months only to rise 48% to 294 five months later. This proved to be a false dawn as US credit dried up on the back of its banking crisis driving the world into a deep depression. The DJA then fell 89% from its all time high to a low of 41 two and a quarter years later.
Sounds familiar? This time the DJA took one and a half years from the credit crunch breaking to fall 54% from its pre-crash high. It has since rallied 44% to its close on 7/14/2009 of 9435. In the UK the initial fall was of the same magnitude but the rally less pronounced to 34%.
The rally – known as a sucker bear rally – in shares is as we write (17/8/2009) is running out of steam. We are likely to see a sharp fall in shares as the markets wake up to the effect of the “end of credit”. This will lead to an increase in the price movements of all financial assets and a big rise in financial volatility. The banks who therefore made gains in the first half of 2009 will suffer steep declines in profits as their exposure to $700 trillion worth of derivatives will create huge losses similar to those they experienced in the autumn of 2008.
Governments would then have to again step into bail out the banks but this time their scope for action is limited by the amount they have spent already and the steps they have to take to find the money to pay for it.
The Bank of England
The Bank of England (BOE) has made two important statements over the last two weeks (3/8/2009 to 16/8/2009). The first was on quantitative easing and 2009’s second quarterly report on inflation. These statements revealed more about the state of the economy and the financial system and its future than any vague optimistic comments that have come from government and City’ analysts.
On quantitative easing the announced that they would raise the total pot to £175 billion – an increase of £25 billion of which £125 billion of the original £150 billion has been used already. The new unused total of £50 billion would be put to use over the next few months. The £175billion represents 12% of our economy (gross domestic product - GDP) and together with other bailouts will take the total of our money spent by the government and the BOE on saving the banks to £350 billion or nearly 25% of our GDP.
Quantitative easing is a tool where the BOE of England prints money and buys back with this money government and other debt from Banks, Financial and other institutions. The idea is this will give the financial system money that they will then pump into the economy in the form of mortgages and loans to consumers and buinesses. All the evidence points to this not happening and instead the financial sector is hoarding the money as a buffer against further looses on mortgages, loans and derivatives.
The table below bears this out. It shows, in billions of pounds, the average monthly personal debt for 2006 – the last full year before the credit bubble burst, the average for 2009 and the figures for the latest month where data is available - June 2009.
Loans Secured Consumer Mortgages Re-Mortgages
On Homes Loans
June 2009 0.3 0.1 6.2 4.3
2009 1.0 0.1 4.6 4.1
2006 9.2 1.1 16.0 11.5
One can see the massive fall off in credit from 2006 that has driven the UK economy into recession. In June 2009 only mortgages – which account for bottoming out of houses prices - are significantly above the average for 2009 which is way below 2006’s average. Of the £125bn of quantitative easing only £1.7 bn has found its way into additional credit!
Why then spend another £50 billion on quantitative easing? The answer can be found in quote from BOE governor Mervyn King in an interview on the recent BOE inflation report. He said that the banking sector was still “in a very bad way” and predicted it would take years to “repair balance sheets” and wean the banks off public support.
In other words quantitative easing is nothing but another bank bail out that we will have to pay for through cuts in public services, wages and jobs and higher taxes. As well as quantitative easing the Royal Bank of Scotland and Lloyds TSB/HBOS have insured over £700 billion of their toxic assets – loans and derivatives – with the UK government, This means we will be liable for further losses which are likely to mount in the second half of the year as we pointed above on the section in banks. The future maximum bill we will be presented with and paid for by us through cuts and higher taxes is unknown.
The Economy
The UK economy and is still in decline only the rate of decline has slowed. Unemploymnet contuses to rise with nearly 20% of 16-24 year olds unemployed. In the US official unemployment has fallen slightly although nearly 250,000 lost their jobs in July. This is mainly because millions have given up looking for work. Those claiming unemployment benefit are 9.4 % of the total US workforce. But the national labour office estimates that nearly 30 million are out of work which is nearly 20% of the national workforce. Consumer confidence continues to fall in the US and inventories of goods are also falling at a rapid rate. This shows that US corporations are unwilling to produce more goods as they no faith that they can be sold. Only government subsidies for the car industry have boosted production slightly.
US corporations’ economic results are only being held up by huge cost cutting programmes. Underlying sales are poor and once the one off effect of cost cutting passes their results will start to deteriorate
Outside of China only France and Germany, in Europe, and Japan have managed to stop the decline in their economies. This is mainly because the French and German governments had to spend less on bank bailouts and were able to put funds into stimulating consumer spending and the infrastructure. These economies had also much smaller level of consumer debt and a smaller housing bubble. But the stimulus is likely to be a one off as European banks losses will increase in the second half of the year as exposure to eastern European and emerging market property loans hit their balance sheets. They also have exposure to derivatives and there are likely to be losses in this area in the second half of 2009 and not the windfall profits that accompanied the stock market rally since March of this year. Outside of Germany and France, economies with a large housing bubble have been hit hard – Spain and Ireland primarily.
The Japanese economy grew 0.9% in the second quarter of 2009 below the median forecast of 1.0%. This ended 15 months of successive contractions with the sharpest in the previous quarter when the economy shrunk nearly 3%. The growth in quarter two was driven by a $2 trillion government stimulus programme and exports. But the financial markets believe the effect of this will be short lived as the stimulus wears off and the global economy continues to shrink in the third quarter of 2009 leading to a decline in exports. On day the figures were announced (17/8/2009) the Japanese stock market dropped 3%.
China though technically not in recession has seen tens of millions of people made unemployed over the last two years. Only a massive stimulus programme driven by the central government has kept its economy afloat. Nearly $3 trillion of new consumer debt has been created in the first half of 2009. But the government are turning this tap off as they see the first signs of a speculative bubble in property and the stock market. Of course this internal stimulus programme does not help the rest of the world’s economy apart for the commodity industries as China is a huge net exporter. And these exports continue to decline as the world’s overall economy continues to shrink.
The Future
The global finance system is so contaminated with bad debt and derivatives that we are likely to see years of declining and stagnant economies. Unlike the 1930s the crisis of credit is not a US one but a global one with the banks also geared up to derivatives which can bring the financial system to the point of collapse when the financial markets decline and volatility in financial assets increases as we saw in the Autumn of 2008.
This means governments will have to continue to use our money to bail the system out rather than create jobs and services. The majority of us will pay for these bailouts through public service cuts and tax rises and unemployment.
But there is an alternative which means taking the banks under our control and neutralising their rotting loans and cancelling their destructive derivative contracts. It means a society where resources and wealth are shared to meet human needs. It is the only rationale alternative to the harsh future that capitalism offers us.
Is The Crisis Over?
Over the last two weeks there has been lots of telling economic and financial data from which some commentators have drawn the conclusion that the worst of the economic and financial crisis is over. We set out here to examine this data and determine if these commentators are right by looking at the banks, stock markets, the Bank of England and global economies.
The Banks
The four major banks and the wholly state owned Northern Rock reported their results, which were described as mixed, during the business week ending the 7 August 2009. We show these in the table below - all the figures are in billions of pounds sterling.
Barclays HSBC Lloyds RBS* Nthn Rock
Pre Tax Profits 3.0 3.5 -4.0 0.2 -0.7
Write-downs -4.6 -9.6 -13.4 -7.5 -0.5
Investment
Banking Profits 1.0 4.2 0.0 5.1 0..0
Profits ex 2.0 -0.7 -4.0 -4.9 -0.7
Investment
Banking
*RBS Suffered a post-tax loss of £1bn
The points of interest are: only Barclays made a profit when investment banking revenues are excluded; and the revenues from investment banking are a one off. Stock markets have rallied by nearly 50% from their March 2009 lows and the price fluctuations – called volatility – of financial assets have fallen making derivatives easier to trade and reducing daily profit and loss moves. In the credit markets the cost of buying insurance against bankruptcy has also fallen. All these factors have combined to create bumper investment banking profits. Normally stock markets would move no more than 10% over such a time span. But as we show later the sharp rally we have just seen is common in stock market crashes. In the past these have proved to be false dawns – often called sucker rallies - with the market falling again to levels below the previous lows.
The write downs in six months are nearly £36 billion. This money was lost as the value of assets the banks hold and loans to individuals and companies were written off. These losses are not paper losses but have to be matched from the banks capital. These are the losses from the banks exposure to the recession. They will continue dripping losses of this magnitude while the recession lasts and house prices continue to drop. If you add a major market fall and an increase in asset volatility, then on top of these losses will be potentially huge daily losses from derivatives – banks globally have a $700 trillion exposure to these assets. Such a scenario would lead to a similar financial meltdown as we experienced September 2008.
Even without a market correction the banks are likely to all return losses in the second half of 2009. The write-downs are probably underestimated as new rules give the banks leeway in accounting for “difficult to value assets”.
The Stock Markets
Stock markets around the world have risen by over 50% (to week ending 7/8/2009) from their low point in March 2009. Stock markets are where companies’ ordinary share capital (shares) is traded. They are usually seen as a leading indicator of what is happing in the economy. So does this rally mean that the worst is over for the economy and the banks in particular?
If one looks at the history of severe economic recessions a pattern emerges: after a sharp fall in share values over several months, shares make a partial recovery in the hope that the worst is over only to be disappointed and fall again to reach new lows.
In the 1930s depression shares fell from a high of 380 on the US Dow Jones Average (DJA) to a first low of 199 over two and a half months only to rise 48% to 294 five months later. This proved to be a false dawn as US credit dried up on the back of its banking crisis driving the world into a deep depression. The DJA then fell 89% from its all time high to a low of 41 two and a quarter years later.
Sounds familiar? This time the DJA took one and a half years from the credit crunch breaking to fall 54% from its pre-crash high. It has since rallied 44% to its close on 7/14/2009 of 9435. In the UK the initial fall was of the same magnitude but the rally less pronounced to 34%.
The rally – known as a sucker bear rally – in shares is as we write (17/8/2009) is running out of steam. We are likely to see a sharp fall in shares as the markets wake up to the effect of the “end of credit”. This will lead to an increase in the price movements of all financial assets and a big rise in financial volatility. The banks who therefore made gains in the first half of 2009 will suffer steep declines in profits as their exposure to $700 trillion worth of derivatives will create huge losses similar to those they experienced in the autumn of 2008.
Governments would then have to again step into bail out the banks but this time their scope for action is limited by the amount they have spent already and the steps they have to take to find the money to pay for it.
The Bank of England
The Bank of England (BOE) has made two important statements over the last two weeks (3/8/2009 to 16/8/2009). The first was on quantitative easing and 2009’s second quarterly report on inflation. These statements revealed more about the state of the economy and the financial system and its future than any vague optimistic comments that have come from government and City’ analysts.
On quantitative easing the announced that they would raise the total pot to £175 billion – an increase of £25 billion of which £125 billion of the original £150 billion has been used already. The new unused total of £50 billion would be put to use over the next few months. The £175billion represents 12% of our economy (gross domestic product - GDP) and together with other bailouts will take the total of our money spent by the government and the BOE on saving the banks to £350 billion or nearly 25% of our GDP.
Quantitative easing is a tool where the BOE of England prints money and buys back with this money government and other debt from Banks, Financial and other institutions. The idea is this will give the financial system money that they will then pump into the economy in the form of mortgages and loans to consumers and buinesses. All the evidence points to this not happening and instead the financial sector is hoarding the money as a buffer against further looses on mortgages, loans and derivatives.
The table below bears this out. It shows, in billions of pounds, the average monthly personal debt for 2006 – the last full year before the credit bubble burst, the average for 2009 and the figures for the latest month where data is available - June 2009.
Loans Secured Consumer Mortgages Re-Mortgages
On Homes Loans
June 2009 0.3 0.1 6.2 4.3
2009 1.0 0.1 4.6 4.1
2006 9.2 1.1 16.0 11.5
One can see the massive fall off in credit from 2006 that has driven the UK economy into recession. In June 2009 only mortgages – which account for bottoming out of houses prices - are significantly above the average for 2009 which is way below 2006’s average. Of the £125bn of quantitative easing only £1.7 bn has found its way into additional credit!
Why then spend another £50 billion on quantitative easing? The answer can be found in quote from BOE governor Mervyn King in an interview on the recent BOE inflation report. He said that the banking sector was still “in a very bad way” and predicted it would take years to “repair balance sheets” and wean the banks off public support.
In other words quantitative easing is nothing but another bank bail out that we will have to pay for through cuts in public services, wages and jobs and higher taxes. As well as quantitative easing the Royal Bank of Scotland and Lloyds TSB/HBOS have insured over £700 billion of their toxic assets – loans and derivatives – with the UK government, This means we will be liable for further losses which are likely to mount in the second half of the year as we pointed above on the section in banks. The future maximum bill we will be presented with and paid for by us through cuts and higher taxes is unknown.
The Economy
The UK economy and is still in decline only the rate of decline has slowed. Unemploymnet contuses to rise with nearly 20% of 16-24 year olds unemployed. In the US official unemployment has fallen slightly although nearly 250,000 lost their jobs in July. This is mainly because millions have given up looking for work. Those claiming unemployment benefit are 9.4 % of the total US workforce. But the national labour office estimates that nearly 30 million are out of work which is nearly 20% of the national workforce. Consumer confidence continues to fall in the US and inventories of goods are also falling at a rapid rate. This shows that US corporations are unwilling to produce more goods as they no faith that they can be sold. Only government subsidies for the car industry have boosted production slightly.
US corporations’ economic results are only being held up by huge cost cutting programmes. Underlying sales are poor and once the one off effect of cost cutting passes their results will start to deteriorate
Outside of China only France and Germany, in Europe, and Japan have managed to stop the decline in their economies. This is mainly because the French and German governments had to spend less on bank bailouts and were able to put funds into stimulating consumer spending and the infrastructure. These economies had also much smaller level of consumer debt and a smaller housing bubble. But the stimulus is likely to be a one off as European banks losses will increase in the second half of the year as exposure to eastern European and emerging market property loans hit their balance sheets. They also have exposure to derivatives and there are likely to be losses in this area in the second half of 2009 and not the windfall profits that accompanied the stock market rally since March of this year. Outside of Germany and France, economies with a large housing bubble have been hit hard – Spain and Ireland primarily.
The Japanese economy grew 0.9% in the second quarter of 2009 below the median forecast of 1.0%. This ended 15 months of successive contractions with the sharpest in the previous quarter when the economy shrunk nearly 3%. The growth in quarter two was driven by a $2 trillion government stimulus programme and exports. But the financial markets believe the effect of this will be short lived as the stimulus wears off and the global economy continues to shrink in the third quarter of 2009 leading to a decline in exports. On day the figures were announced (17/8/2009) the Japanese stock market dropped 3%.
China though technically not in recession has seen tens of millions of people made unemployed over the last two years. Only a massive stimulus programme driven by the central government has kept its economy afloat. Nearly $3 trillion of new consumer debt has been created in the first half of 2009. But the government are turning this tap off as they see the first signs of a speculative bubble in property and the stock market. Of course this internal stimulus programme does not help the rest of the world’s economy apart for the commodity industries as China is a huge net exporter. And these exports continue to decline as the world’s overall economy continues to shrink.
The Future
The global finance system is so contaminated with bad debt and derivatives that we are likely to see years of declining and stagnant economies. Unlike the 1930s the crisis of credit is not a US one but a global one with the banks also geared up to derivatives which can bring the financial system to the point of collapse when the financial markets decline and volatility in financial assets increases as we saw in the Autumn of 2008.
This means governments will have to continue to use our money to bail the system out rather than create jobs and services. The majority of us will pay for these bailouts through public service cuts and tax rises and unemployment.
But there is an alternative which means taking the banks under our control and neutralising their rotting loans and cancelling their destructive derivative contracts. It means a society where resources and wealth are shared to meet human needs. It is the only rationale alternative to the harsh future that capitalism offers us.
Friday, 22 May 2009
How would a "Greed" Tax work?
Europe: The Greediest Corner of Our Planet
By Raphie de Santos
By Raphie de Santos
Europe has been officially declared the greediest continent on the planet. A report* published in 2003 showed that Europe had more US dollar ($) millionaires than any of the world’s continents. Europe had 2.6 million (m) such individuals followed by the United States with 2.2m and Asia pacific with 1.8m. These are individuals who have over $1m in liquid wealth – essentially assets that can be disposed of at short notice which excludes homes.
A modest, one-off wealth tax of just 10 per cent on these millionaires would generate a trillion dollars to create eight million jobs across Europe.
Scotland’s share of that tax would amount to £6.5 billion – enough to create and sustain 80,000 jobs over the next three years, with an average annual salary of £25,000.
We could build tens of thousands of new homes to rent and turn empty buildings and homes into social housing. We could reduce class sizes by employing thousands more teachers and learning assistants. We could insulate every home in Scotland.
Call it a ‘Wealth Tax’, call it a ‘Crisis Tax’ – or even call it a ‘Greed Tax’. It would be a mighty step out of recession, paid for by those who caused the crisis.
The one off wealth tax could be repeated with annual tax of 5% on the liquid assets of these millioniares. This would give them 20 years to adjust to a more normal lifestyle!
Is such a tax justifiable? Most of this wealth has come from goods and services. These goods and services have been made by the majority of the population with their manual and mental labour. The millionaires can then only make money if we the majority buy these goods and services. Essentially through a greed tax we are only getting our money back.
Of course greed does stop at the super wealthy rich. There has been a massive redistribution of wealth in favour of the top half of society. In the UK the bottom 50% of the population has gone, in three decades, from owning 12% of the liquid wealth to owning 1%!
Tax all household incomes over £50,000 a year at 100%. A fundamental of capitalism is privilege, authority and deference, and behind personal power is economic power. This measure would collapse luxury industries like high fashion, grotesquely expensive restaurants and the market for Mercedes – in other words undermine obscene waste and conspicuous consumption. More rational forms of green consumption would follow.
In the UK the richest 10% of households have an average income of £100,000**. Such a wealth tax would generate an extra £9 billion pounds per year for Scotland. Across Europe this would be a trillion Euros!
In Scotland the extra 9bn is equivalent to a third of the entire Scottish budget for 2009/2010. It could fund a whole new health service for Scotland. Alternatively every year with the money we could build 600 new schools or 150 new hospitals or provide 100,000 extra homes. What we would do with the money would be decided by the needs of the majority of the population in a democratic fashion. It would be a society based on meeting people’s needs and not the obscene greed that we now have.
*World Wealth Report, Merrill Lynch Global Private Client Group New York.
** Office of National Statistics.
A modest, one-off wealth tax of just 10 per cent on these millionaires would generate a trillion dollars to create eight million jobs across Europe.
Scotland’s share of that tax would amount to £6.5 billion – enough to create and sustain 80,000 jobs over the next three years, with an average annual salary of £25,000.
We could build tens of thousands of new homes to rent and turn empty buildings and homes into social housing. We could reduce class sizes by employing thousands more teachers and learning assistants. We could insulate every home in Scotland.
Call it a ‘Wealth Tax’, call it a ‘Crisis Tax’ – or even call it a ‘Greed Tax’. It would be a mighty step out of recession, paid for by those who caused the crisis.
The one off wealth tax could be repeated with annual tax of 5% on the liquid assets of these millioniares. This would give them 20 years to adjust to a more normal lifestyle!
Is such a tax justifiable? Most of this wealth has come from goods and services. These goods and services have been made by the majority of the population with their manual and mental labour. The millionaires can then only make money if we the majority buy these goods and services. Essentially through a greed tax we are only getting our money back.
Of course greed does stop at the super wealthy rich. There has been a massive redistribution of wealth in favour of the top half of society. In the UK the bottom 50% of the population has gone, in three decades, from owning 12% of the liquid wealth to owning 1%!
Tax all household incomes over £50,000 a year at 100%. A fundamental of capitalism is privilege, authority and deference, and behind personal power is economic power. This measure would collapse luxury industries like high fashion, grotesquely expensive restaurants and the market for Mercedes – in other words undermine obscene waste and conspicuous consumption. More rational forms of green consumption would follow.
In the UK the richest 10% of households have an average income of £100,000**. Such a wealth tax would generate an extra £9 billion pounds per year for Scotland. Across Europe this would be a trillion Euros!
In Scotland the extra 9bn is equivalent to a third of the entire Scottish budget for 2009/2010. It could fund a whole new health service for Scotland. Alternatively every year with the money we could build 600 new schools or 150 new hospitals or provide 100,000 extra homes. What we would do with the money would be decided by the needs of the majority of the population in a democratic fashion. It would be a society based on meeting people’s needs and not the obscene greed that we now have.
*World Wealth Report, Merrill Lynch Global Private Client Group New York.
** Office of National Statistics.
Monday, 11 May 2009
The Scottish Socialist Party Alternative Summit...
On 16th April 2009, Gordon Brown and his New Labour Cabinet met in the SECC, Glasgow to discuss their reaction to the current stage in the economic crisis. Two weeks later, the Scottish Socialist Party European Election candidates met informally at the same venue. The video shows the SSP alternatives to the decisions made by the "Glasgow Cabinet"...
Promoted by Pam Currie on behalf of the Scottish Socialist Party, Suite
308/310, 4th Floor Central Chambers 93 Hope St, Glasgow G2 6LD.
Tuesday, 3 March 2009
Darling printing money!
by Raphie de Santos
Darling in an interview in today's Daily Telegraph announced the government is to spend up to £200 bn on buying back government debt. This in effect printing money to try and drive interest rates down by pushing the yield on government bonds down by pushing their price up and pumping cash into the system so that it can be lent out. It's an admission that cutting interest rates has had little effect on the economy and the Bank of England monetary committee may not cut rates as expected this week.
Printing money is a short-term desperate measure as doing this for any length of time is:one,inflationary and two, adds to the public debt which has ballooned from 35% of our economy (GDP) before the out break of the crisis in August 2007 to nearly 48% now. At some point we will have to pay for all this from increased taxes.
Stocks fell again today as the new measures show the desperate weakness of the UK economy. The FTSE 100 touched 3500 at one point. The Left Banker is predicting that the the FTSE 100 will touch the 2000 level over the next 18 months if the stock market reacts in the way it did in the 1974 recession. A full depression will see it hit the hundreds. This of course will have a disastrous affect on working class as a large part of their deferred wages are in their pensions and insurance policies which are invested largely in the stock market - about 80% of the market is indirectly owned by the working class through pension and insurance funds.
Just another manifestation of the crisis of capitalism and how it is pauperising the working class.
More on Left Banker - www.leftbanker.net
Darling in an interview in today's Daily Telegraph announced the government is to spend up to £200 bn on buying back government debt. This in effect printing money to try and drive interest rates down by pushing the yield on government bonds down by pushing their price up and pumping cash into the system so that it can be lent out. It's an admission that cutting interest rates has had little effect on the economy and the Bank of England monetary committee may not cut rates as expected this week.
Printing money is a short-term desperate measure as doing this for any length of time is:one,inflationary and two, adds to the public debt which has ballooned from 35% of our economy (GDP) before the out break of the crisis in August 2007 to nearly 48% now. At some point we will have to pay for all this from increased taxes.
Stocks fell again today as the new measures show the desperate weakness of the UK economy. The FTSE 100 touched 3500 at one point. The Left Banker is predicting that the the FTSE 100 will touch the 2000 level over the next 18 months if the stock market reacts in the way it did in the 1974 recession. A full depression will see it hit the hundreds. This of course will have a disastrous affect on working class as a large part of their deferred wages are in their pensions and insurance policies which are invested largely in the stock market - about 80% of the market is indirectly owned by the working class through pension and insurance funds.
Just another manifestation of the crisis of capitalism and how it is pauperising the working class.
More on Left Banker - www.leftbanker.net
Sunday, 1 March 2009
Financial Crisis- what we need to know.
Click on picture below for article from Bill Newman and video discussion featuring Raphie de Santos, Bill Newman and Frances Curran.
More left coverage of the financial crisis at the LEFT BANKER site.
More left coverage of the financial crisis at the LEFT BANKER site.
Thursday, 12 February 2009
From Recession to Depression: the U K Experience
Facilitated by the SSP co-convenor,
Frances Curran
Speakers—Raphie de Santos, Bill Newman.
ARTICLE BY BILL NEWMAN
It is at last dawning on even the most deluded of our MPs and MSPs that the recession (two quarters of negative growth) is not a temporary phenomenon and respected media commentators are not just crying wolf when they talk of years of economic pain. We are just at the commencement of a long depression (a recession lasting years) and it is apparent that governments have no cohesive plan for dealing with this, nor even an understanding that this is a crisis in the very nature of capitalism which requires radical socialist solutions. Indeed, the vacuous dialogues at the Davos forum meeting this year confirmed a global lack of meaningful policies.The crisis was initiated by those bankers who thought that they could avoid the laws of capitalist economics and procede for ever to enrich themselves at everyone else's expense, and the tacit endorsement of politicians too ignorant, lazy or complacent to control this arrogant greed. It's worth recapping in overall terms the culpable stupidity of senior bankers in recent years:
- The naked greed of bank traders, bank executives and bank boards. This greed rewarded short-term speculative gains with obscene cash rewards. Bank risk analysts, where they had the courage to point out dangers, were ignored or even shown the door. Traders, often with little technical understanding of the instruments with which they were trading, could afford to ignore long-term problems given the massive short-term payments they were receiving. Likewise, chief executives and board chairmen were blinkered enough to believe that they could ignore longer-term risks. It is worth recalling that none of the former chairmen and chief executives of Royal Bank of Scotland and HBoS hauled before the UK Parliamentary Treasury Committeee on 10 February had any banking qualifications. Established politicians overtly claimed that 'greed is good', a mantra now castigated by the media without an acknowledgement that greed is an essential ingredient of capitalism.
-Profligate lending. The progressive loosening of prudential controls on the granting of credit led to the ludicrous self certification of borrowers whereby the word of borrowers as to their financial status was accepted without checks. This was compounded, for example, by the granting of mortgages in excess of 100% of the value of the property in question, presumably on the incredible belief that property prices would rise for ever and interest rates remain at historically low levels.
-Bankers as salespersons. All bank customers know that staff at their local branches were there to sell their products rather than cater for their mundane banking needs. Indeed, as every bank clerk knows, performance assessment and the rewards arising there from depended heavily on their ability to sell products and extend credit to bank customers.
- Weak banking regulation. Tight supervision of banks through inspection and financial parameters has been steadily eroded, through the deliberate embrace of the extension of the free market, an embrace, despite evidence to the contrary, that still controls the philosophy of the UK government. It is instructive that where bank regulation has remained tighter, as in Spain, bank crises have been lesser.
-The extension of derivative trading. Derivatives are in essence merely contracts whose values depend on something else. These can be useful and in their simpler form have been around almost as long as banking. The example which used to be used in basic banking instruction was that of the farmer who sold his crop in advance of harvest to a miller at a fixed price for future delivery, removing the element of future financial uncertainty to farmer and miller. In the last two decades or so different types of derivatives have become much more complex and varied. Many, such as credit derivative contracts, although they look like insurance contracts, provide considerable scope for profit when they are traded, not least when the value of contracts is leveraged. They also provide vast opportunities for loss when economic circumstances deteriorate. An indication of the scale of derivative trading and the overhang of contracts in the market is shown by the Bank for International Settlements (BIS) which valued derivatives outstanding on the market in June 2008 at $684 trillion. It is clear that senior executives seem not to have either understood the nature of the complex derivatives which their banks were trading, nor the risks involved.
-The crazy belief that as a result of the miracle-working Gordon Brown there would be no more boom and bust. Such a belief defies all economic laws. You haven't got to understand Karl Marx (though it helps!) to understand the cyclical nature of capitalism. If Gordon Brown had never read Marx, he should at least have known a little of Maynard Keynes, or even Adam Smith.
It is certainly true that the whole world is involved in what is indeed a global recession, compounded by the onward rush towards economic globalisation, but the recession is due to bite harded in the U K than elsewhere. Thus the International Monetary Fund (IMF) has forecast that the U K economy will shrink by 2.8% this year, compared with a deline of 2.0% in the Eurozone and 1.6% in the USA (see appended table 8). Why is the U K performing worse than other developed nations? There is a myth, which seemed to gain credibility in the media and even among opposition MPs that Prudence Brown was a sound, pragmatic chancellor. In practice, he was far from prudent as even a cursory look at his economic stewardeship shows.
Astonishingly, very few in the Westminster Parliament or the media seemed willing or able to expose Brown and the dangerous overheating of the U K economy, though, to be fair, Vince Cable did raise some warnings. Indeed, it seems to have been deemed to be unpatriotic to disclose the deterioration in economic performance.
Just look at performance of the U K's payments balance with the rest of the world (table 1). The U K's trade in goods has moved from a deficet of £12.5 billion in 1995 to a colossal £93.2 billion last year. In the company of astonished European MPs I heard a Goverment economic advisor claim many years ago that the reduction in British goods production and exports was of no consequence as what the U K was good at was the overseas sale of financial services. Well, at the very least, as Table 1 shows, our earnings balance on services by no means compensated for the growing goods trade deficit. And should we expect overseas financial earnings to be sustained this year? How, then, has the U K's growing current account payments deficit been financed? Net investment in the U K has shrunk and in 2007 recorded a substantial net outflow (Table 2) with valatile short-term borrowing meeting the gap.
Moreover, the gains from North Sea oil production have been frittered away and Britain's trade in oil has now moved from a solid surplus a decade ago to a deficit (Table 3). To compound this reverse, coal production, which could have helped meet energy needs, has been deliberately destroyed, first by the Tories, but, as Table 4 shows, New Labour has tamely followed the Tories policy so that the U K now imports more than twice as much coal as it produces, the largest supplier being Russia.
Nor can Gordon Brown claim prudence in managing Government finances. In the early years of New Labour, debt did indeed shrink, but, as Table 7 shows, Government deficits have emerged and grown to pump up economic growth, limiting the Government's room for manoeuvre in the current recession.
It is clear, then, that Gordon Brown's stewardship was far from prudent and was rather associated with a steady deterioration in the U K's economic performance. Nor can it be said that, despite the grandiloquent bluster, that he has shown a grasp of the depth of the financial and economic catastophies facing the U K. Measures such as the pointless reduction in VAT and the reliance on inadequate and inappropriate support for the banking sector hardly augur well for the radical restructuring required. Both he and his tame chancellor, Alastair Darling, seem terrified lest they are accused taking of socialist measures. Even with banks now owned by the state, there is still a reluctance to declare banks nationalised and to take control. It has been explicitly stated that the banks are best left in the hands of those with the necessary expertise, quite regardless of the fact that it is these overpaid "experts" who carry a large amount of the responsibility for getting us into this fine mess.
A totally new and socialist response is urgently needed and none of our established parties will provide this in Scotland or elsewhere. It is more important than ever that people are made aware that capitalism has failed and a different world is possible, and that world must no longer rely on capitalist "solutions".
Click on table for bigger image:
Tuesday, 27 January 2009
INVITATION - "THIS GREED WAS BEYOND IRRESPONSIBLE!"
YOU ARE PAYING!
WHAT’S THE ALTERNATIVE?
THE FINANCIAL CRISIS
—your questions answered.
WHAT’S THE ALTERNATIVE?
THE FINANCIAL CRISIS
—your questions answered.
THIS GREED WAS BEYOND IRRESPONSIBLE!
Kirkintilloch Leisure Centre Conference Room
Saturday 7th February, 10.30am– 12.30pm
Facilitated by the SSP co-convenor,
Frances Curran
Kirkintilloch Leisure Centre Conference Room
Saturday 7th February, 10.30am– 12.30pm
Facilitated by the SSP co-convenor,
Frances Curran
Speakers—
Raphie de Santos
— was head of Equity Derivatives Research and Strategy at Goldman Sachs International. He was an advisor on derivatives and financial markets to the Bank of England, London Stock Exchange, London International Financial Futures and Options Exchange and the Italian Ministry of Finance. Raphie has been a guest lecturer on derivatives and financial markets at Harvard and New York universities and the London School of Economics and has spoken at the annual Nobel Foundation conference in Stockholm.Bill Newman
spent most of his working life in banking, latterly as head of economics and then as Assistant General Manager of a City of London bank. For some 15 years he was also editor of and wrote for a journal on international monetary economics.Bill was also on the Executive Committee and the Management Committee of the Banking, Insurance and Finance Union (BIFU) and a delegate to the TUC.
THE CAMPSIE BRANCH SSP invite your participation in this important discussion. How will this crisis effect YOU?
About the Scottish Socialist Party
While it fights to defend jobs, working conditions and living standards and for houses and health the SSP also demands a new economy.
Such an economy would start the task of harnessing the stupendous technological and material resources which already exist to meet the needs of society rather than the greed of the few.
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