Posted in Finance

Europe’s debt – a con-trick binding the people to banks

The broken Euro symbolThis article was translated by Tom Gill based on the original in Italian at  Il Fatto Quotidiano  by Loretta Napoleoni.

From this year Italians have a 45 billion-euro–a-year bill to pay under the EU Fiscal Compact, a budgetary straightjacket binding Rome to 20 years of economically and socially lethal spending cuts and tax rises. It’s time to end this vicious cycle of impoverishment, designed for the sole benefit of private banks, and cancel the debt, says Loretta Napoleoni.

In 2014 the fiscal compact will become operational. For those who want to refresh your memory here is the definition that Wikipedia gives : Continue reading →

How bad will it get?

Chancellor George Osborne has recently been promoting two ideas. One is that a recovery is under way and the other is that further cuts in government spending are needed, up to £25bn.

The contradictory nature of those two statements tells us something important about the nature of the current recovery and the actual content of economic policy. It is clear that however weak the current recovery is, the overwhelming bulk of the population will not benefit from it. Austerity policies have always been aimed at transferring incomes from labour and the poor to capital and the rich. So for example, a VAT increase was said to be necessary to cut the deficit yet was simultaneously implemented with a cut in the corporation tax rate which reduced government revenues by almost exactly the same amount.  Continue reading →

One law for the banks and another for everyone else

Danger BankersThe banks are getting away with it again, and this time with potentially very serious consequences for the world economy. The 2008/9 financial collapse occurred, as everyone knows, because all the world’s major banks had been peddling toxic mortgage-backed securities based on sub-prime properties and trading them very profitably on a colossal scale across the world.

When inevitably the scam imploded, triggering a worldwide recession that still continues, it was judged that these banks were too big, and too enmeshed in underpinning the broader economy, to be allowed to fail. But that meant rescuing, not just those components of the bank engaged in supporting the domestic economy (the good bank), but also the trading arms of the bank that had speculated across the world in risky ventures (the bad bank) of which the board of the bank had little understanding and even less control. Continue reading →

Animal spirits in the stockmarkets don’t add up to economic recovery in the real world

GraphThere is an extraordinary combination at the start of 2014 of souped-up credit markets and an anaemic economy. The urge to talk up the economic recovery after so many false starts has turned the heads not only of investors but also of the economic commentators who show the same herd instinct of prophesying long-term continuing growth on the back of minuscule readjustment of the ONS figures.

By contrast the factual evidence of what is actually now happening in both the credit markets and in the real economy makes for far more sobering conclusions. The prolonged period of low interest rates has prompted investors to take on greater credit risks or use additional financial leverage in order to reach for higher yield. This has produced highly frothy markets which ominously resemble the pre-crash situation of 2007. Continue reading →

Lloyds & RBS fined £90m yesterday, but (courtesy of Ed Balls) do they give a toss?

Hardly a day goes by without the big banks being penalised, for the umpteenth time, with a record fine. Yesterday Lloyds was fined £28m for ‘seriously flawed’ sales practices, while RBS was forced to pay the US authorities £62m for breaching US sanctions by dealing with clients in Iran, Sudan, Myanmar, and Cuba.

In the case of Lloyds, more than 1 million products were sold to nearly 700,000 customers, but quite apart from whether these products were genuinely needed, what irked the Financial Conduct Authority (FCA) was the structure of targets and bonus arrangements. That was found to involve sales people being demoted, with a cut in salary of up to 50%, if they failed to hit targets, whilst at the other end of the spectrum ‘champagne bonuses’ were on offer of up to 35% of salary for achieving certain targets, with a one-off ‘grand in the hand’ £1,000 payouts to star performers. Continue reading →