The SERTUC Regional Council meeting on Saturday morning (see previous post) had invited the economist, Graham Turner, of GFC Economics to update us on the “impact of workers of the current economic situation and future prospects”. A huge topic to cover in 15 minutes. Graham to his credit didn’t seem fazed at all by this and did his best to cram in a minor PhD worth of alternative financial info in the allotted time spam. Despite the odds - it worked.
Graham argued that the Banks are still lending as much as they did during the boom years despite the common perception of a “credit crunch”. However, what they are doing now is lending to the OFC or “other financial corporations” such as lease and finance companies who use to get their money from capital markets. Which have now all dried up. The Banks are using the money they got from the government to lend to this “shadow banking sector” rather than directly to industry and consumers. He wants the Banks to be nationalised outright since piecemeal recapitalisation of Banks is not working.
He feels for Obama “I really do” since he thinks he will be overwhelmed by events - 1:10 US mortgages are in arrears or being foreclosed. This will increase as the recession takes hold. 1.5 million US jobs have been lost or more commonly, people are forced to go part time. The true unemployment and forced part time rate is now 13%.
He believes that the weakening of Unions in the West contributed to the present crisis since it led to a squeeze on earnings which meant consumer goods and homes were unaffordable which resulted in excessive lending
Graham’s solution is the infamous “quantitative easing” - large scale financial fiscal stimulus of the economy. In April 1932 the tide was turned in the States by buying bonds not cutting base rates. The gilt yield at the moment in the UK is some 4% pa; it needs to get down to 1.5%. By printing money or by whatever is needed. There is no current inflation threat only a real deflation threat. We need to learn from Keynes and from what worked in the 1930’s. Probem is that the lesson of history is of course we don’t learn from history.
Graham is based in Mile End around the corner from where I work. Well done to SERTUC for having him speak. He went down very well with the audience. I did my usual question to him about the role of workers capital governance in the current crisis but got my usual reply (he thought that I was talking about the current dire financial state of many pension funds not workers capital – it must be me?).
Graham has a book out called “The Credit Crunch – Housing Bubbles, globalisation and the Worldwide Economic Crisis”. I queued up with many others to buy a copy which now sits on a shelf immediately to my right and is now glaring at me unread.
Two further things of interest – the first question he had from the floor complained that there hadn’t been enough “class analysis” in his presentation. Graham answered by apologising for not referring to the impact of on the working class of the crisis but made no reference to any theories on class consciousness (which was a relief and a welcome surprise).
Steve Hart, the Unite London regional secretary, asked Graham if could think of a more snappy, user friendly slogan to explain what he was arguing about. Steve, quite reasonably pointed out that he could not imagine going on a demo with thousands of people shouting “What do we want...Quantitative Easing... When do we want it?..."“Now”. I think that Graham suggested “Print Money Now” and “No Wage Cuts”. Which are not that catchy but will do.
