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Blair 'I did what I thought was right'

by zoe Thu May 10th, 2007 at 09:40:43 AM EST

I read these two stories and these two quotes jumped out at me due to their similarity:

First, Tony Blair today:

But, while admitting that other aspects of his premiership - such as the decision to join the American-led invasion of Iraq in 2003 - remained "bitterly controversial", Mr Blair said: "Hand on heart, I did what I thought was right."  

http://www.timesonline.co.uk/tol/news/politics/the_blair_years/article1771045.ece


The second story concerned two teen-age girls who killed their other friend in Australia, in the same newspaper, on the same day:

The girl who twisted the wire around Eliza's throat told police how she watched with detachment as her friends's emotions shifted from anger, to terror and eventually the realisation that she was going to die.

For the next five to ten minutes both girls watched as the life ebbed out of their friend.

They said that they knew it was wrong, but that it just "felt right" and that they did not feel any remorse.

http://www.timesonline.co.uk/tol/news/world/article1769427.ece
Some people might say the comparison is grossly unfair. Is Tony Blair's lack of remorse over the war in Iraq comparable to the anti-social rationale of two alleged murderers? How else can he feel no remorse over the deaths of so many Iraqis and British servicemen, especially in view of the need for "sexing up of the Iraq dossier". A question to be entertained, in my opinion.

Display:
I don't know if Blair did what he thought was right or not, since I don't know Blair well enough to venture a guess.  My suspicion the entire time has been that Blair joined Bush on Iraq in order to preserve the "special relationship" at all costs -- and that he was perhaps betting that a strong alliance with America was important than one with Europe.

That's just my suspicion, but I still struggle to figure why he did it.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu May 10th, 2007 at 09:53:07 AM EST
Just look at these quotations.

BBC news: Blair will stand down on 27 June (10 May 2007)

"I decided we should stand shoulder to shoulder with our oldest ally, and I did so out of belief," he said of his decision to support America's invasion of Iraq.

...

"But believe one thing if nothing else, I did what I thought was right for our country. And I came into office with high hopes for Britain's future, and, you know, I leave it with even higher hopes for Britain's future."

In conclusion, he said: "Actually I've been lucky and very blessed. And this country is a blessed nation.

"The British are special - the world knows it, in our innermost thoughts we know it. This is the greatest nation on earth."

But if you want to know why he did it, see this comment subthread about Irwin Stelzer in the diary The rancid relationship by RogueTrooper on March 23rd, 2006.

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Thu May 10th, 2007 at 10:06:59 AM EST
[ Parent ]
This might have made sense in 2001, but in 2007 it's more of a stretch. Blair could presumably say whatever he wants to say now. The US hardly in a position to attempt a hatchet job on the UK economy, so he could easily have come out and thrown Bush off the cliff. This would be the honourable thing to do now, and is probably the only way Blair can redeem himself.

My guess is either some other form of blackmail - Blair's background is unlikely to be completely squeaky clean, and a few whiffs of weed would be enough to do him seriously political damage - or that Blair got religion in a serious way and actually believes he's in a crusade against Islam.

Or possibly both.

I've seen speculations that the US has a stack of kiddy porn leads on UK pols - which is sort of plausible, but only in a mad conspiracy theory kind of a way. It makes as much sense as any other explanation - which is to say, not much sense at all.

If Bush goes down, Blair would finally be able to tell all - at least subject to the usual threats of a nasty accident. Since an autobiography is inevitable, that would be the obvious place to tell the full story.

But my guess is that whatever the secret is, it's going to stay with Blair until he's dead and buried. And it's likely we'll never know for sure.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu May 10th, 2007 at 01:03:55 PM EST
[ Parent ]
The only thing that makes any sense to me is that he has another job lined up. It probably explains the Youtube message in french as well.

 All the kiddy porn rumours that I have heard that came from any other source than someone who could probably best be left under some form of medication would be one story that I heard about a British Euro figure.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Thu May 10th, 2007 at 01:30:09 PM EST
[ Parent ]
We'll see where he jumps to.

That's going to be a big flashing neon Scooby-clue.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu May 10th, 2007 at 01:44:18 PM EST
[ Parent ]
But my guess is that whatever the secret is, it's going to stay with Blair until he's dead and buried. And it's likely we'll never know for sure.

We can always hope for a messy divorce and Cherie spilling the beans.

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Thu May 10th, 2007 at 06:00:27 PM EST
[ Parent ]
"Next on CNN."

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu May 10th, 2007 at 11:58:33 PM EST
[ Parent ]
I'm not sure the idea of Britain suffering after 2001 holds much water, though.  For one thing, the dollar was already going to fall against the pound, given the downturn in America and the expansion in Britain.  Bush also doesn't have the capacity to significantly weaken the dollar.  From a policy perspective, the Fed is the big player on the dollar.  Congress can spend money to weaken it, but the other factors will ultimately swamp that.  America wasn't in a position to severely damage Britain, even at the height of the Dot-Com Era.

The military subsidies are another issue, but I'm not sure that produces more than a temporary setback, since the next president would have likely brought the subsidies back around.  It wouldn't make sense to weaken one's closest ally over the long haul, unless Bush was planning to cut ties with Britain.  That's, I suppose, not out of the realm of possibility (given his arrogance and generally vindictive personality), but -- and I say this even while taking the treatment by the American press of countries like France and Germany into account -- it would've raised more than a few eyebrows among average Americans, especially knowing how much Blair was talked up by the Bush administration after 9/11.

So, in my opinion, RogueTrooper's argument, in part, makes no sense; and, in another part, gives what can only be described as an incomplete story, at best.

If I were a betting man, -- and people who've seen my incredibly bad poker game can tell you I'm not -- I'd bet that Blair was somewhere on the fence in deciding whether or not to join.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu May 10th, 2007 at 11:46:26 PM EST
[ Parent ]
The economic angle also doesn't make any sense for Bush politically because of his donor base.  Investment banks and insurance companies are his big donors.  And most, if not all, of them have large operations in London.  That's to say nothing of the damage that would be done to American shareholders -- whether wealthy individuals or pensioners or whatever other group -- because of the resulting losses in profit, and at a time when people were being hit quite hard already.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu May 10th, 2007 at 11:56:46 PM EST
[ Parent ]
The only angle I see as making any sense is  this is all done to keep the UK's seat on the security council. There is a push to give Germany and Japan Permanent membership, or to loose the British and French seats and replace them with a European Seat. If this were to happen then the UK would suffer  a blowto its self image. At the moment the UK has its permanent seat on the grounds that it is one of the Five major neuclear powers, however for a large period of time it has been buying its neuclear weapons in. The only countries that replacement weapons could be brought from are the US , every other country would really be discounted for political reasons. Can you imagine how mad the eurosceptics would go if the UK bought its neuclear crak from France? So the UK's status rested on on Keeping the US happy, and George Is just about vindictive enough that he would ban the UK from ever buying neucs from the USA ever again if they had turned him down.

then the Blair government would have been faced with groveling to the French government and that would never have done.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Fri May 11th, 2007 at 09:46:01 AM EST
[ Parent ]
The UK could also develop its own nuclear program. Supposedly Iran can have a nuke in one year, so why can't the UK?

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 10:24:13 AM EST
[ Parent ]
If we built it ourselves, do you have any idea how overpriced, rubbish and late it would be?

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Fri May 11th, 2007 at 11:40:03 AM EST
[ Parent ]
I think I do, yes.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 11:46:54 AM EST
[ Parent ]
Looking at the majority of projects that have been made in the last 20 years, you could take the cost of the US version, and treble it for the cost of a UK version,  so roughly an excess 40 billion pounds.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Fri May 11th, 2007 at 12:27:01 PM EST
[ Parent ]
Maybe it could be funded by bonds. Or an LLP.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri May 11th, 2007 at 01:41:48 PM EST
[ Parent ]
Or an interest-only, negative-equity mortgage.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 04:49:06 PM EST
[ Parent ]
True. But the Iranians are short of even OUR level of management "competence".

They couldn't build a bomb in five years, even if all sanctions were dropped tomorrow and they went shopping at "Centrifuges 'r us"

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri May 11th, 2007 at 11:48:07 AM EST
[ Parent ]
Really?  Short of the country that digs random holes in its streets and doesn't touch them for six months (if even then) for no apparent reason?  You're not giving Britain enough credit for its incompetence, Chris.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sun May 13th, 2007 at 12:50:30 AM EST
[ Parent ]
We are pretty good at incompetence, I grant you.

Pretty good at creativity though: you have to be creative to be idle.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun May 13th, 2007 at 04:05:47 AM EST
[ Parent ]
overpriced, rubbish and late

...only to be referred to as "Stability & Growth" after June 27th.  Enjoy it while you can, ceebs. ;)

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun May 13th, 2007 at 12:52:29 AM EST
[ Parent ]
That, too, would be foolish, though.  It would amount to kicking off one of the two permanent members who are close allies.  (Bush can talk about looking into Putie-Pu's soul all he likes, but France and Britain are the only serious allies on the council.)  And it, too, would sent shockwaves through both Britain and America.

As for buying nukes from France, I suspect the eurosceptic crowd would rather buy them from France than not buy them at all.

Can the US even kick countries off the council?  I have no idea what the protocol is for that at the UN.  If so, and if the US was going to threaten Britain with it, why did the Bushies not kick France, Russia and China off?

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri May 11th, 2007 at 10:52:54 AM EST
[ Parent ]
Nobody can kick countries off the council, though apparently the General Assembly could decide at one point that it was Mainland China and not Taiwan that represented "China" and so the UNSC seat changed hands (and Taiwan lost its UN membership)
From the 1960s onwards, nations friendly to the PRC, led by Albania, moved an annual resolution in the General Assembly to transfer China's seat at the UN from the ROC to the PRC. Every year the United States was able to assemble a majority of votes to block this resolution. But the admission of newly independent developing nations in the 1960s gradually turned the General Assembly from being Western-dominated to being dominated by countries sympathetic to Beijing. In addition, the desire of the Nixon administration to improve relations with China to counterbalance the Soviet Union reduced American willingness to support the ROC.

As a result of these trends, on October 25, 1971, Resolution 2758 was passed by the General Assembly, withdrawing recognition of the ROC as the legitimate government of China, and recognising the PRC as the sole legitimate government of China. China received support from two-thirds of all United Nations' members and the complete unanimous approval by the Security Council excluding the ROC.

The Resolution declared "that the representatives of the Government of the People's Republic of China are the only lawful representatives of China to the United Nations." Because this resolution was on an issue of credentials rather than one of membership, it was possible to bypass the Security Council where the United States and the ROC could have used their vetoes.

Thus, ROC was expelled from UN.



Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 10:59:01 AM EST
[ Parent ]
is that blair is a willing partner in this mess, and that it has a lot to do with peak oil and the declining north sea oil fields. he bet britain's fate on controlling what oil remains, to be a "great" power.

i would love to see what was in those cheney energy task force documents.

by wu ming on Fri May 11th, 2007 at 03:32:58 AM EST
[ Parent ]
"I decided we should stand shoulder to shoulder with our oldest ally ..."

So that would be Portugal, then? So, along with everything else, he is ignorant of history - which explains alot.

by det on Thu May 10th, 2007 at 03:40:37 PM EST
[ Parent ]
It sometimes seems that Blair believes that prehistory started with the Second World War and history started with Margaret Thatcher.

New Labour is notably hostile to every British tradition except that the gentleman in Whitehall knows best.

Blair is tone death to ancient institutional history. For example instead of trying to abolish the office of Lord Chancellor (with its historic executive, judicial and legislative responsibilities) by press release and spawning no end of complex constitutional legislation, there was a simpler answer. Blair could have put the Great Seal into commission and split the responsibilities of the Lord Chancellor between three commissioners.

by Gary J on Fri May 11th, 2007 at 10:38:18 AM EST
[ Parent ]
It's amazing how often exceptionalism is a recurring theme with people who seek to excuse their violent excesses.
by zoe on Thu May 10th, 2007 at 04:29:06 PM EST
[ Parent ]
Yes, the great excuse. And this is exceptionalism of frightening intensity:

this country is a blessed nation.

The British are special - the world knows it, in our innermost thoughts we know it. This is the greatest nation on earth.

Thatcher just talked about putting the Great back into Britain (OK, maybe a bit more...) But this... Gah.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu May 10th, 2007 at 04:44:16 PM EST
[ Parent ]
I heard that quote on the radio in the car and sat there amazed. It was like he was posessed by the spirit of Norman Tebbit.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu May 10th, 2007 at 05:24:50 PM EST
[ Parent ]
The religious tone would be shocking if I didn't know Blair is a Christian  fundamentalist of sorts.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Thu May 10th, 2007 at 05:59:08 PM EST
[ Parent ]
Here's someone who thinks he's analysed Tony Blair's personality using some sort of scientific method

The British choice in Iraq has been characterized as "Tony Blair's War," with many believing that the personality and leadership style of the prime minister played a crucial part in determining British participation. Is this the case? To investigate, I employ at-a-distance measures to recover Blair's personality from his responses to foreign policy questions in the House of Commons. I find that he has a high belief in his ability to control events, a low conceptual complexity, and a high need for power.

http://www.blackwell-synergy.com/doi/abs/10.1111/j.1743-8594.2006.00031.x?journalCode=fpa

by zoe on Thu May 10th, 2007 at 04:58:25 PM EST
[ Parent ]
Here's another analysis.  I can't access the whole paper.

2. Dyson, Stephen. and Lawrence, Brianna. "Blair's War: Institutional and Individual Determinants of the British Choice in Iraq" Paper presented at the annual meeting of the International Studies Association, Hilton Hawaiian Village, Honolulu, Hawaii, 2005-03-05 Online <.PDF>. 2007-05-10
Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: This paper seeks to explain the Blair administration's decision to support the United States in the 2003 Iraq war. The paper develops a framework for the explanation of foreign policy decisions in Britain based upon a model of institutional structure, the resources of key decision makers, and the individual characteristics of the prime minister (Dyson, 2003; 2004; Rhodes, 1990, 1995; Kaarbo, 1998). METHOD: Content analysis of the universe of Tony Blair's responses to foreign policy questions in the House of Commons from 1997-2004 is used to measure his individual characteristics, which are operationalized through Margaret G. Hermann's Leadership Trait Analysis technique (Hermann, 1980, 1983, 1999). The structure of the administration's decision making, and the strategies employed by actors within this structure, are reconstructed through a content analysis of British and international press accounts located through the lexis-nexus search engine. RESULTS: In terms of institutional structure and resources, the paper finds that key members of Blair's cabinet, such as Robin Cook and Clair Short, both opposed the war and utilized resources available to them such as public opposition, the leaking of information and resignation from ministerial posts, in order to seek to frustrate Blair's policy goals. Other actors, such as Foreign Secretary Jack Straw, were personally uneasy about the policy and the prime minister was required to expend significant political capital in order to secure their support. Indeed, had Blair been a less dominant prime minister prior to the Iraq war, it is unlikely that he would have been able to secure the support of his cabinet and of parliament in the endeavor. In terms of individual characteristics of the prime minister, Blair is measured as significantly higher than other modern British Prime Ministers in belief in ability to control events, suggesting a proactive orientation to foreign policy, and significantly lower in conceptual complexity, suggesting a black and white view of the world which accorded well with the Bush administration's framing of the Iraq situation. The findings suggest that explaining the British decision to go to war alongside America requires an understanding of both the institutional structure of British foreign policy making, the resources possessed by key actors within this structure, and the individual characteristics of the Prime Minister.

by zoe on Thu May 10th, 2007 at 05:08:21 PM EST
[ Parent ]
and another:

5. Dyson, Stephen. "The U.S. / U.K. Alliance in Vietnam and Iraq: Why did Britain Stay out of Vietnam and go into Iraq?" Paper presented at the annual meeting of the International Studies Association, Town & Country Resort and Convention Center, San Diego, California, USA, 2006-03-22 Online <APPLICATION/PDF>. 2007-05-10
Publication Type: Conference Paper/Unpublished Manuscript
Abstract: What accounts for the different outcomes in British decisions in Vietnam (not commit forces), and Iraq (commit forces), despite the similarities in the situations? In both Vietnam and Iraq a U.S. President pressed a Labour Party Prime Minister to commit forces to a war that was unpopular in the U.K. Yet, while Harold Wilson resisted repeated attempts by Lyndon Johnson to secure a commitment of troops, Tony Blair went out of his way to support George W. Bush, despite the domestic political cost. In seeking to account for these differing outcomes, I consider four explanatory variables: structural realism, alliance dynamics, domestic politics, individual characteristics of the Prime Minister.Method: Structured, focused case comparison methodology is used to compare the two episodes in a systematic fashion. These cases are in many ways an ideal pairing given the similarities between the situations yet the divergent outcomes. In order to measure the individual characteristics of the Prime Minister, I employ automated content analysis techniques that process an individual?s verbal output to reveal personality traits.Results: Structural realism fails to account for the difference in outcome between the two cases, as both responses (commit troops, don?t commit troops) can be deduced from a structural perspective. Alliance dynamics explanations are also unsatisfactory. Harold Wilson?s behaviour is contrary to what we would expect from a junior partner, and, while Blair?s choice is more consistent with this approach, the evidence shows that Blair reached the decision on grounds other than a pure calculation of alliance maintenance necessity. Domestic politics, on the other hand, is part of the explanation for the difference in outcome. Wilson was in a much more precarious position than Blair, and hence had to give more attention to the left-wing, anti-war part of the Labour Party than did Blair. However, this is not the whole story, and I find that a convincing account of the different outcomes in these cases requires a consideration of the differences between the Prime Ministers. Blair was a much more ?black and white? thinker than Harold Wilson, making Blair more amenable to the ?good and evil? framing of the situation by the U.S. than the less Manichean Wilson. In addition, Blair had fashioned a closed advisory system which insulated him from the opposition of most of the foreign policy bureaucracy to the war, whereas the Wilson administration operated through more open procedures. Consequently, my conclusion is that a combination of domestic politics and leadership style best accounts for the difference in outcomes in British decision making on Vietnam and Iraq. The paper will be of interest to those working in foreign policy analysis and decision making, the U.S. - U.K. relationship, and alliance dynamics generally.

by zoe on Thu May 10th, 2007 at 05:29:25 PM EST
[ Parent ]
FOLLOW THE MONEY. Oil has had excessive profits in which no credible politician in either America or the UK has promoted a windfall profits tax on the oil cos.

The military industrial complex in both countries will have to replace all the hardware and devise new hardware for the war.

If you believe the nonsense cited by Blair,the Tories and Co for the war; you then have to believe all the good fortune which came oil's way was just a coincidental bi product of the war and wasn't the main motivating factor for invading Iraq. Regardless of the oil revenues from the Iraq fields, the oil companies will eventually share; the price of oil has been raised from a pre invasion average of $30 per barrel to an average of $60 since.

by An American in London on Fri May 11th, 2007 at 03:17:32 AM EST
[ Parent ]
I find that he has a high belief in his ability to control events, a low conceptual complexity, and a high need for power

and how many politicians does this not fit?

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Thu May 10th, 2007 at 05:27:44 PM EST
[ Parent ]
I found this on wikipedia.org about anti-social personality disorder and it gave me a chuckle:

A mnemonic that can be used to remember the criteria for antisocial personality disorder is CORRUPT[3][4]:
C - cannot follow law
O - obligations ignored
R - remorselessness
R - recklessness
U - underhandedness
P - planning deficit
T - temper

by zoe on Thu May 10th, 2007 at 10:05:48 AM EST
Some people might say the comparison is grossly unfair.

Indeed. The girls are only guilty of one murder.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Thu May 10th, 2007 at 12:22:35 PM EST
Blair like all politicians is a sociopath. The difference with Blair is he is extremely religious which makes him a dangerous politician. He is also one of the greatest communicators of the modern age.

The only question is whether Blair actually believed his own rhetoric or was aware he was a mouthpiece for multinational opil and the military industrial complex.

The faustian bargain Blair made prior to his first election was to make the Bank of England 'independent'. Meaning the same bank governors who had been protecting the interests of the top 5% of the UK population would continue since had Blair not made the bank independent; it would have meant Blair and Labour could have appointed the majority of governors and would then have had the ability to influence monetary policy for the benefit of the vast majority of voters who ended up electing Blair and Labour.

Murdoch through his papers, The Sun and The Times showed their appreciation for Blair's decision to make the Bank of England independent by endorsing Blair and Labour. The reason the 'elites' needed to make the deal with Blair was because they knew they could do business with him. He wasnt a real Labour person, having been raised in a Tory conservative household. The elites who run the UK also knew if they didn't make the deal; it was likely Blair and Labour would have a substantial majority after the 97 election and could do what they wanted to. Blair and Labour,having been out of power for 15 years, were desperate enough to make the deal, giving up what would have been a revolution because of Blair's 160 vote majority in the House of Commons. A real tragedy since although additional financing was provided for the NHS and Education; it isn't nearly enough to rectify the starvation of public services under Thatcher so today the NHS still has 50% less financing per capita than the Scandinavian countries healthcare systems which Blair and Labour are so envious of.

By making the Bank of England independent; it meant Blair and Labour couldn't finance the majority of the desperately needed funds for the NHS and Education through Bank of England bonds or debt but Blair, Gordon Brown,Labour and the City came up with private financing initiatives(PFI) to finance part of the desperately needed money for the NHS and Education. Unfortunately private financing wasted at least 30-40% of the financing on consultants, fees and the necessary profit margins for the private financing initiatives.

The major question is whether Blair believed in the mantra od private/public partnerships and drank the 'kool aid' or did know he was making a Faustian bargain to be elected and realized getting the financing through PFI was better than getting no financing at all.  

Blair and Labour's government will go down in history as a real tragedy because of the potential opportunites not realized due to the compromises which were not necessary to get back into the majority.

by An American in London on Thu May 10th, 2007 at 01:10:28 PM EST
This is a debate I regularly have with redstar, so just to let you know - I think that independent central banks are actually a good thing.

Inflation hurts the poor most. Thr only thing forgotten lately is that inflation has to include asset price inflation.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu May 10th, 2007 at 04:14:36 PM EST
[ Parent ]
Do you have a link?
by zoe on Thu May 10th, 2007 at 04:27:27 PM EST
[ Parent ]
It's mostly been deep in sub-threads, but if you search for Jerome, redstar  and ECB together, you should probably be able to dig up something.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu May 10th, 2007 at 05:13:39 PM EST
[ Parent ]
The only good Central Bank is no Central Bank at all.

Treasuries could quite easily issue credit directly under the supervision of a Monetary Authority, with no interest charged, but with a payment into a default fund for the use of a Government Guarantee, and a payment for administration payable to Credit Managers formerly known as Banks.

It's not Rocket Science: but it is the disintermediating logic of the Internet.

To paraphrase John Gilmour's great quote re Censorship:

"The Internet interprets Banks as Damage and routes around them...."

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu May 10th, 2007 at 05:26:34 PM EST
[ Parent ]
I recently read Piketty's Les Hauts Revenus en France, where he made the point that with rent control, and wage rise easily given to those that'd become too poor because of inflation, inflation was a big part of reducing inequality during the 20's...

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Thu May 10th, 2007 at 07:36:42 PM EST
[ Parent ]
And when you index the smig, provide enough subsidized, wage-indexed rental housing and run your economy to be honestly at full employment (ie, jobs for all who want them) this can continue to be true.

Plus, inflation hits the poor different than the rich based on the basket of goods they tend to buy. US statistics detail that basket of goods per income cohort and, when cross referenced against CPI data, it emerges, for instance, that inflation is higher in the US for the poor and what the poor tend to purchase, and inflation is lowest for the wealthiest and what they tend to buy.

The fed reserve, of course, does not worry about this.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Fri May 11th, 2007 at 03:20:12 PM EST
[ Parent ]
US statistics detail that basket of goods per income cohort and, when cross referenced against CPI data, it emerges, for instance, that inflation is higher in the US for the poor and what the poor tend to purchase, and inflation is lowest for the wealthiest and what they tend to buy.

The fed reserve, of course, does not worry about this.

I suggest a diary on Daily Kos.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 04:52:47 PM EST
[ Parent ]
The Banks are more concerned with providing a guaranteed higher interest rate for their customers and true owners than any their stated reasons of higher inflation rates.

Besides housing mortgage interest costs; there isn't any underlying significant inflation and housing costs are decreased by lower inflation rates; not higher rates.

As a social progressive; I am surprised you would be taken in by the central banks stated reasons and not look at the true underlying pressures from the 'elites' which control the banks.

by An American in London on Fri May 11th, 2007 at 03:22:37 AM EST
[ Parent ]
As a social progressive, I am surprised you would be taken in by the financial conventional wisdom and advocate massive indebtedness through the issuance of bonds.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 03:30:46 AM EST
[ Parent ]
I've heard many times the "inflation hurts the poor most" bit, but no one saying this ever cared to provide a link to a decent study.

Do you have one?

As pointed out by Lucas below, some studies point out that the poor were doing better thanks to inflation.

(And of course you know my opinion on the current obscure process of inflation measurement)

by Laurent GUERBY on Fri May 11th, 2007 at 02:22:09 PM EST
[ Parent ]
not to mention Blair's complicity in this:

In searching for evidence of the potential danger posed by Iraq, the Bush Administration need have looked no further than the well-kept record of U.S. manipulation of the sanctions program since 1991. If any international act in the last decade is sure to generate enduring bitterness toward the United States, it is the epidemic suffering needlessly visited on Iraqis via U.S. fiat inside the United Nations Security Council. Within that body, the United States has consistently thwarted Iraq from satisfying its most basic humanitarian needs, using sanctions as nothing less than a deadly weapon, and, despite recent reforms, continuing to do so. Invoking security concerns--including those not corroborated by U.N. weapons inspectors--U.S. policymakers have effectively turned a program of international governance into a legitimized act of mass slaughter.

http://www.harpers.org/archive/2002/11/0079384

by zoe on Thu May 10th, 2007 at 02:48:34 PM EST
Not to mention Blair's complicity in wiping out a whole people.

I just can't stand the sight of his satisfied grin on TV.

by balbuz on Thu May 10th, 2007 at 05:06:40 PM EST
[ Parent ]
That's what you leave behind as a legacy when you suffer from low conceptual complexity but are charming with it.

This ties in with a lot of hints that Blair is really just another off-the-peg authoritarian. Possibly what happened in the early years was that he was nestled within the bosom of Labour and his colleagues were allowed to pursue traditional Labour policy - at least up to a point.

Gradually those with irritating old-fashioned ethical beliefs were forced out, for one reason or another.

Then came Iraq, most of the remaining traditionalists resigned. Blair remained as the sole driver, with no moderating influences, surrounded by a collection of yes-people and authoritarian religious types who share his real views.

It's been a very quiet coup. Labour grassroots have deserted, literally in their millions, and what's left of the old party now is just a twitching corpse stifling an urge to turn up in public in a bishop's hat, and fingering a rosary.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu May 10th, 2007 at 06:42:51 PM EST
[ Parent ]
Thanks for the link and the diary which I missed the first time around.

Not only was it very enlightening, it also answered a question of mine. Quite some time ago I picked up a translation (and a good one, with lots of explanatory footnotes) of the Koran, and read quite a bit (a quarter perhaps). Anyway in some parapragh were it is stated that you should respect other people of the book, Jews, Christians and Sabeans were listed as those people. Finally I have the answer to that nagging question "who were the Sabeans?".

And so I find that they question was posed in the wrong tense, but tragically looks like it will be in the right tense soon.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri May 11th, 2007 at 12:07:59 PM EST
[ Parent ]
Yesterday the pair, who pleaded guilty to wilful murder, were given life sentences. Because of their age, they will eligible for parole after serving 15 years.

Any similarity with Blair ends there.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu May 10th, 2007 at 04:01:49 PM EST
If that is the case let him defend himself before an independent court in a fair trial.

No less will do.

by Lupin on Fri May 11th, 2007 at 01:36:47 AM EST
I bet he'd do worse than Milosevic, who reportedly was giving Carla Del Ponte a run for her money.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 03:03:03 AM EST
[ Parent ]
The Special Focus section in today's Salon.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri May 11th, 2007 at 04:15:57 AM EST
Did you read musings of Tariq Ali in Guardian?

Tony Blair's principal success was in winning three general elections in a row. A second-rate actor, he turned out to be a crafty and avaricious politician. Bereft of ideas, he eagerly grasped and tried to improve on Margaret Thatcher's legacy. But though in many ways Blair's programme has been a euphemistic, if bloodier, version of Thatcher's, the style of their departures is very different. Thatcher's overthrow by her fellow Conservatives was a matter of high drama. Blair makes his unwilling exit against a backdrop of car bombs and carnage in Iraq, with hundreds of thousands left dead or maimed from his policies, and London a prime target for terrorist attack. Thatcher's supporters described themselves afterwards as horror-struck by what they had done. Even some of Blair's greatest sycophants in the media confess to a sense of relief as he finally quits.
...
What this reveals is anger and impotence. There is no mechanism to get rid of a prime minister unless their party loses confidence. The Conservative leadership decided Thatcher had to go because of her negative attitude to Europe. Labour tends to be more sentimental towards its leaders, and in this case they owed so much to Blair that nobody wanted to be cast in the role of Brutus. In the end he decided to go himself. The disaster in Iraq had made him hated and support began to ebb. One reason for the slowness was that the country is without a serious opposition. In parliament, the Conservatives simply followed Blair. The Lib Dems were ineffective. Blair had summed up Britain's attitude to Europe at Nice in 2000: "It is possible, in our judgment, to fight Britain's corner, get the best out of Europe for Britain, and exercise real authority and influence in Europe. That is as it should be. Britain is a world power."
by FarEasterner on Fri May 11th, 2007 at 05:03:12 AM EST
Unless you raise taxes there is no other effective way to raise the financing needed for the long term gains of the general population. Bond financing is not perfect but is a method to raise money from pensions, the wealthy, the middle class etc. in order to improve the society. Using bonds is ceratinly mor effective and less costly than private partnerships currently being used extensively in the UK
by An American in London on Fri May 11th, 2007 at 05:50:07 AM EST
[Can you use "reply to this" instead of "post a comment"? Also, make sure your comment display mode is not "Flat"]

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 05:51:55 AM EST
[ Parent ]
Thank you for the advice. What other effective way, other than raising taxes, would you suggest besides bond financing?
by An American in London on Fri May 11th, 2007 at 05:55:29 AM EST
[ Parent ]
Just issue the required ammount of currency to pay for public works. This would be especially appropriate when the government is trying to pay for infrastructure development, and it would be subject to legislative oversight. After all, debt must be repaid using future tax revenue so bonds are just a way to spread out tax increases over time. And if issuing currency is inflationary, so is creating money through bank credit or debt issues.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 06:02:14 AM EST
[ Parent ]
Well, bonds can be repaid from the increased tax revenue resulting from the benefits of the public works being undertaken?
by Colman (colman at eurotrib.com) on Fri May 11th, 2007 at 06:03:41 AM EST
[ Parent ]
I don't understand why the State, which is the guarantor of the money in the first place, has to borrow it in order to undertake public works.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 06:10:09 AM EST
[ Parent ]
Borrowing is an accounting act: on someone balance sheet you have a pile of currency going out and on the other side the promise someone has made to pay back over a period of time is in.

The power to do this accounting magic is privatized in the current "independant" central bank system in that only private banks can do it.

Even within this banking system there are things states and people can do if they don't like what's going on.

I'll be writing a diary on it shortly.

by Laurent GUERBY on Fri May 11th, 2007 at 02:30:40 PM EST
[ Parent ]
Issuing bonds in the period in which the pound is strong relative to the dollar and euro in an interest rate environment in which a guaranteed low return from a bond is very attractive to investors is the 'no brainer' thing to do. It must be approved through referendum in which the voter will vote, knowing the amount of bonds and their specific purposes(education, health etc.) By having a referendum will mot only guarantee their passage but give cover to the politicians who must propose it.

The public is used to borrowing long term mortgages on their homes and will recognize easily the benefits of masive bond financing as long as the society will be improved. The bonds issued must guarantee the investments in public services will improve the society significantly. In order to achieve this the financing in the UK nust be done on a programmed, massive basis over many years. Unfortunately without a referendum; it will never be done on the scale needed because the Bank of England was made 'independent' and the banks' governors and benefactors won't approve.  A referendum may be able to negate any pressure coming from the Bank of England but it would have been much easier to issue the necessary bonds if the Bank of England had remained answerable to a political party, in this case-Labour.

Your ideas of how to finance are noble but not 'realpolitik'. Massive focused bond financing of the 'state' is what built the infrastructure of the state of California through the massively financed university education system which is the most dynamic in the world having created or contributed to most of the improvements in our societies.

by An American in London on Fri May 11th, 2007 at 06:24:12 AM EST
[ Parent ]
the massively financed university education system which is the most dynamic in the world having created or contributed to most of the improvements in our societies.

Really?

by Colman (colman at eurotrib.com) on Fri May 11th, 2007 at 06:26:15 AM EST
[ Parent ]
It has contributed to a lot of research, and the University of California system is one of the best research universities in the world (as well as the biggest producer of weapons of mass destruction). Having seen the University from the inside, my opinion is that as far as undergraduate education goes (and the UC is written into the Constitution of the State of California) the UC is the biggest fraud in the State of California.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 06:37:45 AM EST
[ Parent ]
Doesn't matter if you think the undergraduate is a fraud. It attracts enough intelligent people from all over the world in both the undergraduate and graduate schools that both the graduates and the dropouts have started most of the dynamic industries of the latter part of the 20th century-computer, biosciences, etc. etc. Unfortunately the bi product of tens of thousands of engineers and scientists being from the University System was aerospace and defense.
by An American in London on Fri May 11th, 2007 at 06:51:44 AM EST
[ Parent ]
Aerospace and Defense was not a byproduct, it has been the major Keynesian driver of the US economy since WWII, and the fact that the UC has managed most of the Department of Energy National Laboratories was a cause, not an effect, of its growth as a University.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 06:54:53 AM EST
[ Parent ]
I agree, mostly.
Your ideas of how to finance are noble but not 'realpolitik'. Massive focused bond financing of the 'state' is what built the infrastructure of the state of California through the massively financed university education system which is the most dynamic in the world having created or contributed to most of the improvements in our societies.
And then Prop 13 effectively eliminated property taxes, gutting pre-university education and after-school programs. In addition, the habit of raising taxes through propositions earmarking the funds for specific purposes has shrunk the general fund to such an extent that the Governor has no flexibility left. Then the State legislature decided to give people a rebate on their Car tax as long as the budgetary situation allowed it, and when Davis they tried to reverse the situation because education and health care were going through the dogs through underfunding, Arnie replaced him on a platform to repeal the car tax "increase" and expand after-school programs (see above), and immediately went on to call a budget emergency. Gah.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 06:34:33 AM EST
[ Parent ]
California got bad when Reagan was Governor and the electorate became the 'me generation'. But the integral part of what Gov. Pat Brown( Jerry Brown's father) did in building the state's infrastructuure through bond financing remains in tact.

Bond financing does give the Governor the flexibility to have projects financed as long as he curtails the 'pork'. W3ithout bond financing, California would have been stuck in the 1950's with 10 people running the entire state-seethe film 'Chinatown' and John Huston's character is theepitome of the people who ran California as their own fiefdom.

by An American in London on Fri May 11th, 2007 at 06:56:41 AM EST
[ Parent ]
No wonder we're both in London...

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 06:58:48 AM EST
[ Parent ]
Exactly. The UK should have massive bond financing through referendum because if focused correctly; it would improve its society a great deal.
by An American in London on Fri May 11th, 2007 at 07:06:02 AM EST
[ Parent ]
Getting an established political system to accept a greater role of referendums can also be coined unrealistic.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri May 11th, 2007 at 11:56:01 AM EST
[ Parent ]
I believe in the case of California an dother states, the "initiatives and ballot measures" originates in the Progressive movement of the early 20th century. One can debate to what extent the US political system was "established" back then.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 12:01:53 PM EST
[ Parent ]
"Established" might have been the wrong term, "settled" might have better described what I was searching for.

When politics is a pretty safe career - either in opposition or power - why mess it up with giving the unpredictable people more power?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri May 11th, 2007 at 12:28:20 PM EST
[ Parent ]
There is another way of doing it...

http://www.eurotrib.com/?op=displaystory;sid=2007/5/11/4047/06568

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri May 11th, 2007 at 06:57:20 AM EST
[ Parent ]
Yes, if they made you king but having people invest in their own societies is the only realistic alternative to raising taxes which can't be done or even if taxes are raised; it would never be significant enough when compared to massive bond financing.
by An American in London on Fri May 11th, 2007 at 07:09:04 AM EST
[ Parent ]
I'm pointing out that the process of "Napsterisation" inevitably leads this way because these models actually "work" without banks aka credit intermediaries.

The fact that the number of UK LLP's doubled in two years (and no-one knows what is being done with them) is nothing to do with me (well maybe a TINY bit).

What will lead to the widespread adoption of this mechanism is:
(a)it's the best Equity Release mechanism there is, bar none;
(b)it allows entities without share capital eg charities, social enterprises, governments, national and local, to invest without borrowing and MASSIVELY cut their financing costs.

It will happen for sure,because it works better than the alternative: a classic "emergent" phenomenon.

But you can appoint me King as well if you like.;-)

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri May 11th, 2007 at 08:04:42 AM EST
[ Parent ]

Just issue the required ammount of currency to pay for public works.

You just re-invented the flat tax (as this devalues everybody's currency in the same proportion)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri May 11th, 2007 at 07:47:25 AM EST
[ Parent ]
Just like creating money through bank lending devalues everyone's currency in the same proportion.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 07:49:04 AM EST
[ Parent ]
Does it, or does the increase in economic activity make up for that? Is that not true of government issued money.

What's the difference in theory?

by Colman (colman at eurotrib.com) on Fri May 11th, 2007 at 07:51:19 AM EST
[ Parent ]
What's the difference in theory?

Government Bad! Banks Good!

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 08:13:16 AM EST
[ Parent ]
We have government issued money (via the Central Bank and Mint as agents): it's called cash. In around 1960 the proportion of cash in the UK economy was around 30 % of money in issue. Now it's less than 3% and falling.

This government money comes without the interest burden and governments get the benfit of "seignorage".

It's not inflationary, unless you print too much of it: bank money has to be MORE inflationary then government money, all things being equal, because of the additional "rent" to the shareholders with the monetary monopoly.

ie cutting out "super profits" to bank shareholders could not possibly be inflationary.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri May 11th, 2007 at 08:13:47 AM EST
[ Parent ]
Cash could be electronic, not necessarily printed or minted, right?

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 08:15:47 AM EST
[ Parent ]
I think Chris point is that most money are created outside of government Prints, Mints and electronic mints.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri May 11th, 2007 at 12:17:14 PM EST
[ Parent ]
Incidentially, these are questions one isn't meant to ask. So if the whole of civilisation collapses overnight it'll be your fault.
by Colman (colman at eurotrib.com) on Fri May 11th, 2007 at 07:51:57 AM EST
[ Parent ]
Migeru's Apprentice Wizard™ technology


Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 08:10:01 AM EST
[ Parent ]
With bank lending, the effect is temporary, as the lmoan is paid back, and money destroyed then.

In a steady state (constant amount of loans outstanding as new loans replace repayments), there is no money creation even though there is normal bank lending activity.

It's only growth in aggregate lending that cuases devaluation, so the effect of an individual loan is an order of magnitude less than printing money.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri May 11th, 2007 at 08:18:13 AM EST
[ Parent ]
In a steady state with banks lending money at interest, the share of wealth in the hands of the banks grows logistically until they own everything.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 08:21:31 AM EST
[ Parent ]
You guys wouldn't want to break this out into a new thread, would you? With obligation to explain and be informative so we can all follow?

It's a really important subject and views differ considerably.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri May 11th, 2007 at 08:26:36 AM EST
[ Parent ]
No, can't do.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 08:29:03 AM EST
[ Parent ]
With bank lending, the effect is temporary, as the loan is paid back, and money destroyed then.
That is the cincher. I believe Chris recently posted alink to a film makign the following claims:
  • money is created by loaning and destroyed by repayment
  • therefore: no debt => no money
  • but, in addition, in order to repay the loan with interest, more money needs to be in circulation at any given time than existed previously, or failing that a fraction of the loans need to be defaulted on
  • therefore, the total amount of debt must continually increase, or there must be a continual stream of defaults in your "steady state"


Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 08:27:56 AM EST
[ Parent ]
Principal and interest are two totally different kinds of money.

You have to look at lending like you look at rental activities. When you rent a car, the car and the rental payments are different things. Same here.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri May 11th, 2007 at 08:43:12 AM EST
[ Parent ]
The principal doesn't exist and costs nothing to create, so what is it that's being rented? After all, when it is returned, it gets destroyed. When you rent a car, you return the car and pay rental, but the car isn't destroyed by returning it, nor is it created by letting it. The car rental company has had to buy the car and finances that through the rental it charges.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 08:46:46 AM EST
[ Parent ]
In the old days, it required actual money. Then it requires the trust of the public, plus enough reserves to  be able to react to unexpected cash movements.

Nowadays, with regulatory oversight, it requires a capital allocation (8% or less, depending on the risk).

Not that different from a car, which only really requires the leasing payments or whatever scheme the rental company is using to have access to it.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri May 11th, 2007 at 09:16:43 AM EST
[ Parent ]
If we complete the analogy with the car, cars being money, the lender wants (say) 10% more car to be returned, but since you are not allowed to build cars (that would be counterfeinting) you have to get some 0.1 car to return as interest and these 0.1 cars has to come from a car lender.

Right?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri May 11th, 2007 at 12:15:11 PM EST
[ Parent ]
interest and principal are as different as rental payments and cars are different, thus bringing back payment in fractions of cars makes no sense.

When you borrow money, you rent "Capital" (à la ChrisCook) - you may money for that rental, and what you pay is a substantially different animal than what you use to repay the Capital.

Just consider Capital to be a more liquid form of machinery. Or consider the car you rent as a narrower form of Capital (which you use for a while for a speicfic purpose and then give back).

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri May 11th, 2007 at 12:51:55 PM EST
[ Parent ]
"Secured credit" ie "deficit-based" but "asset-backed" finance is indeed a very different beast from unsecured credit.

"Ownership" of "Productive assets" requires the legal concept of "Property" and the conventional mechanism requires two conflicting legal claims over the same assets.

(a) the claim of the Financier;
(b) the claim of the user of the Finance.

These claims are irreconcilable in our current defict Money "paradigm" and it is the conflict between "Debt" and "Equity" forms of "Financial Capital" which is the faultline in our current system.

I believe the "Capital Partnership" transcends thisthrough giving rise to a single continuous "open capital" asset class of proportional "equity shares" in GROSS revenues

When you think about it, both the financier, and the user of finance are sharing the output (or the revenues from the sale of the output) from the productive asset, and the legal protocols of the  contract of Debt and the Joint Stock Limited Liability Company each give rise to imperfect sharing of risk and reward.

The problem is that the "Principal" provided by Banks is not based upon pre-existing "wealth" or "money's worth, but upon future "Money's worth" to be created by the asset.

Banks are literally providing nothing (other than a Guarantee) for something.

Renting an asset "owned" by someone is a very different thing to renting a guarantee.

The "value" that Banks provide is their Guarantee - backed by 8% of Capital. And there is no reason at all why that Guarantee should not be provided mutually, with bilateral "trade" credit managed by banks instead.

The "fair" or "natural" rate of "Interest" in respect of unsecured credit is the shared cost of administration and of defaults. Anything more is IMHO de facto inflationary.

A fair "Capital Rental" on the other hand is the proportion of production or revenues from sale of production, bearing in mind the certainty of that level of production being achieved.

If this return is based upon equitable sharing of risk and reward, the result is IMHO an optimal outcome for all stakeholders.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri May 11th, 2007 at 02:09:22 PM EST
[ Parent ]
Principal and interest are two totally different kinds of money.

The money used to repay the principal comes from the loan. Where does the money used to repay the interest? From another loan's principal.

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 08:49:44 AM EST
[ Parent ]
is the payment for a service. It's like buying bread.
Where does the money to buy bread come from?

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri May 11th, 2007 at 09:17:47 AM EST
[ Parent ]
From a loan, apparently.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 09:24:37 AM EST
[ Parent ]
If all loans were repaid, how much money would be left, and in whose hands?

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 09:35:12 AM EST
[ Parent ]
What's money?

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri May 11th, 2007 at 10:49:39 AM EST
[ Parent ]
Something that costs banks a lot of effort to create ex nihilo, justifying the charging of interest for its use.

Now seriously, money is the ability to mobilize economic resources, including mobilising oneself. Banks, by being given the ability to create money and award credit, get to decide who gets to do what they want, and who doesn't.

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 10:53:17 AM EST
[ Parent ]
Money in fact is "Dynamic" Value which exists only in the transitory instant of exchange by reference to an abstract "Value Unit" - Keynes' "Bancor".

Capital is "Static", or "potential", Value consisting of "Money's Worth" in:
(a) "Property" ("fixed capital"); and
(b) obligations = credit ("working capital").

That's what Money SHOULD be and COULD be in a rational moneatry system based upon a "Clearing Union" approach and backed by "Guarantee Societies".

The toxic form of deficit-based Money currently in use is an interest-bearing "Claim over Value" issued - as Migeru puts it - "ex nihilo".

In essence it's the Bank taking my credit (promise to provide future value) and reflecting it back to me with their "guarantee". A Bank's "claim on a claim over Value" is a "double negative" giving a "false positive".

It is an illusion of Value or, in an analogy to anti-matter: "anti-Value".

Note that the whole business of "credit derivatives" is to all intents and purpose Banks outsourcing their "Guarantee".

My proposal of a partnership-based "Guarantee Society" achieves the same result, but without the costs and complexity.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri May 11th, 2007 at 11:21:42 AM EST
[ Parent ]
Jerome: It does not cost nothing [to create the principal of a loan] Nowadays, with regulatory oversight, it requires a capital allocation (8% or less, depending on the risk)."

Chris: Note that the whole business of "credit derivatives" is to all intents and purpose Banks outsourcing their "Guarantee".

Does this mean that "credit derivatives" allow banks to get around the "8% capital allocation" imposed by regulatory oversight?

Also, what regulatory oversight are we talking about? Basel II?

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Fri May 11th, 2007 at 11:32:11 AM EST
[ Parent ]
But it's not a steady state. You've got a continuous positive input as Central Banks pumps up the money supply.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Fri May 11th, 2007 at 07:55:50 PM EST
[ Parent ]
Every Money Supply curve you'll ever see (with occasional blips at a Depression -when vast numbers of loans are defaulted on and Money destroyed) goes only one way.

And that upward curve is exactly the same as the Economic Growth measured in deficit-based Money.

That Irresistible Force is now running up against the Immovable Object of sufficient oil to fuel continued Growth.

Whether its Dollar-denominated debt or Euro-denominated debt providing the necessary Money makes no more than a few years' difference.

The only viable monetary system in the long term is an "asset-based" system.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat May 12th, 2007 at 04:44:36 AM EST
[ Parent ]


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