How are they spending our money?

Last week “Call me Dave” Cameron spoke about a Green Investment Bank, a bank that is government run and government funded (aren’t they all?) that would be able to leverage more investment than a private bank. A government bank isn’t a “bank”. It is a “fund”. A bank is supposed to take the money invested and make a profit for the shareholders. A building society is made up of shareholders so makes a profit for its members. A fund is a pool of money from many investors that is used to grant loans and make other investments. Given that the government is using our money to make this Green Investment Bank then what it is really doing is making a fund out of our money. Another example of government doublespeak? Well what do you expect?

What do we need a state run bank for anyway? Isn’t the market already saturated with banks? Oh hang on though. They aren’t lending are they? They’ve been hurt and some of them nearly went down the toilet because of their irresponsible lending practices. Well that’s what you get for taking risks with other people’s money and not having a government that’ll regulate the industry. Rather I should say “many successive governments” because it would hardly be fair to blame it on just one or even two or three. No, it is decades of neglect and unnecessary risk with our money.

So the banks aren’t lending and the government decide that somebody has to or the economy will freeze over like the Ninth Circle of Dante’s Hell. They decide that they’re going to lend our money out to investors. They’re tying up our money, money that we don’t actually have, in order to stimulate the economy. Now they can’t just come out and say that because it would look really bad when they are making “austerity” cuts to public expenditure. That is where I think that this “Green Bank” idea comes in. It looks better if the state is doing something good with our money rather than just ripping us off and making yet another quango to keep boys in the City happy and rich.

There are other ways to stimulate the economy of course without creating a fund to lend back to us our money. They could just tax us a bit less. If we had an extra £100 per month in our pockets we’d spend that money or save it. If we’re buying things then someone has to make things to buy and shops have to exist to sell them. That means more jobs and more tax payers. If we’re saving the money (or paying off our debts) then that means the banks have more money and can pay back their creditors (us again as the bail outs came from our money) and lend money for people who want to buy things like houses. More money is in the economy rather than tied up in the state.

Of course if taxes are cut then that means that less money can be spent in the public sector. That means fewer services, fewer civil servants, etc. Then again the public sector is made up of tax consumers and needs to shrink anyway. Quite a lot. If they taxed us less then they could pay out fewer benefits to workers. If they paid out less in benefits then they would need fewer staff in the benefit office to administer benefit payments.

I do not like the way that this government is spending our money. Unfortunately no other party seems to have an alternative.

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11 Comments

Filed under Our money

11 responses to “How are they spending our money?

  1. HC

    Will they be regulated? Is it even a legal entity? Green lead balloon. And is it still £1billion estimated to be invested? This will be the shortest living bank in history!

  2. I think just as lack of regulation of the financial sector contributed (if not caused) the mess, the financial sector could do with bei9ng properly regulated. Retail banking ops need a different set of rules to wholesale banking. We allowed the edges between different financial instruments to become so blurred that one regulator imposed one set of rules on the market. Reducing the tax burden seems common sense, as a means of stimulating the economy, along with a range of other measures. But the bottom line is we are seeing the results of rampantly out of control short-termism. No-one has invested for inter-generational growth, no-one has laid down a 50-year plan. And we are now paying for that.

  3. HC

    Brennig, whenever I see someone talking about things they don’t understand it makes my teeth itch. Banking, and indeed regulation of banks is my area of speciality so you can just imagine how I feel about people blathering about my favourite subject. I am therefore extremely disappointed that I agree with your comment.

  4. HC, on regulation I really do think that the banks should probably have some. Just a teensy little bit. You know for our protection and for theirs. I also hope that my own amateurism understanding of banking regulation isn’t too grating for you. I’m merely a concerned citizen who wonders where our money is being spent. Feel free to correct any misapprehensions or factual errors that I’ve made. I’m not proud.

    Also its good to have you back commenting. It must be years?

    Brennig, “no-one has laid down a 50-year plan”. What would be the point of that under our current political system. They can hope for one or two terms then they get to be blamed for the problems that were left behind and ignored for half a dozen Parliaments. We’ve got nothing that even looks like long term planning from our main parties in this country. I’d be genuinely surprised if they had any plans whatsoever beyond the next election.

    Oh they’ve made me cynical.

  5. HC

    Mr F, I wasn’t denigrating (is that a racist word these days?) your post, which was piqued my curiosity, only praising Bren’s response. But I don’t think investment banks are unaware of their responsibilities, indeed some of the best organised IBs have ridden out the storm and are gradually emerging revitalised from it, with only relatively few losses as a result of certain exposure. I appreciate that’s a small grain of optimism amidst the shitstorm but banks’ reputation as cowboys is deserved in places but not in others. In fact I suppose that lies at the heart of it, external regulation has its place but is next to meaningless if it is not not adhered to internally.

    • That’s good, I would hate to have given you itchy teeth.

      external regulation has its place but is next to meaningless if it is not adhered to internally.

      Which is why the regulators should have teeth? The FSA, bless their cotton socks, are great when it comes to kicking banks after they’ve been found out but banks should buy into the regulations from the ground up. That means having a powerful, built in whistle blowing policy, decent corrective measures in place like independent ISO standards for banking (not just ISO27001 security standards and some loose definitions for credit card storage), licencing for lending, particularly sub prime lending and a whole host of measures that I don’t understand well enough to suggest.

      Maybe those good banks could build those standards or act as models for the standards that need to be built.

  6. HC

    Oh, years for sure Mr F, married with kids these days! Surely yours must be pretty ewll advanced as well now?!

    • Married! With kids! Crikey! Mine haven’t aged a day of course, they’re all pig tails and bashed knees. No, hang on. They’re actually all taller than their mum now and really expensive.

  7. HC, as you say, I’m far from an authority. Maybe you should set up your own place on the web so we could learn because I love learning. I know the smallest fraction about banking (off-balance sheet limits and margins specifically), having spent almost 10 years as a Forex/Depos trader in IRNs, IRSs, FRAs, FRNs, CDs and short-term EuroDeposits/arbitrages. But there’s a gulf that I don’t know! Thanks for the agreement, I appreciate it when someone thinks the same kind of thoughts.

  8. HC

    Bren, admittedly my tongue was firmly in cheek with my first post but the sentiment was that in a world of flabby opinions, I was welcoming someone with an intelligent opinion. So I don’t need your resume, I’m sure you know your onions.

  9. Nonononono!!! I want the modern gen. All I know about the modworld is what I read in The Eye and FT about limits being lifted. If you’re in the cool place HC, please feel free to chuck your knowledge my way. Srsly!

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