Recession has hit many in the country hard and the gap between rich and poor continues to grow into a chasm that will only be closed after several decades of continued effort.
Whilst just 5 years ago, Britons were amongst the better off peoples in the developed world, having more wealth per capita than Americans, the turmoil in economic banking has hit hard. In order to grind the recession to a halt, there need be revolution of the way the monetary systems correspond with each other: how far countries should integrate, banks make deals, loans be offered etc.
The Independent Commission on Banking is due to deliver a full report and recommendations on how to proceed in these turbulent times come September. However, in its Interim release, there was call for a ‘ring-fencing’ of bank operations.
John Vickers, who is leading the commission and is also the former chief economist to the Bank of England, outlined the suggestion in April. It would involve separating the retail operations of banks from the investment quarters. In so doing, it would be hoped that the taxpayer is firstly never again responsible for the blunderings of the multinational corporates, and also ensure a more stable safe haven for money deposits, by interest rates and bank credibility not affecting all customers to the same extent.
However the Government is under no obligation to implement any recommendations from Vickers.
Although the Commission was set up by the current parliament last year, it seems that there is already a shrugging of its findings, with ministers being shy to accept the report. There is no rush to go ahead with splitting up the sectors.
Of course, economic stability is not quite as simple as it was at the beginning of last century. Whilst countries only had interdependence on a few others, the globalisation of markets has led to a wide and often unstable allegiance of various countries. Whether these are markets for imports or exports, goods or employment, there is now a consensus that any changes need be implemented on a global scale never before witnessed.
With the Eurozone failing and a ban on cold selling, there is a certain unease. Across the pond, America’s credit rating has been downgraded. The giants of world revenue are tumbling.
The head of the British Bankers' Association, Angela Knight, has said that there needs to be a focus on the recovery first and the taxpayer second. She said that regulatory change could undermine the recovery, whilst John Cridland, director general of the CBI, added that "Taking action at this moment - this moment of growth peril, which weakens the ability of banks in Britain to provide the finance that businesses need to grow - is just to me barking mad,"
The question then is how to tackle the crisis.
Naturally, this has been the forerunner of all major economists over the past three years, but this is all the more relevant because just months ago, forecasters were once more predicting growth that was never yielded. There is no stability or predictability in the market. This in turn makes it even weaker. The circle continues so that faith in markets plummet, stocks fall, value is wiped from companies.
In this way, it is logically to assume the real resolve would be to add back confidence. This involves the banks interlending. This would have to be monitored, but if there was a free flow of money, there would be less economic danger of funds being tied down.
This would open new markets and revenues and allow customers to shop more freely, invest more freely, and trust more freely.
However, regulation is difficult due to the uncharacteristic nature of the markets. Any action could send it toppling or cause a bounce back and these extremities are believed too risky. Slow progression is favoured.
Whilst this may be advisable for now, regulation revolution is required if there is to be consumer confidence in money matters once more. The extent of lost revenue and wealth is overwhelming: there need be change to the structures of money lending. Banks can no longer be the only regulators.
Watch this video for an explanation regarding how the economic crisis could spread. Applicable to many countries in the Eurozone too:
No comments:
Post a Comment