So what happened to the recovery and the “we are our of the Great Recession”?
by Michael Smith (Veshengro)
The Governor of the Bank of England warned just recently that living standards may never recover from the financial crisis and that households were only just starting to feel the full impact of bankers' mistakes.
Mistakes he calls it; the banker's mistakes. We should better call it the banker's outright fraud, and it was the Bank of England, under him, that forgot to keep and eye on those rogues.
Mervyn King told British Members of Parliament that ordinary people were not to blame for the pain ahead and that he was surprised there had not been more public fury.
The only reason, I would say, that there has not been more fury is because of at least two things. The first one being that the British don't rise up all that easily and the second one is that it has not completely hit home as yet with many. Wait till that happens and we may see more fury.
"It is not like an ordinary recession where you lose output and get it back quickly," the Governor said when asked if the country would ever recover from a squeeze on living standards on a scale not seen since the 1920s.
"You may not get it back for many years, if ever, and that is a big long-run loss of living standards for all people in this country."
Mr King said that unlike previous recessions, the economy had not needed a shake-up to get industries out of state control or weaken union power and that the people bearing the most pain are blameless.
"They can't look at this and say, 'Okay, something was wrong that has to be put right' and they don't get bonuses on the scale of people in the financial services sector," he told the House of Commons Treasury Committee.
"The cost of this crisis is only now being felt. I'm surprised that the degree of anger hasn't been greater."
Mr King said the cost to ordinary people was one reason why the Bank would take a hard line with banks and let troubled lenders fail when regulation is transferred to it from the Financial Services Authority.
Mr King said the Financial Services Authority (FSA), the financial regulator in Britain, had spent too much time listening to banks' views and getting bogged down in detail. Instead, he said, the role of a regulator should be to clamp down on risky activity and make sure that if a bank gets itself into trouble it can go bust without the taxpayer, savers or other banks paying the price. "It will change the face of banking supervision for the next quarter of a century," he said.
While he, as the governor of the Bank of England is trying to wriggle out of his responsibility here and blame the FSA, the truth is that somewhere along the line the Bank also should have stepped in but didn't.
Bankers got huge bonuses for risking everything and the banks collapsed and the government, here and abroad, stepped in and bailed them out. They were declared 'too big to fail'.
However, manufacturing companies and service companies that went to the wall because of this, regardless of how many people they employed, with the exception of the automotive industry, did not get a bailout. They were basically told to 'sink or swim' and many sank.
Lobby groups and their money seems to be what we are seeing in action here and this country has got itself in such a mess because it has moved from a once great manufacturing industry – from a country that made things – to a country that just provides services and the location for banks.
No wonder we are in this sticky situation and nigh on in the sewers. Only a serious rethinking of our economy and of our way of life will change things.
However, I am sure that we will have to accept that we will not get back to the living standards and the way we have lived in the last forty or fifty years. Those times are over for good, and that especially when the cheap and abundant oil is no longer. Think about it.
© 2011
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