Saturday, May 09, 2009

Pseudo-Green Shoots will wither, while real recovery has yet to germinate.

The Bank of England is braced for third wave of financial crisis/The Guardian: "the Bank surprised the City by announcing that it would pump an extra £50bn of new money into the economy despite recent stockmarket rallies.

Now the Guardian has learned that this increase in quantitative easing was driven by fears in Threadneedle Street that the credit crunch is still sucking the life out of the British economy and the banking sector remains in deep trouble.

The new mood of caution chimes with comments from business leaders yesterday, who warned that apparent green shoots in the economy had shallow roots."

Is is £1.3 trillion that the Government has already poured in to the unreal economy of the financial markets? Something like that. And a few millions into the real economy, much of that into the motor car industry. PFI projects are still going ahead, in defiance of all reason and logic.

It is going to get worse before it gets better. The way to get it better is to put money into the green sector of the economy, while ringfencing off the insane shadow economy of the derivative markets.

Green economics is real economics.

2 comments:

Rob said...

I recently read Anne Pettifors book "the coming first world debt crisis" which helped me a great deal in understanding the money system.I need to reread it though to check I have understood her views correctly.
Though I do not expect any of the current 3 main party's to consider it, would not he best banking system be to allow the private banks to do as they please,fail or boom without government interference or support, and set up a system similar to credit unions with money loaned to them direct from the state at no interest above that of inflation. They would be run, similar to local councils by elected volunteers from the community ,with transparent expenses, who would loan out interest free loans relative to inflation, large and small, for worthwhile and seemingly viable projects, eg small businesses, house purchases,insulation, repairs etc.
Rob

DocRichard said...

Thanks for commenting Rob.
Ann Pettifor is well worth reading.
The problem is that banks are "too big to fail". If allowed to go down, they would have brought down the savings and businesses of a huge chunk of the population, and made the recession far worse.

So the huge injections of peoples' money last autumn was necessary, and has arguably been effective. However, it is still possible that the financial system will crash, because governments have not had the courage to fenc-off the derivatives market.

If this does happen, it will be necessary, as you say, to "set up a system similar to credit unions with money loaned to them direct from the state at no interest above that of inflation....who would loan out interest free loans relative to inflation, large and small, for worthwhile and seemingly viable projects, eg small businesses, house purchases,insulation, repairs etc".

Money systems will be re-created from the bottom up. There are many interesting and effective ways of doing this. More here: http://green-monetary-policy.wikidot.com/start/

Cheers
Richard
Rob