corporate welfare

Did I see correctly the other night in a news report that there are approximately $61,000,000,000,000 of these "Credit Default Swap" instruments out there?

At the end of September the market capitalization of every listed company on the planet amounted to just two thirds of that, and in total, including all state and corporate bonds and other loan instruments the total of financial instruments in issue comes to less than the $61 trillion in swaps out there.

Isn't that bonkers? Doesn't that suggest that every loan, equity issued company or bond issue is completely, fully insured and then some? How does that work then? It seems that there's been a bit of mutual self-gratification going on in these heady dealing rooms. If our money is going to help unwind such ridiculous positions it's frankly outrageous.

When are we going to see the City of London police entering offices in Canary Wharf and carting off senior traders then instead of Brown and Blair fawning over the wreckage trying to rescue something from this deep pile of crap whilst hoping we won't notice that this year's Christmas bonuses are being taken out of our money?

...and we still don't seem to know what to do about bankers!

The Bank of Scotland, whatever is now left of it, is 312 years old. That of England just two years older. Ever since the banking system has been built on state protectionism, corporate welfare, monopoly privilege and, at its heart, a gigantic fraud.

The fraud was that a goldsmith could give both you and I receipts for my gold stored in his vaults and make money on both - from me a fee for keeping my gold, from you interest on the receipt you had borrowed from him. Indeed they found they could duplicate this so frequently, fraud upon fraud if you like, that though gold is perhaps regrettably no longer the basis of our money, the "hardest money", real "hard cash", amounts now to just three per cent of our total money supply in terms of everything we all have collectively borrowed and deposited.

To be fair, most goldsmiths at least issued notes of their own. Customers - both depositors and borrowers - chose which goldsmith to bank with on their reputation. If they became overstretched, issued what was felt to be too many receipts for the same gold, their notes would be less desirable in trade, there may even be a "run" when all the receipt holders tried to get their "real" money, the gold, out of the bank, which of course had much less gold than he had issued such receipts for. Nowadays, however, what they create and destroy in their lending business is denominated in the national currency, a currency issued nominally at least, by the state and guaranteed by the state.

This means it is no longer a private affair between a bank and its customers as to whether their business practices jeopardise their customers' savings; it is a problem for us all. We have ceded control of the supply of money issued in our name to private businesses whose main aim is to make profit for themselves and who, in the course of that otherwise noble pursuit, play fast and loose with the very air the entire economic system requires to function. And states protect them, bail them out as seems about to be the case in the US to the tune of almost countless billions, because they have to guarantee the currency they have so little control over.

Regular readers will know I am very fond of a quotation from Josiah Stamp, Liberal politican, Chairman of the Midland Bank in the 1920s and reputedly second wealthiest man in Britain in his lifetime:

"Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again.

"However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits."

It rather seems to me that with the events of the past few days, we may be "taking the earth away from them" (or, more accurately and nauseatingly, buying it back from them) which they have stolen from us with their inflationary approach to money, but leaving them the power to create those deposits all over again with which, in the next bubble, they will buy it all back again.

Everyone seems to think that money has somehow been pretty constant. The way it works I mean, not whether we call it shillings and guineas or pounds and pence. But the current confidence trick really began with the depression of the 1930s and the work of two extremely wealthy, powerful men in the US who persuaded the government of their day to set up the system that enabled them to create "our" money according to their corporate priorities. The results of John D Rockerfeller and John P Morgan Jnrs' work was the Federal Reserve and the rapid ramping up of fractional reserve banking, and the eventual demise of real solid backing for that currency.

If the current crisis really does turn out to be the "big crunch" at the end of the cycle begun by that 1930s "big bang" we should be ready with policy to replace that fraudulent, anti-competitive, oligarchical system, designed by the very wealthy to keep them that way for little actual productive work with something different. Entirely different. I do not detect any mainstream politicians with the cojones to say so. Our governments and politicians are but eunuchs to the bankers, and the longer that continues, the more the vast majority of us will suffer.

...and is not "liberal" either.

There are often attempts by ministers (Jacqui Smith is mentioned in Sunday's Independent for example about the recent prisoner data loss) to shirk their responsibility for government cock-ups. There are also left wing commentators who crow that these incidents are clear proof that "neo-liberal" policies of "privatising" government functions are evil and should be stopped; that the "free market" does not work in the public sphere.

But I don't consider such contracting out of work as either liberal nor as implying that ministers are no longer responsible for their incompetence. Nor, even, are they truly "privatisation". To me the doctrine that says some things are better done by profit motivated companies (or other, non-government organizations) does not mean merely sub-contracting to a government service level agreement.

Yes, such arrangements may save on costs or similar. But all they are doing is delivering the same policies and procedures designed by government. This is the "corporatisation" of government. It is inherently protectionist - the government grants usually monopolistic contracts to firms, sometimes even, like Capita, that started life as a bunch of civil servants deciding they could do better for themselves by making a profit out of what they do.

No, real privatisation, so called "liberalisation" of government functions, should mean the state divesting themselves completely from interference in that policy area. For example, just because DVLA contracts out its computer systems and administration does not mean the registration and licensing of vehicles and drivers has been "privatised". Not bothering with a DVLA at all and allowing insurance companies to work out ways of ensuring the drivers and vehicles they are prepared to insure comply with what they consider to be safe would be. i.e. a different way of working, free from government entirely, and open to proper competition where new ideas and ways of achieving similar ends can be developed. Finding new structures, free from the dead hand of government to do the things we need, rather than what politicians think we ought to need.

Similarly with ID cards or passports - it is not "privatising" simply to contract out the development and implementation of a government policy to profit making firms. Indeed, this is anathema to true economic liberals - for it is corporate welfare, money for old rope if you like. My idea from yesterday about getting rid of government validated passports entirely and instead letting people buy their own guarantee of identity if and when they need one using a new mechanism such as digital certificates would be liberal; the true privatisation of functions the state previously chose to regulate and deliver itself.

And of course, such liberalisation may not end up being delivered by "for-profit" corporations at all.

So Jacqui, stop trying to hide from your responsibilities. You have cocked up just as surely as if the person with the memory stick were your permanent secretary. You are incompetent. Indeed doubly so - for not only have you failed to do your job, but you've even failed to make sure the simpler option - getting someone else to do it for you is done properly.  You should go.

The Competition Commission has suggested, perhaps commanded (I no longer know what sort of power the CC has given that most competition issues are meant to be dealt with on a Europe-wide basis) that BAA ought to sell some of its airports, and in particular two of the three main London ones. I am uneasy about this for two main reasons...

First off I am deeply suspicious about the timing of the Competition Commission's investigation which seemed to be a (possibly coincidental) reaction to those foreigners (Ferrovial) taking over a British company which had owned those airports for a significant time. If there was a problem with monopoly, surely it should have been taken into account when BAA was first privatised.

And second it is a big step to try and force someone to divest themselves of their own property, especially when it's not as if they are "absentee landlords" but working, and presumably working quite successfully (other than the debt burden) the property.

But there is another problem. The monopoly is not really about the airports themselves - and indeed making them compete directly by being owned by separate owners wanting to maximise their income from each individual airport is likely I would have thought to result in heavier use of all of them, increasing the discomfort for the folk who have to live as neighbours of these smelly, filthy, noisy facilities.

It is exacerbated by the fact that what they really control is access to the airlanes that supply those airports. Airlanes that are, in the economic sense, "land" - part of "unimproved" natural resources with finite space - and in this case also time - (though of course safety technologies can increase the capacity a little) for all the potential users. This is part of the commons, and Ferrovial/BAA and the longer established airlines profit directly from the monopolistic enclosure of those airlanes.

Like the Electromagnetic Spectrum they are part of the "commons" and should be leased at their full economic rent from the state for our collective benefit. They are most commonly called "landing slots" and are worth a huge amount of money - Deloittes reckons that peak day time slots at Heathrow are worth up to £30 million per pair in summer, and there are 9,562 (4,781 pairs - one to land and one to take off on) per week in high season, with an overall limit of 480,000 per year at the moment.

The slot situation is currently, by common consent, pretty chaotic. The government has capped the amount BAA can charge and capped the amount by which it can increase the charge, but 97% of all slots at Heathrow for example are not open to effective competition as they are sold at this capped cost to airlines who have been there the longest, so called "grandfather rights". Heathrow is the only airport in Europe at which there is a significant amount of secondary trading in a "grey" market which is where the £30 million per pair arises. All this profit, the economic rent, goes to the airlines and Deloittes goes on to calculate that BA's slot portfolio may be worth up to £2bn if it were included in its balance sheet as an asset compared with its market capitalisation of around £2.7bn!

The CAA should be auctioning airspace rights to all airports at whatever the market will pay, whilst airports themselves should be responsible for charging the airlines for the use of the "improvements" - the terminal access, ground facilities and so on.

This would force traffic that doesn't actually need to use these massively oversubscribed London airports out to existing regional airports first, often reducing travel times - why travel from Lancaster to London to get a plane if the destination you want is available more cheaply from Manchester - as well as bringing increased economic activity to the areas around those regional airports - airports are a huge draw for international businesses. And unless the overall capacity of slots convenient for travelers' points of origin and destination is actually more than required, would generate a goodly sum for the government in a more market efficient way than say fuel taxes.

I hope we will be having a debate at South Central regional conference on Heathrow's third runway proposals. I believe the rigorous eradicating of this money for nothing monopoly on the part of the airports and airlines through nationwide slot auctions would actually obviate the need for the extra imposition this third runway would cause on teh surrounding areas without affecting overall the competitiveness of Heathrow for flights that really need to use it.

They've been rumbled. The very shaky foundations of the entire house of cards have been exposed. The vast fraud against lower and middle income households that is the financial system, and, ultimately, government has been laid bare. Surely everyone can now see that? No? That doesn't surprise me. Just as there was very little outcry in this country when former Governor of the Bank of England Eddie George revealed that their commission on independence in 1997 was not just to maintain an inflation target but also to see to it that house prices continued to rise by keeping money as cheap as possible for as long as possible.

In my opinion, whatever the consequences in the short term, it would be better if Fannie and Freddie were allowed to die gracefully even as their lives have been a disgraceful deceit. What have they done that is so bad that a normally forgiving person like me would be calling for the corporate equivalent of the death penalty? The seemingly innocent practice of underwriting mortgages is in fact a key factor in the creation of the property price bubble and in the transfer of wealth from poorer to richer.  Yes that's right, redistribution the wrong way!  Without that underwriting the front line lenders would have been more cautious in their lending stabilising prices and not stretching households to the financial limits just to have a home over their heads.

Oh, what a clever idea, you still say perhaps - after all, it surely helps more people buy a home. And that's what Fannie and Freddie were supposed to do, by offering an implicit government guarantee people who would previously not have been considered for a mortgage got to join in the jamboree. And that's the problem - a government guarantee. They, the state, have pledged an eye-wateringly close to unlimited amount of money, that's *our* money of course, to make us have to pay more for our homes to the banks who effectively create the credit in the first place and line the pockets of landowners. And this in a nation that is still so relatively empty as to have marginal land in abundance so other land values should still be relatively stable other things being equal.

But those other things are not equal, the cycle of lending inflates the broad money supply so over time reducing the value of the asset that very system conspired to make you pay so much for in the first place. And all this is only possible because of the enclosure of land, the privatisation of the entitlement to and collection of the value that the whole of the community creates at any particular unique location.

At best, Fannie and Freddie are shining witnesses to the power of unintended consequences - I am sure the New Dealers whose brainchild they were earnestly believed they were helping: at worst, they can be seen as part of a conspiracy between government and those who own the financial system and its institutions to transfer vast amounts of wealth from Average Joe to the richest few. Add the evidence of Eddie George that in the UK the past ten years' property price boom was deliberate though unannounced political policy and it's harder to rule out conspiracy over cockup.

Either way, Fannie and Freddie should go, and go quickly, and, as they say, be buried in a closed casket to boot. It will unleash financial turmoil of unprecedented ferocity I am sure. But it will be the herald of death to a fundamentally flawed, corrupt and downright fraudulent system that continues to benefit a tiny few at the expense of the vast majority. I was introduced to a new, to me, term at the weekend, the Kondratiev wave. Looking at the vast amounts of money involved in the current potential crisis, the fact that the asset bubble is bursting as production is also slowing and there's ever decreasing amounts of money available to maintain existing economic activity, and I'm beginning to wonder if Kondratiev wasn't on to something.

This is a huge opportunity. An opportunity to reinvent a stable monetary system more suited to a globalised world of trade and increasing aspiration amongst a whole new world of consumers, a world in which, of necessity, economic activity is shifting relatively away from the west, from the existing reserve currency and its close followers and towards the east and the global mass of population.

And that, dear reader, is why I am likely to die waiting. An opportunity those who wield power would prefer us to miss.

I hate the G8, there's no doubt. I find the whole idea a nauseating display of mankind's folly that a few people with power can do more or less anything, from manipulating the world's climate to holding in their grasp the lives of billions whose lot in life those leaders of the industrialised nations can barely comprehend, let alone decree how to change.

It epitomizes to me why nation states are vile, unnatural divisions of humanity and the planet which, frankly, seem to have more to do with protecting the wealth of the few and patronizing the poverty of the many on this earth. Their leaders pose, Atlas-like, for photo-calls after their vacuous pronouncements, like some cabal of gallactic princelings in some dystopian Sci-Fi vision of a future inter-stellar imperial court.

Yet I'm no crusty protester you'll find scaling fences at Gleneagles or taking a bullet in Genoa complaining that these neo-cons and neo-liberals want to sell our world to the most hated capitalist profiteer. Oh no. Business, amongst other examples of voluntary human co-operation, has a huge part to play in addressing the needs of everyone on the planet. If only it could all be carried out on a billiard-table-level playing field.

And this is the greatest power these eight chattering onanists have - they could, if they chose, level that playing field tomorrow, or at least leave Japan this week having agreed to do so. But they don't want that, do they. because they also represent the businesses already raping the planet and its people by dint of playing on a skewed field.

They make me puke when I think of them, quite literally. I am nauseous writing this to be honest. I do not believe there are eight people on the planet, in fact not 2008 nor yet even 200,000,008 endowed with the wisdom of gods and strength of titans who could do any better at securing the future of this planet than the possibility oif billions of us being able to communicate and co-operate directly among ourselves.

At the top of my front page you will find what must be one of my favourite quotes from any politician, in this case the truly radical, Richard Cobden:

"Peace will come to earth when the people have more to do with each other and governments less." 150 years later, like infants only learning to crawl, we still rely on those protectionist, egotistical, smugly self-important governments despite the evidence that they cannot and will not deliver on their promises.

Whilst I certainly do not agree with all their policies, I find the idea of SimPol, in which we use modern communications technology to get ordinary people throughout the world, in diverse and distant countries, to voice together our aspirations and make those same sort of global changes on a consensual and co-operative basis.

Y I H8 G8.

...let alone enforceable?

A row that has so far been played out in the pages of the august British Medical Journal has suddenly burst out onto the public stage as MPs have found constituents being told they will have to pay for their NHS treatment because they've paid for additional drugs or treatments, for example that the NHS doctor tells them may help but cannot be prescribed by them.

But is the notion that you can be barred from receiving the treatment your tax already pays for even legal? Apply the same argument to education, for example, and parents who pay for a few weeks extra tuition for their child would be forced to pay for the whole of their state school provided main stream education.

And even if it is legal, how is it enforceable? Should someone who buys some nutritional supplement that a friend recommends in addition to prescription drugs for their illness be forced to pay the full costs of their NHS treatment? Or is there some (arbitrarily?) set level - is it okay to buy an extra packet of over the counter drug but not a cancer drug that NICE won't allow you to have on the NHS even if your NHS doctor says it will possibly help over and above what they can do for you? And how do they know? Is it basically down to whether or not a private consultant requests your medical records from the NHS and the person receiving that request has to snitch on you?

Of course I can see there may be cases where it might be legitimate for the NHS to wash their hands of a patient who has paid for some additional or alternative treatment that actually compromises the care the NHS is trying to give that patient. But if it's complimentary to the treatment the NHS are giving, and only unavailable through them because of NICE, or budgets, or rules, that doesn't apply. Indeed, it would probably be saving the NHS money in the longer run - the quicker you are cured, or the more independent you are, because you have supplemented your treatment, the more resources they have to spend on people who cannot pay the extra, surely?

Again, the comparison with private education is interesting - if someone's additional private tutoring has made them better able to cope with their mainstream school classes in some way, the classroom teacher, surely, has more time to spend on others.

And if it's indeed just if it goes against the advice of the NHS,
should anyone who does not apply government sanctioned wisdom on
healthy living be made to pay for all NHS treatment because their
lifestyle is prejudicial to their health in some way? 

Or, perhaps, could it all be a case of corporate welfare - the NHS has "exclusive" deals maybe with drug companies that, say, give them discounts or some other kind of soft benefit even if only their treatment is used for a particular condition and if people opt to go for a competitor's supposedly better treatment the deals all fall apart. The NHS is riddled with protectionism, particularly in its procurement policies. And yes this itself locks out competition and keeps prices high.

The only real answer is that clinicians themselves should be allowed to select and prescribe their own choice of treatment that they think will help that patient get off their hands as soon as possible and let them get on with curing someone else. Surely that's the whole point of the NHS?