That NEF report on how to cure the economy in full

Breaking up the major banks would
require that they transform how they operate. At
root, a bank should do little more than provide
somewhere safe to place savings, and create
some credit. Localising banks, diversifying
ownership structures, and placing greater
democratic and public control over banking
functions will all help lead them towards that ideal.

The British banking system should become like the Spanish cajas. So that the politicians and union leaders can drive the entire thing into bankruptcy.

The introduction of direct controls on the
movement of capital in and out of the economy,
including emergency taxes and legal restrictions,
would help prevent either possibility. Growing
empirical evidence, recently summarised by the
IMF itself, suggests that, despite the rhetoric of
globalisation, well-applied controls can work in a
range of different economic circumstances. By
managing the flows of capital we can structure a
suite of controls so as to attract longer-term, more
stable investments. Controls that affect the quality
of capital flows invested are, IMF and other
evidence suggests, generally more effective than
those seeking only to impact on quantity –
although these can also be important.

Given that we depend upon foreigners sending us their capital we should stop those dirty foreigners sending us their filthy garlic smelling money for us to enjoy.

With the useful side effect that if no one can take more than £25 out of the country without permission then we can steal it all without their fleeing.

BTW, one does hope that they know that this is entirely illegal in the EU? Capital controls are entirely verboeten.

QE could play a central role in rebalancing and
repositioning the entire economy. Were the Bank
of England to mobilise its capacity to create new
financial assets, and push them towards real
economic activity, investments could be made
and economic activity restarted without running
immediately into the barrier of the financial
system. ‘Green QE’ has been proposed as an
ideal means of raising financing for long-term
investments in sustainability. These will need to
be very substantial: at the upper end of the scale,
Dieter Helm has estimated that £500 billion of
investment in infrastructure will be needed over
the next 10 years to upgrade it to a more
sustainable basis.

And then we\’ll just print more money to pay for everything. Like that hasn\’t been tried before. Anyone ever heard of Zimbabwe?

Maybe Andrew Simms should have finished that course of study at the LSE?

10 thoughts on “That NEF report on how to cure the economy in full”

  1. So Much For Subtlety

    Sometimes you have to ask if they are kidding, whether it is all some vast undergraduate joke on the rest of us. Are they really this stupid?

    Mind you, I put this down as a massive market failure. How can these people come out into the daylight and last a week before being laughed out of town? We have a free competition of ideas and sometimes the Beta Max looses, yes, but for such a long time?

  2. SMFS

    Good question.

    I guess because those in the finance sector have been so demoralised by banking crisis that they are keeping a low profile rather than arguing against this idiocy.

    The left wing media agree with the general thrust of the anti-neo-liberal argument so are prepared to let the actual details go unchallenged. One wonders what Larry Elliot thinks when he reads the economic illiteracy on the opinion pages of his newspaper.

    The “right” are generally clueless at making a decent argument and explaining it clearly.

  3. I do think there is one small piece of sense in this proposal. I would prefer to see a larger number of independent banks- so that if one went belly up there would be less need to panic. Also it would reduce the influence bankers have on the government, and conversely the influence government has on the banks.
    The idea of employing a bunch or rent seekers to control the banks in their own interest is somewhat less appealing.

  4. Are capital controls working well in Argentina?
    They are now the 3rd biggest economy in South America as opposed to the 2nd so I guess not.

  5. “and push them towards real
    economic activity”


    Government picking winners again.

    Do they actually not know that this has beent tried before (with disastrous results), or are they just hoping that we don’t know?

  6. David,

    Given that they jail economists who publish the real inflation rate forgive me if I take that stat with a slab of salt.

  7. I am utterly fed up with this “small banks are safer/better” bullshit. They are not. They are MORE likely to fail, not less. And they don’t necessarily fail safely, either.

    A large number of small banks going belly-up can be just as systemically critical as one large one. As the Secondary Banking Crisis in 1973 showed.

    One small bank which is systemically important can do as much damage as a very large bank when it fails. As the failure of Johnson Mathey Bank in the 1980s showed.

    One fairly small bank which is very significant in a politically-important area of the country, or a politically-important market sector, is inevitably going to be rescued however silly it is to do so. As Northern Rock and Bradford & Bingley both showed – and before them the National Mortgage Bank.

    The record of credit unions is frankly abysmal. They fail more often than any other sort of financial institution. And the payouts to their depositors are funded mainly by the levy on large banks and investment firms. Yet the likes of NEF still promote them as “better” than the large banks that fund their deposit insurance scheme.

    I’m sorry, but this really makes me angry.

  8. As for capital controls – NEF clearly haven’t read what the IMF actually said. The IMF endorsed use of capital controls in exceptional circumstances and on a temporary basis only. They remain committed to the ideal of free movement of capital. No way would the IMF in any way agree with NEF’s idea of permanent restrictions on the movement of capital.

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