5 August 2010

Laughing all the way . . .

So the banks are in profit again, and this is apparently a cause for celebration. The number of questions being begged by the mainstream media mounts by the day. Robert Peston, our most promising hope as a curious voice, limits his comments to an arm-waving complaint about the banks' failure to lend in sufficient quantities to small business, a complaint they bat away with tired lies about low levels of demand. Politicans have failed to enforce strict new capital requirements, indicating that banks are still more powerful than our political representatives. And the profits are a clear indication that the money being made at the public expense is being spent on both bonuses and shareholder dividends, and not to rebuild capital reserves.

We are living through a time when history is being rewritten. The Tory line is that Labour has mismanaged the economy leading to a fiscal crisis, a socialist tradition they enjoy drawing attention to. This is a Big Lie to conceal the reality that we have barely survived a monetary crisis that is a periodic symptom of a capitalist economy system.

Let's ask a few of the questions that the pundits are ignoring. The first is: where do the profits come from? This is a difficult one to pin down, for the very reason that the banks' international venture-capital operations are mixed up with their domestic banking operations so we cannot easily see where the profits are being made. However, the wider distance between Bank of England base-rate (which has been at half a per cent for 18 months) and bank interest rates indicates that much of the profit is coming from the people they lend to. Another source of public subsidy to the banking industry and small cause for celebration.

The media line that we should greet news of a return to profitability by the banks with unbounded joy since belong to us and so their profits are our profits also seems disingenuous at best. The debts we incurred by rescuing the banking system in its entirety two years ago are on the public balance-sheet and the cause of the massive public-sector deficits and consequent cuts. The odd billion here and there that may come into the public finances via the bank levy seems a small compensation.

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