Leftie stuff

The Guardian is a great source of left thinking.  Simon Jenkins, it seems from today's paper, epitomises that.  Apparently the bankers didn't really need the bail outs, they just convinced Alistair Darling they did, and he willingly paid up.  Jenkins is also scathing about how much taxpayers' money has done into rescuing these banks, and is incandescent about the fact that bankers have played such a role in macroeconomic fluctuations.

We've gone through enough macroeconomics now to hopefully be able to pick apart this rather sensationalist speak, which I'd expect to see more in the Mirror or something like that.

Firstly, the banks did indeed need the money, that much is clear.  The fact that Barclays and HSBC have made capital out of not taking any taxpayer money (directly) is a clear sign that, had banks been able to avoid the stigma of taking bail outs, they would have done.  It's not quite as simple as Jenkins tried to make out.

Jenkins appears to be implying that the trillion all came from the taxpayer.  Of course it didn't.  A good chunk was quantitative easing, simply money printed by the Bank of England, and then a load of the rest is financed by the people that bought government bills and bonds in the past year or two (funding the government deficit, or PSNCR).  Of course, at some point in the future, a good chunk of that will have to be paid back by the taxpayer.  But also, the government will sell off Northern Rock at a profit, and probably also its stakes in the other banks.

And of course, on those part-privatised banks, Jenkins mouths off about the bonuses paid.  However, the government needs to ensure these banks remain competitive, attracting the best staff, in order that when they are sold off, the government makes a profit and hence as taxpayers we pay less debt back.

Finally, there is this idea that somehow the only reason the recession exists is bankers.  We haven't really studied the business cycle so much yet, but next year (in econ203a) you'll find out that economies will always display cyclical fluctuations.  Via some miracle, the UK escaped a recession for the best part of 20 years.  But it was merely putting it off, that's all.