It's a curious time to be observing politics. Leaving aside for the moment the quite rational fear that Greece will topple over at any moment and trigger a domino effect across Europe, in the process ripping away the veneer that any of our banks are solvent, the behaviour of the right in the UK, Europe and USA is extraordinary to watch.
David Cameron says he won't bail out Greece, so making insolvency of our banks more likely.
The Republicans in the US refuse to increase the borrowing allowed by their governemtn, so sthreatening the default of their government on its obligations - including in places like Afghanistan.
In Europe centre right governments shove money at a problem - called Greece - but have no clue how to actually solve it.
In the UK the Tories say they're going to cut spending, so endorsing austerity plans for Greece, but time after time are already failing to deliver - the NHS reform (which is adding whole massive new rafts of bureaucracy on top of that already there) being one such case, the reverse on legal reforms, whilst logical, being another. So their plans to control spending - on which they are pinning all their hopes - are collapsing as I write.
And on, and on.
What's extraordinary about all this? Three things. First the incoherence: some on the right are bailing out, others are refusing to do so to spite their own faces. Second the incompetence: there's no underlying logic to these polices, in theory or in practice. They're just expediency for the sake of media gratification which they hope will deliver them further electoral gains. And thirdly, the fact that so far they're getting away with it.
How long can that last?
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“… so making insolvency of our banks more likely.”
Well now. Western governments’ whole response to the crisis has been built around the proposition that the banking sector has a liquidity problem (i.e. that they have a cash flow timing problem but are basically sound), not a solvency problem (i.e. that they have lost so much money on bad investments that they cannot pay what they owe – which in the case of banks includes depositors).
In large and complex organisations that have every incentive NOT to be transparent it can be difficut to tell if the problem is liquidity or solvency. Fortunately, there is an easy way to tell. It is to follow Walter Bagehot’s advice and in a banking crisis lend freely but expensively. If the banks really only have a liquidity problem as they claim then they will suffer a painful period of high costs while they get their cash flow in order (and taxpayers’ will make a profit on the high interest rates charged). If they are actually insolvent they will be found out and, per capitalist theory (but not crony capitalist practice), they will go bust.
Common sense tells us that after years of rampant Ponzi finance and epidemic levels of fraud (especially in the USA) most big banks are in reality totally insolvent but the ruling elite dare not admit to this. Particularly in the UK their ‘national business plan’ has for many years been to promote the spiv economy (because they know no other) and pretend it was somehow real and a Good Thing. Now the whole scheme is dying; inconvenient laws laws are being flouted every last taxpayer cent is being thrown into the black hole and to try and fend off a collapse.
The system was always riddled with inconsistencies, the crisis is simply bringing them to the surface.