Sovereign and Sovereignty

I am wondering whether I can persuade the cast of Blackadder to assemble for one last hurrah. The plot will revolve around the growth of greed in Regency England. It can make refer askance to the South Sea Bubble. The century is entirely wrong but who will care?

Blackadder has become caught up in speculative frenzy. Being immoral but not irrational he is not a very successful trader. He either cannot understand or cannot accept that liabilities are actually assets and this weakens his ability to trade effectively. Baldrick, by contrast, is making money hand over fist trading turnips, night soil, the future value of Prince George's sock collection, and so on.

Cut to Mrs Miggins's pie shop which is abuzz with talk of the positions her customers are taking. Everybody has abandoned their trade in favour of speculation. Suddenly Shelley, in his big girl's blouse, leaps onto the table to decry the 'irrefragable injustice' of the national debt. He is pelted with old pie crusts.

Conversation moves to gossip about new schemes, with a crescendo of excitement around the potential of investments in a mosquito-infested swamp in South America. Shares are increasing rapidly in value. Baldrick has abandoned his current investments to put all his money into this new colony. Nobody is sure who is behind the scheme but nobody can afford to be left behind. Eventually, Blackadder persuades Prince George to trade the national debt for a share of the swampy settlement.

The inevitable happens and the mosquito coast is revealed to be worthless and everybody loses their shirt, including all the Romantic poets who had not been able to resist a flutter. Baldrick is philosophical about his losses, since he is left with more turnips than he knows what to do with. Prince George has transferred his debts to his subjects and still has plenty of socks. Blackadder is revealed as the eminence grise behind the scheme but can no longer be found in London.

The point of the plot is not complex but then neither is the fraud we have all been subject to. What can we propose in terms of a happy ending? Baldrick sets up his own currency based on root vegetables? The people storm the Bank of England to demand direct money creation? Blackadder is tired for treason and his flat in Cheyne Walk is confiscated? Sadly, this is the point where Prince George wakes up and realises is was all a dream.

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Chronicle of a Crisis Foretold

A guest post by Paola Raffaelli, who is an expert in the Argentinian social economy and is studying for a PhD at Roehampton University

The crisis that occurred last week in Argentina is the unleashing of a cycle that began 40 years ago with the onset of neoliberal policies. This was exacerbated by a complex domestic and international situation. These factors that converged this time will be analysed, not losing sight of the structural perspective.

This most recent crisis in Argentina is part of an economic cycle that has recurred frequently during the last 40 years: cycles of currency appreciation, currency flight, devaluation and financial strangulation. The reason lies in the national productive structure of the country: the agricultural sector dominates Argentina's exports but only provides a low level of employment whereas the industrial sector requires imports and but generates high levels of employment. Therefore, from the early 20th century onwards, productive (and Peronist) national models faced recurring crises caused by the limitation on obtaining the necessary dollars for the industrial sector to continue producing. The agricultural sector, that was advantaged by the 2002 devaluation but lost in economic terms during the last five years, has been pushing for a currency devaluation since 2008.

The relationship with the dollar also has a social component. During these 40 years, Argentina’s economy has depended on the dollar, including the 10 years in which it was de facto dollarised as a result of the convertibility Law. Major purchases such as property are always made in dollars which helps to explain why Argentina is the country with the most dollars per capita after the US (around U$S1600 per person).

Economic growth during the 10 years after the 2001 crisis averaged around 7% per year. But growth in a country that does not have its own energy resources (hence the motivatation for the the renationalization of YPF oil company) and with an outdated productive infrastructure is severely constrained. In turn, the lack of control over inflation, which was around 40% in 2013, and lack of trust in the government led to a currency flight of 20 billion pesos during the last 3 years.

In order to wriggle out of a crisis that appeared inevitable, Cristina Fernandez de Kirchner’s government has, since April 2012, implemented restrictive measures to prevent currency flight. These began with the inability of withdraw cash outside the country and deepened to reach a 35% tax on purchases made abroad. Such measures are as impossible to understand for someone who is not Argentine as the despair we have about saving in dollars. These restrictions created a black market for dollars, called the 'blue dollar'. The escalation in the price of ‘blue dollar’ and the inflation increase in recent months could only lead to one outcome. Even if the government had tried to hold the price of the dollar in the last week there was a devaluation of nearly 20%, which adds up to 50% in the last six months (32% of devaluation and 15% increase in the purchase tax).

What is driving the speculation is expectations. Speculation in the agricultural sector, where farmers hoarded their crops in expectation of the dollar increase (it is estimated there are crops stockpiled in silos worth about US$4bn). Speculation among importers, who due to an increase in the dollar, accelerated their purchases in order to reduce costs. Speculation of international companies waiting for a devaluation that would allow them reduce labour costs. From the most important communication media, government opponent since 2008, propaganda emerged during these five years in favour of devaluation and increased inflation. Thus, society as a whole acts according to a self-fulfilling prophecy.

In turn, these crises that are brewing gradually take place within a conducive international framework. In recent times, the fall in commodity prices affected the inflow of dollars to Argentina, and the increase in energy imports to supply production further damaged the national current account. The crisis also occurred at the time when the US was withdrawing stimulus dollars for emerging economies such as India, Turkey and Brazil, Argentina's main trading partner. Finally, the Minister of Finance himself linked the outbreak of the crisis with international pressure, denouncing Shell for having withdrawn capital last week and trying to increase the dollar price.

This crisis is the result of a distributive struggle among different actors, both internal and external, which play a role in Argentina's economy. And government by 'market pressure', which we can equate with the agricultural sector, international companies, domestic inflation and social pressure of banning the purchase of dollars within a more difficult international context than in previous months the months before, finally led to the devaluation.

Argentina has a difficult scenario for 2014 with union claims of around 30%, 40% inflation and national currency reserves of less than US$30bn. Undoubtedly, Cristina Kirchner’s government faces its most difficult year and will have to find answers within heterodox economics if they do not want to betray their principles.
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US Monetary Selfishness is Devastating for 'RoW'

Remember the World Series? The naming of this League has always struck me as an interesting insight into how the US sees the rest of the world. In reality only US teams play in the league, implying that the US is the world. Their economic and monetary policy has always adopted a similar worldview.

The phrase 'the world is your oyster' has really described the approach the US has been able to take to global markets since the agreement at Bretton Woods in 1944 that dollars would become the fundamental backstop of all global value. This role used to be played by gold, which we all had a fighting chance of digging out of othe ground and so had some degree of neutrality. Since 1944 it has been paper money, under the control of the US bank the Federal Reserve.

The agreement also stated that the US had to hold enough gold in Fort Knox to back the dollars it issued. But Nixon unilaterally abandoned that agreement in 1971 and since then the US has been able to create money at whim, and import goods from the world in exchange. This extraordinary and deeply unfair situation has funded excessive consumption and an impossible deficit at home, and left foreign countries - particularly China - holding vast quantities of US debt.

Since the 2008 crisis, the US has used this unfair avantage to pour money into its economy to prevent it suffering the sorts of recessions we have seen in Europe - around $85bn. per month have been shovelled out through buying treasury bills back from financial institutions, in other words a massive amount of value being created and given to banks. Now the US has decided recovery is sufficiently secure to reduce or 'taper' this policy, but the financial institutions are objecting and the stock market has fallen radically as a consequence.

You can see this discussed in a useful video called The Epstein Report. It is also explains why this will lead to an increase in US interest rates. If you think of interest rates as the price of money it makes sense that, as the cheap or actually free money will be reduced, the price of money will tend to rise.

But the consequences of such an interest-rate rise in the US are small beer compared to the devastating consequence of this policy to other economies across the world. US monetary selfishness has led to a financial collapse in Argentina and devaluation of currencies in Brazil and Turkey as the US, in the words of the Brazilian central bank governer, hoovers out of 'emerging markets' the money it is no longer injecting into its markets at home. Decades of openness in global finance, forced on the world's economies by the IMF, have left them completely vulnerable to this US policy, as there are no controls on capital movement and they cannot now establish barriers.

Never has the US's selfishness been more clearly demonstrated. And never has the need for a global settlement on finance, agreed by all parties rather than imposed by the US, been more clear. Tweet

Royal Bank of Scandal Reaches New Low

The Tomlinson Report into the practices at the Royal Bank of Scotland, compiled under instruction from Vince Cable's Business Department, has been passed to the Financial Conduct Authority we read this morning. It will apparently demonstrate that the bank that we saved and which we own, had gone beyond being parasitical on the businesses of this country to actively working to destroy them and profit from their demise. It has long been clear that the financial sector in this country is sucking the lifeblood out of our economy, but the fraudulent nature of RBS's business activity takes us to a new level of revulsion.

Since the crisis of 2008 banks have found it more difficult to generate huge profits that were possible at that time. They have looked for ever more ingenious ways to exploit their customers which has given rise to a continuing tale of scandalous mis-selling, first selling insurance against potential redundancy to employees who did not need it, then selling financial products known as swaps to small businesses who had no need for them or understanding of them.

But the latest scandal to be revealed in the Tomlinson report is another step down the ladder into the slough of public opprobrium. It relates to one part of the bank known as the Global Restructuring Group (GRG). RBS's customers who got into difficulties paying back their loans were sent to this part of the bank apparently to receive help with turning their businesses around. Instead they were deliberately charged high fees so that they would become bankrupt, enabling the bank which had inside information to be the first on the scene to pick up their assets cheap. This is a shocking allegation that will now be investigated by the Financial Conduct Authority that has received a detailed report on the activity from the Business Innovation and Skills Department.

It has been clear for years that the banking sector in the UK is pernicious and not serving the real economy, but to find that it is actively working to destroy the small businesses that we need for our economy to thrive is another shock. It undermines yet again the suggestion that what we need is a change of culture in banking. What we actually need is significant structural reform and a much stronger role to be played by politicians in controlling what is possible in this most important sector in a capitalist economy.

Here is a simple idea which I have suggested before but which seems particularly relevant today: the Royal Bank of Scotland should be broken up and turned into a system of local community banks on the model of the German banking system which has done so much to support their Mittelstand - the layer of small and medium-sized enterprises that is the engine of the German economy. Each local bank could include local business people and others with an understanding of local economic needs on its board. It could still lend at interest but do so in a way that served its local economy and built its resilience rather than actively destroying businesses.

That a bank would work to undermine its customers for its own advantage is shocking and probably fraudulent, but that this activity would be undertaken by a bank that owes its existence to public support and is 80% owned by the public is, quite frankly, unbelievable. Of all the politicians who have been in a position to act on the disasters of the British banking system, Vince Cable has been the most disappointing. He clearly has the knowledge about how to do the right thing so we can only assume that he does not have the power within the coalition. Let us hope that this latest and most shocking scandal gives him the authority to take the action our small businesses so desperately need.

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Living off Our Children

On Wednesday next week, 20th November, students across the country will unite under the banner of the Student Assembly Against Austerity to protest the planned privatisation of the Student Loan Company. The outrage of pushing young people into debt before they even understand the implications lay at the heart of the protests against the increase in student fees two years ago. But the sell-off of the Student Loan Company to fill a hole in the public finances pushes students not just into debt but into the clutches of private finance companies.

The students have a Facebook page to publicise events.It shows that across the country from Aberystwyth to Essex students will be demonstrating against their use as a cash cow for cash-strapped government. In Liverpool students will be running a ‘student debt obstacle course’ and collecting signatures on a petition to send to local MPs. In York they will be having a more traditional rally with speakers. We need to lend them our support wherever and whenever we can to resist what is a mechanism to allow us to feed off their future earnings.

The reason that the student loans are attractive to finance companies is that they are prime material for securitisation - the process of financial alchemy that turns an illiquid asset into something that can be bought and sold and used for speculation. It was exactly this process, with sub-prime mortgages, that lay behind the financial bubble and then bust back in 2007/8. The original asset, the loan to a student, generates a slow although dependable income as repayments are made. But once bundled together and turned into a security these debts can be bought and sold in secondary markets where much greater speculative earnings can be made. This explains the appeal of the Student Loan Company to financial sharks.

My report for the Green House identified the problems generated by a university financing model based on debt. It demonstrated that this is a political choice, in my view based as much on the desire to create docile citizens and willing workers as to save pressure on the public finances. I argued that the privatisation of student debt as part of the plan from the start:

'This determination to sell student debt was partially confirmed in the 2010 Budget in which the government said it would in the next 12 months 'announce its decision on selling part of the student loan portfolio, including looking at the options for early repayment for individuals, in light ofLord Browne’s review of higher education finance. (Budget 2010, pg 44)'

The report quotes data from a study by Grant Thornton that demonstrates how the debt system of finance will exacerbate inequality between students and work against social mobility. The research calculates that those who will lose most are those on high but not excessively high incomes. In their comparison of three representative workers, all of whom graduate with a debt of £40,000, the journalist who never achieves a high income has the vast majority of her interest written off because she does not earn enough to repay it. The barrister (a representative high earner) repays his loan together with £28,000 of interest. The loser is the civil servant who, although he makes rapid career progression, does not earn enough to pay off his loan rapidly, and so incurs interest of £58,000 as well as his loan of £40,000. These are staggering sums of money, and indicate that the students of the future will be funding those financial companies to whom the government will sell on student debt handsomely. 

I end the report by suggesting radical egalitarian models for funding higher education arising from an open debate about the ownership and division of the product of academic labour, which in other sectors i sometimes addressed by the creation of a mutual structure. Under the supervision of Professor Rebecca Boden we have a student exploring options for a co-operative university at Roehampton. The discussion will also be taken forward at a meeting called Time for a Co-operative University? at the Institute of Education, Thursday 12 December 2013, 5.30-7.30pm, Room 804
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Deconstructing Austerity I. Money

The narrative of austerity as proposed by Osborne and his cronies is that our huge national debt is the responsibility of feckless Labour politicians and their uncontrolled spending. An examination of the data from the Debt Management Office shows clearly that this is nonsense (this is shown in the graphic and discussed in more detail in my paper 'Who Owes Whom?'). The many billions that were spent as an emergency to prop up failing banks and prevent the financial system from crashing are the real explanation for the huge increase in the public debt. Osborne is a liar by omission because he will not discuss whether he would seriously have refused to invest this money and allow cashpoints to seize up.

 

The reality is that under Osborne far more money has been poured into preventing the cardiac arrest of the economy that results from a lack of circulating money. This is the money created through quantitative easing and the difference between it and what was spent by Darling during the crisis is that the QE money was direct credit creation whereas the money spent by Darling was generated through the sale of bonds and hence features in our national debt.

Since 2009 £375 billion has been created directly by the Bank of England and poured into financial institutions. They have greedily hoovered up this money and paid it to shareholders as well as improving their balance sheet position. They have barely loaned any of it to businesses or invested it in the economy, although the government could have used it for such direct investment, as I argued at the time. This explains why the wealthy and those with interests in finance are flourishing while the rest of us are suffering austerity. The £80 billion created for Funding for Lending has similarly not resulted in an increase in debt and has also been kidnapped by the banks rather than being fed into the real economy.

The Treasury bonds that were bought during the quantitative easing programme are still sitting inside the Bank of England presumably with a big label saying 'do not touch'. If they were to be cancelled, which they could be since they are IOUs issued on our behalf, nearly a third of our national debt would be wiped out in an instant. What a marvellous way of reducing the burden of austerity - or not depending on your political objectives.

These are political choices and hence the narrative of austerity politics that there is no alternative is simply a lie. Darling could have created money directly to save the banks; Osborne could create money directly now for investment in a renewable energy transition. Darling's unwillingness to resort to direct credit creation in the early days is hard to fathom and perhaps resulted from a failure of understanding. Osborne's refusal now to engage in any type of monetary policy that would assist the real economy is a consequence of his desire to use the financial crisis to achieve his long-term policy goal of destroying the public sector.

Almost without challenge Osborne portrays himself as the saviour of the economy while Cameron claims deceitfully to have reduced the debt. The national debt is of course still increasing (see the Spectator graphic) and while the deficit is slightly decreasing we're way off Osborne's original projections. However, this is all smoke and mirrors since the Conservatives have no intention and no desire of reducing the national debt: it's far too useful to them politically.

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How is the Chancellor Engineering a Pre-Election Boom?

After several years of dire economic news, suddenly, just about the time when parliament went into recess, the stories about the British economy changed. Almost overnight we moved from gloom to boom, with Osborne celebrating 0.6 growth and the euphoric tone of the journalists outstripping that of the Chancellor. With an election now just 18 months away, and it being certain to be an election dominated by arguments about the economy, this has made me rather suspicious about how this return to economic joy is being measured, and how the dark forces of monetary manipulation might be influencing it.

I am not alone in my suspicion that the happy economic news may not be all that it seems. The traditional left, however, limits its critique to the suggestion that the increase in GDP is being driven by the retail sector and is based on withdrawn savings by those who can no longer wait for their wages to rise. Frances O'Grady's claim that 'Britain's fragile recovery is being propped up by families raiding their piggy-banks' is supported by ONS data showing that the ratio of household spending to savings has fallen from 7.4% for 4.2% in the past year.

What first made me nervous about the 'return to growth' was Faisal Islam's excessive use of superlatives on his Channel 4 News report on Monday. He has Capital Economics predicting 1.5% growth in this quarter alone, with huge increases in both business confidence and business investment. This caused me to think back to the stories of companies sitting on cash (largely accumulated as a result of the government's loose monetary policy via QE) because of fear of investing it. There was much discussion of how the Chancellor might encourage companies to invest their cash-pile to revive the economy, including the suggestion that he might impose a levy on them for stagnant cash holdings.

Has the Chancellor somehow found a way of encouraging UK corporates to start spending the £750bn. they have in reserves (incidentially, a figure equal to half the UK's annual GDP)? Certainly his proposal for tax relief on smaller companies, who apparently hold around £120bn. of the total, which was included in last year's autumn statement, may be beginning of have an impact. But is there some other incentives for companies to invest, or threat do them if they do not?

The less subtle evidence of engineering is in the form of the incentives to restart the housing market, that well worn engine of unsustainable booms past. The Help to Buy scheme supports purchasers of new homes to take on mortgages that the banks think they cannot afford to pay. It is thus risky in two regards, since it will tend to keep house prices at the sort of excessive levels that led to the financial crisis in the first place, and at the individual level it risks households losing their homes if interest rates rise. It does appear to have stimulated a boom in house building which helps to explain the higher GDP figures.

The manufacturing and production figures illustrated in the graphic make it clear that the hype over recovery is seriously overdone. Production and manufacturing - the sort of real economic activity that the Conservatives claimed they wanted us to rebalance towards - is still struggling and nowhere close to the level it was before the financial crisis. The improvements we see appear to stem much more from monetary manipulation and the shuffling of cash between various elite players. This sort of wealth does not find its way down to those on average incomes who are struggling with the consequence of the capitalist disaster of 2008.

However, the Conservatives are playing the politics of this extremely cleverly. The Chancellor is likely to come out of his term in shared government with the public sector smashed up and Labour vowing to continue with these destructive and draconion cuts. The recession has also led to a culture of fear amongst employees, who are accepting reduced wages and appalling working conditions, as exemplified by the zero-hours contract. A success for George and his cronies but the real problems around the failure of manufacturing, the ongoing trade deficit and lack of resilience in our local economies and the iniquitous failure of the banking system are all yet to be addressed.
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Make Your Money Work Twice as Hard

It was Treasury Management training day today and as chair of the Audit Committee I get to receive up-to-date financial analysis. Our excellent adviser explained how the Funding for Lending scheme is effectively a replacement for the failed quantitative easing programme. The banks were sucking up the QE money and using it to balance toxic assets they had written off, without increasing lending. The Funding for Lending scheme made £80bn available to them explicitly for lending. The data shows that again they have absorbed the money without much coming back to the real economy.

Treasury Management is really just a piece of jargon for how we invest the money that we need to hold in case of emergencies or to support monthly cash-flow. Of course my aim for our investments is that they should be removed from banks and sent in the direction of socially useful activity. We are a small council without the massive investments of our county, Gloucestershire, which invests in cigarettes while simultaneously being responsible for public health. Our money is mostly in financial investments, the final destination of which we know little about. I would rather follow the advice from Move Your Money and seek to use our money twice.

The problem with councils making such changes appears to stem from the phrase 'ethical investment' itself. Since national rules says that council investments must be based on the three criteria of yield, security and liquidity, many of the investments that we might like to see our councils placing their money in are bound to fail to pass the test of the council's financial officers, either because they do not have a sufficiently strong credit rating or because the yields are lower than those offered by banks and money market funds.

But a council is a political body and so can adopt a policy that designates that a certain proportion of its capital holdings should be placed with organisations that align with its political objectives, rather than being part of an investment portfolio. So if it seeks to support those who wish to purchase houses locally it can invest some money with a local building society, perhaps requesting that they establish a particular fund to be made available to first-time buyers within its postcode areas. Or it could choose to lend money to local social landlords to enable them to build more properties, which will be used as collateral for the loan. Security and yield and still important, but the do not dominate over the council's other objectives.

It is early days for our council to consider whether it can ensure that some of its money finds its way into local economic activity rather than the large international portfolios of the banks. Our next step is to prepare a motion for the Audit Committee to chew over the advantages and disadvantages of such a proposal. And we need to discuss these suggestions with finance officers. But it seems that at least part of the £20 million pounds that we have invested can be used for social good rather than all of it being invested in the same banks that created the financial crisis that has hit so many of our resident and deprived us of the money we need to deal with their problems.

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Quantitative Easing for the Poor?

Creating money was once looked on as a dangerous game, destabilising the economy and potentially leading to rampant inflation. But this traditional wisdom was swept aside and now the financial junkies are protesting the advertised end of the policy in the US and creating market falls on the basis of those expectations. In the UK context, researchers at the Bank of England investigated the distributional effect of their QE policy, i.e. who were the winners and who were the losers. Their conclusion was that most of the benefits accursed to the wealthiest 5% while some of this living on pensions were losing out quite substantially.



On the radical side of economics we have been trying to argue for direct credit creation for social benefit. At the beginning of this month the New Economics Foundation issued a report formalising this demand. Strategic quantitative easing makes the case that new money should be directly created by government to fund the transition towards a sustainable economy, particularly paying for green infrastructure and the rapid policy of home insulation that will reduce carbon emissions and prevent deaths through cold this coming winter.

Now it seems that the US government has found a way of making credit creation work for the poor. I had not realised until I watched Faisal Islam's extraordinary report on the Rhode Island gold card the sheer extent of the federal food stamps programme. US commentators have noted that the food stamps programme is the modern equivalent of the Depression era soup kitchens. It seems sadly symbolic of our individualist and technocratic age that rather than sharing a bowl of soup, in no matter what dreary conditions, today's dispossessed are issued with a deceitful imitation of the gold credit card of the wealthy.  Nationally, the number is approach 50 million and as Islam's report showed, it is now remarkably easy to use your preloaded card to do your shopping.

Now I know that the money to pay for this programme, a huge $75bn., is not directly created, but since the quantitative easing programme buys back treasury bonds, thereby reducing the debt, it effectively creates the scope for this massive federal programme for the poor. It also makes clear that questions about how money is made and who has the right to decide how it is spent has been removed from democratic control through the increasing use of technical language for what is really simple. Governments can make money directly and it is a political choice that in the UK that money is sent to financial institutions rather than to help the poor.
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Drop the Debt, Dublin Style

Campaigners from the Anglo: Not Our Debt camapaign were busy in Dublin this week, investigating a crime scene. They cordoned off the Central Bank in Dame Street and subjected it to forensic analysis on the CSI model. The white-collar criminals were not in evidence, but in the case of Ireland the fury at politicians is at least as fierce as the fury at banksters themselves. The Irish campaign is part of an international network of groups campaigning to challenge the imposition of austerity in response to illegitimate debts that were not entered into by democratic agreement. Such debts should be labelled as 'odious' and should not be allowed to destroy social bonds or public services.

The anger of the Irish campaigners relates to the failure of the government to use the criminal law to bring to justice those who have destroyed the Irish economy. They are encouraging the Irish people  'to submit complaints of suspicion of financial crimes in Anglo to the Gardaí, for example under Section 6(1) of the Criminal Justice (Theft and Fraud Offences) Act 2001.' Hence the creation of a crime scene in central Dublin yesterday.

Although the Anglo-Irish Bank no longer exists the Irish people are still paying for its reckless lending: repayments will amount to more than €47.9 billion by 2031, a full 30% of Ireland’s GDP. The campaigners are calling for the debts to be frozen. Their fury has been increased by the release last month of the so-called 'Anglo tapes', in which John Bowe, ex-head of capital markets at Anglo, can be heard laughing about the bailout that the bank has managed to extort from Irish taxpayers.

In a tape that would shame anybody outside the financial 'community' Bowe discusses his negotiations with Ireland's financial regulator as 'fun and games'. He asked for €7bn. in return for which they offered only paper guarantees and which he refers to as a bridging loan 'until we can pay you back. . . which is never', this last joke being a cause of considerable mirth on both sides. The phone call took place in October 2008, two days after Ireland pushed through a €440bn (£373bn) bank guarantee scheme that has nearly bankrupted the state. What the tapes make entirely clear is who is holding the power: the politicians have clearly capitulated to the interests of the bank's boldholders, explicitly so according to Bowe.

But these tapes underline the illegitimate nature of the debts and increase the potential for arguing a legal basis for them to be declared odious.Vicky Donnelly, of the Not Our Debt campaign said, 'The Anglo tapes show that the Anglo debts originated on the basis of deliberately misleading information. We question the timing of the release of the tapes and request that the full content of the tapes be publicly disclosed. We want to know who knew of the content of the tapes which, had they been made public earlier, would have led to massive public pressure to write off the Anglo promissory notes last February. This debt is illegitimate and should be written off now, once and for all.'
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One Rule for the Rich?

My suspicions were aroused when the credit-rating agencies started criticising the capital holdings of the Co-operative Bank. After all, any bank is effectively bankrupt at all times, so pointing the finger of accusation just becomes a self-fulfilling prophecy. I put my suspicions down to paranoia, but now that the BBC's Robert Peston is starting to make similar noises about the Nationwide I am beginning to wonder whether I wasn't suspicious enough.

As Peston notes, the response by many to the disasters and calumnies of the banking corporates has been to look in the direction of mutual ownership. I have called for the Royal Bank of Scotland, rather than being sold back to shareholders, to be broken up into a system of local community banks, owned by those in the local economy who would uses their services, and with boards made up of local businesspeople, councillors, and citizens. Green MP Caroline Lucas made a similar point during her intervention in the banking debate earlier this week.

The logic is clear: if we, the public, provide the guarantee that allows the banking system to have credibility while operating in a state of permanent insolvency then we should have control over how it directs credit and should also see the profits from banking invested for public benefit not private gain. The redistributive effects of such a shift would be massive, which may be why the commentators are now portraying mutual financial institutions as unreliable.

Yesterday's suggestion from credit-rating agency Moody's that the situation is improving for the commercial banks is the final piece in the puzzle. Since the problem for both the Co-operative Bank and the high street banks is that they are holding commercial property assets that have massively lost value since the crisis, it simply cannot be right to say that their credit ratings are moving in opposite directions, at least not if you take this as an independent indication of financial health, rather than a piece of political propaganda. The rules set by the Basel Committee as to what counts as a reliable form of capital are similarly prejudicial to the interests of building societies, whose assets really are safe as houses and far less subject to risk than the complex financial instruments counted as assets by the banks. Nationwide boss Graham Beale made a similar point in an interview with the FT recently.

The inconsistency with which mutual and shareholder-owned financial institutions are being treated by financial commentators leads to an unsavoury conclusion. Could it be that, having used austeria to attack public services and the working conditions of those employed throughout the economy, the defenders of capital are now using it to destroy the vestiges of the co-operative and mutual economy?
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When is a Co-operative Not a Co-operative?

I was glad to be able to host Peter Pannier's well-informed explanation of the travails of the Co-operative Bank. Since I have spent years recommending on this blog and in public talks that people shift their bank accounts to 'the co-op' I feel a responsibility for its failure. For me, criticising any part of the co-operative movement feels like attacking a member of my own family and I am well aware of the glee with which capitalist apologists are greeting the bank's problems. But if the advantage of mutual economic is our genuine ownership the along with this comes a responsibility to be questioning and critical.

My reluctance to comment is also because I have long known that the answer to the question is 'when it is the co-operative bank' but I have never been sure of the exact ownership structure of the bank. The organisational chart shows that the bank is owned by the Co-operative Group. It is the co-operative bank because it is the banker to the co-operative movement, not because you own and control it if you have an account. We know that anyway because we have never elected the directors and did not get to vote on the decision to buy up the Britannia.

Which brings us to the nub of the problem. Peter Pannier's data demonstrate to my satisfaction that bad decisions were taken by Britannia executives which led to the crisis of solvency. It was exacerbated by the financial crisis but was vulnerable before. Like the managers of other mutuals, at Britannia the directors seem not to have understood the market they were involved in.

I am still left questioning why the credit-rating agencies condemned the Co-operative Bank because of the weakness of its lending against commercial property when they have not done this to the other banks who are holding loans to businesses that are effectively bust and whose collateral has lost so much value since the beginning of the recession that the loans are bound to be bad.

A second question: if the control of the Co-operative Bank now passes to shareholders, as the result of a grand-scale debt-for-equity swap, is it worth continuing to hold an account? We are promised that ethical standards will continue but if your motivation is to avoid the extraction of value by the holders of capital you are left with a difficult decision.

In trying to see the bright side to this gloomy news I am left asking whether it offers evidence of solidarity that you would hope to find in the mutual sector. Just as with the collapse of some of the building societies, which were absorbed by others, the decision to buy the Britannia was argued at the time to be about gaining access to the High Street, but was it really about supporting a mutual in trouble? If not, one is left with serious questions about the quality of the due diligence that was undertaken.

You might also argue, a a pinch, that the solution announced earlier this week is based on self-help. The movement has come up with a plan that avoids government involvement, although it reduces the proportion of the bank that can still be considered 'co-operative'. Many of the bad decisions made by co-operatives and mutuals, especially their excessive borrowing from financial markets, resulted from an attempt to compete in a capitalist market, which is always a weakness of the idea of co-operation within capitalism.

But even these reasons to be cheerful cannot conceal that we are losing a bank that has been part of the co-operative movement for 150 years. As capitalism's crisis slouches on, this seems to be yet another example of how it is sheltering its own while the interests and institutions of working people are being sacrificed.

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What is Going on at the Co-operative Bank?

A longer-than-usual guest blog by Peter Pannier and begins a process of analysis of the troubles at the Co-operative Bank and their implications for UK mutual and/or financial institutions (questions and comments welcome via @peterpannier on twitter)

The idea that the Co-operative Bank and the 47 remaining building societies represent a positive alternative to mainstream banking been most enthusiastically pushed recently by the Move Your Money organisation as well as by anti-capitalist activists, Greens and supporters of the alternative economy. So where are we following the furore surrounding the Bank's 'rescue plan'?

Yesterday (17 June 2013), the Co-operative bank announced its plans to meet the capital requirements of £1.5bn (non-specialists might prefer the Guardian summary). This follows a decision earlier in the year to abandon a bid to take over 631 branches from Lloyds Banking Group, dramatic downgrades by Fitch, S&P and Moodys, and a changing of the guard at the boards of both the Bank and the wider Co-operative Group.

Some people have started asking some pretty good questions about what went wrong at the Co-op: Ruth Sutherland comes up with a dozen and more recently Patrick Collinson put forward another eight.

The problems can be traced back to the takeover (announced in October 2008 and completed in August) of the Britannia Building Society, where the issues were:

• A high volume of (mispriced) commercial property loans, made at the top of the market. With empty shops and low consumer demand, this portfolio seems unlikely to regain any value in the near future.

• A high volume of (mispriced) risky mortgage lending, also made at the top of the market. Again, arrears and repossessions are rising, real wages are falling (meaning making mortgage payments is getting harder), while we still have record low interest rates.

• The need to raise capital ratios because of higher capital requirements instituted since the financial crisis, and the difficulty of doing this through retained profits.

• An inability to raise capital by issuing shares. Many people have suggested this is because of the banks mutual status, but this is wrong. The Co-operative Bank is a plc, hence its ability to convert bonds into listed shares (see this diagram of the ownership structure). The reason the Co-operative Group could/cannot raise capital through issuing equity is two-fold. First, despite the fact that its ownership model does not prohibit it, it has been trading on the idea of being a ‘mutual’ ‘alternative’, and shareholder equity doesn’t fit with this PR image. Secondly, if it tried to issue equity while in crisis it would likely experience the same problem as RBS – no-one wants to buy shares in your bank when it looks like they are going to be throwing their money away. Hence why it has converted bonds (which don’t count toward capital) into shares (which do) instead.

Before the merger with the Co-operative Bank, Britannia was the second largest Building Society in the country. Contrary to perceptions of building societies being safe, traditional, and guided by ethics and principles rather than profits and growth for their own sake, Britannia was following a business model not dissimilar to those of HBOS and Northern Rock: borrowing from the wholesale markets to fund asset growth, frequently via mispriced risky lending, with an increasing interest in (large) commercial property loans.

Perhaps the aspect of the Britannia’s business model that made it most vulnerable in the crisis was its high reliance on wholesale funding. In the UK, building societies face a regulation that means they must raise 50 per cent of their funding from individual retail depositors. Everything else (wholesale borrowing from the short-term money markets and longer-term capital/bond markets , combined with non-retail deposits from other organisations such as local authorities) counts towards the ‘Funding Limit’. Britannia had the highest funding limit ratio of any building society at year-end 2008, and in all but one of the previous five years (it was still the fifth highest in 2005).

Just as they face regulation on liabilities side of the balance sheet, building societies are also limited in the kinds of assets they can hold: they must hold 75 per cent of commercial assets (liquid assets are excluded from this calculation) in the form of residential mortgages. Here too, Britannia was pushing the limit.

In 2008, the lending limit ratio was the highest for a UK building society. Though this was not true in previous years, the trend line is worrying: the Britannia was rapidly increasing the proportion of its lending not in the form of residential mortgages. A particular focus was commercial property, and rather than building up a portfolio of small, relatively safe loans to B&Bs and flats above shops, £900m of the £1.7 bn of ‘impaired’ loans is from just 12 big loans (Collinson, 2013: url, paragraph 1).

This is not to say Britannia were not also making lots of mortgage loans: in terms of mortgage lending as a percentage of prior year loans, Britannia were the 7th fastest growing building society 2007-2008. It appears that the decisions about who to lend to were not well made: 'Impared loans on a book of former Britannia mortgages known as 'Optimum' are running at 17 per cent--way above the industry average--with £1.2bn. of home loans at risk of going bad . . . Across the Co-op Bank’s whole mortgage book, 6 per cent of lending is classed as impaired. A further £1.1billion of loans are in ‘forbearance’, meaning borrowers in supposedly temporary straits have agreed a deal such as a payment holiday.'

In hindsight, these graphs and statistics show that Britannia went into the crisis with pretty much the worst business model possible. It would perhaps be OK if there had been profit in this model, and it was all being put into capital in case of the eventuality that things didn’t turn out well. Unfortunately, as the next graph shows, even as it continued to lend more and more, and in areas theoretically more risky for a building society, Britannia was making less profit per pound of lending (in other words, mispricing risk on a grand scale). I cannot believe that these graphs were not considered as part of a due diligence process (but, if you read the PR from the time you might conclude otherwise).

According to my analysis there are three broad reasons why the merger took place:

• The Co-operative Group had long wanted to take on / offer an ‘ethical’ ‘alternative’ to the larger retail banks in the UK. It had identified various large building societies as routes to this objective, lobbied for the Butterfill Act and took the opportunity when it came, paying little or no heed to the realities of Britannia’s past or the unfolding financial and economic crises. This might also explain the wholly misguided project of taking on the Lloyds branches.

• 
  

• The Co-operative Group was interested in growing its banking operation (consistent with above). The senior management at the Co-operative Bank did the due diligence on Britannia, and decided that the risk was worth taking on. Such a conclusion would rely on an expectation that the UK economy would recover strongly and quickly, and that the turmoil in financial markets would end soon.

• 
  

• The Co-operative Group did the due diligence on Britannia and, given this and the deteriorating economic environment and continuing turmoil in financial markets, decided it would rather not take it on, but gave in to pressure from the FSA and government to persuade it to do so.

As far as I’m concerned Option 1 amounts to hubristic foolishness, Option 2 amounts to naive optimism and Option 3 amounts to dangerously craven weakness. The Co-operative Bank was facing a capital shortfall of £1.5bn. I personally cannot see how selling off great chunks of your business (life and general insurance arms), ceasing lending to new business customers, and undermining your brand by introducing external shareholders to what had been considered a ‘mutual alternative’ are going to combine to create a business model that can ride out the problems that remain.

Just about the only shining light for the Co-operative Bank is that, thanks to a reputation for customer service and an ethical stance, it has in the words of Frances Coppola 'an amazing customer base which has been astonishingly loyal'. Some of the Co-operative Bank’s customer base will remain loyal. However, for new customers (of whom there were apparently as many as 100,000 last year) this loyalty will be very shallow. Anecdotally, such customers feel betrayed and are already leaving. Even old and traditionally loyal customers may reconsider their relationship with the Bank following the introduction of shareholders and the associated incentives to maximise short-term profits, not to mention the revelations of previous bad management. If I were a retail customer, I’d certainly be thinking twice. Perhaps more to the point, I’d wager that larger borrowers and investors aren’t feeling too positive about the Co-operative Bank at the moment, and that won’t help them one bit.

But this isn’t the bad news. The bad news is that the UK financial crisis of 2007-8 was not solved, but merely deferred (much like the crisis of the 1970s that lies at the root of our current problems). The problems at the Co-operative Bank are just the beginning. Your money is probably safe (assuming you haven’t got very much), but our financial and economic systems still very much are not. The storm that is coming is as likely to selectively avoid particular ownership models in finance as nature’s storms are to avoid houses on the basis of whether they are owned by the occupier, a landlord or the local authority.
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This is What Austerity is For

In a climate of fear and austeria the received wisdom is that you should not be concerned about the size of your pay cheque: you should be grateful to have a job. It is this climate of reduced expectations and hegemonic exploitation that has led to the situation described by a special issue of their journal published today by the Institute for Fiscal Studies, which shows that wages have fallen more in the past five years than in any previous time during our long economic history. As far as those earning wages or salaries are concerned, this is the worst ever recession.

Although even I would not go so far as to suggest that the controllers of capital would have provoked a global financial crisis in order to attack the interests of labour, as soon as the crisis arrived they were the first to control the ideological agenda. Sadly, like sheep, most working people and the party that is supposed to represent their interests followed in the wake of the corporate spin-masters, bleating the mantras of austerity and failing to challenge the inequality and economic disintegration that its policies would inevitably bring.

The figure shows that the falls in wages came not during the recession itself but later, during the period of austerity that was caused by Tory policies (P50 is median earnings and P10 and P90 the lowest and highest 10% of the population, respectively). The IFS also show that the effects of the recession have hit the wages of the young particularly hard. This is useful for the interests of capital, since we are now likely to have generations of young people who are grateful for employment on any conditions and grow used to exploitative rates of pay.

There is a human side to the story, since the data make clear that those working for small firms are experiencing a degree of solidarity. In harsh economic times employers are keeping staff on, partly no doubt for fear of losing skills; partly for more humanitarian reasons. The longer the government strangles the economy the more these compassionate employers will come under pressure to also dismiss their staff.

The IFS conclude that the agreement to reduce wages but keep unemployment low makes this a less severe recession that those of the 1980s and 1990s. I would beg to differ for two reasons. First, the concealing of unemployment and under-employment in this creeping recession reduces the pressure for mobilisation and political change. Secondly, the permanent reduction in the wages of working people will affect current generations for their whole working lives and future generations too. The gains that resulted from the struggles of past generations have been lost and few have the will or the understanding to challenge the loss.
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When is a Tax Haven Not a Tax Haven?

This question began forming itself in my mind last month when I heard a presentation from Lynne Oats, Professor of Taxation and Accounting at Exeter University, describe how difficult it would be to get a legal handle on the problem of corporate tax avoidance. She drew attention to the accelerating race to the bottom between countries in terms of their corporate tax rates. While to my mind this is not enough to constitute a tax haven, and I am not convinced that this is a technically impossible issue, it is interesting to note that UK corporation tax was reduced again in last week's budget.

But surely there is more to being a tax haven than having very low rates of tax? Doesn't it involve aspects such as not asking too many questions, or allowing companies what we might politely call a lack of transparency in their dealings? Here I think the UK might also score rather highly. Why else is Britain opposing the EU's proposal for a Financial Transactions Tax but for the fact that, in order to tax something, you have to measure it first? The rate is not finally determined but at the level of a fraction of a percent it cannot have bankers shivering in their shoes about the loss of asset value. But the advent of transparency is a different matter.

Which brings me to the issue of Cyprus, a country in our midst, in our very own single European market which is suddenly revealed as being a tax haven. This was not mentioned when Nicosia's communist government took over the leadership of the European Union?.It is only since the new government came into power that the big beasts of the Eurozone have decided to throw Cyprus to the wolves. Yet its problems started because of the Troika policy of fudging rather than solving Greece's bankruptcy. Given the close ties between Greece and Cyprus the haircuts led to massive losses for Cypriot banks. The cover stories about Russian billionnaires being funded by German taxpayers arise from the problems faced by Merkel in the forthcoming elections rather than any serious attempting at analysis or policy-making.

The bloggers as Naked Capitalism make a brave attempt to explain why Cyprus is not a tax haven, but for my money they are not making a very convincing job of it. So given that George Osborne has made it central to his policy to attract foreign investment and to keep the financial sector happy, and that he is deliberately and successively reducing our rates of corporation tax, how long will it be before we will be thinking of the UK as a tax haven?
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Why I am Not a Communist

Hell, I am not even a socialist and have never claimed to be. As a Green it is my firm opinion that we are part of a new ideology and one that my Green House colleague Andy Dobson has helpfully labelled 'ecologism'.

Since I am not a great fan of theory you may be wondering why I am setting out in this somewhat defensive way. The answer is that I am responding to an article in this morning's Guardian from the lovely Zoe Williams who has helpfully put the citizens' audit proposal in front of the nation's liberal readership while they enjoy their Saturday morning croissants. Zoe quite rightly suggests that we are in need of revolutionary changes to our economy and especially in the area of finance.

She begins with Ha-Joon Chang, the highly influential economist based in Cambridge, where you are still allowed to work without subscribing to the tents of neoclassicism. To his credit (and according to  Wikipedia) Chang has been an intellectual influence on Ecuador's President Correa, so he should be familiar with the idea of a citizens' audit and the suggestion that some of the debt we are carrying is odious and should not be repaid. But when Zoe put this question to him he responded by expressing concern about ideas that might result in one being labelled as a communist.

I have no such fear, which probably arises from the fact that I have never found communism appealing. My proposals have always included a strong element of private, community, and co-operative ownership that negates and dilutes the centralised ownership of productive capacity in communist regimes. I am still struggling with the reality of the fact that many people seem more highly motivated by individualist financial return than community benefit: have the learned this as children of capitalism, or were they born that way?

But it is the vision of the world as a a dichotomy between capitalism and communism that is most limiting, as though we had so little imagination that we could not think of countless other ways of organising our economic affairs. Not to mention the fact that it would be inaccurate to describe the global economic system of our contemporary world as capitalist. The last time I looked in my economics textbook capitalism was a system where a large number of companies competed in each market, with thrusting and innovative entrepreneurs rapidly entering to keep the competition fierce. The whole rationale for such a system, and the reason it is justified as superior, is to prevent the pattern of concentration of wealth and power in the hands of the few that we see around us.

So Zoe is right: we do need an economic revolution. We need to find the courage to challenge capitalism and replace it with a different vision of economic life. In Green Economics I offered my vision of an economy with social and ecological justice backed up by greater political involvement. With a patchwork of self-reliant and democratic local communities this is far from a communist vision, although it does raise urgent questions about the ownership and control of resources. In The Bioregional Economy I extend that vision to explore how it could help us to deepen our relationship with our local places and how this might offer an attractive substitute for the consumer culture.

It is exactly these sorts of alternative visions that the communist-capitalist dichotomy seeks to outlaw.  So if you really want an economic revolution it is time to emancipate yourself from mental slavery and start working out your own alternative.
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Dangerous Liaisons with Financial Markets

The results from the Luxembourg jury are in. Thanks to Green MEP Sven Giegold citizens across Europe have been feverishly reading up on the exotic financial products the City Boys have dreamed up over the past decade or two and comparing their toxic effects.

The winner in the category of 'products that harms consumers and investors' is the Credit Default Swap, proposed by financial policy adviser at Oxfam. In proposing this loser for a winner he wrote that:

'The root cause of the Eurozone debt crisis was government borrowing, which wasn't stopped despite an active sovereign Credit Default Swap market. The issue here is that once a government gets in trouble, a CDS market can mean there's no way out. The same applies for emerging market governments too. It's too small a benefit, for too big a risk, and there's a human impact that can't be ignored.'

The results for the category as a whole were:

1) Credit Default Swaps on emerging markets sovereign bonds (46.8 %)
2) Credit cards with extremely high interest rates (22.4 %)
3) Foreign currency loans payable upon final maturity (21.2 %)
4) Reverse convertible bonds (9.6 %)

In the category for products that harm the environment, the global poor and third parties the winner was Food Speculation Funds. This was proposed by German campaign group Geld mit Sinn, which focuses on financial education and enlightenment. Sadly its name does not mean 'Money with sin', which perhaps it should, but 'Money with sense' or 'Money with understanding'. Their nomination read:

'Products based on food speculation are dangerous because they cause price increases of basic food stuff. Hence these products threaten? livelihoods of low-income earners and can even result in the death of
those who cannot afford their food anymore.'

In this country the votes were cast as follows:

1) Food Speculation Funds (71.4 %)
2) Extraction of Oil Sands (13.3 %)
3) Extraction of Uranium (11.7 %)
4) Extraction of Gold & Silver (3.6 %)

Sadly, our votes in this ballot are about as meaningful as in the Eurovision Song Contest. However, on our behalf Sven Giegold will join members of the jury and the authors of the winning proposals to meet the European Securities and Markets Authority (ESMA) in Paris. I am sure we all wish them well in speaking truth to power on our behalf.

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What is Going on in Cyprus?

Why is the banktruptcy of a tiny economy in the Mediterranean making headlines across Europe? The answer is that the Cyprus solution is what every saver across Europe fears might be coming their way soon. The awareness that money is not real and that countries are not good for the amounts of money they have guaranteed has been creeping into people's consciousness over the past five years. I know this because I speak to large groups of people about money and this fear is lurking behind their questions about gold and their decisions to put money into renewable energy schemes or socks under the mattress.

It was this fear that drove Alastair Darling to increase the savings guarantee in Britain at the start of the financial crisis: nothing is worse for a banking system than people feeling that their deposits are not safe and withdrawing their money. And nothing spreads this fear as rapidly as governments taking money out of their citizens' bank accounts as the Cypriot government has threatend to do. When the Argentinian government made a similar move in 2001 it precipitated a massive withdrawl of capital and the collapse of the national economy.

I am pleased to see that, although the levy on Cypriots' bank accounts is a policy made in Germany and to please German tax-payers, the Green Group in the European parliament, alhough it is dominated by German MEPs has made its opposition clear. Greens/EFA co-president Dany Cohn-Bendit is quoted stating that:

'The attack on ordinary depositors in the context of Cyprus' bail-out is outrageous and must be urgently corrected. Small depositors should be last in the line of fire in any bank restructuring. This is the guiding logic behind EU legislation providing for national deposit guarantee schemes, as well as draft legislation currently under consideration on an EU deposit guarantee scheme. While the proposed depositors' levy may be legally consistent with the existing legislation, it is a cynical ploy, which totally defies the spirit of the rules and their raison d'être.'

Merkel's decision to crush a tiny and vulnerable economy comes less than a month after the 60th anniversary of the cancellation of Germany's own war debt. By 1953 Germany was still carrying pre-war debts which had been massively increased by the costs of borrowing to fund the war itself. The country was in ruins and was incapable of borrowing to rebuild. Germany's former enemies agreed that for the sake of peace and humanity a significant portion of its huge debts should be written off, sums amounting to a value equivalent to 75% of Germany's exports in 1950. The remaining debt was restructured and interest rates reduced.

The Dublin based Ango: Not Our Debt campaign celebrated the anniversary, which is passing unmentioned in Germany. Its spokesman Andy Storey commented:‘The 53 Accord was signed initially by 22 creditor countries, including by Ireland and Greece.' Anglo: Not Our Debt point out that the amount of debt cancellation received by Germany in 1953 in today’s terms is worth nearly €37bn., similar to the amount of the principal of Anglo debt being paid by people in Ireland over the next 40 years. Indeed, the amount of debt cancellation received by Germany is all the more impressive, as Germany’s economy was far smaller then than today

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Vote Now to Counter Dangerous Finance

Following hard on the heels of the bankers' bonus cap the European Green Group are proposing further action to control the damage that the financial sector can do to the European economy. Sven Giegold, a Green MEP from Germany and member of the EU Commitee on Economic and Monetary Affairs has launched a public poll to identify the riskiest financial product, as a preliminary to a campaign to have it banned.

The proposals that have been suggested by citizens from across Europe give a glimpse of the socially destructive nature of modern banking. Many are complex forms of derivative, where the value to the 'investor' depends on one or more highly unpredictable events: such products are nothing more than gambling and should have no place in a properly regulated banking system. Others include vulture funds, where finance companies seek to profit from countries that have had to default on unpayable debts, or payday loans that charge punitive interest rates and force those on low incomes into debt. In the European context some of the most dangerous activities of banks have been to encourage EU citizens to take out mortgages in foreign currencies; as exchange rates have varied they have found the repayments impossible to pay and have lost their homes.

This is not simply a poll. Since its establishment in 2011 the European Supervisory Authorities with responsibility for banks, investments and insurance products has the power to prohibit products that threaten the vitality of the European economy or society. This power has already been used to ban naked short-selling but the Greens are now increasing pressure to have the powers used more widely. Once we have chosen the most dangerous product a campaign will begin to lobby for this regulation to be used to protect us from one aspect of financial degradation.

The financial products chosen offer a number of risks. Some threaten the integrity of the financial system by introducing high-level and large-scale risk to the banking sector. Others, such as those facilitating in land and food prices,  destroy the  livelihoods of the poorest people in the world. Use your opportunity to fight back against the socially destructive finance industry by voting in the European Green Group ballot - and learn something about the appalling behaviour of the finance sector along the way. Voting remains open until 14 March
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