Thursday, December 13, 2007
Pettifor calls attention to the analysis by the International Swaps and Derivatives Association that in the second half of 2007 the value of Credit Default Swaps (really a form of insurance) was $43.5 trillion - that is about £21,000,000,000,000 sterling give or take a few tens of millions between friends. Which is twice the value of the US Stock market and three times the GDP of the USA.
On Northern Rock she says:
Private gains and public losses
The tide of “easy money” daily drains away from the stricken mortgage-lender Northern Rock and other financial institutions. This bank was chaired until recently by Matt Ridley, a rightwing libertarian who once wrote that "governments do not run countries, they parasitise them”……
The management and shareholders of Northern Rock have built up £40 billion ($80 billion) in
liabilities, mainly to British taxpayers. Alongside the apparent bids for the company - from Virgin and the private-equity firm Olivant among others - the option of the Bank of England to "nationalise" it, and therefore "socialise" its liabilities - is being actively promoted. In that case, the burden of its rescue would fall on British taxpayers. That has not stopped investors entering the fray and blackmailing both the government and the Bank of England for more money.
The crisis of Northern Rock has exposed many persistent delusions about capitalism, among them one recycled in openDemocracy by Roger Scruton: it is one of capitalism's strengths "that, when investors make mistakes, they pay for them" (see the tenth comment here).
Not so. While gains by banks and corporations are inevitably privatised, their losses are often nationalised (read socialised). The true parasites reside in the private sector.
The debate on all this will be quite heated I think.