Should Banks and Government Merge to Become One?

There was a problem we promised to solve on Monday. To refresh your memory, the problem is that both banks and governments need money. Governments borrow from banks. But because government finances are so terminally bad in Europe, government bonds are destabilising the capital structure of the banking system. How can the bankrupt possibly bail out the insolvent?

Our solution is elegant, simple, and completely in keeping with the major trend of centralisation and “bigness” that’s dominated the last 100 years of government and finance: merge the banks and the government! You can call it nationalisation. You can call it a public-private hybrid. You can call it a monster. Heck, you can call it bubblegum! But you can be pretty sure it will begin to happen in 2012.

At some point, national governments are going to simply take over their “too-big-to-fail” banks. In America, it could be Bank of America or Citigroup, or both. In Britain, Barclay’s. In France, BNP. In Germany, Deutschebank. And in Switzerland, Credit Suisse.

The nationalisation of major money centre banks will formally zombify the financial sector. It will be the logical conclusion of the relationship between the State that borrows profusely and the financial sector gaining competitive privileges by lending to the State and financing political campaigns. It’s also the only way to marginalise market forces that would otherwise take both banks and sovereigns down several pegs, or out of existence altogether.

Yes…that’s a gloomy forecast. But the alternative is enduring even more debt deflation or veering into an immediate currency crisis. The solution will be to slow things down by making them more complicated, interdependent, and harder for capital to escape from. Despite their differences, we can see all the Great Powers colluding to preserve a system that allows them to be Great Powers and exercise physical and financial control over people.

Obviously we have to get off this planet before that happens. Or at least find a refuge. Keep your eyes on Kepler-20 in the night sky. It could be an intergalactic

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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3 Comments on "Should Banks and Government Merge to Become One?"

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Anonymous
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Yes, the banks should become nationalized ! But only the Reserve Banks of the world. The reserve banks are the ones that are given the right to print the money supply for entire countries. Only the government should be given the right to do this and not the private banking institutions that own the Reserve Banks. This concept is clearly stated in the US constitution for example and yet private banks have owned the Fed for decades – the exact opposite of what the constitution allows ! Not only this, but the private banks that currently own the reserve banks… Read more »
Anonymous
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Yes, the banks should become nationalized ! But only the Reserve Banks of the world. The reserve banks are the ones that are given the right to print the money supply for entire countries. Only the government should be given the right to do this and not the private banking institutions that own the Reserve Banks. This concept is clearly stated in the US constitution for example and yet private banks have owned the Fed for decades – the exact opposite of what the constitution allows ! Not only this, but the private banks that currently own the reserve banks… Read more »
Justin Jefferson
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“The reserve banks are the ones that are given the right to print the money supply for entire countries. Only the government should be given the right to do this and not the private banking institutions that own the Reserve Banks.” Why should government be given the right to print money? “This concept is clearly stated in the US constitution…” No it doesn’t. The US Constitution says that any right not explicitly granted to the feds, is reserved to the states and the people respectively (Xth amendment). As printing money is *not* a power given to the government, therefore the… Read more »
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