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20 January 2009
WITH THE recent cut of the interest rates to 1.5%, there still seems no end in sight of the banks actually delivering any cash to the business sector.
As a consequence they are neither stimulating the market nor freeing up the much needed cash flow into the heart of our economy.
The end result is thus that we are moving into stagnation, which will continue to strangle many if not all businesses, and cross over into all sectors of people's lives.
Is it that the banks are using the taxpayers’ money, solely to keep themselves going by only paying their own costs, salaries, etc? Very likely, as what little is left may go to those customers who have to renegotiate an existing loan or a new credit line on such stringent terms that again it puts the business owners at such risk that the reality is that they cannot afford to maintain the payments and whoops, another business goes bust.
Is this really the case of what is actually happening? In all probability it is nearer the unpalatable truth, which is even more frustrating for all concerned.
Yes the banks have to re-capitalise, but over what period of time do they need to do so before they start honouring their promises to start lending at 2007 levels? It is a question that no one has asked yet. Well the banks are very good at playing the long game, as they know that society has short memories, and they will hope that we all forget that it was their incompetence in the first place that principally got us here. Mind you, with a little help from most of us by living beyond our means, there again society has engineered itself for the demand of buy this get 2 for 1, etc, so have we all been conditioned in some 'Pavlovian' experiment?
We can only imagine the frustrations by Treasury officials beavering away behind the scenes in trying to get the banks to see sense, whilst the banks on the other hand are resisting all attempts for them to kick start the economy. The danger being that the Government may well end up, as already suggested, in printing more money, If so we could see the introduction of a £1000.00 note and even a £10,000.00 pound note just to buy a loaf of bread. Then we would be in real trouble.
At the end of the day the overall management responsibility of all of this sits clearly with the Government, and again this is where real leadership and accountability needs to be clear and decisive.
If the decision is not only to talk about nationalising the banks as a leverage tool to start lending again, then perhaps the time has come not only to talk about it but actually do it, we are sure that it would send a shiver of fear though all the banks that they are in fact beholden to all the people in this country and not as they think the other way around.
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