In These New Times

A new paradigm for a post-imperial world

Northern Rock, the Pound and the Euro

Posted by seumasach on January 7, 2008

Cailean Bochanan

21st September, 2007

On Monday night the government made the decision to guarantee deposits at northern Rock. This was hailed by some as an act which sacrificed shareholders and management whilst protecting depositors. What the government had really done was was to underwrite the beleaguered bank’s liabilities whilst leaving it to dispose of its assets as it pleases. Actually this is the kind of arrangement financiers have always favoured for quite obvious reasons. Meanwhile, the depositors , if they do take Darling’s word, will end up, at best with a reimbursement deeply eroded by inflation. True to form New Labour stands behind the British oligarchy. To defend his actions Darling, recalling his student days, may have come up with a slogan like this: defend the gains of the thatcherite revolution!

To guarantee Rock’s deposits was not wrong, but it was only part of the required policy: they also had to take control Rock’s assets. These of course would not themselves be very solid given the problems its clients, and British mortgage holders, in general, are having. But the government would be in a position to restructure these loans allowing mortgage holders in difficulty to remain in their homes on reasonable terms. As it is, the financial vultures are set to take over Rock, milking it for what it’s worth regardless of social consequences. The government has missed an opportunity to intervene decisively to sort out the mess at the expense of the financiers and in the interest of the British people (although, it must be said, it was an opportunity that they were never likely to take).

The consequences of the government stand have been as immediate as they have been unremarked (careless talk costs profits): the pound has plummeted on the foreign exchange markets. The prestige and high value of the pound sterling underwrites the prosperity of Britain’s post-industrial, consumer economy. Under the wing of the dollar, it is a global reserve currency: its demise is, for better or worse, the end of Britain as we know it.

It’s true that in happier times reckless financial strategies would not have ended in tears in this way. Indeed, the anglosphere has spent the last thirty years partying as we offloaded our crisis onto the rest of the world. But these are no longer happy times for ailing hegemons. The Anglo-American empire is a financial empire underpinned in the last instance by military force. That force has been put to the test in iraq and Afghanistan and found to be wanting. There is nothing left to restore the stability of the pound and the dollar. The situation is precisely analogous to that of Italy at the end of the Roman Empire where, having hollowed out its own productive capacity, it had woven itself into the heart of a division of labour around the Mediterranean on which it was dependent, but no longer controlled.

For thirty years we in Britain have subverted every notion of what it means to maintain a society, a state, a coherent body politic. We are left, not with a legal or constitutional framework, not with a public sector free from private profiteering, not with a responsible citizen body, not with a commonwealth of any form, but with nothing but money, paper money, soon to reveal itself as worthless.

In the summer of 2005 the British media were celebrating the demise of the Euro. Now things look rather different: despite massive intervention by the ECB the Euro is holding firm, although they still have the real test in the form of Spain’s total bankruptcy. So with an eye to stabilising our own rocky ship we can consider ourselves lucky to have the option of moving into the euro zone if our continental friends are satisfied that the right conditions are being met ( we will probably have to undertake considerable sanitisation of our finances before qualifying for such a move). We have that option, but not if our oligarchs of the Murdoch school have anything to do with it; these same oligarchs who now plan to mete out to us what they have been meting out to the rest of the world for a long time. For these recipients of corporate welfare the government in their pocket must not be devalued.

UKIP and others, failing to see that our sovereignty is being subverted internally, reject Europe in the belief that they are defending that sovereignty. For all that Europe has still a way to go before truly emerging into the post neo-liberal, post-imperial world, I believe it provides us with a lifeline, a context in which to claw our way back to civilization, an escape route from the horrors of a failed state run by a vicious, murderous cabal.

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