Home > Finance and money > Crime and collective punishment

Crime and collective punishment

If there has been some very bad lending practices going on, who should bare the brunt of this? The borrower alone, the lender alone, or a shared responsibility?

This is THE public debate that should be taking place, but is dodged or quashed at every opportunity.

I saw a good lecture at the LSE by George Magnus on Wednesday. He had briefly mentioned about debt re-negotiation and destruction at the start of his talk, but then never really discussed it further. I raised this with him during the Q&A, that bank bailouts and austerity measures are not permitting debt destruction, in fact quite the opposite, protecting the lending class at the expense of the public at large.

Mr Magnus guardedly admitted that there was some justifcation for “an Austrian prescription”, and that (with hindsight!) debt re-negotiation may have been a better solution than bailouts.

But we need foresight, not apologetic hindsight. As I’ve asked before, are we really all in this together?

Austerity assures that the lender bears no responsibilty whatsoever for their faulty judgement in lending out in the first place. It is not debt destruction but instead debt maintenance by any means necessary. I didn’t get myself stupidly in to debt, so why should I, or students, or public sector workers pay the price of private debts gone bad? It is taxation without representation.

This situation is compounded by the evidence that the banks have potentially been mis-representing the cost of borrowing, and then when it goes wrong to shift the burden on to the tax payer *.

It is nothing less than Collective Punishment deliberately engineered in, or as Michael Hudson calls it: “a post-modern neoserfdom that threatens to return Europe to its pre-modern state.”


Update 16/2/11: Mervyn King asserts that tolerating higher inflation is preferable to raising interest rates. This is further evidence of Collective Punishment, in that savers and low / middle income wage earners are being punished regardless of whether they took out excessive loans.

* This is the “crime” angle referenced in the title – see recent release of the film “Inside Job”, and this excellent inside view from a former Fraud Squad detective on how oversight of fraud has been neutered:


Categories: Finance and money
  1. Tom
    February 11, 2011 at 11:35 pm

    I’ve enjoyed reading your posts on Paul mason’s blog for a while – I hope Paul reads them. Also hope he takes note of your blogroll, Steve Keen and Chris Martenson are worth a hundred Paul krugmans. Whoops, sorry, the Nobel Prize-winning economist Paul Krugman….

    I’d also add to your list the guys at Automatic Earth, and Mish Shedlock

    I’m on the road at the moment but I’ll check back here when I can, best of luck…

  2. February 13, 2011 at 10:26 pm


    Thanks for the feedback! It’s anybody’s guess whether Paul does read the posts. I would say though that what he probably thinks in private is far more astute than he seems “permitted” to reveal on the BBC. His talk at the LSE about 2 weeks ago was very good.

    I agree with your recommendations. Nicole Foss is worth a thousand “economists”, and Mish’s contributions are valuable too.

    Both of whom I probably wouldn’t be aware of if it weren’t for the incontravertible Max Keiser!

    All the best,

    Hawkeye, the ForensicStatistician

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