I have not posted about the economic recession for a while now. It has been a deliberate attempt to control my blood pressure. Every newscast brings fresh news of our politicians doing headless chicken acts. They are grimly Newtonian; to every action there is an equal and opposite reaction. Of course the media hasn’t helped. Words like disaster, meltdown, cataclysmic to describe a 2% drop on the Stock Exchange do overdo the drama. Neither group seem to have any grasp of reality.
The facts are quite simple. Personal greed led some banks to take excessive risks. Shareholders and directors were not really worried because banks rarely fail and the rewards were far too tempting. Then the bubble bursts. Governments everywhere go mad and bail them out. Let it be noted that no government can actually match the total debts of the combined world banks so at best their action is a sticking plaster on a shrapnel wound. This is the equivalent of the local council bailing out a corner shop that goes bust. In fact that scenario would have a greater chance of a happy ending.
If the toxic banks had been allowed to go bust, the unintended consequences would not have materialised. Royal Bank of Scotland would have gone under leaving some innocent profitable bits to be snapped up at bargain basement prices by more sensible banks. The pieces of HBOS of any value would have gone to Lloyds for a few hundred million instead of billions of pounds. Furthermore there would be no problem about bonuses or pensions, at least not for the taxpayer, because there would not be any. And most importantly shareholders would have learnt a valuable lesson. Best of all the taxpayer would not be about to pay for this unmitigated political tomfoolery for the next forty years.
So having saved the country about a trillion pounds, the government could have let Royal Mail have a nice fat cheque to help all the worthwhile businesses which are short of a few thousand pounds to keep them afloat while the economy adjusts downwards. This would also have saved Peter Mandelson the trouble of trying to privatise it. There would have been plenty of room for manoeuvre to apply loans and grants all over the real economy to keep more people in work. What is more the hundred or so building projects in the further education sector would not have had to be halted and it would have been possible to give more money to councils hit by the failure of their investments in Icelandic banks. I know that sounds like bailing out the undeserving bureaucrats but it would also keep a lot of people in work. Those two examples represent actual job cuts by the government. There would have still been a few billion left over to start new work, like creating first-world school buildings and investing heavily in energy related research both in universities and industry so that as the economy stabilises we are in a more competitive position. We might even have bought the army some proper gear.
As it is this government in particular is ranting about the greed and having a totally new banking regime while do its best to return to to the previous status quo. Actually the banks are being realistic in not lending as much as the government are exhorting them to do. Somebody somewhere in the banking system obviously realises that there is need for more caution.
And now my blood pressure is through the roof!