Sunday, March 10, 2019

Robert Woodford - City of London: The shocking study no mainstream media outlet dared to publish

The British Government says we have run out of money so we have to have very harsh austerity now. They say it will put right the economy and then one day we will be all be better off again.

Thatcher said we are living beyond our means and that cut backs are necessary. We have to tighten our belts, she would say. Look after the pennies and the pounds look after themselves.

Conservatives say they believe in the work ethic, and that no one owes you a living. They support the Conservative Party for this reason. They say we can't afford a better health service, or give young people a state paid university education.

Hmm, but perhaps all this time someone has been siphoning off our money.

Each year, the banking and financial services industry in the City of London is sucking out of Britain’s economy the equivalent of 160 per cent of total government spending on all health care including the NHS, or 100 per cent on social protection, which includes that of all pension payments per year, or 700 per cent spent on public order and safety or 230 per cent of spending on education.To go further, this sum of money represents the equivalent of £67,500 of wealth losses to every person in the country.
The SPERI report breaks it down into current losses and losses incurred as a result of the 2008 banking led financial crisis. The report says that it – “provides the first-ever numerical estimate for the scale of damage caused by the UK’s finance sector growing beyond a useful size. Of the £4,500 billion loss in economic output, £2,700 billion is accounted for by the misallocation of resources where resources, skills and investments are diverted away from more productive non-financial activities into finance. The other £1,800 billion arises from the 2008 banking crisis.
News reports galore tell us that the financial crisis cost Britains economy about £500 billion. Some say more, some less. Not one, anywhere, has stated that in the first decade it cost the economy £1.8 trillion. And it’s not over yet.t off. 

 TruePublica: A seriously important and highly credible study was published five months ago last October. It was completely ignored by all of the mainstream media. Not one took the opportunity to publish the stunning revelations for fear of what might happen if they did. The report has unpalatable political consequences for the government – in fact, both Labour and Tory are implicated by the exposure of this colossal crime.

On the 5th October the 2018 SPERI report was published. The Sheffield Political Economy Research Institute made some stunning statements. Its first paragraph stated that – “(this report) suggests that the total cost of lost growth potential for the UK caused by ‘too much finance’ between 1995 and 2015 is in the region of £4,500 billion. This total figure amounts to roughly 2.5 years of the average GDP across the period.
To put that statement in context we need to deconstruct it a little. We are talking £4.5 trillion over two decades. That’s £225 billion a year.

True Publica


Konrad said...

For Americans, the “City of London” is the UK’s financial district. It is equivalent to “Moscow City” in Russia, Wall Street in the USA, Rothschild Boulevard in Israel, Marunouchi in Japan, Bankenviertel in Frankfurt, the Beijing Central Business District in China, the Dubai International Financial Centre in the UAE, and so on.

Below is a global list of financial districts…

Until mankind gets these under control, MMT cannot help us.

Ralph Musgrave said...

Unfortunately the SPERI report does not have any simple clear ideas for solving or at least reducing the problem. The problem would be much reduced by switching to full reserve banking.

Banks under the existing system are subsidised, hence the bank industry is larger than it should be. That is, under the existing system, one person or firm can lend to another via a bank and the lender is guaranteed not to lose out because the state (i.e. taxpayers) stand behind the lender via deposit insurance. The latter “lender / borrower” relationship is clearly COMMERCIAL and it is not the job of taxpayers to stand behind commercial transactions.

As for when that commercial transaction goes BADLY WRONG, as in the recent crisis, the Fed loaned banks around $750bn for about 18 months at a near zero rate of interest. That’s some subsidy, in effect paid for by the population at large.

Under full reserve, lenders would charge a higher rate of interest because they are not protected by deposit insurance, thus interest rates would be higher and the bank industry would be smaller. However that new and higher rate ought to be nearer the genuine free market rate, because no subsidy is involved, hence GDP ought to be higher.

The bank industry in the UK is a whapping TEN TIMES the size it was in 1970 relative to GDP. Exactly what we’ve gained as a result of that boated bank industry is a mystery.