Friday, 30 April 2010

Money too tight to mention


I don't follow the news as closely as I perhaps should these days, much of my time being taken up with work and family commitments, so I'm probably displaying huge political ignorance here, but there are some things that have been puzzling me as I think about the issues involved in this election campaign.
As a country, we owe huge amounts of money; according to some of the panel on this week's question time the national debt amounts to the equivalent of £90,000 for each household in Britain, or £1.1 million for each day since the birth of Christ!
Whenever he's questioned about the financial mess we are in and the consequent need for public spending cuts and savings (the scale of which, many commentators say, are currently being hidden from the electorate by the three main parties) Gordon Brown rightly points out that we are in a global financial crisis which originated in America and affects the whole of the worldwide economy (as he did, for example, on tonight's interview with Jeremy Paxman).
But wasn't the global financial crisis originating in America originally referred to as a 'credit-crunch'? And didn't it largely consist of banks losing lots of money through dodgy investments (mainly in the sub-prime mortgage market) and in some cases going out of business, while those that remained batoned down the hatches and became extremely cagey about lending money to businesses? It wasn't about national debt.
So the huge debt we're saddled with is not directly connected to the global financial crisis - unless, of course, it was incurred as a result of the extremely costly bailouts that the government so generously undertook to prevent crucial businesses from going bust as a result of the worldwide crunch. But the recipients of those massive bailouts were, almost exclusively, the banks.
In which case, from whom did we borrow these vast sums needed to effect the bailout?
Presumably, from other banks! Ones that, clearly, weren't in such dire financial straits at the time. In which case, why couldn't the struggling banks have just borrowed the money directly from the financially healthy banks? Why did the government (and, ipso facto, the taxpayer) have to be involved at all? And anyway, if these apparently financially robust banks existed, why was it so crucial to the economy that the failing banks didn't go under? Okay, some bank customers might have lost their savings, but the government could far more easily have bailed those customers out rather than racking up huge debts getting the whole banking sector back up and running, fat salaries, hefty bonuses and all.
Anyway, like I said, these are probably stupid questions born of ignorance, but they've been puzzling me so I thought I might as well mention them.

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