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: