Recently the media has been inundated with stories of looming economic doom and destruction. Recession. Bank Collapse. Inept politicians meddling in the socio-economic capitalistic nature of modern British life creating the new socialist state. Ok, I half made the last one up. But the fact remains that our elected politicians are directly effecting changes in the money flow structures on which our free market economy is built.
It started small with the “Temporary Emergency Loan” handed out to the Northern Rock in mid september. The key words here are Temporary and Loan. The money was to be paid back to the Bank of England in due time, and was merely to tide the bank over and prevent a run.
Next came the HBOS Lloyds Merger in early October, which, it is said, the government backed. I would imagine in other times the Competition Commission would have much to say about creating a bank holding as much as 1/3 of all UK mortgages, but that this path was smoothed by the politicians eager to prevent natural market forces taking place.
The last nail in the coffin for our free market economy is the de-facto nataionalisation of 4 of the major high street banks expected to be announced today. The government has urged these banks to take a collective £50bn cash injection in exchange for Preferred Stock. Whilst not technically giving the government control over the bank, the people (or rather our money) is now what is keeping our financial institutions afloat. We are now paying tax some of which will be siphoned off for the banks, which will ensure that money which was ours in the first place is still there.
What strikes me as odd about all of this is that no where in the this chain of events is the incompetence of numerous bankers being questioned or challenged. More over tax payers money is now being used to pay the salaries of people who have perpetuated the current state of affairs.
Now I’m not a socialist, but it does seem to me that actually nationalising any failing banks into a single High Street Bank of England, circumventing the cause of our problems and ensuring that no profit can be drawn from the use of tax payer’s money to repair the damage already done, would be a far more intelligent idea. Of course banks that don’t need rescuing should be free to operate as commercial entities, which would hopefully rekindle the free market, new youthful banks could spring up in place of the old, and eventually any nationalised bank could be reprivatised to the benefit of the tax payer.
So who wants to join me in starting a new bank…?