Corrupt capitalism: Banks are throttling Economic Recovery

The Business Secretary, Vince Cable, today accused Britain's banks of "throttling" the economic recovery because of an anti-business culture which focuses on short-term profits. 

Speaking on the BBC1's Andrew Marr Show, the business secretary said: "The real problem at the moment is that the banks – because of their existing culture which is frankly anti-business, obsession with short-term trading profits, not focusing on the long term – are throttling the recovery of British industry."

The business secretary blamed the banks for undermining the multibillion-pound quantitative-easing programme by the Bank of England to inject liquidity into the economy.

He said: "There has been a breakdown in the mechanism, in the transmission. It just doesn't get through to companies. We are going to ensure that the new money that the chancellor and the governor of the Bank of England talked about at the mansion house does actually directly reach the companies.

"Given that our leading banks are, frankly, throttling recovery by not making business-lending available, particularly to small-scale companies, we now have to focus single mindedly on that task. How to make sure that the additional money gets through to business."

However talk is cheap ... as he/his party voted against a wide ranging judicial inquiry into the culture and practices of banks. His limited understanding of the level of corruption involved is also deeply worrying (n.b. the banks actually create/counterfeit over 90% of the money supply in the UK, not the Bank of England, and given this they are able to decide how they want to spend/gamble it).

We need to i) take back control of money supply (off the private banks), ii) separate casino banking and retail banking fully (i.e. not just 'ring-fencing') and iii) tax financial (casino bank) transactions just like any other form of gambling.

Only by doing these things will real businesses start to thrive and the UK economy start to flourish. Unfortunately Cable doesn't understand this, and the Labour party doesn't either (given their parallel announcements today)! 

No wonder Cameron and Osborne were desperate to stop a wide ranging judicial review ... as it would have started to expose/explain everything to them!

Double dip ... here we come!

Further evidence today that we are heading for a double-dip recession ... 

1. Two of the nine Bank of England Monetary Policy Committee (MPC) members have effectively now admitted it ... with one now saying there is a 50-50 chance the economy will contract in the final three months of the year. They are trying to 'rescue us', or should I say 'cover the recession up', with a further £75bn of quantitative easing (printing money) ... and they hinted a further extension of this is likely in the coming months. The problem with this approach is that the money simply ends up in banks (who caused the problem in the first place) for them to speculate with (rather than lend out to businesses) and it also pushes up prices/inflation (nb the idea that the stock market is 'rallying' is a big con ... it simply follows the effective devaluation of the pound).

2. Sentiment among the British public has dwindled to recession levels as fears mount over the outlook for the economy and household finances. GfK NOP's consumer confidence index fell to -32 in October from -30 in September. It has only breached that level on two occasions since the survey began in 1974 - March 1990, and June 2008. At both points the UK was heading into recession.

But don't worry ... the Chancellor and the Government now have something else to 'pin the blame on' ...  not themselves ... or any of their policies/inaction ... but the crisis in Europe* ... how convenient ... and timely!

* After all the rhetoric from Cameron and the Government about listening to the voice of the people (and giving them a referendum on Europe), it's interesting that they imposed a 'three line whip' to force MP's to vote against a proposal aimed at giving ordinary people an opportunity to have their say over Europe ... whilst they continue to use taxpayers money to prop Europe up! Hypocrisy indeed.

It's official - Families are having to pay for bankers greed

Families will see their disposable income eaten away as they “pay the inevitable price” for the financial crisis, Mervyn King warned.

With wages failing to keep pace with rising inflation, workers’ take-home pay will end the year worth the same as in 2005 — the most prolonged fall in living standards for more than 80 years, he claimed.

Mr King issued the warning in a speech in Newcastle upon Tyne after official figures showed that gross domestic product fell by 0.5 per cent during the final three months last year, increasing fear that the country is poised to slip back into recession. 

Disposable household income has been hit by sharp increases in the cost of food, fuel and tax, coupled with restricted wage rises for most workers. Last year, take-home pay fell by about 12 per cent, official figures showed, and the trend is expected to continue in 2011 (nb a back drop for recovery - I don't think so)!

The governor warned that the Bank “neither can, nor should try to, prevent the squeeze in living standards”. He said that the economic figures were a reminder that the recovery will be “choppy”. However, he said the biggest threat facing the Bank’s Monetary Policy Committee, which sets interest rates, was rising inflation.

The Bank is expected to use interest rates to keep inflation below two per cent, but the governor said inflation could rise “to somewhere between four per cent and five per cent over the next few months”.

He claimed that rising inflation had been caused largely by increases in global oil and commodity prices, and tax rises such as the increase in VAT introduced at the beginning of the year, which the Bank was powerless to control (nb not true, as 'quantitative easing', or 'printing money', devalued the pound and increased import prices).

“In 2011, real wages are likely to be no higher than they were in 2005,” he said. “One has to go back to the 1920s to find a time when real wages fell over a period of six years.

“The squeeze on living standards is the inevitable price to pay for the financial crisis and subsequent rebalancing of the world and UK economies.” (nb this statement shows they've known all along who will pay for bankers' greed).

Mr King insisted that the Monetary Policy Committee could not have increased interest rates from their current record low level to tackle the rise in inflation. (nb they did not however have to embark upon quantitative easing, which pushed up inflation, and served to only benefit the banks)

“If the MPC had raised the Bank Rate significantly, inflation might well have started to fall back this year, but only because the recovery would have been slower, unemployment higher and average earnings rising even more slowly than now,” he said.

“The erosion of living standards would have been even greater. The idea that the MPC could have preserved living standards, by preventing the rise in inflation without also pushing down earnings growth further, is wishful thinking.”

He added: “Monetary policy cannot be based on wishful thinking. So, unpleasant though it is, the Monetary Policy Committee neither can, nor should try to, prevent the squeeze in living standards, half of which is coming in the form of higher prices and half in earnings rising at a rate lower than normal.” (nb see later on to understand their plan with respect to the latter).

“The Bank of England cannot prevent the squeeze on real take-home pay that so many families are now beginning to realise is the legacy of the banking crisis and the need to rebalance our economy.”

The comments represented one of the governor’s starkest warnings yet, and yet alongside his apparent sympathy lies a very different truth ... as instead of expressing apparent frustration at not being able to prevent the squeeze in take-home pay, the Governor was actually telling us he wants to make sure take-home pay continues to be squeezed (by keeping down pay)! He said "attempts to resist the implications for real take-home pay by pushing up wages would require a response" from the Bank's monetary policy committee (i.e. they'll raise interest rates), implying that the Bank plans to thwart attempts by wage-setters to keep up with the above-target price rises (i.e. stop above 2% pay settlements). This sinister threat was almost 'hidden' from view, under a veil of sympathy, from someone we cannot trust. 

Mr King's feigned sympathy for savers and highlighted the failure of lenders to pass on cuts in interest rates. “I sympathise completely with savers and those who behaved prudently now find themselves among the biggest losers from this crisis,” he said. “But a return to economic stability from our fragile condition will require careful and well-judged steps looking beyond the next few months.”

He chose not to mention the big winners in the crisis, i.e. the bankers! Yet his claim that the banking crisis was behind the ongoing squeeze on living standards also comes at a sensitive time as the banks, who indeed created this crisis, under the watchful eye of the Bank of England, announce multi-million pound bonuses for their executives and whose current speculation is continuing to push up commodity prices (and hence inflation)!

Oh they must see the people in the UK as bunch of 'mugs', or more specifically a group of ignorant and apathetic people!