April 27, 2015

Now is the time for a New Deal

Posted in Sunday Business Post · 63 comments ·

Edinburgh is a majestic city. The view, in bright sunshine, from the statue of Adam Smith on the Royal Mile down the hill towards the New Town must be one of the finest urban vistas anywhere in the world. Today, the St Andrew flags are flying everywhere, and with the SNP set to win more than 50 of Scotland’s 59 seats in Westminster, there is a real feeling that the nationalist movement is predominant.

The big news here in the morning papers is the quote from Alex Salmond, the former SNP leader, that he will enjoy “writing Labour’s budget” – a reference to the fact that the Labour Party can only govern if they are propped up by the SNP.

As kingmakers, the SNP’s top brass can demand what they want. The last nationalist party to wield as much power in Britain was Parnell’s Irish Parliamentary Party in the late 1880s.

The most likely result is that the SNP won’t go into government but will prop up a weak minority Labour government, in return for a shopping list of goodies for Scotland. In this way, the SNP consolidates its power at home without the responsibility of government. If things go well, it takes the kudos and if not, it blames Westminster.

There are many emotional issues driving the Scottish nationalists, but apart from the issues of nationhood, the issue of economic inequality is fuelling the switch to the nationalists. The Nationalists – whose policies are quite left – constantly reiterate that the British economy is being run for the rich, and an independent Scotland would be run for the people.

The current SNP leader, Nicola Sturgeon emphasises how, unlike the posh Ed Miliband and much posher David Cameron, she actually grew up in a council house and thus understands ordinary people.

According to an article in the Guardian this week, in post-war Scotland, most children of Sturgeon’s generation grew up in council housing. Slum clearances in every Scottish city and town enormously increased the number of council properties. In the 1960s and 1970s, about 60 per cent of Scotland’s homes were rented by their occupants from local authorities and housing associations, twice the proportion in England. Scotland is said to have had the largest public-to-private ratio of housing stock in any country west of the Soviet bloc.

Given this political backdrop, the irony of being in Edinburgh to talk economics to upbeat investors at the imperious Balmoral Hotel, under the statue of the free market’s chief prophet, is not lost on me.

The reason investors are upbeat is that stock markets have been roaring ahead in recent years – all over Europe. This is making the owners of assets very rich. But who do you think owns assets? Rich people own assets, and poor people do not.

Therefore, rising economic inequality is not the unintended consequence of policy – it is policy. Economic policy is exacerbating inequality not reducing it because the new ideology, driven by central banks, is based on printing money to boost the economy and drive growth.

The hope is that, when the banks get all this free money from central banks, they will lend it, pushing up the price of assets, stocks, bonds and houses.

In time, the theory is that as asset prices rise, people will “feel” richer, and this feeling of being richer will coax people into buying more, borrowing more and investing more.

This is what was termed “trickle-down” economics in the 1980s. It was championed by right-wing warriors Reagan and Thatcher. Today, it is being trumpeted by all mainstream parties from the German right to the French left.

What is actually happening is that opportunity is not trickling down to wages, but greed is pushing up asset values.

This conundrum is the source of the deep political fault-lines all over Europe which is amplifying inequality and driving left-wing parties like the SNP, Syriza, Sinn Féin and Podemos; and right-wing ones like the Front National in France and Ukip in England.

All these radical parties were minority affairs only a few short years ago. They were dismissed by the centre Left and centre Right, but now they are becoming significant players and kingmakers in some cases. The reason they are gaining power is because they have a narrative which appeals to people. They can make their story of the excluded more communal and universal by wrapping it in the national flag.

If the centre parties want to choke off the rise of the populists, they have to stop depending on financial markets to do their job for them.

This policy of using monetary policy exclusively to jump-start the economy is precisely the opposite of what was used by Franklin D Roosevelt during the Great Depression. Back then, Roosevelt realised that if the banks caused the problem by too much lending, they shouldn’t be relied upon to find the solution to a problem which they had caused.

He saw that, when interest rates are close to zero and there is no real investment, any new investment can have an amplified positive impact on the economy. He concluded that the knock-on effect from one large-scale investment would be very significant, so he embarked on a massive public works plan to get the US economy going again.

As his plan worked, it was adopted by different countries after the war. As a result, the reason why Nicola Sturgeon grew up in a council house is because the British state built them as part of a public works project.

Today, with the rate of interest at zero, there is an amazing opportunity for this country and other European nations to address inequality by investing in housing, education and health. We know that state investment in these crucial areas is what makes societies more equal.

There has never been a better time to do this. There has never been a greater political need for it either, but the centre seems paralysed. Wouldn’t it be amazing if the centre ground of European politics was destroyed because it failed to do the sensible things that you’d expect of the centre ground to do in the first place?

  1. Felix Quigley

    I did not get a chance to write on last topic but I noticed some cruel things said about the Jewish people as represented by their Homeland Israel so let me point out this “http://jewtube.tv/innovation/say-goodbye-arab-oil-hello-israels-car-runs-air-water/”

    I am mystified why any Irish person would not fully support Israel, and here since we talk about UK, support the Scottish Nationalists. My heart, soul, mind, body is witht he Scotish Independence.

    We are coming down in our world to the very essence of what it means to be human and being human means in the first place being Irish or Scottish or Jewish etc.

    However I stress that in this situation the Scots are making a mistake. They need to not get involved at all in British politics but use the parliament only to insist on Scottish Independence. Use it as a platform. Use it in the same spirit that Leon Trotsky used the conferences after the 1914-18 war and the Revolution.

    We need a party in Scotland that will do that.

    I am a Trotskyist and I wish to build a Trotskyist Party in Scotland. In doing so I would start with the Scottish youth.

    It is the exact same in Ireland and in Spain. It is up to the youth very much now.

    The youth guided by the historical and rich theory of revolutionary socialism opposed to the crimes of Stalinism.

    Above all the youth must be trained to recognise Antisemitism. Do your readers really think it ended in 1945?

    • cooldude

      Felix here are the reasons I personally do not support the current government of Israel.

      Israel is now an openly apartheid state and treats all non jews as second class citizens in the areas of law, property and human rights. This situation used to be hidden behind equality rhetoric but is now openly supported by the government and is gradually being supported by openly apartheid legislation in all area of life. There is now even support for segregation on public transport which was the benchmark for racial apartheid in South Africa and America.

      Israel is no longer supporting a two state solution with the people of Palestine. This is now official government policy and there is no longer any pretense that they want to coexist peacefully with the people of Palestine. Instead they continue in their policy of illegal settlements on lands seized in contravention to the 1967 UN borders. Until Israel respects the actions of the UN and acts according to international law they should be treated as a rogue state who has no respect for the rule of law.

      Israel continues to inflict huge punishment on the long suffering inhabitants of the Gaza strip. These people are denied all basic human dignities and are under constant harassment simply because they are ethnically from Palestine. The farmers have their crops destroyed, fisherman are shot at in their own legal waters and no trade is allowed with the outside world. These people deserve to be allowed to live in dignity and until Israel stops their blockade of these people and allows them to have a proper statehood it should be boycotted by any supporter of human rights.

      I would appreciate it if you do not label me anti semite because I am definitely pro equality of all people no matter what their race or religion is. I do not support inequality wherever it comes from.

    • EugeneN

      “We are coming down in our world to the very essence of what it means to be human and being human means in the first place being Irish or Scottish or Jewish etc.”

      But not Palestinian, I see.

    • Mike Lucey

      Felix, I think you really need to study the real situation in Israel and not the propaganda dished out by the highly controlled popular media before accusing anyone here of being an anti-Semite. This might be a good place to start for a true definition of the term, http://en.wikipedia.org/wiki/Antisemitism

      Cooldude has echoed my feelings on the situation with regard to Israeli actions over the past 60 plus years and I also will voice my opposition to current Israeli policy whenever I feel its needed.

    • Grzegorz Kolodziej

      Your Trotsky, along with with Lenin, murdered more people than they died in Auschwitz – which is difficult to achieve and even more difficult to be proud of (and if you red on Trotsky from a non-communist sources, you would know that even Lenin thought Trotsky was too cruel). Surely that’s more cruel than anything what has been written about Israel on this blog.

      As to antisemitism, I do not think it has ended in 1945, but the development of Zionism – which is a racist ideology – did not help to eradicate it.

      And many Zionists actually thought that antisemitism is good for their strategic goals. Here is one interesting quote from Albert Einstein:

      “Anti-Semitism will be a psychological phenomenon as long as Jews come in contact with non-Jews—what harm can there be in that? Perhaps it is due to anti-Semitism that we survive as a race: at least that is what I believe.”—Albert Einstein, English translation by A. Engel, The Collected Papers of Albert Einstein, Volume 7, Document 37, Princeton University Press, (2002), p. 159.

      Einstein was a genius. I do not want to think what the lesser Zionists had thought about it.

      In fairness, I think that much of the anti-Israeli criticism is rather cheap and double-standard and I wrote that. But it is not helped by statements of one their biggest theologians that in one of their newspapers that

      “Goyim were born only to serve us. Without that, they have no place in the world – only to serve the People of Israel,”, or this:



      ‘I am mystified why any Irish person would not fully support Israel’.

      Well, how about because Israel implementent their own version of Nurmberg Laws? – which was noticed by Hannah Arendt, who – in all due respect – had much bigger knowledge about it than you…

    • Deco

      As a Trotskyite, can you please give us your opinions about the manner in which Trotsky put down the Kronstad Sailors revolt.

      Trotsky was not a pacifist, until he was kicked out of the USSR, and had his military power removed from him.

      Until he was a blood letting, sadistic thug, more than anybody else than the Soviet leadership at that time. Had he been in power instead of Stalin, he would murdered his way through purges on an equal, if not greater scale.

      • Deco

        Trotsky was the world’s first reconstructed Stalinist. Eamon Gilmore, Pat Rabitte and co, all owe him a great debt, in their careers.

        After being kicked out of the USSR, Trotsky had to reinvent himself – minus the thugs carrying bayonets. And he seems to have done an impressive job.

        Trotskyism found principle is “what could have been” (if only Trotsky had got in control if the USSR). The assumption being that Trotsky would have been different to Stalin.

        Well, actually Trotsky was not kicked out of the USSR because he was not tough enough. He was kicked out because Stalin did not want competition for being the boss.

        The starting inaccuracy of most Trots is the fact that they gloss over a lot of nasty stuff about Trotsky and his use of power when he had it.

    • DB4545

      Felix Quigley

      Felix you need to operate in the real world. You sound like a 1970′s academic Marxist. I travelled in the Eastern bloc before the wall came down. The average person hadn’t got a pot to piss in while the elite siphoned off everything. Check out “volvograd” in East Berlin where Mr Honeker and his cronies lived. I remember a “dollars only” restaurant in Sofia Bulgaria in 1982. The food I was served wasn’t fit for a dog. In order to get anything done people had to be bribed with Malboro cigarettes/scotch whisky. A bottle of Johnny Walker got you a “top hotel” in Belgrade. I’ve been in better travelodges. Malboro were the de facto currency.I was in East Berlin on the 33th anniversary of the DDR. When I changed my DM to ostmarks all I could buy was sausage and bread and a watery beer. The bread had the texture of roof tiles and the contents of the sausage didn’t bear thinking about. I ended up giving my ostmarks away to a passerby before heading back to West Berlin.

      Putin said anyone who didn’t miss the USSR hadn’t got a heart but anyone who wants it back hasn’t got a brain. Put down the Marxist textbooks and speak to some Ossies, Poles or most people who lived under that regime and ask them do they want it back? Whatever f**k ups the a**holes who are running this economy are making pale in comparison to the lunacy of a socialist/communist command economy. You might want to visit one but you definitely wouldn’t want to live in one.


      • Deco


        It is easy to be a Trotskyite when other people are the “workers” doing the actual work.

        The Trots spend a lot of time talking about the workers, on a career that involves avoiding work.

        Trotskyism is an excuse to do much less work than everybody else, patronize them to tears, engage in attention seeking stunts, and present oneself as smarter than everybody else, and maybe even useful.

        It is suitable for a particular psychological complex. The same complex that feeds clueless fools to fascism, and religious fundamentalism, incidentally. The cause is always superior to the people who are simply flawed in not joining up. Simple minds and an absurd cause, can make great misery.

    • coldblow


      I have always had a soft spot for Scottish independence and indeed for all small countries. However within the context of the EU Scotland would be just another small region (in a Europe of the Regions) which can be more easily controlled by the EU (or, to be realistic, Germany).

      Then consider what independence has meant for Ireland. From a cultural point of view you would have to admit that it did achieve something but in the end it has been a failure. The same can be said of economics, I suppose, only more so (in that the bit which was achieved turns out to have been a mirage). I recommend you read Raymond Crotty’s Ireland in Crisis, although a good friend of mine read it years ago, when I first did (I lent it to him), and agreed it was excellent, but it didn’t stop him from being a Marxist Leninist.

      I assume you are a young man. When I was at university in the late 70s one or two fellow students claimed to be anarchists or what have you. At the time I thought they were twerps. Now, looking back, I know they were.

      What interests me (to the point of obsession) is why people believe and say the things they believe.

      I support Israel, though not uncritically. It seems that the Arabs living there would far rather be living there than in the neighbouring Arab states, though they won’t say this publically. Those who support the Palestinian cause and condemn Israel do so because… well, because that is what ‘everyone else’ seems to do.

      Have a look at Peter Hitchens Mail on Sunday blog, as he was a Trotskyite in his youth. He has a written knowledgeably about Israel too. Don’t bother with the readers’ comments though.

      • cooldude

        Coldblow the idea that Arabs are happy living as second class citizens in Israel is the exact same argument used in South Africa by the white elite. They constantly argued that the blacks were happy with apartheid and preferred it. This argument is always wrong and racist if you believe in equality and human rights regardless of color or religion. The Arabs in Israel are openly victimized in all areas of life. This includes housing, land , the law, schools and soon to be segregation on public transport if the extremists get their way.

        This mentality that a certain section of society are sub human or even on the level of animals, as many Israelis view Arabs, always leads to the type of violence against women and children we have seen in Gaza. Not only does it destroy those who are discriminated against it also destroys the elite from becoming full human beings and respecting their fellow humans. This racist mentality is predominant in Israel and is becoming more transparent all the time.

        The reason I condemn this racist attitude and philosophy is not just because everyone else does it is because it is morally corrupt and corrupts both sides. This applies to any state where racism is clear government policy and enshrined in the law.

        • coldblow


          ‘Coldblow the idea that Arabs are happy living as second class citizens in Israel is the exact same argument use in South Africa by the white elite.’

          Whatever about them being ‘happy’ there my understanding is that they say (in private) that they would be ‘happier’ there than in an Arab state. I don’t know that much about it to dismiss your claim that they are second-class citizens but I doubt it, and I doubt they are prepared to sacrifice their (relative) prosperity and happiness to live as ‘equal citizens’ in chaos and lawlessness. As for this ‘white elite’ this is a nebulous notion like ‘the rich and powerful’ (see the Channel Four News investigation of Plebgate on YouTube) whose use probably does more harm than good. You might also read a little about the wonderfulness of South Africa these days. The liberal ‘elite’ haven’t (yet) accepted the fact that Jacob (bring me my machine gun) Zuma is not the paradise they so badly want to believe it is. There is certainly good evidence for rich and powerful elites in the former capitalist-colonized parts of the world. I will also say that I disapproved of the apartheid regime (and don’t believe the Israel situation is at all comparable).

          ‘… always wrong and racist if you believe in equality and human rights… ‘

          I believe we are all equal before God but I don’t believe in ‘equality and human rights’. What does it mean? I try to live by Christian morals not by a list of virtues, prejudices, thought-crimes and rhetoric abstractions.

          ‘This mentality that a certain section of society are sub human or even on the level of animals, as many Israelis view Arabs, always leads to the type of violence against women and children we have seen in Gaza.’

          Again, I feel confident even at my level of knowledge in dismissing this accusation of racism. Certainly Jews and Israelis are on the receiving end of such attitudes from what I have learnt. Aren’t the notorious Protocols of the Elders of Zion still doing the rounds in the Arab world? As for violence against women and children, was there not also violence against men, or don’t they count? For the record, I think Israel’s retaliation in Gaza was excessive and wrong, and counter-productive.

          ‘The reason I condemn this racist attitude and philosophy… is because it is morally corrupt and corrupts both sides.’

          This is more rhetoric. And, as I said above, I don’t think they are racist and your comment has certainly not persuaded me otherwise.

          As for your link, Yvonne Ridley’s Wiki is interesting and made me smile.

      • DB4545


        Sometimes I reflect on the serious f**kups that we’ve made in this Country and wonder would we have been better off remaining in the UK. But then I remember travelling through parts of Birmingham, Glasgow, Bristol,Liverpool, Manchester and Stoke on Trent that make Coolock look like Dalkey. When you live on a rough council estate in the UK you really have a job clawing your way out of it and often the army is your only option if you’ve made it that far without drugs blighting your life.
        I’ve worked in London but London is another planet compared to some of these cities. I think we made the right choice if you consider that we served only as a farm and an industrial backwater for the Empire. If these Islands moved to a federation based on the State system in Federal Republic of Germany I think we could work well together. But as the UK is presently constituted it’s a one trick pony. It has the global City State of London with a large Island surrounding it. Look at the “subvention” to the North.
        Whatever our problems I wouldn’t like us to be reduced to that level of dependence regardless of how attractive some aspects like the NHS may seem from time to time. The UK would slam the door and run like hell if the North agreed to leave the Union and both Unionists and Nationalists know it. I don’t think it would tug at their heartstrings in the way that Scotland would. I think for that reason alone we’re better off paddling our own canoe.


    • dwalsh

      Putting aside all the stuff about Trotsky etc there is a simple answer as to why all right-thinking Irish people do not support Israel. Their genocidal policies against the Palestinian people. The last onslaught by the Israeli war machine on the Palestinians left thousands of women and children dead or wounded and destroyed swaths of civilian infrastructure. The only reason they get away with it is because they are supported by the premier terrorist organisation on Earth – the Washigton regime.

      • coldblow


        Can I ask you what why those who support Israel (by your definition not right thinking) do so? I mean, what are the reasons for this or their motivations? This is not a trick question, I genuinely want to know what you think about this.

  2. dwalsh

    To my perception central bank money printing is not boosting the economy; it is boosting another asset bubble. The result is stock market levels that are disconnected from the underlying fundamentals in the real or physical economy; and this is driving inequality. Wealth is not trickling down, it is flowing up. Central bank policies are serving the financial economy (the virtual economy) not the real economy.

    Central banks ought to be part of the public commons. They ought to serve the real economy and the common good. Central banks ought to be national banks. But the central banks are effectively private institutions. That is the reality obfuscated by the phoney ‘independent’ label attached to them.

    It is time for a New Deal. The notion that economies and nations should be structured and managed so as to best serve financial markets has run its course. Our economies and nations ought to be structured and managed so as to best serve the common good; which means emphasis must be placed on the real economy, the productive economy, in which the common people live.

    This can only be achieved by state action; specifically state investment in infrastructure; economic infrastructure and social infrastructure. This will massively boost the real economy and fuel a real recovery.

    There will also need to be Glass Steagall like measures to insulate and protect the real economy from the global financial markets, which are a basket case; completely out of control; a time bomb waiting to explode. They represent a mortal threat to our global civilisation and fulfil no productive function, other than to enrich already far too rich oligarchs.

    It is time for new economic thinking and a New Deal.

  3. michaelcoughlan

    Hi Felix,

    I like this post. I didn’t know trotsky was Jewish. Your post is very courageous and well written. <the bit I don't like is "revolutionary socialism". When you go down this road it always stays a revolution and the honourable aims of the socialists get lost in the political machine.

    A person like you might be very interested in the superb sucesses of organisations like mondragon;


    Forgive me if you know about these guys already.



  4. michaelcoughlan

    Hi David,

    “Today, with the rate of interest at zero”

    I don’t think it’s a good idea for the govt to take on more debt because sooner or later interest rates will rise. Too much debt is the problem.

    “there is an amazing opportunity for this country and other European nations to address inequality by investing in housing, education and health. We know that state investment in these crucial areas is what makes societies more equal”

    Yes unquestionably. Will the “state” do it? No. Can citizens act in this manner guided by you and led by the example of max keiser with crowd funding initiatives etc do it for themselves? Yes.

    Don’t you think it’s time to direct your insights directly at the CITIZENS and motivate them to act in their OWN interest collectively and stop getting side tracked into believing this government will ever do anything to help the people? I think so.



    • Danny

      The immediate issue would be more debt, but longer term the investment in health, education and housing should greatly reduce spending. Better health, improved housing and education will ensure those affected do not rely on welfare.

    • Mike Lucey

      Yes indeed Michael, with the advent of internet based crowdfunding its now possible for ordinary citizens to get small enterprises underway, some of which could well grow into large enterprises.

      I’ve actually backed a number of projects on Kickstarter and Indiegogo and most have been successful with just a few failing. A couple have also grown into quite large businesses in a very short period of time.

      As regards crowdfunding for housing goes. This idea has been around for many years in the form of housing co-ops. The co-op movement could be pushed further with the use of the internet thus gaining a much broader and more organised membership which in turn would greatly increase labour efficiency / management and decrease material costs via mass purchasing deals with suppliers.

      As for government building sufficient social houses, forget it! However they could help with incentives such as full VAT reclaim and lessening of red tape.

      I agree that DMcW’s clout would have a much better effect aimed in support of crowdfunding enterprises.

      I’m just back from a month in Sydney and Auckland visiting my daughters. Both the Ozzies and Kiwis seem to be doing well in the big cities but I fear they are in the last stages of a huge property bubble. The average house price has gone way beyond what the average earner can afford and rent levels have gone to as much as folks can pay. While talking to my daughter this morning on Skype she showed me a sales leaflet adverting a single car parking space in Sydney with an asking price of A$65,000 and a A$1000 a year rates / expenses after that.

      If that’s not an indication of bubble territory I don’t know what is. Hopefully they will have a ‘soft landing’ but I doubt it. However there are murmurs from the Kiwis that they intend to levy heavier taxes on non resident landlords which would appear to be the main group of investment purchasers.

      Another thing that I was glad to see in New Zealand is that the Post Offices are combined with Kiwi Banks. The Kiwi government has set up this arrangement some years ago and its taking off very well. Maybe its a case of the government showing some foresight just in case the preverbal hits the fan.

      • Deco

        Debt deleveraging is about to hit Australia. And New Zealand.

        It will be a disaster. The stupidity that prevailed in the debt load up period will be laid bare for all to see.

      • DB4545

        Mike Lucey

        I couldn’t agree with you more regarding a bubble in Australia. Perth house prices are insane for relatively modest(4 bedroom 2 bathroom)homes and that’s repeated in all the major cities. Ridiculous prices for a Country with very low population density in relation to its land mass even factoring in that large areas are uninhabitable. Remind you of anywhere?


      • DB4545

        Mike Lucey

        I couldn’t agree with you more regarding a bubble in Australia. Perth house prices are insane for relatively modest(4 bedroom 2 bathroom)homes and that’s repeated in all the major cities. Ridiculous prices for a Country with very low population density in relation to its land mass even factoring in that large areas are uninhabitable. Remind you of anywhere?


  5. EugeneN

    The way to go is social housing for people who can’t afford market rents. For two reasons, firstly the government will see, after it’s investments, a return in rent. For the subsidised private rent it’s sees nothing, but the rentier classes make off like bandits. Secondly this will help reduce, rather than put a floor on, private rents.

    unfortunately, at least for now, this won’t have the backing of the majority, as it will probably reduce house prices. When social housing was introduced it was introduced into societies where the majority were in private housing. The stock of privately owned rental was about 90% in 1915 in the UK, council housing and rental controls reduced that to 10% in 1990, with 70% of the housing stock owner occupied, about 20% in council hands. After Thatcher’s giveaway the council part reduced and for a while the owner occupied ratio increased, the the labour government gave BTL’ers interest free loans, and the London boom increased out of all proportion to wealth, and within a decade the number in london in private rented housing is in the majority, the rest of the country to — no doubt — follow.

  6. Adelaide

    The Greek government are side-lining its Finance minister Varoufakis at the behest of the EU finance ministers who don’t want to be reminded that Capitalism has matured into its twilight years and its demise is imminent.

    • Deco


      Democracy was born in Greece. And now the EU is killing it off.

      The problem with Varoufakis, is that he is simply too good at producing counter-arguments to the ECB.

      Memo to the Greeks. Pick a Noonan. Somebody with no clue, who provides the populace with glowing reports of how Big Brother in the EU will look after us, if we just do as we are told, and believe in this absurd corporatist, centralization of power project.

    • michaelcoughlan

      “Capitalism has matured into its twilight years and its demise is imminent”

      Lady Adelaide,

      It’s the exact opposite. Capitalism is trying to break out of it’s monetary straight jacket.


  7. Very nice to see David outline the reason for the financial asset boom.
    He correctly states tha central bank money funds the reserves of the commercial banks which in turn create multiples amounts of currency which finds its way into the stock and bond markets.

    Meanwhile the general economy stagnates and wages too. That is except for notable exceptions of individuals attached to the foregoing. Even, Google, Facebook and amazon are apparently hollow economic shells that are not profitable but have astronomic pricing of stocks based on the infusion of the monitorist policies cash.

    But when will he take the final step and acknowledge that all the additional money is issued as a debt at interest. It id this debt and interest that is killing the real economy all the while the financial instruments, the derivitive bets, are highly levered.

    The new deal is not for government to invest more debt based money on infrastructure but to disband the central banks and issue the money directly from treasury both debt and interest free. Why give the central bankers a free ride together with the sycophantic bloodsuckers attached.

    Use the post office as the national bank.

    Then repeal the legal tender laws and re-institute commodity money and we we see the fiat currency abandoned as it should be.

    It is the current monetary system is the problem

    • michaelcoughlan

      “Then repeal the legal tender laws and re-institute commodity money and we we see the fiat currency abandoned as it should be”

      You are making three mistakes.

      1) You don’t need to wait or get the government to do anything. Thinking like that means you think like a bonbon or a Keynesian meaning the whole thing can be fixed from the top down. It can’t and it won’t.

      Go onto bullioncapital.com and open an account. You can trade authorised warranty certificates which are iou’s for the physical metal stored. These awc’s will serve as a currency backed by sound money.

      2) The hard money needs to be stored to prevent shaving the coins in circulation and to prevent episodes of bad deflation. The awc’s are flexible soft currency backed by gold to prevent bad deflation and any bottle necks developing in the economy due to physical constraints of delivering large amounts of metal.

      3) The citizen must take responsibility for ensuring his own money (metal) isn’t being diluted. Giving the state or a CB the right to issue the money will have the same effect. A currency or money supply diluted to nothing.



      • You confuse what should be done with what is likely to be done.

        1) I am not waiting for the government or anyone to do anything.
        You mistake my comments and suggestions for a general solution for my individual actions.

        2) it is possible and desirable to store ones own bullion in whatever form it is deemed useful. I would recommend a coin like a Canadian Maple Leaf that is recognized and easily verified.
        I have never had a problem either buying or selling them. I likely would not have a problem using them directly as money.

        I might have a problem wondering how many pieces of paper have been offered by this AWC and wonder if they are tempted by the idea of fractional reserve banking as practiced by the goldsmiths of old and refined by the central bankers and bullion banks of today.
        Oh, shaving coins is inflationary not deflationary and I am at a loss to imagine the period of bad deflation you mention caused by commodity money.
        There seems to be little physical restraint to moving gold around for final settlement. Most trade was and could be done using the real bills doctrine with 90 day settlement clauses and silver coin is ideal for day to day shopping.

        3) is a point I often make. But the antidote is ignored.
        That is to repeal the legal Tender Laws. Provide competition to the fiat currency (whether issued by CB’s or Treasury ) to keep them honest. Then if fiat is abused and loses the trust of the people people will be able to move to an alternative.

        Stating that the “whole thing ” will not be fixed from the top down may or may not be true but that does not preclude me from stating what is needed. Weather it should be fixed at the top is debatable. If it is not fixed we will move to the final phase of current currency destruction with devastation of individuals and nations alike.

        Trying to reinvent the wheel is a waste of time as there are templates in existence that are the solutions. The rest of the world is reverting to precious metals as a store of wealth and a basic reserve. Central banks are net accumulators.

        The only states divesting of gold reserves are those who are bankrupted and those who are invaded and the gold stolen. The bankrupt include the US who refuse an audit of gold holdings for 50 years. Likely there is nothing left in Fort Knox and the custodial gold of other nations along with it.

        If you can’t trust the government why would you trust the government money. The world is divesting of US dollars. The biggest buyer of government bonds and the stock market is the Fed. The markets have been destroyed and float on billions of imaginary fiat debt based currency that in fact does not exist. The economy has become an illusion.

        Why do so many people have a purely Western perspective on what honest true money is? Look around and see that the old adage of gold is the money of rulers IS STILL TRUE, and “he who has the gold makes the rules.

        It will not be long before it is revealed which nation states have the power of gold and which have squandered their inheritance. “The times they are a changing”

      • http://investmentresearchdynamics.com/cash-is-crashing-from-stocks-is-the-stock-market-set-up-to-crash/

        “It’s hard to say when the stock market and cash flows will re-converge, it’s even harder to predict in which direction the convergence will occur – i.e. cash flowing back in (likely injected by the Fed) or stocks crashing – but I would suggest that if this divergence continues, with stocks moving higher and cash leaving stocks, the Fed has greater control over our markets than anyone outside of the elitist circles understands – and that’s a truly frightening prospect.” –Dave from Denver

  8. Deco

    SNP = Something 4 Nothing Promisemakers.

    The SNP are waiting to be found out. True Sturgeon is more a breath of fresh air compared to Cameron, Milliband, Clegg, Farage, Bennett, the DUP, etc..

    And Sturgeon intends to keep her promises.

    She is correct about Trident. Britain having a nuclear submarine fleet is pointless, when the Americans already have a much large one, and UK foreign policy consists of “we agree with Washington”. It is a massive waste of money. Better to spend it sensibly.

    Sturgeon is also correct about the way that the Labour Party run the institutional state, making it fatter and more incomprehensible – and making it unaccountable to the people.

    Sturgeon is correct about the Labour Party taking working people for granted. Sturgeon is also correct in her assessment that having people only choosing one option repeatedly is not democracy. The Tories are correct in their assessment that the LP need the working people to depend on the LP, and that the LP aim for this. But nobody yet went with this argument to the constituency on the left, and pointed it out to the people.

    However, where Sturgeon is wrong is with regard to the numbers. The UK economy is built on a massive pile of unsustainable debt. Only Farage seems to grasp the seriousness of the debt problem, and he fails to comprehend how to fix it. The others simply refuse to see it. Britain is debt addicted. Like the Irish state system, the British state system has too many commitments, that are unaffordable, and that afford no pay-back. This was built up during the Blair years. Cameron was supposed to fix it. But Clegg made sure that it never got fixed. And Cameron got accustomed to non-reform.

    Based on the current numbers, Milliband will be the next UK PM. He is a good intentioned lad. However, he has a front bench that lost the plot when they were last in power. Ed Balls is clueless. But Osborne is no genius, so he probably reckons he can get away with it. Harriet Harmon is a disaster, and has been kept in the background so that people do not make the comparison between her inane ramblings, and the cautious sensibility and preciseness of Theresa May.

    The real significance of the SNP, is that they will distract from the seriousness of Britain’s financial predicament. The Tony Blair concept of an institutional state is not merely nonsensical, it is expensive and wasteful. It does NOT improve the lives of ordinary people. It does DRIVE up debt and property prices though.

    The eventual consequences of Milliband’s team of fools, getting into power, is a serious financial crisis in Britain, within 12 months. I think that Ireland should plan accordingly.

    [ Judging by the behaviour of the current FG/LP government, and their plans to buy the next election, I think that Ireland has the wrong plan in place for what is now likely to occur].

  9. Deco

    If you give some people something for nothing, and if other people have worked to earn that, then that is also a form of inequality. It is a perverse form of inequality, because it festers all sorts of negative emotions.

    Giving people free housing, free education, and free healthcare does not make “universal” sense. The building of people’s hopes that they can get things for free, does engender a behaviour that later demands these products.

    Housing, Education, and Healthcare are never free. They can be given for nothing, to some people, if somebody else pays for them. That means that some people are expected to work extremely hard to generate money to pay for somebody else to get something for nothing.

    Giving stuff for free in societies that were organized conservatively, modestly, cheaply, simplistically, and collectively in the 1950s/1960s worked up to a point. Beyond that point, there seemed to be a consensus that people would be responsible. And there was pressure on people to get off the system and make a contribution.

    Nowadays, it merely breeds resentment, nastiness, and contempt. There is simply too much contempt in the culture, to make it happen without a kick-back. The real damage of the Thatcher/Reagan revolution was cultural. Narcisism behaviour was raised to become a cultural achievement. There is far too much selfishness in the cultural mores. And secondly the legal profession has wised up to the potential of such an arrangement, and has demonstrated an agility to quickly make the system bankrupt, through excessive commitment.

    The entire institutional state has become too complex.

    But there is another aspect of that also. The more complex, and oversized that it has become, the more functionaries, and organizational parasites are living off it. And the louder their voices become to demand extraction of resources from the host populace to sustain their livelihood.

    And that is where we stand in the Western World today.

    We have been here before. In the decades leading up to the fall of the Roman Empire. Unfortunately, the history of those decades is biased in favour of those who were part of the state system. The barbarians could not read or write. Obviously the Goths had a much better grasp of common sense, otherwise they would have been beaten. They were less in need to reassurance, and less in need of complicated extortion mechanisms. They were probably more direct, and honest in their approach. The Roman state functionaries had lost faith in simplicity, directness, and courage itself. The failure to simplify, resulted in failure.

    • DB4545


      One phrase I remember is that a communist may not have much but he’s willing to share half of what you have. That’s the Institutional State in most of the West today. The State extracts over half of your earnings through taxation with the understanding that these resources will be used for the common good. Then politicians, corporate lobbyists and all the insiders siphon it off through inflated salaries,obscene pensions, tax breaks, graft and crony capitalism.


      • Deco

        “Symbiosis” – when the parasite outgrows the ability of the host to support the parasite.

        Example – the Irish institutional state.

        The assumption is that the parasite can grow, if it can invent a new moral justification for growing. Enter social housing.

        Social housing is the one reason why the dole queues will not be reduced. The dole is not enough to keep people on welfare.

        But the choice between a mortgage and social housing, amounts to a massive difference. In fact social housing is the number one factor restricting the efficiency of the labour market in Dublin.

        The current media chorus for more social housing is misplaced. The social housing is like a lottery. If you get the winning ticket, you are made. Much better than paying a mortgage to live in Laois, and spend two hours in a car going to work every day.

        • DB4545


          That’s part of it. What about parasites like Ahern and Cowen elected to manage our resources who absolutely took this State to the edge and still collect 3000 a week in pension? The traditional model of the State assisting with housing creates welfare ghettos which doesn’t help individuals or society. In fairness people with a Laois accent face huge social disadvantage and need all the help they can get.


  10. Deco

    The big news in Ireland this past week concerns SiteServ. now, David cannot discuss this. In fact many in the Irish media have to keep their mouths shut.

    But thanks nevertheless for discussing the Insider versus Outsider culture that exists, at the junction of money and institutional power.

    That is all that we needed to know.

    • DB4545


      It is the big news. If that man gains any further control over the economy his corporate interests will become what used to be said about IBM. “IBM aren’t the competition they’re the environment”. I voted for FG/LAB parties to clean FF out of government and now FG are tucked up in bed with big business. Mr. Noonan’s track record in the Hep C scandal should serve him well defending corporate interests. The activities of the institutional State, the political elite and the corporate communists in this State make the Borgia popes look choirboys.


      • EugeneN

        Yes. The man who cannot be named pretty much controls FG. There is nobody to vote for.

      • michaelcoughlan

        “Mr. Noonan’s track record in the Hep C scandal should serve him well defending corporate interests”

        Excellent. Like I said before whether it’s noonan or big bird; The more you can be relied on the fuck your own the more regarded you are. It’s what I call nazi logic; The more people you exterminate the faster you get promoted.


        • DB4545


          I think their primary motivation is Darwinian in nature and probably no different to most people except they are far more greedy and absolutely exercise their utility. They want to ensure that they and their families control resources and have access to influence and control down the generations. I don’t think you’ll find evidence of straightforward bribes. I think you’ll find if they’re compliant or complicit doors open for their children to attend top schools and universities. Their offspring gain access to “internships” with global banks/corporations/global institutions and are “given” influential roles within those entities. In turn they’re “rewarded” with non executive directorships when they’ve delivered the goods. It’s still a politburo just a corporate communist one.


          • michaelcoughlan

            “It’s still a politburo just a corporate communist one”

            Fascist I’d say.



  11. Deco

    David is advocating Keynesianism for Britain.

    Britain called in the IMF after the last episode of Keynesian economics ended.

    The Friedman economics (monetarism) that has been tried since Thatcher, is now about to be found out.

    The argument “Keynes” or “Friedman” is nonsense. They both bring about systemic failure in the end. A mixture of the two approaches (like being tried currently by the Democrats in the US) is dangerous. The debts mount. The case of militarism continues.

    At the outset of this crisis, I was discussing the economic problems with an elderly Italian Engineer. And when he covered everything, he said “in the end they will want war”.

    And he was right. War empowers those in the power centre, who are facing the possible consequences of being found out. It regiments the populace back into obedience. It is not that they want war. They want obedience. They want control over an increasingly sceptical populace. And War is the best means of achieving a clampdown on criticism within.

    As shown by the Brussels demanding that the Greek Fin Min be sacked, those at the power centre do not like insubordination. In fact they do not even tolerate dissent.

    And so this Empire that we are now in, needs a war. It really needs one. The people do not need one. In fact they need accountability. But their desire for accountability creates a desire for war, from those that which to preserve the power centre.

    • EugeneN

      People who think Keynes was wrong don’t really understand Keynes. He didn’t advocate pump priming in booms and austerity in recessions — which is in fact what the world is doing — but the opposite. Austerity in booms and loosening fiscal policy ( he didn’t really discuss monetary policy) in recessions. With the surplus you build up during the good times. An eminently sensible application of negative feedback. The problem is convincing people in booms that taxes should go up.

      • michaelcoughlan


        Re Keynes;

        McWilliams is advocating in this article Keynesian spend to get Ireland going. He also refferences FDR. What he hasn’t copped onto is that WAR IS THE ULTIMATE FISCAL EXPRESSION.

        I don’t expect that Dick Cheney will be fixing his bayonet anytime soon however.


    • Grzegorz Kolodziej

      Milton Friedman had a few good catchy sayings, but the main problem with him is that him and Keynes are both on the demand side of the economy. The second problem is that some things he was saying in his interviews do not quite follow from his theory…

  12. StephenKenny

    One of the things that people seem to miss, these days, about FDR’s policies was that the actions he funded – roads, electrification, dams etc – were fundamentally good for the economic structure of the country:
    He didn’t just relay existing roads, or build alternative roads, he transformed the transport system of the USA, making a whole plethora of industries possible, where they’d been previously impossible
    He provided electrification for huge areas where there had been no electricity network – again, providing the ability for a whole host of economic activities that had been previously impossible.
    The TVA transformed farming, and therefore output and food production, over a wide area area, and provided very useful technical improvements, that benefitted the entire agricultural sector.
    Many of the New Deal policies were very beneficial in terms of future wealth generation.

    Today, that is very hard. Building houses would be good, but it would also “damage” the one sector that governments hope will “grow” the economy.

    I was in London recently, talking to a senior employee of one of the government ministries. The whole Greek thing was all over the news, and over coffee afterwards we chatted about how difficult it must be for the Greek public at large. She said something along the lines of “At least nothing like that can happen here, the austerity we’ve had has meant that our budget deficit is not a problem”. I was surprised by this, and we pulled out one of Mr Jobs’s finest devices, and looked around. After quite a lot of digging, mainly in the German and US press, the consensus seems to be somewhere between £90bn and £100bn per year.
    She found this really quite chocking – especially when she realised that it is equivalent to not much short of the entire UK education budget – every school building, every teacher, every university, and on and on.

    Two things were interesting about this encounter: firstly that the UK media clearly has a moratorium on the size of the deficit. We looked at a lot of news media sites, and, for example, the BBC website page specifically about the budget deficit was full of pie charts and graphs, and nowhere did it give a straightforward number; secondly, was the fact that his intelligent, well informed, very engaged, member of the UK public really thought that there was no problem with the UK budget deficit.

    • Krugman doesn’t seem to care about the debt:

      “Top economist attacks Tory austerity – and Labour’s limp response”


      • Grzegorz Kolodziej

        Krugman got wrong nearly everything. His popularity and celebrity status is purely due to the fact that he has a column in NYT (its theses are often repeated in the Irish Times by Fintan O’Toole (who is a Marxist) a week later without any critical reflection).

        In 2008 he described Europe’s economy as ‘Europe’s economy looks a lot better now – both in absolute terms and compared with our economy – than it did a decade ago.’

        In March 2009 he was worried that Europe may ‘make the mistake of thinking that “big welfare states are … the cause of Europe’s current crisis. In fact … they’re actually a mitigating factor.’

        He got the timing of the eurozone breakup wrong 11 times until he stopped predicting it and I would not be picking him on that one for I got it wrong myself in my hedging (but I got right so many things Krugman got wrong, like not taking a mortgage when Krugman was praising property asset bubbles), except that he is such an arrogant geezer.

        Someone calculated that only eight of Krugman’s more than 100 columns in 2006 referred to the bubble in the U.S. housing market and the danger posed by its bursting and that the key word “subprime” did not appear in his column until March 2007.

        I could go on about him much longer, but my break has finished.

        Check this out:


    • coldblow

      Stephen Kenny

      That is a very interesting post. Despite (or rather, probably because of) the oceans of information available people find it difficult to know what is happening. And even if the information is to hand in a clear way you would still need to *want* to know. I suppose if you had talked to an official from the Dept. of Finance here ten years ago he wouldn’t have suspected what was around the corner. I wonder do those at the top (PM and ministers) know what is going on.

      Former govt aide Dominic Cummings thinks they don’t. He spoke of ‘politicians running around who don’t really know what they’re doing all day or what the purpose of their being in power is.’ He also said, ‘Everyone thinks there’s some moment, like in a James Bond movie, where you open the door and that’s where the really good people are, but there is no door.’


      Hitchens thinks that the debt is off the agenda until the election is over.

    • Yep, the economy of the world can be summed up in the statement.”It’s the debt, stupid”!!

      Some of us have been talking about this for decades. We are bound to be right sooner or later :) Not too long to go now for the giant purge of the debt from the economy. Then we all start again from nothing which is where we were before we started again the last time.

      In the meantime have fun and enjoy yourself because that is what is left in life. It beats being an economic serf or slave.

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