Ann Pettifor: speech notes for presentation to the Just Banking Conference, Edinburgh, 20th April, 2012
blind spot for credit
There is only one tool these policymakers argue, with which to tackle the impending catastrophic crisis facing Europe: monetary activism by the Bank of England or the European Central Bank. That is shorthand for pumping money into private banks and leaving them to tidy up the mess.
But as Keynes taught us, we cannot, in a slump, separate monetary policy and fiscal policy. Pumping ‘liquidity’ into the stratosphere that is the globalised and largely unregulated banking system – without terms and conditions – means that the credit so created is invariably used by bankers for speculative purposes. It is particularly so now, because bank balance sheets are shot full of holes, and bankers and financiers urgently need to mobilise additional cash to clean up those balance sheets. And, after all is said and done, the returns on speculation tend to be higher than returns on sound investment in the real economy.
In a slump following the catastrophic bursting of a credit bubble which has left the private sector heavily indebted and risk-averse, the wiser action for the central bank would be to direct credit creation towards the last investor left standing: government.
But ideological antipathy to public sector investment prevents orthodox economists from recommending the only course of action that would revive employment and economic activity in the debt-laden Eurozone and the Anglo-American economies
This is part of the end of Pettifors presentation, I recommend her presentation to everyone who has as much trouble as me, understanding the absurd behavior of current Governments and their continued kowtowing to Big Finance. We will all suffer from their hubris.