Yet again the British taxpayer is being fleeced to prop up the banking system; the UK government has today announced a package of measures which could cost the taxpayers £500bn ... or around £10,000 for every man, woman and child in the country. BBC News story.
We know this whole thing is a mirage; money is no more than pieces of paper which are worth only the value of the ink printed on them. But would this happen if the government had to do all this in actual gold? I doubt it. For a start there isn't that much gold. As I understand it the capitalisation ratio is generally somewhere in the region of 1:25 to 1:30 (ie. 25-30 times as much money supply as there is real money, aka. gold). If we all wanted to draw our money from the banks we couldn't; there physically isn't even enough paper to do it! It's all electronic bits somewhere.
Notwithstanding that I do seriously wonder what these people are on! What are they doing? Basically they are making an ever increasing mountain of debt to service the debt mountain which already exists! And they can't see it! For instance £250bn will be available to the banks as loan guarantees for lending between banks! So Bank A borrows money from Bank B, with a loan guarantee from the government. Bank A fails and defaults on the loan, so the government pays off Bank B. So here now is a government debt, taken on to service a loan which is probably being used to cover Bank A's debt to Bank C. Is this a sensible way to run a business? Or an economy? Or a country? I don't think so!
Worse ... "Banks will have to increase their capital by at least £25bn and can borrow from the government to do so". Que? Banks need more money, to service their debt. How do they get more money. They borrow it from the government (ie. you and me the taxpayers). Borrowing money to pay off debt. Isn't this how loan sharks operate? Isn't this the whole basis of usury, for which the medieval Jews were so vilified?
Ah good! The FTSE as I write is down around 4%. So the money markets don't entirely believe this either! And neither it appears do the investors in some banks as their shares are down too.
But it's all a mirage. A house of cards built out of mirrors. And I feel sure it will come tumbling down. The only trouble is when it does it will be a whole lot worse than it would have been had the markets been left alone now to sort themselves out. I've been saying for years it's all over-hyped. The FTSE is a con; at best it should never have been above 3000. The end of the world is nigh. But fortunately most of us won't survive to witness it, but it might be an unpleasant end game.