6 March 2009

Something for Nothing

Yesterday was QE day: the day that the government and the Bank of England proved the justice of the argument for which monetary reformers have been pilloried for decades. It is possible simply to create money as credit when the economy needs it. There is no need to create it as debt whether public (enforcing citizens to work to pay it back) or private (ensuring an automatic transfer of economic value to the banks and the rich who profit from them).

I spent the day in Merthyr Tydfil - the day that was also the 25th anniversary of the Miners' Strike. That strike, and the economic devastation that followed the politically motivated closure of the South Wales coalfield, led to massive levels of indebtedness and I was attending a conference of good people who run credit unions trying to help the victims of Thatcherite capitalism manage their paltry incomes with the help of credit unions.

The £75 billion that was generated yesterday could have been used to wipe out all the debts in the South Wales Valleys - some sort of political amnesty for the local people's refusal to sign up to free-market capitalism. Instead it was used to buy up worthless assets that have been generated by a corrupt financial system.

When the asset bubble was being inflated, the banksters and their mates could price an asset at whatever they could persuade somebody to pay for it. So long as they could sell it on, it was possible to then translate this artificial value into real value, by buying land or gold, for example. Once the bubble bursts these assets have no value and those left holding them are bound to lose out massively. The government is using its ability to produce money to prevent this from happening.

Rich people's debt is repaid by government; poor people's debt remains with them, forcing them into lives of grinding despair. Sending the money to banks is a hopeless strategy in terms of reviving the economy, since it will be sucked into the black-debt hole that has swallowed up all the rest of our money thrown at the problem.

But ideologically it is crucially important that this money isn't given to citizens or spent on the health service. If it were the capitalist mantra that you cannot have something for nothing would be seen to be false. Of course this mantra has only ever applied to poor people and working people. If you are a member of the Bullingdon Club working out smart ways to conceal the fact that you live from something for nothing is your congenital life strategy.

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