From one of
our comrade fellow bloggers Quoth
Alistair Darling:
"The Financial Services Authority has announced a further increase from tomorrow to the compensation limit for retail bank deposits to £50,000 per depositor, which means £100,000 for joint accounts. That measure will ensure that 98 per cent. of accounts are fully covered."Now, quoth
Iain Duncan Smith:
"At the Dispatch Box, the Chancellor mentioned, quite rightly, that our protection covers about 98 per cent. of all depositors, but he will also recognise that we have significantly more money on deposit than Germany does. The reality is that that 2 per cent. represents a very significant amount of money. What concerns me right now is that, given the febrile nature of the markets—watching little things and then panicking—if they see any flight of capital, even that 2 per cent., towards Germany, it could cause another stampede and another crisis. I recognise the Chancellor's problem about indicating what he may or may not do, but does he not recognise that that 2 per cent. alone is perhaps enough to tip over the markets if they saw a flight of that money to, say, Germany or even Ireland?"So, what they are saying is that the vast majority of accounts in the UK hold less than £50,000 (£100,000 for joint accounts) in retail banks.What they are saying is that there is an incredible disparity of wealth - but that the very wealthy have the capacity to cause crises by the overwelming might of their money.
Let's be clear, what this means. Economic crises are not natural phenomena, they are the results of the owners of society exerting their influence. They are profoundly political - the wealthy making us dance to their tune. The wealthy on strike.
Capitalism causes a crisis by its very existence, starvation, starvation related diseases, gross poverty, curtailled life-spans, wars - they are all ignored as background noise.
When the capitalists feel the pain, then we are all made to jump.
This isn't a case of being for or against bail-outs - after all, who can blame the man with a gun to his head - but a matter of being for or against capitalism.
Our only demand must be:
"End class society!" else this will all happen again. It is not a glitch, it is politics, the political decision of the real voters to vote with their feet.
From our discussion forum Robert Reich, former Labor Secretary under Bill Clinton has an interesting article in the current New Statesman:
http://tinyurl.com/4h4ss8"The problem lies deeper. Most Americans can no longer maintain their standard of living. Remember, Wall Street's near-meltdown originated with the bursting of the great housing bubble. That bubble had allowed millions of Americans to take money out of their homes byusing their rising home values as collateral for loans. But now the bubble has burst, those homes can no longer be used as piggy banks.…The bubble masked this basic reality: for most Americans, earnings have not kept up with the cost of living. The earnings of non-government workers who are paid by the hour - and who comprise 80 percent of the American workforce - are lower today than they were in 2000, adjusted for inflation. They are barely higher than they were in the mid-1970s"This fact is so undeniable, that even the `CIA world fact book' (a US foreign policy reference guide -
http://tinyurl.com/33l9f8) describes the situation in the US as:
"The onrush of technology largely explains the gradual development ofa "two-tier labor market" in which those at the bottom lack theeducation and the professional/technical skills of those at the topand, more and more, fail to getcomparable pay raises, health insurance coverage, and other benefits.Since 1975, practically all the gains in household income have goneto the top 20% of households."Now, for Reich this becomes a basic under consumptionist theory –that Labour was unable to buy back its produce. In simpler terms, it shows the basic failure of the sub-prime lending model. Lending to labour when wages aren't rising meant the whole of that lending relied on continually rising house prices, as soon as the rise stopped, the pyramid scheme failed.I think the most significant part of this crisis is that it shows how capitalism cannot meet workers' needs. All the talk of irresponsible lending masks the fact that in order to get and keep a roof over their heads, workers resorted to massive quantities of debt... this is where our focus should lie.
Obviously, upping wages would not simply end the problem, because cash strapped firms would be unable to pay them. But I think thisdoes confirm a class centric view that a weak working class is actually bad for capitalism – certainly, for advanced markets. I once read that the US industrialised so rapidly due to the small sizeof its skilled working class – this compelled industrialists toinnovate and improve the intensive exploitation of capital. The converse is true if skilled Labour is plentiful.More pertinently, if productivity has been rising without wage rises to compensate, this too could affect the quantity of money capital kicking around, hence feeding the stock market/banking bubbles...As I say on my blog today, the crisis is nakedly political - what weare calling a crisis is tantamount to strike action by the owners of the world, as they try to protect their investments and their income.I think we need to avoid giving the impression that it is a mechanistic problem, rather than the result of conscious human action in an unequal society...[An] interesting factoid from Alistair Darling's statement yesterday, by guaranteeing accounts up to £50K (£100K in joint accounts) they are guaranteeing 98% of deposits. That's a gross amount of inequality,because the remaining 2% contain collosal amounts of cash, sufficient to cause bank runs by their chasing security and returns.
That 98 per cent of deposits contain less than £50,000 but of the 2 per cent that were above this, they accounted for about half of the total amount desposited. In other words, the top two per cent have as much on deposit as the other 98 per cent put together, yet another confirmation of the Party's case over the years.
