City of greed, the disease that spreads far beyond its boundaries.
This article, hybrid thing of the internet era, lays out for you in the simplest of terms with the minimum of technical reference or jargon how and why the UK has become the playground of a gallery of thieves and wrongdoers. I hope by the time you have read to the bottom you will be suitably shocked and sufficiently motivated to follow some of the references I provided, to question everything you are presented with regardless by whom and above all to stand and take responsibility for your country for democracy, for freedom and your children’s and grandchildren’s futures. In the summary I provide a little further information about the style of my writing which may confuse some traditionalists and remarks on how you might respond should you feel motivated to so do.
Rules made for crises then relieved when the sun shines. Lessons ignored until they are conveniently forgotten, read on, you are guaranteed not to like it.
“Those who don’t study history are doomed to repeat it, Yet those who do are doomed to stand by helplessly while everyone else repeats it.”
George Santayana
The abundance of history graduates in the UK parliament today would contradict the above view.
Milton Friedman died in 2006 but his Frankenstein-like monster, “Neoliberalism” lived a year longer before spectacularly destroying most of western economics and devastating lives.
Twelve years later, the corpse of Frankenstein lies in a building in Manhattan, wired to it’s siblings in London and global centres via the internet, dead, but breathing because of a pulse of electricity that makes him occasionally twitch in a lifelike manner for the press and say yes to important questions.
This rotting corpse, is responsible, not indirectly, but in the most direct manner possible for Trumpism, Populism, Brexit, and all the other variants here now, or about to emerge.
Why is it that Neoliberalism has destroyed civilisation as we know it?
A very, very short history lesson that serves to frame this discussion for anyone not trained in economics. I promise, I won’t get technical, it’s not necessary. Just a few short paragraphs.
The Economics most modern students learn is still based on models and principles written for the era of Adam Smith (18th century). It was the Feudal lords versus the People written by Feudal lords and makes as much sense today as the Bible. You believe it or you don’t believe it, but there’s no logic and no proof.
Money (Fiat Money), in the simplest terms, happened originally as pieces of paper that could be exchanged instead of one’s gold bars. Carrying them around was dangerous and a nuisance so you wrote a promise to deliver it signed by the guy running the deposit box bank. Gradually the banker realised he could sell lots of these bars because only a small number of people ever came in for their gold. Out of that simple idea came eventually fiat money as we know it and later all sorts of fancy contracts. All that was important here is that actual assets need not change hands only promises to supply and trust that the supply will, or rather could happen. I say could because a huge portion of transactions today are only bets not resulting in anything being delivered. Hence the modern financial system.
Today’s bank differs only in that instead of holding gold bars as collateral for the notes (fiat money), they hold deeds for assets such as houses ,factories and cars etc. Before they create money they get their hands on an asset as collateral, but otherwise it’s the same deal as before including a little license to be creative with the balance sheet. By the way, gold was just as subject to value fluctuation via market forces as any other asset with the same impacts.
The great depression and the solution
In the 1920s in the US, the stock market was growing so fast and everyone making so much money that banks lent and lent. They got so greedy they stopped holding back any cash for sudden demands and lent it all, in fact they even lent beyond 100% at times. The assets were mostly homes rather than gold bars and as the price went up and up they lent more and more. Then it all went wrong.
People had borrowed for boats, cars, caravans, facelifts, designer clothes, you name it and they just couldn’t spend any more. Factories closed, people lost jobs, the banks started repossessing homes but the houses were now only worth a fraction of the money the banks had lent, so the banks all went burst.
Now remember the paragraph about having spare cash in case someone turned up and asked for his gold, well the banks had no cash and remember the sentence about trust being important, well nobody trusted the banks and wouldn’t deposit any money. Just to frame this explanation, On September 17th 2019, twelve years after the big crash, and roughly a century after the great depression was caused, the Fed had to intervene again because the banks had insufficient cash to the tune of around $170bn. Thankfully, the Fed rescued them and it seems to have steadied the ship.
Back then the lack of money and of lending meant nobody could sell stuff because they reckoned, they would never get paid and money was worthless. After all, the banks were bust. Nobody selling means nobody making and that means nobody working, people starving. It happened.
This was all rescued by the US government inventing something called QE or Quantitative Easing.
In simple, but accurate terms, it meant the government, via the central bank, printing money and using it to buy the near useless assets from the bank thus giving them the money they needed to start lending again and get people gradually back to work.
Then of course all this money in the US economy really began to create big demand and inflation began to get out of control so they adjusted everything to control inflation and the day had been saved and a new cure had been invented. That cure was QE. After QE they began to act on lessons learned and tighten controls, but you guessed it, that didn’t last.
Just remember this key concept, a country with its own currency can’t go bankrupt because it can print the money to pay off the debt. Only when this happens an awful lot will trust gradually diminish to the point where nobody accepts their currency and things get sticky, but modern day to day currency dealing creates levels of imaginary balances that 1920s economists could never have imagined, and it does no harm at all.
History lesson over.
Thatcher, Reagan, Milton Friedman and their terrible legacy.
Friedman was a Nobel winning monetarist. A monetarist is to economics what a brain surgeon is to surgery. Don’t go to him with a rash. Friedman and “Chicago School” are synonymous.
No surprise then, Friedman was obsessed with money supply and the belief that it was a powerful tool to manage an economy. I deal with that further down, it is a very simple concept such that it is extraordinary to see apparently intelligent people sucked in by it.
This deadly trio, Thatcher, Reagan and Friedman loosened up all the laws put in place in the 1920s and gave the banks free reign to do more or less what they pleased. In UK it was called “Big Bang” and you were the one being ..
Once again, we had mortgages in excess of 100% on houses overvalued by 200% to 300% and even more.
Safe multiples of income had long since fallen by the wayside to qualify borrowers. In US, People were renting furniture when their mother in law visited, then handing it back, so indebted were they in their huge houses they couldn’t afford to live comfortably in, all in the hunt for asset appreciation and a fast buck.
This debt resulted in a fall in consumption, fall in manufacture and commerce, fall in employment and very quickly defaults and total collapse of the economy yet again along with collapse of banking and all it’s secondary markets. This time the tentacles could not even be traced to try and understand , never mind control the risk. Crisis management just didn’t work. Yes you are right, this is the short version.
QE, in the UK and the US, has created untold misery on a scale that saw Trump sneak into the Whitehouse and Farage become a household name in the UK.
How did it do this?
Economists responded to the banking crash of 2007 by first printing lots of money (QE) to rescue banks just like the great US depression of 1920s. In the UK the estimate of QE spending to date is €1.1 trillion and QE as I write, September 2019, is being ramped-up again. Seen in the context of people committing suicide while waiting on Universal credit payments or hospital appointments, that figure takes a lot of grasping. It even dwarfs the £350m a week lie on Boris’ bus. A mere few billion pounds per annum.
So what’s QE supposed to do for the UK ?
It is intended to increase money supply (all the cash in circulation * the speed it is circulating at is a useful way to look at it). It sort of tells you how much people have that they might be able to spend and hence whether the economy might grow if they spend it.
MS is the thing that drives customers into businesses to buy stuff and that keeps us all employed and everyone happy. If you’re a Chicago School economist, that is. (If you are marketer or Socioeconomist you know that confidence, feel good factor and what you see others doing are much more important factors. ) Trying to make broke or depressed people spend money by increasing supply is like trying to push a rope up a hill. It doesn’t work. A Socioeconomist would quite rightly add that uncertainty is the worst damper of all when it comes to consumer largess. The sight of devastation on all sides, not surprisingly, encourages us to save our cash.
So why didn’t the government pay off people’s loans and mortgages instead of buying bonds?
The theory they rarely admit is the one that says, giving money to people will make them lazy and business can’t get rich enough if people are lazy. Also, writing off their huge card debt of interest on huge interest would teach mere citizens that there is no “moral hazard”. (You can get away with it), what would bankers do then? Become undertakers perhaps, I digress.
To Friedman, Thatcher, Reagan, Osborne, Hammond, Bernanke, Draghi we are children after all in the hands of our sage politicians and carers, many of whom studied politics and history mostly, but didn’t pay attention to that either. Also Germans in particular, remember QE (helicopter money literally) going horribly wrong in the pre-war, Weimar Republic, but that was very, very different.
Why is QE evil?
It’s evil because the money is printed and used to buy bonds from (make loans to) banks mostly, often at 0 %, or even -1% in recent times.
That’s right, they pay people, rich people, to take the money, why then would anyone deposit cash.
The pathetic theory is that if they cant earn interest they will invest in businesses to sell stuff to broke customers. (They will push rope up hills as it were.) Also they forget to mention tax havens and other solutions not available to you and I.
That’s how the hedge funds make a buck in recent years. BlackRock and other Wall street firms used a lot of this free money to buy hundreds of thousands of repossessed homes and rent them back at huge rents causing massive homelessness and exploitation in the US and in Ireland and probably other places. They fed off the misery post collapse.
In 2007, lenders foreclosed on 79% more homes than in 2006: 1.3 million foreclosures. In 2008, this skyrocketed another 81% still: 2.3 million. By August of 2008, nearly one in ten mortgages in US nationally were in default and foreclosure proceedings. A similar story in the UK
The QE money all went into assets such as property only not people in need of homes were buying because their bank was empty and their credit record shot to pieces, it was hedge funds and speculators of all sorts mopping up the easy pickings using the free money from the central bank, they also invested in stocks, mostly in tech or developing countries and the result is a huge asset bubble that still rolls.
The impact of too much institutional capital and a shortage of supply can be seen in the fact that a home in UK costing £120k to produce costs £350k to buy, this situation is even worse in many places especially London. Restrictive planning laws also help with the bubble.
London housing is a special case, because it has been promoted and managed by Tory MPs for their banking supporters as the number one safe place to hide questionable wealth regardless where you hail form. No questions are seemingly asked about the source of this wealth and the houses and flats, which by the way come with a full UK citizenship, rights not afforded the legitimate Windrush folks. Many multi-million valued homes are locked up, but soaring in value on the basis of scarcity, while legitimate hard-working Europeans are treated like vermin and legitimate asylum seekers turned away. One standard for crooks and another for those in need with legitimate claims and those willing to contribute.
This double standard on housing is the main reason for Londoners on good salaries sending hungry children to school without breakfast.
These homes are treated as investments or games instead of places for families. The net result is epic levels of homelessness and despair plus fear of job loss in a country where there is no help with mortgages if you lose your employment and prime homes lie empty.
The sad and disgraceful sequel is that developers are now busy convincing the older generation as they lose their faculties to hand over their homes they paid for so dearly in return for a little apartment with a buzzy thing. If not doing that they are dreaming up schemes to get hold of the money from the scheme to help first-time-buyers. Naturally that money was long ago priced into all new builds and serves only to line the pockets of Tory supporting house builders.
Company valuations are wildly inflated because of the stock bubble, but returns to investors are dismal with serious consequences for pensioners and wages and salaries remaining stagnant since 2008 so effectively falling. Productivity too has been forgotten as CEOs chase asset appreciation via stock buy backs and acquisitions in place of entrepreneurship and creating value for customers.
What is important to bear in mind before you get sucked in by government propaganda is that their measure of inflation does not include your huge rent or mortgage costs, only stuff like food etc, when in fact, housing is the biggest issue on the majority of peoples budgets up and down the country. Were this measured and reported honestly, things would look very different as our incomes stagnate or fall in real terms and our cost of living soars.
It is also key to understand that were it not for forcing people into very low paid work that can’t support a family, unemployment would really be nearer 15%.
Rent seeking on a grand scale is now the accepted right of the CEO.
Low cost housing for those low paid people, even if it does get built, will be paid for by whom? Not the employers with whom this responsibility rests, no it will be you and I paying from our taxes to support the tax free bank accounts of these leeches who refuse to pay a decent wage and are allowed to get away with it. Who pays for the roads they use and other services, law and order, justice and all the stuff we take for granted without which they could not do business? Not businesses funding all this, but you and I. This is the meaning of the term rent seeking in this context
It is roughly a decade since the FTSE 100 hit its post-financial crisis low point of 3,512, before going on a dizzy bull run to the present day, doubling to more than 7,000 . That staggering bubble was all done by QE but not a penny of this went into the pockets of citizens.
All of this is a bubble, which, when it blows, will destroy the banks again and it is widely predicted to be any day now while most experts consider it long overdue. In fact the panic in the eyes of certain wealthy and the peculiar behaviour of politicians is almost certainly leading straight out of this frightening fact.
Politicians have no idea how they will deal with the unemployment and deprivation with nothing in reserve and no plans in place apart from Windrush and drumming up racism, but they are determined to wiggle out of their commitments to human rights before that time.
While all this QE madness went on, 200,000 British people died because of benefit and health care cuts, many of these deaths were suicides. A tiny fraction of the cash spent on QE could have saved them or better still, given them decent jobs. This should never be forgiven or forgotten by the British, it is too important.
Approx. 40% of people in UK live in poverty by UN standards and it is getting worse. 4.3m British (2.3m of them children) in deep poverty and 4m British destitute. This is so bad that the UN took British politicians to task for not abiding by treaties on human rights.
The United Nations expert warning about deepening poverty in UK has said, ‘the government’s denial is as worrying as the poverty itself’. Alston may have overstated one of the most startling statistics in his report, that “close to 40% of children were expected to be living in poverty by 2021”.
Well we exceed that figure and absorbed more than 10% inflation in 2022/23, with most of it focused on food, fuel and other necessities, but with no pay rises to absorb the pain, not even for the very lowest paid.
A woman knocked off her bike, breaking both legs, wasn’t eligible for benefits and was left having to go to food banks. Murdo Macleod/The Guardian.
Most experts agree that the benefit cuts introduced by the coalition government were directly responsible for Brexit and the breakdown of leave voters backs this theory up strongly, with a predominance of pensioners and unemployed. The figures also correlate strongly with the index of deprivation in terms of geolocation.
If all that doesn’t convince you that it is evil, you won’t be convinced.
And the rescued banks, flushed from their bonus spending spree in the tropics are back at their old tricks worse than ever. The government has been busy loosening the rules again to give them more scope, they are busy charging equivalent of 50% APR on overdrafts, Cheap borrowing costs have, allowed debt levels to build up again. Borrowing on cards, personal loans and car finance has soared above levels seen before 2008. The people who paid for the banks’ rescue have seen their incomes drop off and are in no state to deal with a new global recession much less a UK one.
UK PLC is a shambles of embarrassing proportion, one that stifles every attempt at improvement.
1. UK has been refusing to tackle the issue of no codified/written constitution. Despite debating the issue again in recent years, it was put on the back-burner yet again. As I write we have yet another non-elected PM. His predecessor almost burst the banks in a single week and the one before that, also unelected, was charged in the Supreme court with ignoring “The constitution”. A t a time of grave national crisis the country was busy reading history books and an ancient scroll to try and figure out what the constitution would say if there were one. You couldn’t invent this.
2. That unelected PM was selected by a closed ballot of Tory members with the stated aim of keeping the Tories in power and demonstrating no commitment to serving the people and who represented .02% of the population.
2a. The PM threatens to completely ignore the law if he is ordered by the courts not to do the thing he is planning.
3. A think tank (ERG), funding much of its work from tax-payers money together with a loose federation of other think tanks dedicated to unregulated global commerce, appears to have taken control of government, seeming to have an almost iron grip on the UK media apart form C4, the Guardian and a handful of smaller publications. The BBC, a public funded media body, in the eyes of many spectators, spreads the far-right Tory party message blatantly and there seems to be nothing anyone can do.
4. If all that is not anti-democratic enough, the city of Westminster, representing the Banking community and closely aligned to ERG think tank is allowed to place an unelected member in the UK Parliament and entirely escapes the scrutiny of parliament. When I previously referred to the UK as Medieval I was attacked as though I exaggerated, but ask yourself this, in what way does the representation of the City in UK democracy differ from the ancient system of Medieval Guilds? And what in the world are we playing at in 2019? Surely a classic case of “Don’t fix it, just stand there!”
5. A group of City Gents currently stand accused of stealing £60bn from European governments, our trading partners, via a sophisticated tax fraud for which they stand to do a time slightly greater than you or I might for lack of a TV license or late paying Council Tax.
6. The key funders of the Tory party include among their numbers many of the people who also appeared in the “Paradise papers” a document naming British business and Political figures who hold substantial sums in tax havens and which list even included the Queen and then PM David Cameron, Amber Rudd, David Davies, leading Brexit funder, Banks and many more. Now despite being anti-monarchy in principal, I am a big fan of this particular QE, but really? Was that wise of her advisers? Is this a measure of just how brazen they have become and the level of acceptance this sort of behaviour has earned through familiarity.
7. Not only that, the same list of tax dodgers combined with the Tory backers list includes the owners of nearly all of the UK Media, who might in previous decades have been trusted by the public to hold the governing party to account.
8. On a public stage, not Brexit itself, but the ham-fisted handling of it and almost total breakdown of this once-proud state has shaken observers everywhere, because despite the odd one justifiably enjoying the spectacle, they all know that, but for the grace of whoever they believe in, there go they. Here’s a selection of comments:
· Germany: ‘Johnson is seen as treating Europe as a big joke. Quoting witty lines in Latin won’t change that’
· Japan: ‘The Japanese have always seen Britain as a gentle, stable country, but that has changed’
· India: ‘If Britain wants a deal with India, it will have to relax immigration. This is non-negotiable’
· South Africa: ‘There’s a gleefulness in watching the British realise the ineptitude of their own politicians’
· Russia: ‘Our leaders see Boris Johnson as temporary — a clown. They’ll wait for the new leader’
· The United States: ‘Trump’s US doesn’t look as desperate for friends as the UK does in its split from the EU’
· Brazil: ‘The UK appears fixated on its own problems — it is losing relevance quite quickly’
If only we had the enlightened leadership to adapt to our mostly self-inflicted injuries, the EU too is facing some challenges, Brexiteers would respond well to a deserved reprieve from their sentence to poverty and there are new opportunities emerging globally, other than the stream of foreigners with unexplained wealth interested in UK passports.
In summary
I have tried, without boring you too much, or losing you in details; I hope, to give you just enough armour plus a few links, to help you form a realistic opinion of your own. I too suffer from lack of time to sit and concentrate in our crazy world.
Unless you set out with a determination to convince yourself otherwise, I put it to you that you can not fail but see the truth about where we are and how we got here.
If I were a politician, I would be preaching answers and you wouldn’t believe me because quite rightly you wouldn’t trust me.
Thankfully I am not and don’t plan to be, my concern is that my British children have a right to live in a civilised, fair and reasonably prosperous country should they so choose and they should not be forced to hang their heads in shame in the wider world. Remember, Tokyo is to your children what Liverpool was to you at that age. There is nowhere to hide anymore and no hole to crawl into.
The facts are in my view irrefutable:
1. Not even the slightest attempt has been made since the turn of the century by British politicians to even address the issues, let alone to fix them.
2. The people in power have proven that apart from having demonstrated their lack of integrity with abundant evidence, they are also too dim and too ill-informed to achieve anything were they miraculously to discover their conscience, or have their noses rubbed on the grinding stone.
3. London and Westminster are rotten to the core and completely in the hands and total control of a handful of big business owners and financiers who are bleeding us dry and have plans to make things much worse. Plans that right now, nobody appears willing or able to oppose.
4. Against that backdrop, it is widely accepted by top economists that the last financial crisis was never fixed, but patched over and the next one is on our doorstep. If the Financial crisis were not a worry, the next economic depression is about a year overdue and all the signs are there.
Consumers everywhere are borrowed to their maximum and have no more to offer. The moment this threshold was reached, sometime earlier this year, sales began to fall and thus productivity, already under pressure, began to steadily tail off. The result will soon be job losses, loss of GDP and recession.
If the financial system has not already gone belly up for the last time, it certainly will do then. Remember my explanation of how the great depression began. This is a carbon copy as most of them are.
The trigger to start this has already begun, falling sales. With or without Brexit, but faster with it, the already falling London Housing Market will tumble, dragging the rest along behind it and that will be the single thing that ignites Armageddon for Britain. In the US, feelgood factors depend on Wall Street, but in the UK, it is House prices that make chins drop and recession bite deeper. How long can they keep the market manipulated and what is the price of doing so?
Right in the middle of all this risk and overbearing catastrophe, British politicians and the PM, for their own personal gain are leading us into a period of certain job losses and economic turmoil that without the external influences is more likely than not to begin three decades of misery, but combined with the latter, just may be bigger than we can cope with this time.
What I suggest is that you carefully research your viewpoint and then look for solutions to your problems that don’t involve losing anyone’s job or making anyone homeless, because there are better ways, this I promise you.
If you are an economist, you may be disappointed by the speed at which I raced through history, but it’s that or a book and they haven’t helped much. I have tried to include the information you need to grasp the concept and no more. Unless you want knowledge enough to go and find it, I cant help.
