• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Go to Positive Money Europe

Positive Money

Making money and banking work for society

  • About us
    • Our vision
    • Who we are
    • History & highlights
    • Contact us
    • There are currently no vacancies available
    • In the media
    • Funding & Annual Reports
  • What we do
    • Educate & empower
    • Research and Policy
    • Campaign & local groups
    • Influence decision makers
    • In the media
    • International Movement
    • Events
  • Resources
    • Videos
    • Publications
    • Local group resources
    • Lobby your MP
    • Organise an Event
    • Policy resources
    • Shop
  • Press
  • Blog
  • Donate
  • Positive Money Europe

The Wilful Ignorance of Political Leaders

by Ken MacIntyre (Guest Author)

 

Mr Podsnap was well-to-do and stood very high in Mr Podsnap’s opinion. Beginning with a good inheritance, he had married a good inheritance, and had thriven exceedingly in the Marine Insurance way, and was quite satisfied. He never could make out why everybody was not quite satisfied, and he felt conscious that he set a brilliant social example in being particularly well satisfied with most things, and, above all other things, with himself.

Thus happily acquainted with his own merit and importance, Mr Podsnap settled that whatever he put behind him he put out of existence. There was a dignified conclusiveness – not to add a grand convenience – in this way of getting rid of disagreeables, which had done much towards establishing Mr Podsnap in his lofty place in Mr Podsnap’s satisfaction. ‘I don’t want to know about it; I don’t choose to discuss it; I don’t admit it!’ Mr Podsnap had even acquired a peculiar flourish of his right arm in often clearing the world of its most difficult problems, by sweeping them behind him (and consequently sheer away) with those words and a flushed face. For they affronted him.

Charles Dickens, Our Mutual Friend. 1865

[sws_blockquote_endquote align=”” cite=”” quotestyle=”style02″ link=””] Consumers and homeowners who borrowed too much during the economic boom must “accept responsibility” for their part in the financial crisis, a cabinet minister has said. The defence secretary Philip Hammond claimed banks were not the only ones responsible for the crash, adding that those who took out loans, spent on credit cards and accepted large mortgages were “consenting adults”. Hammond said the banks “had to lend to someone”.

The Guardian, 3 May 2012 [/sws_blockquote_endquote] 

Philip Hammond with personal assets estimated at £7.5m can certainly claim to have thriven ‘exceedingly’ but blaming the financial crisis on feckless consumers shows the wilful ignorance of political leaders in refusing to recognise the reality of banking and the monetary system.

Just suppose that we all take Phil’s advice and seek a life free from debt in saving for purchases rather than borrowing, settling credit card bills every month, renting rather than buying (only those with Hammond’s  levels of assets can afford to buy without a mortgage) and pay off rather than take on more debt. What could be better than a clean slate and fresh start? There is only one problem: such a strategy would bring about economic collapse. This is because – and it is a truth that Podsnappian politicians refuse to acknowledge – virtually all the money supply in developed countries originates as loans issued by commercial banks.

When private debt is growing, it leverages demand and economic growth. Over the past 30 years of debt-led growth and ersatz prosperity, politicians and central bankers imagined that recessions and inflation had been banished forever. They spoke of ‘economic miracles’, ‘the great moderation, and ‘an end to boom and bust’.
A debt based money system must grow exponentially if the economy is not to seize up. More loans must be issued to meet previous liabilities. Most bank loans go not into productive investment but speculation on asset prices. Asset prices must rise indefinitely for banks to stay solvent. In other words, all the miracles and moderation turned out to be an old fashioned pyramid scheme. The ‘end of boom and bust’ brought about the biggest bust of all time.

When the debt overhead exceeds capacity to pay, the dynamic leveraging of growth goes into reverse. And this is the source of the financial crisis. Total demand is incomes plus the change in debt. So when households start to repay debt, unemployment, bankruptcy and repossession grow. This has nothing to do with reckless borrowing.  It is built into the monetary system. Only when commercial banks are forbidden to create money and it is issued debt free by governments will the problem be addressed.

Until then politicians and central bankers deserve the scathing comment of Michael Hudson on the latest crop of European ‘technocrats’ as bank lobbyists tunnel-visioned enough to act as useful idiots on behalf of their corporate handlers.

In the News

Ken MacIntyre (Guest Author)

Ken MacIntyre has MAs in political science and social and political theory from Edinburgh and London (Birkbeck) Universities. He has been researching money and the financial crisis since seeing queues outside a Northern Rock branch in September 2007. More recently he gave a talk to the Conway Hall Ethical Society on the theme of Collapsing Pyramids: money austerity and the financial crisis. At the end of June he will become a freelance pensions management consultant.

Primary Sidebar

Get our latest campaign updates

Recent Posts

  • Quantitative easing “turbocharges” inequality: our evidence to the House of Lords
  • Surprise for Sunak: 60,000 demand climate action on frontpage of his local paper
  • QE or not to QE? Soaring inequality shows it’s time for a new macroeconomic approach
  • Update from Chair of the Board on Interim Leadership
  • Why GameStop reveals the flaws of big finance

Footer

Follow us on social media

  • Facebook
  • Instagram
  • Twitter
  • YouTube

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.


Privacy Policy, Terms & Conditions


Positive Money is a company limited by guarantee registered in England and Wales. Registered number 07253015.
Registered office: 307 Davina House, 137-149 Goswell Road, London EC1V 7ET.


Positive Money Europe