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The cost of kleptocracy

Andy Haldane of the Bank of England:

He said that the permanent loss of output caused by the global financial crisis is between $50 trillion ($50,000bn) and $200 trillion. That’s between one and four years’ global production of goods and services globally. He also put the amount of money thrown at the problem (in bailouts etc) by governments around the world at $15 trillion and counting — 13% of global GDP.

Charting the reasons for the global financial collapse Haldane said that UK and US banks (and those in certain other countries) had been allowed to grow too big. He described how they had ballooned their balance sheets in 2000-07 largely by lending vast sums [created by fraudulent financial instruments based on real estate] to each other — as opposed to the real economy.

When combined with the ‘amplifier effects’ of the “implicit government guarantee” provided to too-big-to-fail banks and other factors such as the increasingly concentrated nature of the banking market, increased illiquidity of bank assets and increased inter-connectedness Haldane said it was little surprise that disaster had occurred.

Picking up on themes from his The contribution of the financial sector — miracle or mirage? speech of July 2010, Haldane added that, despite the ‘moral hazard’ of implicit government guarantees, massive state subsidies, they still remain firmly in place. He said the annual subsidy provided by the UK government to British banks was £100bn in 2009 alone, or “roughly what we spend on our National Health Service.”

So, what that means for the UK is that the opportunity cost of the "choice" that "we," as a society, made to bail out the banksters is, truly and exactly, the tens of thousands of lives that would be saved were the budget for health care to be doubled. I'm sure that in the United States the situation is just the same, and maybe worse.

That makes the banksters murderers, in my book. But when you murder with a gun, and you're poor, and especially if you're black, you die. When you murder with a spreadsheet, and you're rich, you get richer. Now, I don't believe in capital punishment. But I do think the banksters should be doing real hard work that helps people. Like emptying bedpans, say.

In a society with even a semblance of justice, we'd at least be seeing a bankster scapegoat. But n-o-o-o-o-o-o. There will no restoration of "confidence" until we see banksters in orange jumpsuits doing the perp walk on the teebee.

UPDATE A second example of opportunity costs from Ian:

Refusal to move off of oil in a large way. Trillions of dollars for bankers, but hardly any money to refit western economies to a new energy regime.

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rapier's picture
Submitted by rapier on

It must be remembered that the "permanent loss of output caused by the global financial crisis" must be calculated from the inflated output during the 00's made possible by the credit excesses of the banking and financial world.

It is just like those numbers for loss of home values since the peak of $XX trillions but that peak was simply an inflated bubble. The 'values' deserving those ironic quotes.

Increasingly since Morning in America the growth has been based upon excess credit funding wasteful consumption and asset bubbles.