Alistair Darling said on 5.10.08 that he would welcome cross-party agreement on the financial crisis.
I suggest that Greens should respond to this offer, and open a dialogue with him on the situation, to continue a correspondence as it unfolds.
The present situation is that the decision of Ireland, Germany, Greece and others to give 100% guarantees on banks deposits has sent the markets whirling downwards on a day that they should have been soaring upwards in response to the American Bailout on Wall Street. Europe, including the UK, is almost certainly going to have to follow suit with bank guarantees, which are good for preventing a runs on the banks, but horrendously expensive if things go wrong.
So, whatever the level of the final decision within Europe, there is a commitment to guarantee a large part of deposits. A wise decision, designed to inhibit the risk of a run on the banks. The money is being focused on real people's savings, rather than trying to draw the poison out of abstract, obscure accounts in the financial casinos.
However, it does not leave governments with much money to give to the City of London and other stock exchanges, should they suddenly discover themselves short of funds.
Gordon and Alistair are both emphasising:
“We will do whatever it takes to maintain economic stability, to protect people and banks”.
Wednesday 7th Oct Darling will publish his £ multi-billion City bailout plan.
To both guarantee the people’s bank deposits, and also to buy up the toxic debt the City would be financially challenging. We are already a heavily indebted country, and there is a limit to what any government can borrow.
A City Bailout has the following disadvantages:
*Moral Hazard,
*Opposed to Natural Justice,
*Opportunity Costs, (money better spent in the real economy, applying the Right to Rent (GP policy) and GND.
*Probability of corrupt and/or sophisticated diversion of the monies into banksters' pockets, and undue pressure being brought by lobbyists
*Difficulty with Quantification of these toxic assets. Nobody knows how much is actually there, given the obscurity of the hedge funds &c that have been playing around with these debts.
The only argument in favour of a City Bailout intervention is the Gun To The Head argument: "Give us the money or the economy gets it."
The counter argument to the Gun To The Head is this : "Is a the Bailout guaranteed to save the life of the patient, or is it an expensive medicine that will delay the demise of the free market in money for a period of time, maybe weeks, maybe months?"
Finally, if successful, a bailout would allow the financial markets, a little more soberly than of late perhaps, to continue with a debt-based economic system that is slowly but surely munching its way through the web of life on this planet.
So there is the choice.
I think our position should be that it is best to leave the City to market forces, even though that may mean that the onset of the world recession is brought forward. Our position should be to support a suitably designed guarantee for bank deposits, nationalising the banks as necessary), we should ask Darling to roll out the Right to Rent and also the Green New Deal.
