Bonuses: will bankers go abroad if bonuses are cut?

The fact that Government ministers talk and do nothing about bankers bonuses shows that the banksters have more power than the elected leaders of the people.

Or that they are all in it together with the banksters.

Or they lack the brains to counter the arguments made by bankers.

The regular excuse/reason given for bonuses is that if the City does not pay bonuses, the "best people" (i.e. the numpties who brought the world's banking system to the very brink of meltdown in 2008) will up sticks and go somewhere where their skills are justly rewarded.

What this excuse overlooks is that the only place for them to go is Wall Street, because it is the Anglo-American banksters who lead the world in unregulated greed. And in fact, Obama is inclined to be tougher on the idiots than the pusillanimous Cameron, who is all mouth about the wrongness of the bonus awards, but is severely lacking in the trouser department.

All it takes is a bit of coordinated action between the US and UK to curb the excesses of the greedsters, and we could be sorted. But no, because both countries are hot-beds of free market fundamentalist fanatics.

The other unspoken aspect of the bonus culture is that bonuses are paid in recognition for individual effort, as opposed to corporate teamwork, and therefore if a bonus recipient (for example, Fred Goodwin) fouls up and lands his company (e.g. RBS) with billions of pounds worth of debt, he should be made bankrupt, thus annihilating at least a proportion of the debt.

Debt - should we be bothered?

I tweeted l link to this piece on the UK debt set in context.

Matthew Jeffries (@Berrieds) tweets back "Borrowing will not get us out of recession, will only weaken the private sector. A historical perspective" and links to this blog post on Thinking With a Hammer (TWAH).



TWAH says economic laws are not different between a nation and the individual.

RL: Well, they are different, so. Nation states command all the diverse resources, both human and natural, in their territory. Nation states have the ability to create money.
Yes there are similarities. Both nation states and individuals are compelled to satisfy their needs for water, food, warmth, shelter, and hygienic waste disposal. But the pure individual (think Robinson Crusoe) has no need to trade with himself, nor to administer his affairs, nor to have money.

So the premise is wrong.


TWAH says public expenditure does not create wealth. RL: Not true. If, say, the Government invested (either by borrowing, or better, by creating the money) in a Green New Deal, a massive project in energy conservation and renewable energy production) it would create wealth both in the short and long term.  It would enable money otherwise spent on fossil fuels to be diverted elsewhere, and will cushion the impact of Peak Oil. It  would also give our descendants plentiful cheap energy, and also help save them from the worse effects of global warming.



TWAH then gives a useful historical review of the UK's borrowing record since the war.
He argues that Keynesian policies only work when unemployment is high, and that they must be financed out of borrowing, not taxation. But borrowing burdens future generations: the det of WW2 was only paid off in 2006.

The UK National Debt now stands at somewhere between £2.2 and £3.8 trillion, depending how you count it.

Wilson, says TWAH, increased the debt 1964-70, leading to a devaluation. [This is barely visible as a lump on the falling graph], which led to higher costs for imported raw materials, which combined with higher OPEC oil prices, led to inflation. Heath's attempts to control inflation with wage restraint led to the miners' strike and a Labour Government, which ended in Healey needing a £3.9 bn loan from the IMF, with £2.5bn cuts in public spending. 

Under Thatcher average wealth went up, but people hated her so much we got Labour, who inherited a public sector debt of 32% in 1997, and bequeathed one of 50%. 


TWAH is big enough to recognise that some of this 50% figure is due to the banks, but puts the blame for that on Labour's slack regulation regime. [Like the Tories would have been tougher on the banks].


He ends with a general discussion, key to which is that it is a bad idea for an economy to be over dependent on the banks. See Ireland, Greece, [Iceland] - and the UK.

Overall, TWAH does a little historic review reiterating the notion that Tories cut and Labour spends. It is the old struggle between two dinosaurs, one wanting a bigger state and one a smaller state. The dinosaurs have no concept of true wealth, won from natural resources by human skill and intelligence, nor of the necessity to transform to a green economy, in harmony with the laws of nature, as far as possible cyclical in its use of materials instead of linear, an economy in which everyone feels motivated to play a part.

Debt is not good. It is indeed a burden on succeeding generations. Most of our national debt is dumped on us by our own forebears. However, the financial burden of debt that so concerns Osborne and his dupes is just the tip of an iceberg of ecological debt that we will be passing on. I'm talking about resource depletion, biodiversity loss, and change in global heat transfers . There is a bigger, unseen debt, the one we owe to our children. This we can address by the Green New Deal, greening the economy through a Green Wage Subsidy, and by measures such as reforestation of the whole planet. If there is a a financial cost to this, and if it is paid for by borrowing, it will benefit the generations who are required to pay for it.

This kind of consideration shows that it is time we move beyond the old, irrelevant  tory/labour ding-dong, and begin to look at the economy in its correct ecological setting.

The Day the Uni's Died

I have spent the day watching Twitter on #dayx3, and watching BBC TV news 24 propaganda.

Parliament has spoken, and the Coalition was its majority drop from 84 to 21. But the vote means that from 2012 most students will leave university with a debt of up to and over £36,000.

Note that the MPs who were graduates will have left university with a debt of ~£0. Zero. Morally, those who voted in favour should write the universities a cheque for £30,000. "Morally". Don't hold your breath.

What are the unintended consequences of Parliament's decision? Here are a few possibilities. This is not my field, and the experts should have covered these points. Or not, as the case may be.

1. A whole generation of students have been "blooded" in demonstrating and many will have animosity towards police that was not there previously. Big Society, anyone?
2. Some who could have gone to University will not do so. Student numbers will fall, so student fees will fall, and Uni incomes will fall.
3. Some who leave with a debt of £30k will go abroad. >Brain Drain.
4. Some will curb their ambition or their tax returns to make sure that they do not cross the £21k threshold where they start paying tax.
5. Some will be unable to afford a mortgage as well as their student debt. This will have an effect on the housing market, which, reasonably or not, is an important component of the UK's economy.

So, well done, George Osborne and Nick Clegg. Five unintended consequences.
Six, counting the fact that the whole nation has been glued to TV/Twitter all day.

Student demo in Bristol, from the outside.

Went into Bristol to meet son Joe for lunch in Park Street, prior to a Chopin recital in St George. Saw a whole bunch of lemon coats going down Park St, tightly surrounding about 100 citizens. Realised it was a protest, went out onto the street to give solidarity, and saw a Green Party comrade in the protest, so stepped inside the police line to chat briefly, then stepped through the line of freedom to go and have lunch. After lunch, we walked down to College Green where there was a line of police vans including the dreaded Stazi Support Team. Chatted with police at the edge of the kettle. My man said the protest had sinned by stopping traffic, therefore stopping citizens going about their normal business (this was Sunday mind, with not many citizens about, mostly sight-seers, and the demo was offering a sight to be seen. I said the kettle was of dubious legality, (he frowned), but he did not frown when I said that Osborne's cuts were doing damage not just to the fabric of society, but also to police budgets. And that we have a duty to civil disobedience if Government is not acting in the interests of the people.

The crowd inside were doing a bit of chanting, but mainly acting as people who have been trapped.

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