An accounting firm BDO Stoy Hayward (the same firm that was commissioned by the British government to produce a report on the MG Rover saga) published recently an analysis:
"Time to break the silence?".
"It is no secret that due to the recession, the bank bail-out and corporate mis-management, that the UK is now facing a £175bn deficit. It's also no secret that one of the principal options to address the increasingly urgent need to 'balance the books' is by raising tax. BDO's Prudent estimates put this figure at an additional £25bn a year! Tax on you, me, our families and our businesses.
None of the political parties are currently standing up and speaking out about how they intend to reduce the national debt. Now it's time for politicians to speak out and Break the Silence over potential tax policies."
The entire report makes a very uncomfortable reading for both the Labour and the Conservatives. The former do not want to lose the next elections (held by spring next year at the latest) or lose it by the least possible margin. The latter do not want to scare the electorate too much. Labour keeps spending as there was no tomorrow (to survive till election) and the opposition stays almost quiet about it. As a result the public stays deluded that everything will be all-right.
However the whole truth is even more uncomfortable than it transpires from the BDO report. Firstly the government, as it admitted, does not have an idea of the size of the liquidity hole that it still may have to plug. There are already signs that the next wave of liquidity crunch may be on the way. Other governments, like German’s, are gearing up for it. BDO report assumes, implicitly, that the scale of deficit will not increase dramatically. This appears to be an optimistic assumption.
Secondly the scale of financial burden that the taxpayers will have to bear – even assuming rather optimistic picture that the report paints combined with the recent approach to bankers’ pay scales - shows that the relationship between the financial industry and taxpayers evolved into loan sharks and their victims arrangement. Taxpayers will keep paying through their noses forever to support opulent life-style and massive earnings in the financial industry.
Indeed it is high time for politicians to tell the truth about the scale and consequences of the current crisis. It is also high time they confront the financial industry and instigate prosecutions (including wealth confiscation) of all those responsible. This crisis is not a failure of capitalism or free market economy. It is a result of common criminality: centuries old fraudulent methods that resulted in turning the financial system into a giant global pyramid scheme.
"Time to break the silence?".
"It is no secret that due to the recession, the bank bail-out and corporate mis-management, that the UK is now facing a £175bn deficit. It's also no secret that one of the principal options to address the increasingly urgent need to 'balance the books' is by raising tax. BDO's Prudent estimates put this figure at an additional £25bn a year! Tax on you, me, our families and our businesses.
None of the political parties are currently standing up and speaking out about how they intend to reduce the national debt. Now it's time for politicians to speak out and Break the Silence over potential tax policies."
The entire report makes a very uncomfortable reading for both the Labour and the Conservatives. The former do not want to lose the next elections (held by spring next year at the latest) or lose it by the least possible margin. The latter do not want to scare the electorate too much. Labour keeps spending as there was no tomorrow (to survive till election) and the opposition stays almost quiet about it. As a result the public stays deluded that everything will be all-right.
However the whole truth is even more uncomfortable than it transpires from the BDO report. Firstly the government, as it admitted, does not have an idea of the size of the liquidity hole that it still may have to plug. There are already signs that the next wave of liquidity crunch may be on the way. Other governments, like German’s, are gearing up for it. BDO report assumes, implicitly, that the scale of deficit will not increase dramatically. This appears to be an optimistic assumption.
Secondly the scale of financial burden that the taxpayers will have to bear – even assuming rather optimistic picture that the report paints combined with the recent approach to bankers’ pay scales - shows that the relationship between the financial industry and taxpayers evolved into loan sharks and their victims arrangement. Taxpayers will keep paying through their noses forever to support opulent life-style and massive earnings in the financial industry.
Indeed it is high time for politicians to tell the truth about the scale and consequences of the current crisis. It is also high time they confront the financial industry and instigate prosecutions (including wealth confiscation) of all those responsible. This crisis is not a failure of capitalism or free market economy. It is a result of common criminality: centuries old fraudulent methods that resulted in turning the financial system into a giant global pyramid scheme.
As the co-writer of the BDO "Time to break the silence" paper, I have much sympathy with the comments above that the c.£175 billion deficit projected in the budget for both of the next two years might turn out to be too optimistic. The key theme in our paper is that a public debate is required well before the general election is announced as some tax increases are more damaging to the economy than others.
ReplyDeleteStephen Herring
Senior Tax Partner, BDO Stoy Hayward LLP
Dear Stephen
ReplyDeleteThanks for reading my blog. I absolutely share your comment. Incidentally the purpose of my blog is not only to present my analysis but also to inspire a public debate on the current crisis.
Best
Greg
But aren't pyramid schemes merely a natural extension of the capitalist paradigm? If capitalism did not exist, there could be no such thing as a pyramid scheme. We are all participants in the same criminality, just to different extents.
ReplyDeletereadeian,
ReplyDeletegood point, i believe you're utterly right but that's the point, things have gone too far
put crudely (if you can forgive me Greg), it's one thing getting f*cked in the arse, it's another thing getting fisted...
the extent of the criminality of the banking sector is now beyond reproach
Thanks for reading my blog. Pyramid schemes are explicitly made illegal in the capitalism. They are as much of capitalism paradigm as robbery, blackmail or hijacking for ransom.
ReplyDeleteIt only suits financiers (regulators and politicians that supported them) if the debate over this crisis is reduced to ideological arguments between (broadly) left and right (anti-capitalist v capitalist).
This crisis is a result of common criminality: in the same way as robbing a shop has nothing to do with a capitalism (or socialism), running pyramid scheme is a serious crime.
Best
Greg
But if you think (as I do) that capitalism per se is to be equated with common criminality (someone getting rich by exploiting someone else with fewer advantages/less desire to exploit) then your argument does not stand up and yes, those other crimes like kidnapping etc are also a part of the same paradigm. Don't get me wrong: I like your blog and its good to point out that what has been going on is the running of an enormous pyramid scheme, but why stop there? Take your thinking a bit further, what have you got to lose? By the way, the politicians will not be prosecuting the people responsible because THEY are some of the people responsible, and many of them actively profited from the pyramid, which is why it is still going on as we speak. They will all sell their buy-to-lets before the magic £225 billion of QE is reached before calling time. Then the fun will start.
ReplyDeletereadein, this is the kind of argument that I want to avoid. It is ideologial debate between left and right, socialism v capitalism etc. The point I am making is that pyramid schemes are highly illegal under any civilised jurisdiction. Hence the bankers were commtting serious crimes. And this is regardless of ideology.
ReplyDeleteMaking ideological arguments simply helps pyramid purveys. So your arguments are likely to achieve results opposite to your expectations.
Best
Greg
I bet the bankers don't think they are committing serious crimes. I bet they think they are just playing the game the way it should be played: with the gloves off and if you fall for the con, then the more fool you. I know someone who did this kind of thing for a living and this IS the way they all think. It's been going on for centuries and they keep getting away with it. Read your history. No-one will be prosecuted because they are all in on it.
ReplyDeletereadein, you wrote: "I bet the bankers don't think they are committing serious crimes."
ReplyDeletePrisons all over the world are full of such people.
Prisons all over the world are full of those who could not succeed in the educational system and the underpriviledged. White collar crime goes unpunished practically everywhere and in all but the most exceptional circumstances. As it will this time.
ReplyDeletereadein, it is not the purpose of this blog to debate ideology, but I admit you hold views which should be debated and are indeed shared by many. The point I am trying to make is that in the context of this financial crisis ideological debate shifts and argument from common criminality to social philosophy. This helps the bankers to escape justice as there is no chance of prosecuting anybody for holding capitalist's view. However there is a chance, if only theoretical, that social pressure can lead to prosecution for pyramid scheme purveying (i.e. common criminality).
ReplyDeleteSo you will hate my comment so my apologies as no insult is intended, but on a pragmatic level, your criticism of capitalism (irrespective of the fact whether correct or not) helps the bankers. Pragmatically people who make arguments like you do are financial world's best friends.
(There will be time for having arguments of a type you make once pyramid purveyors are properly dealt with through the legal system.)
Best
Greg
PS. Read this: New Labour: a cunning project of Old Labour - http://gregpytel.blogspot.com/2009/09/new-labour-cunning-project-of-old.html
Oh dear! I think this rather proves my point!
ReplyDeleteType in "Bear Sterns prosecution" into Google and see what happens. These two guys were caught red-handed with their fingers in the till, consciously promoting a pyramid scheme. Surprise surprise they get to go home. The prosecution made a clear case but the jury did not convict, even after it was made fully clear it was pyramid and the two accused knew it was. What does that tell you?