So Osborne's big idea is out in the open now. It's called "credit easing", and it's not quite what it seems to be.
Media commentators are presenting it as a much needed shot in the arm to British business. No longer will they have to go cap in hand to unsympathetic bank managers, who cannot lend them any money, because they don't have any money to lend. Now, they can issue some corporate bonds, and swap them for cash at the Bank of England.
But what does this mean, for the country and for the companies who take part?
According to the FT, the Bank of England intends to issue Gilts in order to raise the money needed for the scheme. Oh dear. That means that there will be billions more in interest to be paid, leaving the taxpayer as the ultimate holder of the liability.
As for the businesses themselves, they will also have to pay interest on the money they receive from the Bank. I suppose the Bank will argue that the interest paid by the businesses will cover the cost of the money raised through the Gilt issue. All well and good so long as the business concerned succeeds. But what if it fails?
In that case, the business would find itself effectively owned by the Bank of England; required to act as the Bank dictates. Much in the same situation African countries have found themselves with the World Bank/IMF over the years.
So, if I were a cynic, I would say this is another asset stripping exercise.
British business needs credit, of that there's no doubt. But throwing credit at a dying system gets us nowhere. It must go hand in hand with a complete restructuring of the financial system (Glass Steagall!), and a coherent, production based economic policy, free of usurious City of London interests. Sure, if they want to play their silly speculative games as they worship their god, money, they should be free to do so. But only when they are utterly separated from the real physical economy, just as they are from reality.
