Economy Latest
Anger has broken out again as the huge bonuses begin to reappear in the City. The difference is that this time these payouts are dependent on a foundation of taxpayers cash. The argument for this is that the City produces so much tax revenue that we must go to any lengths to preserve it. The argument against is that the investment banking companies, often dealing in financial instruments that even they cannot explain, should have been allowed to fail.
What we do know is that the cost of rescuing the banks significantly exceeds the revenue they produce for the taxpayer. Moreover this revenue will fall because, as they did not actually collapse, they will be able to avoid tax for years by carrying their gigantic losses forward. I align myself to the view that the retail banking system should have been nationalized and the investment element should have been allowed to fail. What is happening at the moment is that money is being sucked out of the base of the economy to finance the exotic speculation at this frothy end of business.
Meanwhile small businesses struggle with cash flow and new start ups, as everyone knows the engine of a sound recovery bringing new wealth into the economy, are choked at birth for lack of finance. All of it has gone to prop up the very structures that fuelled the unsustainable boom and brought about the disaster.
This is socially unjust and economically unsound. The living standards and life quality of the poorest are being reduced while their money is being used to sustain and enhance the living standards of the richest. Meanwhile the national debt mountain grows to a height which maybe beyond the power of the nation to climb.