A Cashless Society

This blog is closed and has moved to http://Charlottegore.com. See you there!

So Brown's getting close to implementing one the key planks of a traditional Socialist State: Wholesale compulsory nationalisation of banks. This is a joke, right? Someone please tell me this is a joke?

The problem is that small businesses, you see, aren't being lent money by the banks, even though they've had taxpayers money and, grr, while they promised to remain 'hands off', the banks are making Brown look like a bloody fool and must be shown who's boss.

See, the banks are making decisions about which businesses will be able to pay that money back - short term cashflow issues, for example, to get the capital required to fill a particular order, and those which need to borrow money to stay alive until orders start coming in. Those types of businesses go the way of the dodo, as all failed businesses do, and in an economic contraction that is what happens.

The reality is that no matter how much money the banks take from taxpayers, they're still a business, and if they do not wish to go bankrupt - or trigger another crisis of confidence - they must be seen to have the most exacting and careful analysis of credit risk when making decisions. People may think you can turn banks into the magic money fairies again, but this reliance on credit, this desperate sense that banks should be forced to lend to people because 'people need money' is insane. Absolutely insane. It is a political point of view that is pure poison and I can think of no single greater risk to the economic health of this country than this belief becoming ubiquitous and accepted as a 'fact of life. It will destroy the banks and it will destroy those people who use this belief to cut corners preparing business plans, or run loss making businesses indefinitely based on an infinite line of credit from 'socially aware' lolcat banks that can actually be talked into lending by sob stories. 

This is the path of madness and the absolute definition of a very clear and predictable road to ruin.

Just as banks have had to quickly adapt to a drought in the international money markets - no more cheap easy credit for the banks - so business and individuals in the UK need to adapt too. Those businesses that are still operating in loss will find it impossible. Those with the ability to accumulate capital reserves of some kind, who actually have a good level of cashflow and operate in profit - those will survive.

But this idea that you can someone use the banks to somehow avoid the inevitable business closures, redundancies and all the other crap that comes with a recession is, again, I use this word: Madness. It cannot be done. It is fantasy economics. It is the desperate fool ringing their bank when they've maxed out their credit cards and overdraft, who've run out of a money a week before their pay day begging to have more credit, just to tide them over, when it is clear they cannot afford the credit they already have. 

The Government can Nationalise the banks and force them to do what they currently refuse to do, but the result will be the eventual collapse of the economy, leaving us at the mercy of the IMF.

But this brings me to the title of this piece: The 'Cashless Society'. We used to think that meant moving to cards, but now I think it actually has more value in describing economic reality in the UK: We have no cash. Businesses have no cash. We pay such absurd levels of tax that the only realistic way for people to buy anything is to put it on credit cards, or take out loans. 

I mean, if businesses didn't have to pay such stupid levels of tax in the first place then maybe they wouldn't have needed so much credit in the first place. Perhaps they wouldn't need so much credit now. Perhaps us, as consumers, would actually be able to afford things (now that we can't just cheat and get things on credit) and so more businesses wouldn't have cashflow problems. I mean, christ, would we even be in a recession now if the entire economy hadn't just spent the last 10 years on a complete credit binge that was supposed to be paid tomorrow?

Well, we pay it back today. That's it. That's how this works. Our stupid economy, where nothing really happens and we punch above our economy weight by borrowing, where we live beyond our means through credit cards - simulating a 'booming' economy full of productive, useful activity and masking the decline, the inertia and stagnation in every part of the economy that isn't to do with the housing marking or store cards.

To those of you that think we're going to get out of this mess by forcing the banks to start lending reckless, stupid amounts of money to people and organisations that can't afford to pay it back again, if you think we can use the banks to subsidise British industry and commerce by the back door, so to speak, if you think that this will do anything but postpone the devastation that's supposed to be happening right now, then please: Give me a time and a place where I can come and kick you hard in the nuts. 

This blog is closed and has moved to http://Charlottegore.com. See you there!