Quantitative easing allowed the wealthy to get out of cash and into assets, writes Martin London; the provisionally passed Ceta deal is TTIP by the back door, says John Airs. Plus letters by David Dodd and Paul Nicolson
The debt crisis Larry Elliott predicts (Borrowed time: Threadneedle Street is right to fear a bubble, 19 September), is the result of our failure to resolve the financial crisis of 2008. The credit crunch demonstrated that western economies were living beyond their means and that there was too much money and too much debt in the system. The required solution was for creditors to give up a considerable portion of their wealth, and return living space to debtors. Significant austerity was unavoidable.
Governments chose quantitative easing instead, which allowed the wealthy to get out of cash and into assets, retaining or regaining any loss caused by the crash. The rest of us had to bear the brunt of austerity: cuts in benefits, the erosion of full-time jobs, the rise of the gig economy and increases in rents. Additional debt, funded by the liquidity of quantitative easing, enabled millions temporarily to retain a semblance of normal living: but the unequal distribution of wealth has not gone away.
The sell-off of its $4.5tn portfolio, bought to keep interest rates down after the financial crash, is as unprecedented as the stimulus programme that came before
The Federal Reserve has announced it will begin the great unwinding of the gargantuan stimulus programme it began close to a decade ago in the teeth of the worst recession in living memory.
As widely expected, the Fed voted to start reducing its portfolio starting in October, and kept interest rates at a range of 1% to 1.25%.
Related: Janet Yellen rebukes Trump over plan to lift financial regulations
Related: The financial system is still blinking red. We need reform more than ever | Rana Foroohar
The virtual currency’s success reflects the continuing lack of trust in traditional banking following the credit crunch
When the boss of Wall Street’s biggest bank calls a bubble, the world inevitably sits up and listens, albeit with a sense of historically weighted irony: of course an investment bank boss would spot disaster after his industry presided over the last one. Jamie Dimon, the chief executive of JP Morgan, said last week that the ascendancy of the virtual currency bitcoin – which has risen in price from just over $2 in 2011 to more than $4,000 at points this year – reminded him of tulip fever in 17th-century Holland. “It is worse than tulip bulbs,” he said. “It could be at $20,000 before this happens, but it will eventually blow up. I am just shocked that anyone can’t see it for what it is.”
Dimon’s comments are an open invitation for derision from those who, rightly, point out that although JP Morgan may be top of the Wall Street heap, that heap is far from being the moral high ground. Under Dimon’s leadership, it has agreed a $13bn settlement with US regulators over selling dodgy mortgage securities – the instruments behind the credit crunch – and its run-ins with watchdogs include a $264m fine last year for hiring the children of Chinese officials in order to win lucrative business in return.
Structural reforms since financial crisis are slowly but surely starting to bear fruit, with the lowest unemployment since 2009 and production ratcheted up
It was a story few predicted: the eurozone is growing faster than the United States. When Jean-Claude Juncker gave his annual state of the union speech on Wednesday last week, Europe’s booming economy was near the top of his list. Ten years since the crisis struck, “Europe’s economy is finally bouncing back,” the European commission president told MEPs. Detailing the economic resurgence, but also referring to the EU’s newfound unity after Britain’s vote to leave, Juncker declared: “the wind is back in Europe’s sails”.
In fact, growth in the 19-country eurozone has quietly outshone the US for the last two years. The latest annualised growth numbers show the single currency bloc growing at 2.3%, compared with 2.2% for the world’s largest economy. Eurozone unemployment has fallen to the lowest level since 2009, while factories are humming again, with production up 3.2% on last year.
Related: Weakest eurozone economies on long road to recovery
Though it might be deserved, the chance of campaigners securing reparation through suasion is extremely low
One sympathises, of course, with the former shareholders in Northern Rock who are still campaigning for compensation a decade after the bank’s nationalisation. They are not faceless City institutions. Many are small shareholders who had invested substantial sums, presumably in the belief the Rock was a solid north-east institution run by a competent board, and lost the lot.
The problem with the compensation idea, however, is that it doesn’t stand up. Yes, it is probably true that the Rock was not insolvent, just suffering an extreme liquidity crisis. After all, the Treasury is set to make a clear profit from the run-off of the mortgage book. But those profits are not evidence of unfair confiscation. Taxpayers assumed a risk the Rock was unable to bear because it had been running a risky and reckless funding model that couldn’t withstand the crisis. For a bank, lack of liquidity can be a life-threatening event.
Related: Darling: Brexit would not have happened without banking crisis
With neoliberalism in crisis, it’s time to emphasise the importance to people of belonging and co-operation, argues this optimistic call to action
That which is dangerous can also be thrilling. Many liberal democracies are engaged in something dangerous, as questions of identity, community and nationhood are being asked with a fresh urgency, with some of the answers turning out to be deeply disturbing. But is there also something thrilling going on? The capacity for democracy to throw up surprises, such as Britain’s 2017 general election result, is mesmerising. Brexit may be a famous act of economic self-harm, but something new will be born one way or the other. Still the danger persists and may be growing.
That this is happening now, as opposed to 10 or 20 years ago, is a direct consequence of the disintegration of the economic policy framework that has held sway in Britain, the US, the European commission and many multilateral institutions for much of the previous 40 years. That framework is often referred to as “neoliberalism”, even if the term irritates a certain class of pundit, for whom it is some sort of swearword without any clear referent. Its disintegration is producing conflicting sympathies, as many on the left come to realise the xenophobia that can be unleashed in the absence of stable market-based rules.
Related: Neoliberalism: the idea that swallowed the world
Ex-chancellor admits government ‘lost control’ for a few days 10 years ago and says people have felt ‘badly treated’ since
The UK would not have voted for Brexit had it not been for the banking crisis which began 10 years ago with the run on Northern Rock, according to the former chancellor Lord Darling.
Darling admitted the Labour government “lost control” for a few days at this time 10 years ago when customers were queuing outside branches of the lender to withdraw their cash, and said the consequences were still being felt today.
Related: UK’s high street banks are accident waiting to happen, says report
The perpetual quest for growth drives our economics. That’s why our environment and financial system lurch from crisis to crisis
There was “a flaw” in the theory: this is the famous admission by Alan Greenspan, the former chair of the Federal Reserve, to a congressional inquiry into the 2008 financial crisis. His belief that the self-interest of the lending institutions would lead automatically to the correction of financial markets had proved wrong. Now, in the midst of the environmental crisis, we await a similar admission. We may be waiting some time.
Related: George Monbiot: how do we get out of this mess?
The sigh of relief from insurers and financiers when Irma changed course could be heard around the world