STOCK MARKET WATCH -- Wednesday, 21 November 2012

[Demeter]

11. Why are we bailing out the banks? – Part Four – What happens now?

http://www.golemxiv.co.uk/2012/11/why-are-we-bailing-out-the-banks-part-four-what-happens-now/

In part one of this series http://www.golemxiv.co.uk/2012/10/why-are-we-bailing-out-the-banks-part-one-the-simple-answer/#comment-20703 I suggested that the simple reason we were bailing out the banks and simultaneously cutting public spending was because,

If the banks were to be wound up it is the wealthiest 10%'s credit/debt backed ‘money and the assets held in it, which would burn to ash….So the simple reason our rulers insist on bailing out the banks is that by doing so the wealthy and the powerful are simply bailing out themselves and guaranteeing the continuation of a system which suits them perfectly.

In part two http://www.golemxiv.co.uk/2012/10/why-are-we-bailing-out-the-banks-part-two-theory-ideology-and-failure/ I argued that while the simple selfishness answer is true there are also theoretical justifications (albeit flawed ones) for the bail and cut policy.

The two aspects of their policy ‘bail and cut’, they will insist are not contradictory at all. Simply put, they will say they are loosening or increasing the money supply (QE) in order to invest in growth (classic Keynesian) while simultaneously cutting those expenditures which they feel do not generate growth and which are in fact ‘drains’ on productivity – in their view any ‘public’ expenditure (Classic Free-market). Growth, for them, equals the free-market/private sector, while drains on growth equal government, public spending….Basically – Private Debt good, Public Debt bad.

I argued that one of the legion problems with this world view is the fact that whatever the ideology says should happen, the reality is that giving money to the banks for them to invest has simply not worked. It was never going to work because it is founded on a misapprehension about the nature and business of modern banks. Namely – that they invest for growth. They do not – certainly not in the broader economy during a recession. Banks used to ‘invest’. Today they much prefer to speculate. Investing is long and slow and does not make big bonuses. Speculating on food prices, currency fluctuations and sovereign debt, lending for leveraged, debt ladened buy-outs - now these things can all provide the quick returns and big bonuses which old fashioned investment does not...The idea that ‘we are all in this together’ coupled with the other idea that the banks are there to help – or are ‘there for the journey’ as a UK bank advert claims, is wishful thinking at best. These notions may make snappy sound bites but that is all they make. Banks are not there to help. They are NOT a service industry. Banks exist to make a profit as fast and as often as possible for those who own them and large bonuses for those who run them. Which is fine. They are a business. As long as we remember that and treat them accordingly I have no problem. I have a massive problem when, in the good times, the banks insist on being recognized as a business in the free market, to be treated with a laissez faire, light touch. But then in bad times insist even more fervently that they are not just a business to be allowed to live and die by the rules of the market like any other business, but claim instead to be an essential, – no, THE essential public service which must be protected above all else. So essential, in fact, that all ‘other’ public services must be cut in in order to better save the banks....Let’s be clear the banks are not a public service. Banking – rather than the banks – could be a public service, but it is not run as such today. The banks are run as ruthless businesses. They exist according to an almost entirely selfish philosophy which extends from how they imagine human nature to be – no one, they think, would even turn up for work let alone do a good job unless rewarded more than anyone else – to justifying any and all fraud on the basis that if it makes a profit then who could blame you for trying. Be that as it may…

In part three http://www.golemxiv.co.uk/2012/10/why-are-we-bailing-out-the-banks-part-three-lies-and-opposition/ I suggested that the official policy with its armature of ideological justifications and soundbite explanations was today’s Big Lie and looked at how and why Big Lies work.

In this last part, having looked at the origin and ideological justifications for the ‘bail the banks and cut everything else’ policy, I want to look at where the policy goes now. Because I believe the policies of the last four years have brought us to a critical and unstable juncture.

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For the last four years our Dear Leaders, political and financial, have been labouring to push everything back up the hill from which it slipped. As they have neared the top, however, I think they have come to see that the policies they have forced upon us can do much more for them than simply restore what they had before. Why stop there, they now wonder? The top of a hill is a place of fantastic opportunity. l think our leaders have come to see that shoved hard in the ‘right’ direction they could propel our societies in almost any direction they desired. But this state of potential is also perilous. The top of a hill is the place and the moment when the forces are all finely balanced and almost any ‘unauthorized’ push could send the system off in a direction the Dear Leaders would not like. Victory for the powerful and wealthy seems so close at hand and yet the crisis, far from being over, is also at its most critical juncture. So many possibilities exist together, like overlaid quantum states, in this one moment.

Just as our rulers prepare for one last push, to enforce one more round of austerity and bank bail outs upon us, to propel us more firmly to their desired future, they find there is a building and spreading opposition to everything they are doing. I believe we are at, or very near, that place of maximum potential and maximum uncertainty where things could tumble down any number of quite different paths. Irreversible victory is within our leader’s reach. Yet at the same time they are only a stumble, a determined opposing push away, from irrevocable disaster.

MORE AT LINK

AND FOR THE RECORD, THERE IS NO SUCH THING AS "IRREVERSIBLE VICTORY"

ALL THROUGHOUT HISTORY, WE HAVE SEEN SUCH EFFORTS FAIL. AND EACH TIME, THEY FAIL QUICKER, BECAUSE PEOPLE ARE A FORCE TO BE RECKONED WITH, GREATER THAN "POWER" GREATER THAN "WEALTH" GREATER THAN ANYTHING, WITH THE POSSIBLE EXCEPTION OF CLIMATE CHANGE, ALTHOUGH I DO BELIEVE THAT WE CAN LEARN HOW TO DEAL WITH CLIMATE CHANGE, AND WE WILL HAVE TO. AND THAT WILL PUSH THE 1% OFF THEIR MOUNTAIN TOP FOREVER.