22nd October, 2008.
I am dictating this piece down the phone from Budapest in Hungary where I have just arrived to deliver a lecture to the Ybl Club. My hosts were in a state of shock on arrival because the central bank of Hungary has just raised interest rates from 8.5% to 11.5%…
11th October, 2008
The sin of usury, diluted by Eck and the Fuggers banking family in the 1500s, ceased to be condemned as a sin after John Calvin (pictured) gave a license to the charging of interest. Usury as a sin should be brought back now, I argue in the columns of the Guardian today.
9th October, 2008. Central banks’ obsession with inflation is stopping them from tackling a far more pressing threat.
Both the British Chancellor, Alastair Darling and the shadow Chancellor, George Osborne, have been on the radio this morning, resisting the idea that interest rates are political. Instead they have argued, vehemently, that the Bank of England is independent, and that the Bank must decide whether or not to lower interest rates.
The Prime Minister, Gordon Brown, speaking on Radio 4’s flagship current affairs programme this morning, repeated something he says regularly: that ‘interest rates are low’ and that his government, through the Bank of England, kept them low. The question the BBC should have asked is this: if interest rates are low, and have been so, why on earth are people/companies/banks having such a hard time paying debts? Surely the Credit Crunch crunched, because debts – of banks in particular – became both too large, too expensive, and unpayable? Do small businessmen/women pay low rates on investments? Mortgages? Credit Cards? Car loans? Does the PM live/work on another planet?
In this big bad world of the Credit Crunch, powerful central bankers – civil servants all – have bent over backwards to help powerful and rich private bankers.
On one day, ‘debtonation day’, central bankers in Europe and the US pumped an eye-watering $150 billion into the financial system, to keep big banks afloat. According to Bloomberg, the US’s Federal reserve has ‘cycled $2.58 trillion through U.S. money markets since December’. (Bloomberg 8th August, 2008).
Have been listening to debates about the conflict in Georgia over the week-end. There has been much wailing and gnashing of teeth about Putin’s disregard for democracy. In a similar vein, western commentary about President Hu Jintao’s Olympic Games is never complete without some tut-tutting about democracy and human rights in China.
Yet these leaders have in reality much in common with Alan Greenspan, former chairman of t he US Federal Reserve, who is held in the greatest esteem by western commentators. He came to London recently to promote his book, and I 
attended one of his sessions at Chatham House. The deference from the British political and media establishment was nauseating. The Prime Minister had already honoured him with a knighthood, so deferential is he. Yet this is Greenspan on democracy, as expounded in the columns of the Financial Times last week:
“It has become hard for democratic societies accustomed to prosperity to see it as anything other than the result of their deft political management. In reality, the past decade has seen mounting global forces (the international version of 
Adam Smith’s invisible hand) quietly displacing government control of economic affairs. Since early this decade, central banks have had to cede control of long-term interest rates to global market forces”
Fulfilling my duties as a citizen, I am now confined to the Southwark Crown Court as a juror, so have little time to update the blog. However the effective insolvency of two US government sponsored banks or enterprises (GSEs) – Fannie Mae & Freddie Mac – will now impact not just all those US individuals, institutions and local governments that may have invested in these banks; not just on US taxpayers who are expected to bail them out; but also on you and I (our banks may well hold Fannie and Freddie securities); the central banks of the world that have bought their debt – confident that it will always be repaid.
Their insolvency now threatens a global systemic financial crisis, and their taxpayer-funded bailout of shareholders, bondholders and an incompetent management exposes the hypocrisy of much neo-liberal cant.
In Ten tactics to brighten the gloom, the Guardian invited ten experts to give advice to the Chancellor and Prime Minister on how to lift the economic gloom – and to do it in just 100 words. Other contributors included Howard Davies, Robert Peston, Irwin Stelzer and Bill Emmot. Here is Ann Pettifor’s contribution:
Don’t crucify the economy on the cross of inflation. In the 1920s, central bankers crucified debt-laden economies on the cross of gold. In the 90s Japan’s finance ministry crucified that economy on the perceived threat of inflation. Ending the creditor-driven policy of inflation targeting frees up the Bank of England to cut interest rates and immediately helps debt-laden banks, companies and consumers. Inflation is feared most by creditors, grown rich on financial deregulation policies. The greater threat to the poor is a debt-deflationary spiral leading to high unemployment – made more certain by high real rates of interest.
The FT reports today on a debate economists are having with the Bank of England (BoE). To summarise: the Bank of England does not seem bothered by falling house prices; economists are.
This is a very important debate for all those that have debts – because while house prices are falling, the debts on those houses loom larger for owners. According to the Office for National Statistics in May, unemployment is rising, and unemployment makes it hard, if not impossible, to pay off any kind of mortgage. This is the context in which the BoE is preparing to raise interest rates above the current 5% and appearing relaxed about falling house prices.
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A response to the "Triple Crunch" of financial crisis, climate change and oil depletion. Read the report published by the Green New Deal Group and nef (new economics foundation).
Welcome to my blog about the financial crisis. I'm Ann Pettifor, author and analyst of the global financial system, and co-author of the Green New Deal. I predicted an Anglo-American debt-deflationary crisis back in 2003, and am known for my work on sovereign debt and international finance, including Jubilee 2000. Currently a fellow of the new economics foundation and director of Advocacy International.