Which hole did we leave the money in?

Knighted for services to digging

‘Sir’ Martin Sorrell, CEO of WPP, the world’s largest advertising/publicity/media conglomerate, which he is perpetually promising to return to a UK tax base (returning the compliment of his knighthood), but not just yet (like the uncle who rewraps your Christmas present each year), has announced yet another bumper set of financial results. He points out that western corporations are sitting on several trillion dollars worth of ‘largely unleveraged’ assets, and that, by way of quaint illustration, Apple recently boasted greater assets than the US Treasury. Rather than invest in productive capacity (guess why), according to Sir Martin, those corporations are reinforcing their brands, thus accounting for WPP’s current success.

So western business have no faith that economies are set to grow but are spending to try to hijack business from their competitors and ensure that their brands are the last to drop off the public’s shrinking shopping list.

Sir Martin, however, still backs the UK government’s economic policy of cutting the deficit ahead of all else. It’s just as you do with any company, he explained, you get the balance sheet right first… Some may find it depressing that not only so many businessmen but also so many politicians profess to believe that the principles for running a national economy are indistinguishable from those for running a private company, or even a household budget.

Meanwhile banks, despite their plunging share values (and who holds bank shares apart from other banks and financial/ investment corporations?) have some largish amounts of money too (albeit not large enough). ‘The US banks are not lending but not because they don't have the money. The Big US banks have $1.7 trillion on overnight deposit in the NY FED. Most of that is QE money. It is doing nothing for anyone except the banks. US tax payers 'gave' it to them and the banks are now being paid interest on it ... by the tax payer.’



The only show, or hole, in town

‘Hopes that the Bank of England could unleash a new round of quantitative easing to rescue the ailing economy were boosted on Thursday when a member of its monetary policy committee said there was "undoubtedly scope" to restart the recession-busting policy if necessary.’ The member in question is said not yet to think it is necessary but today in the US and elsewhere all eyes are turned to Jackson Hole, former beaver trapping location, in the hope that Bernanke, chairman of the Federal Reserve, is about to announce the third round of US quantitative easing. Opinion is by no means unanimous that QE3 is either desirable or possible but ‘David Blanchflower, economics professor at Dartmouth College in New Hampshire and a former member of the Bank of England's monetary policy committee, believes that QE3 is the "only show in town" for the Fed.’

It has been pointed out that, with the fantastic concentration not only of wealth but of influence and financial decision-making in a very few hands, western economies are becoming effectively not ‘free-market’ but planned and directed economies, essentially similar in structure to the Soviet economy before the collapse of communism.