Saturday, January 22, 2011

unfunny money

Some things are hard to write about. They induce such a feeling of abhorrence that they become almost taboo subjects, so loathe are we to think about them for too long lest our ability to contemplate life itself is so compromised that we fear not ony for our own individual futures but those of the world too. Such subjects must by and large be put aside by most people to avoid the deep and miserable despair that the focus on them inevitably brings. Children with awful illnesses, the horrible and unspeakable atrocities of war, the savage cruelty of nature’s disasters, and the vile, obscene and sickening remuneration of bankers.

Bonus upon bonus. Huge salaries. Gigantic financial rewards for the lives they have ruined by their crass, incompetent and unbelievably arrogant behaviour, kicking the economy down a steep hill by lending to people with no realistic chance of repayment. Oh I’m so sorry; we’re not allowed to talk about that anymore; from the sub-prime to the ridiculous. The prime minister says it it time to forgive and forget. Curiously, just a few months ago our Dave was dead against bonuses for bankers. But not now. Having once said that bonuses should be capped at £2,000 it seems that adding three noughts to the end is within his tolerance level. He has become a double agent. Even the demands of the Lib Dems (google it if you’ve forgotten who they are) for a bonus tax have been rejected.

Leading banker, Bob Diamond (I kid you not), said he thought the time for remorse and apology was over. Well he would, wouldn’t he, as was once famously said by Mandy Rice-Davies, a society prostitute, who knew a thing or two about scandals. The remorse Diamond refers to was hard to spot.

So when their bad deeds brought the world into financial chaos, we bailed them out. For losing their money we gave them ours and suffered the resulting hardship, or certainly will do if we haven’t yet, so that they could buy their fourth luxury property, their third flash car and their first charity flag for the lapels of their expensive new suits. And yet even now, when they would have us believe they are much the wiser and chastened by the humbling criticism taken to their hearts, they are not doing what they are there to do, that is to lend money to small and medium sized businesses that have been starved of the funding needed to survive and grow and give real, not imaginary, impetus to the economy. They are thinking only of themselves.

The disgust at their multiple-trailing-zero payouts is mixed with a wry smile at the many feeble attempts at justification. The craziest is that the government needs the tax they will pay on the bonuses, presumably to fund the benefits that will be paid to those who have lost their jobs because of the banks. The funniest is that unless they earn millions they will go abroad and the City of London will suffer. Well, there’s a chance worth taking.

There are many myths about banking. They love to claim that it is so difficult that only the premier brains of the country can do it well. But it won’t wash. It is all basically either gambling on market trades, or lending money (however cleverly they dress it up in complex and sophisticated sounding product names) which is actually very simple; the only slightly more taxing part is the judgement as to whether the borrower can repay, how much and when. We all know that they showed themselves to be inept at that in the recent past. In the present, they only lend where they can demand so much security from the borrowers that they take no risk at all. The bonuses are not from real cash generated by good business trading; they are given out from artificial money based on income they hope to receive in the future. The bankers can’t lose. We can, and do.

History will look back at the bankers and their extraordinary incomes with incredulity and distaste. Future generations will not understand why it was allowed. They will never understand how to reconcile those riches with the relative poverty that so many suffer, to a high degree as a result of the bankers. And they will never look back with approval of what the bankers have done to give themselves wealth on such a grand scale. At least let’s hope they don’t approve, because if they do then how frightening is that !

The banking crisis (crisis for us not the banks) was fuelled by greed and self-interest and insufficient intervention and control by a weak and frightened government. Nothing has changed there and that’s why there will be another collapse. The hope is that the next one will be so unpalatable to the people that government will have the courage and strength to take measures to prevent a repeat. That would be a bonus.



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