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.

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.

Worth reading.

Paul Sagar is a young man with his head screwed on.

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.

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.

Wanted: old banking hand with a halo to take on high pressure role in the political spotlight.

The emergence of Sir Win Bischoff as the frontrunner to become chairman of Lloyds Banking Group has highlighted the short supply of well-qualified candidates for leading roles in the sector.

The 67-year-old former chairman of Citigroup is in a small field of candidates at a time when three banking institutions are searching for new chairmen.

I guarantee you: he’s the wrong man.

But that’s not really the point. The reality is that the shortage of candidates to manage these banks is not caused by a lack of suitable people; the cause is that these banks are unmanageable. Win Bischoff could not manage Citi. He won’t be able to manage Lloyds.

When we create organisations that are ‘too big to fail’ management goes out of the window: it has to survive but the inherent conflicts in that process of survival are too great to reconcile, as recent events have shown. No one can reconcile those claims, so there are non candidates because the job is wrong, and that’s because the organisation is wrong.

The job of UK Financial Investments is not to offer up another failed banking grandee as a sacrificial lamb to Lloyds Bank; it’s job is to split Lloyds into manageable parts. Then appoint people to run it.

Undoubtedly black money is a global problem, but while it forms just about 4 to 10 percent of GDP in developed economies, in India it is as high as 50 percent of GDP depending on what you include as black money,” said [Dev] Kar [of Global Financial Integrity].

This is why even Kar believes that India needs to examine the forces driving illicit outflows and institute policies to mitigate them, while also calling for multilateral efforts to increase transparency and accountability in offshore financial centers, tax havens, and onshore banks, which are points of absorption for illicit flows.

The questioning of Ramesh Rajan, chairman and CEO of PricewaterhouseCoopers, India (PwC) by CBI last week, has revealed that the Satyam balance sheets were in fact audited by Lovelock & Lewes and not Price Waterhouse (PW).

It is also learnt that the auditing fees, though deposited in the name of Price Waterhouse, Bangalore, was later transferred into the account of Lovelock & Lewes. "It is from here that the partners S Gopalakrishnan and Srinivas Talluri withdrew the money," sources involved in the investigation of the case told TOI.

Apart from Rajan, other senior partners of PW, from Delhi and Kolkata, were also summoned by the CBI last week. The partners denied any association with PW, Bangalore and said that Gopalakrishnan and Talluri were not entitled to sign any balance sheet on behalf of PW.

"So as it turns out, the auditors who are partners with PW, Bangalore, wrongly signed under the name of PW, and also outsourced the work to Lovelock & Lewes," said sources adding that investigations confirm that the entire auditing team at Satyam is from Lovelock & Lewes.

On being questioned by CBI about this "outsourcing" of work , Rajan, who is also a partner with PW, Bangalore said that the firm has no manpower and, hence, as part of an internal arrangement gives out their work to Lovelock and Lewes. "But this is not acceptable, considering that the two firms are completely different entities," said sources.

An India-based auditing firm, Lovelock & Lewes, though is a network firm of the international consulting body PwC, has no authority to audit under PwC’s name. The CBI is now in the process of recording Rajan’s statement and also plans to summon other partners of PW, Bangalore for questioning, later this week.

As Dennis Howlett says on this:

Are you kidding me? So let’s get this straight:

PWC were the auditors of record but didn’t do the work
PWC audit partners signed off
PWC received fees and then paid to an associate firm
but..they didn’t do the work and, by implication are not therefore to blame AND
Lovelock and Lewes are a PWC network consulting firm.

The question surely must be: How deep a hole does PWC want to dig for itself because this now takes on an entirely different flavour?

Satyam is a US listed company. There are strict rules about what entities can audit public companies. Lovelock & Lewes would fail that test. By implication, PWC has failed that test.

Bring on the lawyers.

But still this firm is treated as being a key player within the world financial services system, and a provider of assurance of compliance with regulatory requirement.

When all along it is perfectly obvious that it is ethically bankrupt.

How long can this last before the whole edifice of auditing collapses? And what then for the operation of markets? I seriously hope these questions are being asked, because they need to be if another sort of crash, that right now seems inevitable, is to be avoided.

The U.S. Justice Department said on Tuesday it was pressing ahead with its five-month-old lawsuit against UBS AG to force the Swiss bank to identify thousands of U.S. clients with secret UBS accounts.

Despite recent media speculation about a possible settlement of the case, the Justice Department said in a brief filed with a Florida court that it was seeking to enforce tax compliance with the full weight of U.S. law.

Good news.

Justice may be done.