Wednesday, 4 July 2012


Later today, we might get a further lifting of the shroud in the dealings between the Banks and the British State, as Bob Diamond testifies at the Select Committee meeting. Already, Barclays have released details of an internal document that detailed discussions with Deputy Bank of England Governor, Paul Tucker, which in turn referenced discussions he had had with “senior” people in Whitehall. So far, there is no smoking gun, but that is why a thorough forensic investigation is required. As I said yesterday, we cannot rely on members of the Establishment, all of whom are involved in one way or another with the web of intrigue that connects the City, the Media, the upper echelons of the State, and the top politicians, to conduct such an inquiry. Just look at the number of Tory MP's, who even on the Select Committee have to declare an interest because they sit on the Board of, or are otherwise connected to some Bank of other City institution.  We need an independent Workers Inquiry to get to the truth.

Once again what we are seeing is verification of the point I have made previously that Capitalism depends on systematic lyingCapitalism And The Importance of Lying. As I pointed out there it is one of the reasons the ruling class and their states hate Wikileaks. The systematic lying by the Banks over the Libor rate is just totemic of the way the system itself relies upon such lies.

For example, look at the way the bail-outs of European Banks has proceeded. On each occasion, including the latest Spanish bail-out, we get politician, and state bureaucrat one after another vociferously denying that they need to be bailed out. Day after day we are treated to this pantomime, until within the blink of an eye they admit, well yes we do need to be bailed out after all!

And, as I've pointed out in the past one of the clearest examples of this kind of lying is over house prices. The fantasy of high house prices in the US, in Ireland, in Spain was maintained by all the vested interests, the State, the Banks, the Estate Agents right up until the minute they crashed through the floor, leaving people bankrupted and homeless. The same is happening in Britain. The official announcements on house prices have become a cruel joke, as I pointed out in – Incredible Indices. Of course, if you have recently bought a house, you have every incentive yourself to want to believe these ridiculous figures that bear no resemblance to reality. If you are a retired person that for some strange reason sees their house as some kind of investment or pension scheme, or if you think it will be a nice gift to your children when you are gone, then, of course, you will want to believe the ridiculous headlines produced at regular intervals by the Daily Express, proclaiming that house prices have once again defied gravity in the middle of a Credit Crunch, squeezed wages, and rapidly rising unemployment, to reach yet new astronomical heights! But, as the quote from the BBC's Ian Pollock illustrates in that post, all these ridiculous claims for Asking Prices do is create an ever widening rift between what people ask and expect to get for their house, and what they end up selling it for! But, of course, the media in their headlines never give the data on actual selling prices, which are around 40% below asking prices!

Just look on websites like Propertysnake and you will immediately see the reality of properties across the country that have been reduced – even in terms of Asking prices by as much as 58%!!!! Many of the property sites now allow you to look for properties sold in your area, and to see what they actually went for, as opposed to what the asking price was. All around me, in a desirable area, such a search shows that selling prices have been at least 25% below asking prices. Some places that were up for sale for £1.5 million, have now been reduced to around £800,000. If you can afford to pay that much, you are not short of a few bob, so if houses in that price bracket are falling by that much, it shows that the underlying health of house prices is pretty sick. But, of course, the Establishment need to keep up the pretence that house prices are not cratering for the same reason they needed to massage the Libor rates downwards. Eventually, as happened in the US and Ireland, and as is beginning to happen in Spain, reality will break through the attempt to cover it in a warm rose tinted glow for the sake of appearance. For all the people trapped in negative equity, unable to make their monthly repayments and facing eviction it will be too late. For all the amateur investors, who have been lured into becoming buy-to-let landlords as a result of a host of TV get rich quick programmes, it will also be too late, as their rents fail to cover their mortgage payments, and as the value of their “investment” becomes a pair of concrete boots dragging them under.
Then as happened in Britain in 1990, under similar conditions when Thatcher's cheap money, and Council house sales programme encouraged millions to become “property owners” - for which read renting from the Bank and Building Society to whom you were massively in debt – there will be a firesale sending not just asking prices down to current selling price levels, but sending both way below even that. The bubble in 1990 was nowhere near as big as that today, and the general level of debt was not as great, nor was unemployment likely to rise as high, nor were real wages going to be as squeezed as now. But, in 1990, prices fell by 40%. They didn't recover even their nominal level until 1996. In the US and Ireland prices have fallen between 50-75%, depending upon the location. In Spain, prices have fallen by around 50%, and yet property still isn't selling, and prices need to fall another 50% to get to reasonable levels, particularly considering the economy is in a Depression.

But, its obvious why the State needs to maintain this fiction. It is the same reason they appear to have colluded over the Libor Rate fixing. They are committed at all costs to keeping the Banks and their shareholders afloat. The attempts to manipulate Libor, were not to rip off people with mortgages as was originally presented by the media. The rate was manipulated DOWN, which meant that mortgage rates were also manipulated down! The people who got ripped off were not those with mortgages, but the people with savings, who received an even lower rate of interest than the meagre sums they were already getting. One media myth that used to be perpetrated was that Council House tenants were subsidised by taxpayers. In fact, it was the other way around, Council House rents used to subsidise the General Rate Fund of Councils. Meanwhile, people with mortgages for decades received Mortgage Interest Relief. The higher the tax band you were in, the bigger your mortgage, the more tax avoidance you could legally engage in, being subsidised by other taxpayers i.e. people who didn't have mortgages. Over the last few years people with mortgages have been massively subsidised because money printing by the Bank of England and other such measures have forced down interest rates to unsustainably low levels. On average people with mortgages benefited by around £7,000 a year in 2009, as a result of the reduction in their mortgage payments!

Or take another example, in attacking State Capitalist sector workers and their pensions, the Liberal-Tories often bemoan the low level of private pensions. But, who is responsible for the appalling level of those pensions? Certainly, not workers in the State capitalist sector like teachers and nurses!  Firstly, responsibility lies with the Banks and Finance Houses that provide those pensions. As Panorama demonstrated a year or so ago, these providers are taking around two-thirds of all contributions into the schemes and pocketing it themselves in fees, commissions and back-handers to each other, rather than investing it! But, secondly responsibility lies with the Government and the Bank of England. When you come to take a private pension it is based on what is called an Annuity. An Annuity is basically a given percentage payment on the pot of money you have accumulated in your Pension Fund. It can be a fixed sum, or you can agree to take a lower initial amount in return for having it increase year by year by a certain amount to protect against inflation. Annuity rates are based on, current interest rates (i.e. those fiddled Libor rates, and the Bank of England's fiddled interest rate etc.) your age, sex, and life expectancy. A few years ago, you would have expected for a 60 year old man to have obtained an Annuity Rate of at least 5%, and even in the last ten year as high as around 7-8%, for a 65 year old. But, today you would be luck to get 2%!!!   Put it another way, when the Liberal-Tories compare a teacher or a doctor's pension, and say to obtain it, you would need a £2 million fund for a private sector fund, the answer is that if Annuity Rates had not been manipulated down, then a pot of only £500,000 would be needed.  If the pension providers were not pocketing two-thirds of contributions, a pot of only £150,000 would be needed!!! 

The reason, Annuity Rates are so low is because the Bank of England has printed loads and loads of money to bail-out its friends in the Banks, and as a result has artificially lowered interest rates. In the process it has increased inflation, squeezing wages, it has kept house prices in an unsustainable bubble, so that its friends in the Banks are not seen to be sitting on £2 trillion of private debt that is likely to turn bad, and which will crush them when it does.  It isn't just the lying of Barclays and the Banks that needs to be exposed, but the lying and manipulation of the State, and politicians that equally should be exposed. That is why we cannot rely on those politicians to conduct any inquiry, but it is also why we cannot rely on other sections of the State and the Establishment, such as the Judges to conduct any inquiry. That is why we should demand a Workers Inquiry. We should begin passing resolutions through Trade Union branches now, demanding the TUC begin to organise it.

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