cracking post from our friends over at Positive Money.
Just in case you missed it.
Mr Podsnap was well-to-do and stood very high in Mr Podsnap’s opinion. Beginning with a good inheritance, he had married a good inheritance, and had thriven exceedingly in the Marine Insurance way, and was quite satisfied.
He never could make out why everybody was not quite satisfied, and he felt conscious that he set a brilliant social example in being particularly well satisfied with most things, and, above all other things, with himself.
Thus happily acquainted with his own merit and importance, Mr Podsnap settled that whatever he put behind him he put out of existence. There was a dignified conclusiveness – not to add a grand convenience – in this way of getting rid of disagreeables, which had done much towards establishing Mr Podsnap in his lofty place in Mr Podsnap’s satisfaction.
‘I don’t want to know about it; I don’t choose to discuss it; I don’t admit it!’ Mr Podsnap had even acquired a peculiar flourish of his right arm in often clearing the world of its most difficult problems, by sweeping them behind him (and consequently sheer away) with those words and a flushed face. For they affronted him.
Charles Dickens, Our Mutual Friend. 1865
Just suppose that we all take Phil’s advice and seek a life free from debt in saving for purchases rather than borrowing, settling credit card bills every month, renting rather than buying (only those with Hammond’s levels of assets can afford to buy without a mortgage) and pay off rather than take on more debt. What could be better than a clean slate and fresh start? There is only one problem: such a strategy would bring about economic collapse.
This is because – and it is a truth that Podsnappian politicians refuse to acknowledge – virtually all the money supply in developed countries originates as loans issued by commercial banks.
When the debt overhead exceeds capacity to pay, the dynamic leveraging of growth goes into reverse. And this is the source of the financial crisis. Total demand is incomes plus the change in debt. So when households start to repay debt, unemployment, bankruptcy and repossession grow. This has nothing to do with reckless borrowing. It is built into the monetary system.
Only when commercial banks are forbidden to create money and it is issued debt free by governments will the problem be addressed.
Until then politicians and central bankers deserve the scathing comment of Michael Hudson on the latest crop of European ‘technocrats’ as bank lobbyists tunnel-visioned enough to act as useful idiots on behalf of their corporate handlers.
Just in case you missed it.
Mr Podsnap was well-to-do and stood very high in Mr Podsnap’s opinion. Beginning with a good inheritance, he had married a good inheritance, and had thriven exceedingly in the Marine Insurance way, and was quite satisfied.
He never could make out why everybody was not quite satisfied, and he felt conscious that he set a brilliant social example in being particularly well satisfied with most things, and, above all other things, with himself.
Thus happily acquainted with his own merit and importance, Mr Podsnap settled that whatever he put behind him he put out of existence. There was a dignified conclusiveness – not to add a grand convenience – in this way of getting rid of disagreeables, which had done much towards establishing Mr Podsnap in his lofty place in Mr Podsnap’s satisfaction.
‘I don’t want to know about it; I don’t choose to discuss it; I don’t admit it!’ Mr Podsnap had even acquired a peculiar flourish of his right arm in often clearing the world of its most difficult problems, by sweeping them behind him (and consequently sheer away) with those words and a flushed face. For they affronted him.
Charles Dickens, Our Mutual Friend. 1865
Consumers and homeowners who borrowed too much during the economic boom must “accept responsibility” for their part in the financial crisis, a cabinet minister has said. The defence secretary Philip Hammond claimed banks were not the only ones responsible for the crash, adding that those who took out loans, spent on credit cards and accepted large mortgages were “consenting adults”. Hammond said the banks “had to lend to someone”.
Philip Hammond with personal assets estimated at £7.5m can certainly claim to have thriven ‘exceedingly’ but blaming the financial crisis on feckless consumers shows the wilful ignorance of political leaders in refusing to recognise the reality of banking and the monetary system.The Guardian, 3 May 2012
Just suppose that we all take Phil’s advice and seek a life free from debt in saving for purchases rather than borrowing, settling credit card bills every month, renting rather than buying (only those with Hammond’s levels of assets can afford to buy without a mortgage) and pay off rather than take on more debt. What could be better than a clean slate and fresh start? There is only one problem: such a strategy would bring about economic collapse.
This is because – and it is a truth that Podsnappian politicians refuse to acknowledge – virtually all the money supply in developed countries originates as loans issued by commercial banks.
When private debt is growing, it leverages demand and economic growth. Over the past 30 years of debt-led growth and ersatz prosperity, politicians and central bankers imagined that recessions and inflation had been banished forever. They spoke of ‘economic miracles’, ‘the great moderation, and ‘an end to boom and bust’.
A debt based money system must grow exponentially if the economy is not to seize up. More loans must be issued to meet previous liabilities. Most bank loans go not into productive investment but speculation on asset prices. Asset prices must rise indefinitely for banks to stay solvent. In other words, all the miracles and moderation turned out to be an old fashioned pyramid scheme. The ‘end of boom and bust’ brought about the biggest bust of all time.
Only when commercial banks are forbidden to create money and it is issued debt free by governments will the problem be addressed.
Until then politicians and central bankers deserve the scathing comment of Michael Hudson on the latest crop of European ‘technocrats’ as bank lobbyists tunnel-visioned enough to act as useful idiots on behalf of their corporate handlers.
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