By Ann Pettifor – Posted March 16th on Labour List

Together with the Prime Minister of Greece, Mr. George Papandreou, I am going to give evidence to the EU’s Special Committee on the Financial Crisis in Brussels this Thursday, March 18th.

So today’s leaked report from the EU, arguing that Labour’s plans for cuts to public spending are not “ambitious enough”, has got me really het up.

Labour, it appears, is just not ambitious enough about its goals for cutting investment and exacerbating unemployment. It does not have punitive enough targets for cutting benefits to the poor and services for the mentally ill and frail.

In the “imbecile idiom” (to quote Keynes) of today’s financial fashion, the EU, it seems, would prefer for unemployment to rise, for people to live in hovels, and for government “to shut out the sun and the stars” – so that we conform to an arbitrary number set in Frankfurt by a group of bankers, under a pact unwisely signed by an earlier British government.

Continue reading the article…

7th January 2010,

Read Ann Pettifor and Jeremy Smith’s letter on why Iceland must NOT repay the debt in the FT today:

” Sir, The president of Iceland’s refusal to approve repayment to the British and Dutch governments should be welcomed (January 5). The pause gives the Anglo-Dutch governments an opportunity to withdraw their demand for full repayment from the government of Iceland, a country whose population at 317,000 is somewhat smaller than Leicester’s.

The UK and the Netherlands, with a combined population of 76m, should cease to use economic force majeure on a tiny country, and accept the principle of co-responsibility for the crisis. Repayment of the nationalised losses of a private bank amounts to €12,000 per Icelandic citizen, and will inevitably impact harshly on their lives and public services. By contrast the cost to Dutch and British taxpayers of the bail-out will be about €50 per capita.

We understand the strong desire of the present government of Iceland to restore the country’s tattered reputation.

But anyone reading the financial press in 2007 and 2008 (as opposed to the academic reports commissioned by Iceland’s chamber of commerce) would have known that Iceland’s banks were far from risk-free. That was why British and Dutch depositors enjoyed good rates of return on their deposits.

The British and Dutch governments have sound political reasons for protecting small savers lured into shark-infested financial waters. What is unjust is that the tiny population of Iceland should be forced to bear the full costs of the laxity of Icelandic, British and Dutch regulators and the reckless behaviour of private bankers and risk-takers. “

Read the letter on the FT website here.

6th December, 2009.

Most economists (who should know better) confuse the government’s budget deficit with total government debt.

The distinction really is important.

Mixing them up is a little like confusing stocks and flows.  Or confusing your outstanding mortgage – say £200,000 – with your monthly debt repayments. They are quite different things, and if you were to lose your job, the flows (paid with your salary) come to a halt, and then it’s the stock – the £200,000 – that really matters.

Furthermore it is quite possible to increase your mortgage – and lower your monthly payments.  Many did this in the boom years of mortgage re-financing. Or even to decrease your mortgage and increase your monthly payments.

So, just as the movements in regular mortgage payments tell us little about the outstanding stock of debt, so government deficits tell us little about the stock of debt invested and the stock of debt outstanding.

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29 October, 2009

Dan Roberts has a great column in the Guardian today. He asks the right questions. First, why is the Treasury spending £8 billion of taxpayers money reinflating the housing market? Second, why is the Treasury encouraging this now nationalised bank to increase mortgage lending, when the productive sector of the economy – companies, small businesses et al – are being starved of loans from taxpayer-bailed-out-banks, or else having to borrow at usurious rates?

A superb report from the Centre for Research on Socio Cultural Change at Manchester  (“An alternative report on UK banking reform”) suggests the answer: The nationalisation of Northern Rock is being treated as an “equity style turn around”, with the overarching objective of protecting and creating value for the taxpayer as shareholder.

“It is not clear whether the banks have been nationalised or the Treasury has been privatised as a new kind of investment fund.”

It makes perfect sense doesn’t it, given that the Treasury is advised on these matters (some would say it has been captured) almost exclusively by bankers? Get reading the CRESC report -its excellent -  the first piece of independent, academic thinking on reform of the banking sector to have crossed my path.

Ann Pettifor: September 24, 2009

As world leaders meet in Pittsburgh and then Istanbul (for the World Bank and IMF meetings) expect much self-congratulation and back-slapping for having got the world through the post-Lehman crisis.

But behind the cacophony of self-praise, watch out for three alarms flashing red:

• The escalating foreclosure and rising mortgage delinquency rates in the US
• The dramatic contraction of credit in the US over the summer – putting paid to any hope of the US acting as the ‘engine’ of a global recovery
• That big accident waiting to happen to the European economies –Spain

With the help of a great new book – about to be published in the US – let’s take a look at why there is no room for complacency.

“No way to run an economy” (Pluto Press, 2009) is by a man whose research and analyses I have come to respect and rely upon – Graham Turner of GFC economics. While the book is full of solid facts and data – it is eminently readable for those prepared to unleash their inner wonk.

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Ann Pettifor: September 3rd, 2009

I have just listened to the excellent Dr. Paul Woolley on Radio 4’s the Today programme…He of the aptly named Centre for the Study of Capital Market Dysfunction – like it.  But what bothered me was his remark that the finance sector only acts as ‘intermediary’ between those with savings and those needing investment….

The truth that will not speak its name is that banks do not even do that….I learned all this at the feet of Dr. Geoff Tily, author of an important book on Keynes as first and foremost a monetary economist.

Because banks are licensed to create credit, and because bank money is such a wonderful human invention – there is no need for an investor to dip into someone else’s savings – or to  hire an agent to act as an intermediary…..as I explained in a recent letter to the Guardian. (below my unedited version). I was responding to a piece by J Freedland, urging us all to join Zopa, and share our savings with those needing to borrow…..

“While I welcome Jonathan Freedland’s determination to sideline the banking sector, his remedy – the exchange of savings and loans via Zopa at interest rates in the region of 8% – is based on a profound misunderstanding of bank credit (Don’t howl with rage. Try an idea that does away with banks altogether, 19 August).

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The Motley Fool, September 2nd, 2009

Motley Fool blogger TMF Sinchiruna spotlights the Times interview, describing me as “once ridiculed, later vindicated…” TMF Sinchiruna goes on to say: “Peter Schiff, Jim Rogers, Niall Fergusson, Ann Pettifor … these are the voices that I believe investors need to hear. Turn off the tv and look deep into the events of last year and consider for yourselves whether anything more than a hail-mary reflationary maelstrom has been heaped upon the fire that started it all.”

Read the Motley Fool article >

Also just did an interview for You and Yours on Radio 4 which was broadcast Wednesday. You can listen to it here.

From The Times: September 1st

Phil Thornton’s Times interview with me on the economy today.

“The economy is no longer in freefall and, as a result, there’s an enormous amount of complacency from politicians, in particular, about what will happen next. I believe politicians have given away the opportunity to restructure the banks and reconfigure the system.”

Read the interview >

From Open Democracy: August 13, 2009

“A single day, 9 August 2007, will go down in history as ‘Debtonation Day’ – the beginning of the end of the deregulation and privatisation of finance that marks the era of globalisation.”

I wrote these words on 13 August 2007, in anticipation that the great stock-market collapse of four days earlier presaged the end of the era of neo-liberal globalisation.

So it has proved.

Read Open Democracy article>