The Day that will live in Infamy?

By tomtom

1^st May 1997 the day the Charlatans took hold of the Levers of Power

The real problem today is that from this moment on 1st May 1997, reality took flight and has still not come back in to land. Okay, to use an in-flight analogy it’s on the approach, though that’s not much use till it touches down, especially in Berlin, Paris & Brussels.

  As the EU moves to write off-debt for the Greeks and at the same time governments express their intention to get lending on the move to (SMEs). For those less informed souls out there, these are the Small & Medium Enterprises on which most national economies depend for the bulk of their income.

  The employed are taxed by (PAYE) Pay as you earn and companies contribute on a quarterly basis, the National Insurance accumulations. So, thereby lies the root of the problem. Without a flourishing (PAYE) sector delivered by these (SMEs), the government can be in deficit, it has to borrow and when we include personal debts: (We’re all in it Together) whether we like it or not. In fact were all in schtuk, to coin a phrase. However, what they fail to make apparent to all and sundry, is that this huge Pyramid-cum-Ponzi Scheme, is severely undermined by writing off credit. Especially if it is the credit these (SMEs) rely on to keep trading.

  The Bankers are asked to lend out cash they don’t have and the only way they can fund this borrowing is by creating bonds they can sell to the money markets or buying bonds they expect to provide interest payments they can lend out. In this way therefore a vicious spiral is created and it is this spiral which has the entire economy teetering on the edge of an abyss, when all these pigeons come home to roost.

  So the write-off of debt, makes an untenable situation even worse, it immediately erodes the amount of cash available to a lending institution to apply to its lending account. The main obstacle being what goes under the heading of Fractional Reserve Banking. This is a practice whereby the liquid assets available to a bank, represent only a fraction of the assets it is liable for on its books. The rest of its assets are lent out again and again or used to buy interest producing bonds, till only a small amount a few percent is available in cash for immediate emergencies. Like those produced by a Credit Crunch, the likes of which we saw in 2008.

  Who would be a banker in today’s world? They must be going out of their tiny minds in desperation? The bonus cheques they fill their boots with, are gone like smoke up the chimney and all they can come up with is to grab the cash available from the Bank of England as it prints the money to keep them in business.

  Then they wring the necks of anyone wishing to start up an (SME) or raise a mortgage, to keep the Housing Market on the move, as funds dry up at an unprecedented rate and they Hoover-up all the spare cash in the economy to shore up their balance sheets as they too teeter on the edge of the abyss and still try to fill their boots at the same time.

  So that’s it in a nutshell folks or as Shakespeare’s Polonius put it: “Neither a borrower or a lender be.”

Watch this space, I’ll be back!

Tom.