In September 2008, America was facing a crisis. Some of their biggest banks were on the edge. The US economy was on the brink of collapse. The US government, with the federal reserve bank, went into overdrive. As the crisis unfolded it became clear that the problems were not confined to the US. Our fanatical belief in globalisation was really showing it's worth. Governments around the world took up the challenge..."save the banks" they cried. And so they did. With trillions of dollars of tax payer money.
Today it is understood what caused the GFC. It is a matter of historical fact. But whatever the details, whichever way you look at it, it is fair to say that there are those in the financial sector who acted criminally. The kindest description might be criminal negligence. A more accurate description is probably organised crime. These people racked up billions of dollars of bad debt. Not just bad debt...appalling, stinking, rotten debt. Debt that could never and would never be paid. And they knew it. Those fucking bankers knew it. Knowing the debt was rotten, what did they do? They packaged the debt up into nice little packaged deals and sold it...to investors. Family investors. People looking to set themselves up for the future. Their hope was nothing more than to live their retired lives in a modicum of comfort. To be able to look after themselves, without being a burden on their kids or the state. But here's the kicker, these bankers, knowing that the debt could never be paid, took out options on the debt defaulting. Or put simply, they bet against the debt. When the debt did default, they made money.
And default the debt did. Spectacularly. And the banks let it happen. They were entirely complicit in the whole affair. But its fair to say that not even the banks had much idea of how bad it would get. I'm sure their intention wasn't to put themselves out of business. But that's what nearly happened. So, here were the banks, on the verge of losing all of there ill gotten gains. So close to paying for the pain they'd caused. Closing down. Justice...
"Save the banks", they cried.
Today some of the largest economies in the world stand on the edge of collapse. Being crushed under the weight of their public debt. Debt that was created by saving the banks. And those investors, lost billions. Families, charities, local governments, pensioners...lost billions
There was a question that I asked a friend of mine back in 2008. It was a question that still troubles me. "Why do we have to save the banks?".
"Because that's who's got all the money" was my friend's response. "The world needs money to function". Of course it does, I think I understand that. But I want to imagine what would have happened if the banks had collapsed and governments had kept their money.
Take America. What if the banks closed, but instead of people defaulting, they kept their homes? Instead of bailing out the banks, the government bailed out people. People who still need bread and milk, clothes to wear, the internet to stay connected, petrol to put in their cars, and most importantly, jobs to go to. People would have been bailed out, they would have spent their money, the economy would have kept going. People spend money, companies survive. Companies and people pay taxes. The government builds roads, people have jobs, they spend money, companies grow, pay taxes, government spends, jobs, taxes, spending, jobs...that's how it works doesn't it?
In the last two years, America has doubled it's debt. 14 trillion dollars. For what? Low growth and high employment. Oh, and they saved the banks. In the UK, public debt is now 90% of the country's GDP. For what, low growth, high unemployment...and they saved the banks.
What if we saved people instead of the banks? People will tell me I don't understand the basics of economics. That we'd be a whole lot worse off if we hadn't saved the banks. Maybe I don't get the basics. But somewhere along the way, I think we've been had...
And now, the debt has to be paid. Not by all those bankers. But by tax payers, everyday tax payers. It has to be paid by nurses, teachers, police, cooks, people who had nothing to do with causing the debt. Occupations of which there are now less of. Companies downsize, people stop spending money, the economy suffers, governments cut spending, the economy suffers...what a self perpetuating mess.
"Save the banks", they cried. What for? Somewhere along the way, I think we've been had...
Published with Blogger-droid v1.7.4
No comments:
Post a Comment