söndag 1 mars 2009

Corrupt government hand in hand with rich financiers

That sounds like Africa or Latin America, doesn't it? And supporting lame-duck industries was something that happened in the bad old days of socialism. Not twenty-first century Britain, where politicians and bankers are all honest and above board and market forces rule, a faith demonstrated by the portrait of Adam Smith on the £20 notes.

A failed private company, going cap in hand to the government for an advance of taxpayers' money, can expect to be sent packing, with the reminder that the free market is about capitalists taking risk and accepting the good and the bad together. It hasn't worked like that, with banks receiving hundreds of billions in "insurance guarantees". Only that is not what they are at all. These are guarantees on loans where defaults are certain on a large scale, secured on bubbled up land values which are now collapsing. Thus the bankers are being protected against their follies. What ought to happen is for the banks to be allowed to go bankrupt and then the loans written off.

This is of course going to be hugely disruptive to the economy but the alternative is high unemployment which will persist for several years, and a huge loss to be borne by the taxpayer, almost certainly in the form of inflation at 1970s levels and probably much higher.

Expect serious social and political unrest this summer.

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