"Self-employment" accounts for 80% of the increase in employment since the crash, warns business secretary Vince Cable

Chris and Fee cautiously celebrate the record employment figures...

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Ring-Fencing Retail Banks – why it’s barking mad to delay

The director general of the Confederation of British Industry in an interview on Radio 4’s Today Programme, on 31/8/2011, commented that all the “over 240,000” members of the CBI – who come from just about every industry in Britain from banking to bolt-making – oppose plans to reform bank regulation at this time.

When Evan Davis, presenter of the Today Programme, suggested the CBI director general, John Cridland, is a paid spokesman for the banks, Cridland responded:

“I am a paid spokesman for business, I’m not a paid spokesman for the banks on their own….There is no division in our membership [on opposing reform at this time]….”

Reforms that Cridland describes as “barking mad”. To suggest there is “no division” for such a diverse group smacks of a North Korean election result. Perhaps it reflects the fact that the CBI’s idea of representation bears the hallmarks of the advisory panel of the Dear Leader, Kim Jong Il, which includes his long dead dear dad Kim Il-Sung in his role of “Eternal President”. As can be seen by the constitution of its Charimen's Committee which drives CBI’s policy:

• According to the CBI website, the CBI Chairmen’s Committee “takes the lead responsibility for setting the CBI's position on all policy matters” and comprises at least 10% representing SMEs.

• Government stats show that small and medium enterprises (SMEs) represent “99.9 per cent of all enterprises, 59.8 per cent of private sector employment and 49.0 per cent of private sector turnover”

Evidently small and medium businesses are poorly represented on the policy making committee of the CBI. The key point of contention the CBI has joined up with the British Bankers Association to oppose is the ‘ring-fencing of retail banks’.

The big banks and their acolytes have a whole legion of reasons why ring-fencing is not a good idea. Their pronouncements go on about how things will be worse and more expensive for the likes of you and me and the butcher, baker and candlestick maker. Commentators from august organs such as the Financial Times deny this. But they are not paid to bang on about it, lobbying, dissembling, and generally propagandising as their day-jobs. So it is the banks’ well paid voices that prevail, most importantly in Conservative Central Office.

Two key reasons why the banks don’t like the ring-fence:

•         It takes away one of the dirt-cheap ways they have of raising money to bet on risky investments: our deposits.  The money from our monthly salaries and our saving, for which they pay us around 0.1% interest – and charge many of us £100s per annum for the privilege.

•         So long as their Investment Bank is tied to their Retail Bank, there will be an implicit guarantee that they will never go bust – the taxpayer will save them. This also brings down the cost of borrowing for the banks, because lenders to the bank know even in the worst case they will get their money back from the taxpayers.

Two things that boost the banks’ profitability. Bankers’ bonuses up, but we still get our measly 0.1% interest on our savings.

So what is the ringfencing all about?

Keeping things simple – a business is solvent so long as its assets exceed its liabilities. For a bank:

If people can't pay back their loans, (a mortgage or business crisis, or a country defaulting on its loans), or the bank's own proprietary investments fall then the banks’ assets fall, threatening the gap between assets and liabilities.

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Steve Hilton's blue-sky thinking

KJ and Chris are not impressed by the ideas of David Cameron's guru

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Cuckoos In The Nest Egg - As we approach Banking Bonus Season, consider how top bankers manage to pay themselves so magnificently, and get away with it.

“And, being fed by us, you used us so

As that ungentle gull, the cuckoo's bird,

Useth the sparrow--did oppress our nest”

William Shakespeare, King Henry the Fourth, Part I

Money is the key to releasing all the skills and assets in a nation. Which is why those who manage the flow of money, the bankers and financial traders, have been able to enrich themselves in a way no other non-criminal profession has. Possession, after all, is nine tenths of the law. And once you’ve put your money into a bank or an investment, it is de facto in the possession of the banker.

You can do a lot of things with money. In fact, that is the entire point of money – you can do a lot of things with it. Money, after all, is the physical manifestation of liquidity. The economy is ultimately based on people exchanging goods and services produced by their own labour and assets for goods and services produced by other people’s labour and assets. Money is nothing more than the token used to conduct this exchange.

If money didn’t exist, the only way a carpenter could get his teeth fixed would be by finding a dentist who happened to need some carpentering. The carpenter would build the dentist some shelves, and in return, the dentist would fix the carpenter’s teeth. The dentist too would only be able to employ those tradesmen who happened to have a toothache. All our skilled carpenters, bakers, butchers, doctors, dentists, computer programmers, and everyone else would spend virtually all their time finding a counter-party who not only needed their particular skill but could also provide the particular skill they needed in exchange.  And have very little time left to use their actual skills. Imagine, if the dentist’s house was burning down and the fire truck arrived, only those firemen with bad teeth would take the trouble to fight the flames!

Under these circumstances, the only way to have a Rapid Response fire brigade would be to have literally thousands of firemen waiting at the station. When there is a fire at, say, a butcher’s shop, it would require a show of hands of those fancying a pork chop for dinner to raise a crew.

Money is the token that enables people to offer their skills to anyone with money. The dentist pays the fireman, through his taxes, with money – so even those fire fighters with good teeth will save his house, chattels, and loved ones. The dentist fixes the teeth of tradesmen he has no need of, providing his dentistry skills in exchange for their money. And he uses that money to pay for, among other things, his taxes which makes sure firemen are available regardless of the state of their molars.

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Vince Cable to investigate Wayne Rooney?

Chris and KJ get their cities mixed up

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