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Economy
In reply to the discussion: STOCK MARKET WATCH -- Monday, 30 January 2012 [View all]Demeter
(85,373 posts)15. WEEKEND REPOST: Banking Wasn’t Meant to Be Like This
http://michael-hudson.com/2012/01/banking-wasnt-meant-to-be-like-this/
...If governments are to underwrite bank loans, they may as well be doing the lending in the first place and receiving the gains. Indeed, since 2008 the over-indebted economys crash led governments to become the major shareholders of the largest and most troubled banks Citibank in the United States, Anglo-Irish Bank in Ireland, and Britains Royal Bank of Scotland. Yet rather than taking this opportunity to run these banks as public utilities and lower their charges for credit-card services or most important of all, to stop their lending to speculators and gamblers governments left these banks operating as part of the casino capitalism that has become their business plan.
There is no natural reason for matters to be like this. Relations between banks and government used to be the reverse. In 1307, Frances Philip IV (The Fair) set the tone by seizing the Knights Templars wealth, arresting them and putting many to death not on financial charges, but on the accusation of devil-worshipping and satanic sexual practices. In 1344 the Peruzzi bank went broke, followed by the Bardi by making unsecured loans to Edward III of England and other monarchs who died or defaulted. Many subsequent banks had to suffer losses on loans gone bad to real estate or financial speculators.
By contrast, now the U.S., British, Irish and Latvian governments have taken bad bank loans onto their national balance sheets, imposing a heavy burden on taxpayers while letting bankers cash out with immense wealth. These cash for trash swaps have turned the mortgage crisis and general debt collapse into a fiscal problem. Shifting the new public bailout debts onto the non-financial economy threaten to increase the cost of living and doing business. This is the result of the economys failure to distinguish productive from unproductive loans and debts. It helps explain why nations now are facing financial austerity and debt peonage instead of the leisure economy promised so eagerly by technological optimists a century ago.
So we are brought back to the question of what the proper role of banks should be. This issue was discussed exhaustively prior to World War I. It is even more urgent today....
...If governments are to underwrite bank loans, they may as well be doing the lending in the first place and receiving the gains. Indeed, since 2008 the over-indebted economys crash led governments to become the major shareholders of the largest and most troubled banks Citibank in the United States, Anglo-Irish Bank in Ireland, and Britains Royal Bank of Scotland. Yet rather than taking this opportunity to run these banks as public utilities and lower their charges for credit-card services or most important of all, to stop their lending to speculators and gamblers governments left these banks operating as part of the casino capitalism that has become their business plan.
There is no natural reason for matters to be like this. Relations between banks and government used to be the reverse. In 1307, Frances Philip IV (The Fair) set the tone by seizing the Knights Templars wealth, arresting them and putting many to death not on financial charges, but on the accusation of devil-worshipping and satanic sexual practices. In 1344 the Peruzzi bank went broke, followed by the Bardi by making unsecured loans to Edward III of England and other monarchs who died or defaulted. Many subsequent banks had to suffer losses on loans gone bad to real estate or financial speculators.
By contrast, now the U.S., British, Irish and Latvian governments have taken bad bank loans onto their national balance sheets, imposing a heavy burden on taxpayers while letting bankers cash out with immense wealth. These cash for trash swaps have turned the mortgage crisis and general debt collapse into a fiscal problem. Shifting the new public bailout debts onto the non-financial economy threaten to increase the cost of living and doing business. This is the result of the economys failure to distinguish productive from unproductive loans and debts. It helps explain why nations now are facing financial austerity and debt peonage instead of the leisure economy promised so eagerly by technological optimists a century ago.
So we are brought back to the question of what the proper role of banks should be. This issue was discussed exhaustively prior to World War I. It is even more urgent today....
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