Lough Erne. Should read more like Laugh Erne! The G8 summit opens today in Ireland under the Presidency of Prime Minister of the UK, David Cameron. Beyond the fact that now given that the G20 exists and even the G77 (the more the merrier?), questions are raised as to whether the G8 is still willing or even capable of doing very much in the world today. Except perhaps of spying, that is. As the world reels back from the shock of US-spying tactics and the world also revels in the fact that the 2009 was marred by then-PM Gordon Brown’s interception foreign communications from politicians to heads of state and the setting-up of fake internet cafes just to collect information ahead of the summit, we ask what are they doing in Lough Erne? Isn’t it laugh-able?
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G8: Lough Erne
The summit opens today for two days of public display of back-slapping and hand holding, championing the things that the west does best. The summit was preceded yesterday by the parading of 8 life-size puppets with huge heads to draw attention to poverty levels in the world. But, while some are starving in the world, the G8 will be bringing to the forefront of its agenda the question of tax evasion in tax havens [24] around the world. Despite the fact that the majority of the countries present actually have their own tax havens, in fact. All very well to criticize and condemn, but when you live in glass houses, you know what you shouldn’t be doing.
But, just how effective is the show of camaraderie in changing world events? Recall the moment when the world collapsed and the markets imploded at the start of the financial crisis. In 2008, the G8 held an extraordinary summit to solve the world’s problems. Remember that the statement began by:
“We, the leaders of Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States of America, and the President of the European Commission, are united in our commitment to fulfill our shared responsibility to resolve the current crisis, strengthen our financial institutions, restore confidence in the financial system, and provide a sound economic footing for our citizens and businesses.”
Half of those countries have gone under since then, buckling under the weight of the financial debts that they ended up ladening the taxpayer with. France has officially been declared in recession. Italy has sunk like the Doge’s Palace in Venice. The United Kingdom is as about divided as you can get on whether to stay in or get the hell out of the EU and run as fast as they can. But, where? The US is printing money like it is going to go out of fashion and the EU is propping itself up as hard as it can, and half the countries are heading for the failed-state checklist these days.
So, we were told in 2008 that they would “resolve the current crisis, strengthen our financial institutions, and restore confidence” [Laugh]. The plan was called the G7 Plan of Action. Simple.
There were five points:
1. “Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.
2. Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.
3. Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.
4. Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.
5. Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.”
All of these were promised to be actions that would “protect the taxpayer”. How far does that hold true? Has the taxpayer in the EU been protected in paying for failed Eurozone countries? Has the taxpayer in the US been protected from bailing out the banks?
The banks cost the United States $700 billion in recapitalization through the Capital Purchase Program (CPP). But, there was no investigation of the banks’ financial plans. There was no tailor-made plan for each bank. The banks just got the money thrown at them. The Federal Reserve got $211.5 billion back (of the initial payment that was made of $204.9 billion). So, they made a profit. Although, not all the banks have paid the money back. Just under half (48%) used other Federal-Reserve money to pay the Federal Reserve back. Goes round in circles so much that it makes you dizzy! So, the banks that got the money from the Federal Reserve (that got the money from the taxpayer at the time), paid the Federal Reserve back with extra money that the Federal Reserve gave them (from the taxpayer again). I thought the taxpayer was supposed to have been spared in all of this. The big banks have managed to pay back using that money. The smaller ones haven’t. Either they didn’t get the money from the Community Development Capital Initiative program or they are not turning a profit. There are still $16.7 billion outstanding. Some even asked for the bill to be written off by the Federal Reserve. That would have been openly making the taxpayer pay, wouldn’t it. Above board, at least.
Now the Federal Reserve is buying $115-billion worth of Treasury Bonds a month. But, the money is not getting out there to the people. It’s filling the coffers of the banks. Deposits are growing far faster than the bank can actually give the money away. That’s because the economy is not growing at the same rate as the money that is being injected. It’s being left unused and it seems like the only thing we are using is the ink on the printing presses. The deposit growth rate has been increased by roughly 9-10% since QE3. But growth of loans has been at about 3.5-5% per year. That means there is surplus money sitting somewhere unused at the expense of the taxpayer. Loan demand just can’t absorb the deposits because the Federal Reserve’s dollar-pumping policy is injecting money into markets, boosting stock prices higher, but the ‘wealth’ is not trickling down to the economy, because it is lying dormant and is unproductive today.
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G8 UK 2013
So, as the G8 leaders are seated in Laugh Erne today they might learn that words are essential, but action is even better. There was certainly some action when faced with growing derelict buildings and unemployment, there was an action-decision taken to create false shop-fronts and hide the misery that is part and parcel today of Lough Erne.
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G8 False Shop-Front, Lough Erne
Getting rid of tax havens and bringing them into line with the rest of the world’s taxpaying community is laughable some might say. Remember that the ‘taxpayer must be protected’. But, it seems that there might be two different types of taxpayer that we are talking about. Which one do you belong to?
Originally Posted G8 Summit: Just How Effective? [27]
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