Politics
Jacob Rees-Mogg is right: the Bank of England is a massive threat to our well-being
The Guardian has reported this morning that:
Jacob Rees-Mogg has accused the Bank of England of “miserable incompetence” over its failure to reduce inflation more quickly and its bond-selling strategy, as rightwing Tories prepare to renew their attacks on the Bank’s independence.
The former business secretary accused the Bank of damaging the economy with its interest rate decisions and costing the taxpayer tens of billions of pounds by selling off government debt too quickly in an attempt to reduce its balance sheet – a policy known as quantitative tightening (QT).
I hate to say it, but he's right.
He's also right to suggest that, incompetent and bizarre as Lis Truss's budget in September 2022 was, it was the Bank of England that caused the financial crisis during the weekend that followed it, with its announcement of unprecedented QT, which failed to take into account its impact on pension funds.
Dire as Tory economy management has been - and dire is in many ways too kind a word to describe it - the Bank of England has been much worse.
I don't agree with Jacob Rees-Mogg on almost anything else, but on this issue, he is right. The Bank of England, as it now operates, with its current leadership, is the most massive threat to our well-being, with Labour ranking as the second biggest threat because it says it has no intention of changing the way in which the Bank operates so that life might be made better for the vast majority of people living in the UK.
Interest rates should be as low as possible
I put out this video this morning suggesting that the Bank of England is trying to force up interest rates so that they can keep them as high as possible. That’s deeply threatening to our well-being by redistributing wealth upwards, reducing the amount of investment in the country and demanding austerity of government. Interest rates need to be as low as possible.
The transcript is:
Interest rates should be as low as possible in the UK.
I say that for very good reason. There is no natural reason why anybody should pay interest. You don't buy anything when you settle the interest liability on any loan that you have. You just hand over your money to somebody else for having been lent money that they, if they're a bank - in the vast majority of cases they will be - created out of thin air.
All banks create money out of thin air. You promise to repay them. They promise to pay, whoever you ask them to. And in that exchange of promises, money is created. It's as simple and straightforward as that. And yet, they charge you for the privilege of them making their promise and give you no credit for the value of your promise.
Instead, you have to pay interest. But what are you paying for?
Now, economists will say you're paying for the time value of money. The assumption is that somebody, a depositor with a bank, gave up their money so that you could borrow it from the bank and spend it now when that person didn't want to.
Therefore, they say you're compensating them for the fact that they can't consume now and paying for the fact that you do want to spend now. But that argument is utterly ridiculous and totally untrue because banks never lend you other people's money. They create the money that they lend to you every time you get a loan. And there are no exceptions to that in all the major loan creating banks in the UK.
So why do we pay interest? Well, simply so that the banks can compensate themselves in two ways. One is so that they can actually cover their costs of making the loan. I accept that's a real thing that they should be paid for.
Secondly, the risk is that you won't repay them. I accept that's a risk that they should be compensated for.
And thirdly, there isn't a third thing. It used to be that they would say you've got to compensate their savers. But you haven't because they don't need to have any savings in their bank to be able to make you the loan in the first place and they never lend you other people's money.
So, that third argument disappears.
Therefore there is no reason why we should have high interest rates because you are not compensating anybody for the fact that you want to consume now. What we actually need are the lowest possible interest rates that we can get.
And, historically, interest rates are at the lowest possible rate they've ever been, and there's good reason for that. It's because risk is lower than it's ever been, because we have better information systems about the costs and risks of lending to anyone now, better than we've ever had in history, because, of course, we all have credit records.
So, as a consequence, interest rates could be very low, and they should be very low. And why is that the case? Because when interest rates are very low businesses can afford to borrow to invest. We do get optimal outcomes in society as a consequence because we have investment in the things we need. And we don't impose burdens on people for the excessive costs of borrowing for things like owning their own homes.
If we have high interest rates, all we're doing is moving wealth from those who have to borrow to live to those who have an excess to live on because they are able to save. But, their money is never used to create your loan, so this is a completely bogus claim that we've got to compensate them by paying them interest.
Low interest rates are good for the economy, good for households, good for young people, good for the delivery of social benefit and investment, and bad for all those who like to claim that they are lending people money when they aren't. Please, don't believe the arguments that we need high interest rates.
High interest rates exploit the borrower, and we shouldn't tolerate that.
Labour and the Tories are both making the same false claim, which is that we can no longer afford government
As is apparent from yesterday‘s posts, I took a relatively quiet day with regard to the blog because I wanted to think and reflect on where we are politically. Given the total collapse of any identifiable Tory ideology, excepting something heading in the direction of racist neofascism, and Starmer’s creation of a totally ethics-free Labour Party, embracing policy positions that can, apparently, overlap with those of the far-right of the Conservatives, this reflection seemed entirely appropriate.
As I noted on Saturday, it is entirely fair to suggest that this situation is the result of the adoption of neoliberal thinking by both these parties. As a result of this they presume that morality, ethics, and even political opinion have no role to play in the creation of their policy programmes. Instead, finance is the only decision criterion that they recognise, with self-imposed constraints on state finances being the only conditions that apply when considering those issues.
This led to the obvious question as to what this shared platform that both these parties now wish to present to the British people might be. I say shared, because it is apparent that there is almost no identifiable difference between them when it comes to this chosen ethical void excepting the degrees of apparent detachment from reality with which the resulting policies are pursued by them.
What became clear is that the argument that these neoliberal politicians are presenting is that we can no longer afford government. Their claim would seem to be that whilst we might have been able to do so once upon a time, now that we are supposedly richer than we have ever been, the collective desire that we live in a jurisdiction where we can put our faith in institutions over which we can exercise some degree of choice as to their composition in the hope that they might act in our collective best interests, sharing our resources in common for mutual benefit, is now, apparently, impossible. What they are saying as a result is that we must, therefore, now learn to live without the safety net of government that we once, when collectively worse off, enjoyed.
I do not, of course, accept this argument. That is because it is a very obviously carefully fabricated deceit. Those politicians making this claim do so on the basis of the support of those who have been best rewarded by more than four decades of neoliberalism. Whether those providing that support be the wealthiest people in the country, or the largest corporations that operate within it, these politicians seemingly exist to support the claim made by the wealthy that those with the greatest capacity to contribute to the common good should not bear the burden of responsibility for doing so.
This is because, it is argued, we would not even have the option of having a government if the wealth of these people were constrained by a requirement that they contribute in a way that even vaguely approached the demand made upon the majority of the population. That is because requiring this would, apparently, so suppress the entrepreneurial spirit of those with wealth that there would be insufficient resources left in society for anything even approximating to affordable government. Where, however, this entrepreneurial spirit is to be seen within a society that has already provided the wealthy with so many opportunities for it to flow free, I do not know, because I am certainly not a witness to it.
This argument is, as a result, obviously false. The argument is that those possessed of wealth, who think themselves the creators of it as a consequence (irrespective of its actual sources), cannot be required to pay for government because if that demand were made, there would be no wealth to fund it. They have set up the ultimate political paradox as a consequence, which both the Tories and Labour buy into, hook, line and sinker, which is that we cannot have sufficient government without wealth, but if we have sufficient government, we would not have wealth, meaning that wealth must go untouched by government.
What, however, the wealthy require as a result is that people be elected who support this claim. As a result they have funded politicians willing to subscribe to this view. The consequence is that the possibility of beneficial government is now denied by the political assumptions made about the necessary structures of wealth and its preservation within the society in which such a government should operate that have been created by those who do not wish that such a government exist.
As a result, we live in an increasingly lawless state. Our judicial system is ceasing to function. So too, as I noticed yesterday, has company law. This is also true with regard to much of divorce law, where most people get by without legal assistance, laws to protect children, employment law, law to protect those with disabilities, and so much else. The denial of rights and the denial of the means to access the legal system that might afford those rights is now so normal that those who do not wish effective government to operate have guaranteed that it cannot. Whatever the law might dictate, the means to enforce it is now largely non-existent for most people.
Simultaneously, public services of almost all sorts are failing. Those who do not wish government to operate and who think (whether rightly or wrongly) that they can afford to buy themselves out of the system of services that the government provides are not just indifferent to this outcome; they welcome it because they think this provides them with greater opportunity to exploit society at large, which exploitation is the true source of much of their wealth.
Meanwhile, the existential threats to society, from climate change, community breakdown, and so much more, are growing, but those who think that we do not really need government seemingly also think that stresses with regard to these issues can be constrained, no doubt with the use of a little judicial or even physical violence, which is why so many human rights have been abused in recent years both by their cancellation in law and increasingly unfettered police action.
Put all this together, and this idea that we cannot afford government is the common implicit but unstated theme that both Labour and the Tories will present to us during the course of the election that we will have this year. The real choice between the two, excepting the degree of mania on display, is insignificant. Instead, the conspiracy between the two is glaringly apparent. They are in obvious agreement that whatever it was that we could once afford to deliver government is no longer possible, whether that is true or not, and therefore they will make no attempt to deliver it.
What we are, therefore, faced with are politicians seeking office with one common objective, which is to destroy the very institutions that they seek to control, and all to serve the interests of wealth to which both parties have made themselves completely subservient.
For how long can this madness last? Or, to put it another way, for how long do we have to put up with a political duopoly that now asks for us to vote for them even though they are collectively saying that they do not believe that they can deliver whatever it is that we need, let alone want?
And, why is it that they can still presume that we might find this prospect appealing?
Is it that the conspiracy of first-past-the-post has simply been captured, like so much else, with the goal of denying us anything approaching the form of government that we really need? Or is the malaise deeper than that so that it infects even those parties supporting the replacement of that profoundly corrupt system of voting? That is open to debate.
The reality that we face a political conspiracy to deny us the chance of lives well lived supported by benign government intended to promote universal well-being is beyond debate. This is a fact. The question is, now that Labour under Starmer has gone so far out of its way to make this clear, what do we do about it?
The Underground Economy of Politics
Secret funding, offshore donors, control by the ultra-rich. Sorry, but this is not democracy.
By George Monbiot, published in the Guardian 3rd May 2024
There’s a sensible rule in British politics: it should not be funded by foreign donors. Democracy is meaningless if a country isn’t run at the behest of its people. But the rule is riddled with loopholes. Those who have done the most to keep them open are those who most loudly assert their patriotism. Noisy “patriots” are always the first to sell us out to offshore capital.
Here are some of the tricks they use. One is the “unincorporated association”. This refers to groups that don’t have to open business bank accounts, file financial statements, register with any official body or even give themselves a name. They’re as transparent as the Berlin Wall on a cloudy day. Astonishingly, these associations are a legal channel for campaign finance in the United Kingdom.
The Good Law Project has calculated that these groups have shovelled £5.3m into the major political parties since 2022. We have no means of knowing where most of this money came from before it passed through these associations. Here’s how it works.
In principle, an unincorporated association must register with the Electoral Commission if it passes more than £37,270 to political parties in the course of a year. But donations don’t count towards this total unless they each exceed £500. So a donor could schedule a payment of £499 to an unincorporated association every minute of every day, amounting to millions of pounds, and the association would neither have to register with the commission nor report such gifts – or even keep a record of them. It’s an open invitation to “impermissible donors”.
The Tories are the worst offenders, taking £3m of the £5.3m. Money passed through these channels has long been directed towards marginal Conservative seats. This means that surprising or narrow Tory victories have been facilitated by funds whose origins no one can see. Ten years ago, Labour railed against the use of these channels. Since 2022, it has used them to amass £1.2m.
The next loophole is the use of corporate subsidiaries. As long as the subsidiary making a donation is UK-registered and operating in some capacity in the country, it doesn’t matter where the parent company is based. An example is the UK subsidiary of a company operated from Dubai, registered in the British Virgin Islands and owned by an Indian food tycoon that gave more than £220,000 to the UK Conservative party. It may be legal. But in what sense is it not a foreign donation?
Of course, the dividing line between foreign and British money is never entirely clear. Even if a company operates only in this country, this doesn’t prevent its foreign owners exercising influence by using it as a funding vehicle. Allowing corporations to donate seems as wrong as allowing unincorporated associations to do so.
After all, the UK, as the Tory MP David Davis has observed, is “the global capital of dirty money”. Why would those who control this money not wish to flex their political muscle? What’s to stop organised crime and foreign kleptocrats buying influence? To give one example, it is hard to explain why a large portion of the lucrative waste disposal industry has been ceded to organised crime in the UK while successive governments look the other way. Might they have been, in effect, legally bribed? Thanks to our opaque funding rules, it’s impossible to say.
If, despite the loopholes, there’s still a problem with a donor’s status, there is always a workaround. As the Guardian’s investigative journalist Tom Burgis has shown, when the multimillionaire Mohamed Amersi first offered to donate to the Tories, there was a hitch – he was not yet listed on the UK’s electoral register. No problem. A Conservative official requested: “The donation must please come from Nadia’s account.” So the legally recognised donor of £200,000 was Amersi’s companion, Nadia Rodicheva, who was registered to vote here. However, the thank you letter the Conservatives sent was addressed to Amersi, as was the bank receipt for the payment. Later, when Amersi, by then a registered UK voter, totted up the funds he had given to the party, he included the money that was declared as a donation from Rodicheva.
Last year, MPs sought an amendment to close the loopholes enabling foreign donations. Conservative MPs were whipped, forcing them to vote it down. Whenever there’s a choice between country and party, the Conservatives, those patriotic stalwarts, choose party.
The next issue is more complicated. It’s entirely right that citizens of the United Kingdom should play a full and active role in our political life, regardless of how long they have lived here. The problem is that some people born overseas have a far better chance of becoming citizens than others. If you are very rich, a red carpet awaits. If you are very poor, it’s razor wire and border guards. The way citizenship is allocated therefore favours a certain politics: the politics that serves the very rich.
The £5m the Conservatives have received from Mohamed Mansour, a naturalised UK citizen who was previously a government minister in Hosni Mubarak’s dictatorship in Egypt, is entirely legal. But it feels profoundly wrong that a former minister of a foreign government should fund a UK political party.
Mansour calls the UK a “second home”. One might question the extent to which he has embraced us. Last year the Sunday Times reported that he had agreed to a multimillion-pound settlement with HMRC after his company, Unatrac, was investigated in a “diverted profit tax case”. Consider that one of his family companies continued operating in Russia for more than a year after the invasion of Ukraine, despite the UK government’s call for divestment. Nevertheless, in December 2022 he was appointed the Conservative party’s senior treasurer, and in March this year he was given a knighthood on Rishi Sunak’s recommendation. A Downing Street source stated that Mansour was being honoured for his charitable works.
In any case, there’s nothing fair about a system in which a few people, whether born here or not, can buy political influence. In my view, the only equitable system is one in which everyone can pay the same small fixed fee for membership of a political party, and no further private funding can be taken. Otherwise, democracy gives way to plutocracy.
But this and other essential reforms are nowhere on the political agenda. Far from it. Those who claim to defend our interests against “foreign interference” and “assaults on our sovereignty” are the very people who ensure we remain prey to them.
Disappearing Dutton Reminds Journalists That He Doesn’t Work Weekends
Australian Opposition leader, Peter ”Disappearing” Dutton, has sent out an angry missive to journalists reminding them that he does not work weekends.
”Yeah the bloody journo’s need to learn that Pete doesn’t do weekends, or questions,” said a Liberal Party Insider. ”I mean he will let them know when he is ready to rant about Albanese.”
”Or some World event that he can somehow link to Albanese.”
When pressed on why the Opposition leader continually disappeared when there were questions to answer, the Liberal Party Insider said: ”Well, Pete is a busy man, what with his farm, family and puppy strangling hobby.”
”Don’t worry though, once he is PM he will be available to answer questions, when needed. Of course assuming there are any journalists free to ask those questions.”
”Now, if you’ll excuse me, I need to go and scout locations for future nuclear plants. Dutts has asked me to look at viable locations in prominent Labor electorates.”
Mark Williamson
@MWChatShow
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