Business Secretary Vince Cable has announced the instigation of a new government investment bank backed by £1 billion of new capital. Hasn't he and everyone else forgotten something?
Mr Cable made this pledge yesterday at his party conference in Brighton, the day after Nick Clegg promised - or perhaps that should be threatened - to make sure the rich pay their fair share of taxes (read harass medium to high earners while ignoring the super-rich).
Hang on a minute, isn't Mr Cable along with the rest of the Coalition Government forgetting something? Does no one remember quantitative easing, one of the great myths of our times?
Even more relevant, doesn't anyone remember the last round of quantitative easing we had here in the UK? Back in February we reported that another £50 billion had been pumped into the economy by this mysterious process, and that in addition to a recent £275 billion. If this is indeed the case, why is the Business Secretary talking now about a bank capitalised with a mere one billion, and where has the previous £325 billion gone?
The simple answer is that the banks were given this money FREE to lend at interest at their caprice. Rather than lend this money which cost them nothing (don't be taken in by that rubbish about its being exchanged for securities), they have decided to invest it short term or otherwise elsewhere, again at interest.
Rather than create money out of thin air and give it to the banks, the government could and should get the economy moving again by doing what the States (the Parliament of Guernsey) did two centuries ago. Check out The Guernsey Experimenthere.
The proposed new investment bank could take 18 months to set up; the government could create the required credit tomorrow. To understand why it won't, check this out.
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