Debtonation » Blog Archive » Ignorance of money helps bankers and politicians escape.
Ann Pettifor (a Green New Deal colleague) says (rightly) that:
most assume that credit = savings, and that only by mobilising savings or surpluses (generated by production of one sort or another) is it possible for banks or financial institutions to lend money to finance economic activity. In other words, that money (deposits/savings/credit) exists only as the result of economic activity; and those deposits/savings/credit then create economic activity.
On the contrary: it is bank money/credit that creates economic activity - and only then are deposits, surpluses and savings generated. And not the other way around.
Precisely.
And this is why we can spend our way out of recession. Indeed it is why we must spend our way out of recession. Any other option costs more, increase debt, and causes more hardship.
Why is that so hard for people to undertsand? Keynes did - and he called it a paradox that what works for individuals is completely unsuitable for states - and yet the mindset of the grocer prevails in government.
Richard Murphy Economics
Auditors face charges in Satyam fraud - Accountancy Age.
Auditors caught up in India’s Satyam scandal have been charged with the offence of luring investors to buy shares of the company by ‘knowingly certifying forged and inflated balance sheets’.
The allegations against PricewaterhouseCoopers’ Subramani Gopalakrishnan and Talluri Srinivas have been detailed in a written submission by the Central Bureau of Investigation (CBI) of India, made to the High Court in the state of Andhra Pradesh. The law enforcement body is opposing a bail application made for the accused.
Apparently though:
Meanwhile, any bad publicity associated with the Satyam affair does not appear to have dented PwC’s reputation. It has announced that it will be increasing its staff by 50% in India.
The raeson? International Financial Reporting Standards are coming to India. Now there’s a cae of regualtion by the chaps for the benefit of the chaps if ever there was one.
Richard Murphy PWC
There is a new post this morning on my Enough Economics blog – on the need to accept constraints.
Richard Murphy Economics
FT.com / Companies / Rail - National Express rail empire hopes end.
I think it’s time to face reality:
1) Privatisation does not pass risk to the private sector - only profits
2) Rail privatisation has failed
3) We once had a very good rail operator who required a much lower level of subsidiy for a much higher level of efficiency than we have now - that operator was called British Railways.
And that’s where we should be heading back to.
The East Coast route should stay in public hands - and be joined by all other franchises as they end or fail.
Then we can have a cohesive transport system again.
Richard Murphy Economics
FT.com / Companies / UK companies - Nearly 75% of private equity exits end with receiver.
Nearly three-quarters of all UK private equity exits ended in administration in the three months to June, underlining the scale of challenges facing the industry as the value of new buy-out deals shrank to a 14-year low.
Out of 108 buy-out exits this year, nine were secondary buy-outs, 25 were trade sales and 74 ended in receivership, according to research published on Wednesday by the Centre for Management Buy-Out Research (CMBOR) at Nottingham University.
There were no buy-out exits via a stock market flotation for the sixth consecutive quarter, another record.
Surely this shatters the private equity bubble for good? Not only did they receive massive state subsidy in the form of interest tax relief, profit exported abroaduntaxed and low rates of capital gains tax on what should have been income, they also very obviously failed to add value. In fact, as this data shows, they were just riding the back of an asset bubble, in exactly simialr fashion to the housing market.
I have nothing against venture capital: I have run VC backed companies. But private equity is just asset stripping. There has never been a place for that in a sustainable economy. It has to go.
Richard Murphy Private equity
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