Sir, – Charles Bagwell (July 2nd) seems to confuse the solvency of the Greek state with the solvency of our collective, global financial system.
In debating the supposed profligacy of government spending, let us recall that there is nothing more profligate than a government which nationalises private debt. Instead of using future taxes to pay for education, the health service, the elderly, and so on, the Greek and Irish governments have bought into the austerity argument – to privatise the people’s assets, cut services and save the current financial system.
At what price to keep the show on the road? In the Financial Timeslast week the governor of the Bank of England highlighted a key aspect underpinning the financial crisis and its prolongation in recent years – many wanted to believe, or were deluded into thinking, that the problem was a question of liquidity rather than solvency. As we all know, the then Irish government behaved like a rogue European state in announcing the Irish blanket bank guarantee, inevitably meaning the State, was to assume the problem of insolvency. However, the insolvent banks had a global reach, hence the description of the crisis as systemic.
Problematically, it is the ordinary taxpayer who is propping up the balance sheets of corporates and now defunct banks, on a global scale. More worrying is the emerging consensus that the bailout loans cannot possibly work. Eminent economists have pointed out that they are equivalent to “kicking the can down the road”, but at what point is the scale of the problem to be faced? Prior or subsequent to a fire sale of state assets, in Greece, Ireland, or elsewhere? It is prudent to keep one’s eye on the money trail and to recall that, in the past three years, the “money” has not in itself disappeared. Some have been greatly enriched. Rather than castigate ordinary Europeans earning meagre wages and their supposed profligate leaders, should we not also be debating the problematic aspects of fractional reserve banking, fair value accounting, and risk management or hedge accounting in our global financial system?
The level of debate in the mainstream media has been low. Is it too much to hope that The Irish Timescan lead the way and instigate more meaningful discussion of a defining problem of our time? – Yours, etc,