Friday, 5 August 2011

Do The Default

I have solved the world's financial problems several times here since I started blogging, but my proposals - abolish the financial markets, everybody join the euro, and so on - have been totally ignored.  I can only assume that this is because they are not radical enough.  So it's time to take the velvet glove off.

Somebody recently asked (in the Guardian, of course): if practically everyone is in debt, who do they owe it all to?  Nobody came up with the obvious answer, which is 'each other'.  And nobody has yet explained to my satisfaction how the inverted pyramid of piss which seems to be causing all this trouble came about, or why anyone puts up with it.  On the radio only this morning, I heard an apparently important person, from a position of some authority, explaining in all seriousness that the problem was that governments were not doing enough to convince the markets that governments were doing enough to constrain the activities of the markets.  I simplify, but not by much.

So, let's all default on our debts.  Let's all - countries, corporations, families, people - say 'nope, sorry, can't repay you.'  What would happen then?  Susan from over the road would ask me to lend her £350 to buy a new iBrow or something.  I'd say 'fine, I'll just nip next door and borrow it from Crispian.'  Crispian would gladly say yes, because he knew that Kimberley two doors up would be good for it ...  We'd all be happy, because we'd know that we'd be welcome round Susan's place any time to play with her iBrow.  And the people who make iBrows would be perfectly happy.

Pretty soon everyone would get fed up with wasting all their energy whizzing money faster and faster around the planet, and hunker down to making and doing things that are actually useful to each other. 

Meanwhile, I can't even buy a decent cheese grater.  The company that used to make them has gone bust.


  1. Your blog captivated me because it makes so much sense! All the money that's missing must be SOMEWHERE and it can't all be in China! About a year before the Sub-Prime nonsense , when things were all on the up, I was speaking to a young businessman friend of mine and I said I couldn't understand finance. It seemed to me that it was all noise with nothing underneath. I said I fully expected it to disappear in a puff of smoke! And, of course, it did! But, at the time, he patted me on the shoulder and said 'It's hard for someone not in business to understand!' (I am a grandmother and ex-kindergarten teacher.)
    Now all this borrowing and lending business has me equally befuddled! SOMEONE's got all the money somewhere. Now, for the good of world affairs, they should just give some of it back and let us all start again.
    After all THEY are going to suffer as much as anyone else from the turn-down. It's only common sense!
    By the way, here in Australia we've escaped the worst, because we've continued to sell minerals to China. We're actually short of workers! BUT everyone is so jittery because of Europe and America that they're refusing to buy houses and goods, and our retail and housing markets are in a bad decline!
    None of it makes sense!
    Sorry to ramble on but you inspired me.

  2. Can't think of anything sensible to say. The whole business is built on vain imaginings. Money is only a token representing goods, services and labour. I'm reminded of some pantomime patter I remember from childhood where Comedian A wants to borrow half-a-crown from Comedian B, who has to borrow it from the orchestra conductor and in some merry-go-round logic way it gets returned to the conductor. I've been conducting all my life and no one has ever given me half-a-crown for it.

  3. I know, let's all buy shares in Moody's, S&P and Fitch. (With money that doesn't exist, of course.) Then we can close them down and mere governments can get on with governing.
    Oops, sorry, I've just spotted the flaw in that. Governments have forgotten how to govern.

  4. I still say the first step is a global currency. You only need a couple of dozen countries to agree, the rest will happily fall in line. It has only one problem: the starting point - the initial exchange rates. But even that's easy - just take the average of exchange rates for say the past 5 years & put them all in the pot. I'm not a mathematician but surely it can be worked out?

  5. Yes, the conversion exchange rates would be a problem. And the interest rate. And the bond yields. And the fiscal policies. And the price of fish ...

  6. Well of course it's been tried before at Bretton Woods which I believe failed in 1971 because a certain Richard Milhaus Nixon decided it wasn't in the US' best interests. Then the speculators moved in & destroyed it.
    Keynes wanted to call the global currency the bancor (but the US had their way; the dollar became the reserve currency for fixed exchange rates).
    But the bancor coulda been a contender, it coulda been something.

  7. Ahh, those were the days! 4.8 dollars to the pound, I seem to recall. Of course we still had an Empire then, and nobody worried about interest rates because they prided themselves in never ever having been in debt (apart from the mortgage, which was a modest investment), and the Overseas Sterling Area had the Colonies battened down; and the Chinese and the Brazilians didn't really come into it ... well, apart from all that, I can see no flaws in your plan.
    PS Moody started his plan for world dominance in about 1868.