All The King’s Men 1: Economists

The government employs numerous highly qualified academics to assist in the most important financial decisions for the country. These people have spent their whole lives studying economics and work each and every day on sophisticated economic models and forecasts to analyse the nation’s finances, assess the domestic and international economic climate and predict the impact of the government’s policy decisions. Yet, so far, how successful have these economists been? The UK owes near to a trillion pounds for which we, the citizens, are the guarantors. The government continues to run a budget deficit each year and last year it was around 170 billion pounds. If the country was a single person, she would be maxing out a brand new credit card every year. If the country were a business, it would long have been declared bankrupt. So why have these so called ‘experts’ failed so miserably in running the country’s finances? And why have they not been sacked? 

This post is the first in a short series about the inability of government to perform certain tasks and why we urgently need to democratise certain government positions so that they might act more in line with our interests. 

High Treason

A total of five national parliaments have recently been shaken up as a result of the ongoing crisis in the European Union. Most legislation from the EU is voted on in Brussels and presented directly to governments for implemention, thereby bypassing national parliaments. On numerous occasions however, and increasingly so during this period of crisis, the interests of national governments can conflict with the core EU agenda. When the stakes are high and measures must be executed swiftly and decisively, this creates a problem. 

Highlights From The Commons 24/10/11

This post is simply a small collection of four of the ‘best bits’ from the recent EU referendum debate in the House of Commons, in which many powerful speeches were made. The debate lasted some five hours before being put to the vote in which 111 MPs defied their party lines and voted yes to hold a national referendum on our membership with the European Union; 483 MPs voted no. The nos have it, the nos have it.

Monopoly Money 3: Fear Of The Unknown

If you or I were to print money, we would be thrown in jail. Why? - Because it is against the law! But the reason it is against the law is presumably because it is unjust for people to increase their personal wealth in relation to other people, without earning it. Yet the government and the banks do it all the time. It goes without saying that this is not fair. So why do people not complain?

A state controlled currency is widely accepted simply because people don’t know any different. It is deemed to be the norm. Every country has a government with a central bank that is in charge of the money. There is an unspoken trust for the government to act in the best interests of the people, and to act competently. But unfortunately for the majority of us, this centralised control of our money provides the means and the incentive to abuse the currency in order to indulge in human desire and create short term unsustainable economic growth at the expense of increased inequality in society and an inevitable future economic downturn, that is, when the boom eventually becomes a bust. So what can we do about this?

This post is the last in a three part series about money. In the first part we spoke of the rapid expansion of the amount of money in the economy. The money supply is going up, and the value of our money is falling. This has been happening on a huge scale in the last 40 years since the fall of the Bretton-Woods agreement when the last link to gold through the US dollar was severed. At this time an ounce of gold was agreed at $35, but since 1971 the price of an ounce of gold has soared, and peaked at $1900 in August of this year. The money that we use, however, buys nothing like what it did back in the day. The devaluation of our currency makes prices rise, and ordinary people bear the brunt. In the second part, we established that the root cause of economic discontent lies with the central bank, and hence with the government. We talked specifically about the system of fractional reserve banking and how it relies on confidence. If confidence was to be lost, everyone would attempt to withdraw their money from the bank and not everyone would get it back. We spoke of how the government and the banking sector are jointly involved in creating money. The Bank of England buys government bonds and other financial assets, using money created out of thin air, which in turn increases the money in the banks. The Bank of England also supports the creation of money and credit by the banks themselves in its role as the ‘lender of last resort’, which guarantees the credit worthiness of the banks so they can all compete by lowering rates in order to create and lend more money.

The sad truth is that so long as the management of our currency is left to government, it will continue to be debased at our expense. Depreciation of the value of our currency will continue indefinitely until one of two things happen - The government voluntarily changes its policy and embraces the subsequent recession, or continues in its money creating activities, artificially spurring growth until the economy becomes so reliant on monetary expansion to survive that the only possible outcome is total collapse of the financial system. Or is there a third option? Can we find a way to release our currency from its strict bounds and permit a free flowing stable monetary system, immune to the human forces that seek to manipulate it? In this post, I talk about the management of our national currency and some of the proposed solutions to break up this vast concentration of power.

The Emperor Of Europe And The Future Of Nations

The sovereign countries that exist today have not been around forever. In fact only very recently in the history of mankind, have we finally come to embrace the concept of the nation state; where political rule coincides geographically with ethnic or cultural identity. Before the nationalist uprisings of the 19th century, multi-ethnic Empires, and Kingdoms, were the norm on the continent of Europe. We have come a long way, and waged many wars, to achieve this common belief in nationhood, where people live in countries, side by side with other countries, and people chose to live with their own people and be ruled by their own people, whatever their definition of ‘their people’ may be. In some parts of the world, the struggle is not over, and it is quite possible that there are new countries still to emerge in the future. However, even when some peoples are still fighting for the basic freedoms that many of us have enjoyed our whole lives, there are some that think that it is time for change. These people believe that now we have achieved nationhood and cooperation, the way forward, or the next step from here, is to join our nations together again, but this time in a way where everyone is equal instead of one country ruling over many others. They may be right. But are we ready for this? - to expand our definition of ‘we,’ and alter our perception of who we call ‘our people?’

Κάνουμε το πατριωτικό μας καθήκον

Today has been a mighty day for democracy. The Prime Minister of Greece, George Papandreou, announced earlier that he will put the new bailout and debt write-down package to the Greek people in a referendum. Finally, the people of Greece are being allowed to have their say in their future. "The command of the Greek people will bind us," says Papandreou.

In recent months, the country has been surviving hand to mouth from EU bailout financing in order to prevent a default on sovereign debt that would send a shockwave across the other European economies. But the bailout funding has not been without strings attached. Representatives from the European Central Bank, the International Monetary Fund and the European Commission, who have come to be known as ‘the troika,’ have been making regular trips to Athens to evaluate and oversee the progress of austerity measures and public sector reforms designed to reduce the budget deficit but which so far have only plunged the country deep into recession. Athens and other major Greek cities have seen massive riots and demonstrations against austerity measures and most blame the current government for selling them out to overseas dictators. Without a referendum, a peace offering to the people, Papandreou will most probably be unable to avoid early elections.

The referendum will allow the Greek people to approve the latest deal proposed at the summit last week, details of which are still pending, but will provisionally be a new €100bn bailout loan and a 50% write-down of Greek government debt held by private creditors. The referendum may, in the end, boil down to whether or not Greece will remain inside the Euro or not. If they accept the bailout package, it will mean years of austerity and financial hardship. If they reject it, it will mean full default, chaos, and a serious reassessment of their European relationship. More importantly, it will allow Greece to regain some dignity and decide for herself what the next move shall be. 

Whatever the outcome, the fact that the government has finally realised it cannot go on ignoring the people, bodes well for democracy as a whole and greatly strengthens the case for referendums in other countries too. Let it be the first of many.