By Michael Baxter 3 Dec 2009 [0 Comments | 390 views]
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Nearly headless Nick Sarkozy has been at it again. Directors at RBS are screaming. European banks are becoming more bloated than ever. And good old Alistair Darling has been speaking up for greedy capitalists.
They are all connected, and there’s a lesson in it for us all.
You may already know, but our good friend Nick Sarkozy has been doing a bit of gloating of late. What with a Frenchman running the IMF, The European Central bank and the World Trade Organisation, and now a countryman from France’s neighbour is President of Europe, the world is looking decidedly non Anglo-Saxon. Britain has been the loser, he gleefully proclaimed, smirking over the Franco triumph.
Then there’s the banks. The view doing the rounds at the moment is that he is determined to put an end to the “Anglo-Saxon” model of capitalism once and for all. If France can never become a major player in global banking, well, he might as well ensure Britain can’t either.
It’s all media hype of course. In fact Nick Sarkozy is a great fan of the City, as he is of all things English.
There is this suspicion, however, that the EU somehow wants to impose regulation on the financial system, hitting Britain hard, but barely affecting France at all.
Al is having none of it. Our silver chancellor has warned the EU to keep its regulatory hands off Britain’s golden goose.
Mind you it’s a tough one. For on this occasion, the very newspapers which so hate the EU, and all it stands for, are the same papers which have vilified the bankers. It seems EU bureaucrats and the Great British Public are on the same side.
Pity the directors at RBS. They have threatened to resign unless the government agrees not to put curbs on the bonuses they hand out to their staff. Whose side do you think the public will be on?
It is hard to believe they will have much sympathy with the bankers. Mind you, Lord Myners is with the public too. He has claimed that over 5,000 City bankers are set to earn over £1m this year. He described the pay as “grotesque,” and reckons the banks, after taking billions from the taxpayers are paying no heed to public disquiet.
Meanwhile, Bloomberg has quoted David Lascelles, senior fellow at the London-based Centre for the Study of Financial Innovation as saying “We are sowing the seeds for the next crisis. What we have been doing in the last two years is making banks much bigger. It really goes against the currents of the time.”
Many of the problems we are now dealing with would have gone away, of course if banks had been allowed to fail. If the government had just sat back and watched the whole thing go up in smoke, bankers would be in the dole queue. Some of the more heavily leveraged ones may now have been selling the Big Issue.
That’s the snag with any bail out. It means we don’t learn the lesson. Errors are repeated.
But it is a complicated issue. If we hadn’t rescued the banks, the recession would have been a whole lot worse
The lesson of the 1930s is that when banks fail money is sucked out of the economy. Depression sets in. Maybe what policy makers should have done is allowed banks to fail, but then made up for the resulting contraction in money supply by printing money, compensating individuals who lost money through no fault of their own, and then channelled the money they created into business.
No doubt that also would have been too Anglo- Saxon for Mr Sarkozy.
