But the question is whether it could ever work. Even Will Hutton and his Work Foundation have gone very quiet on the idea of separate “good” banks, and for very good reason. Such an attempt to resurrect the US Glass-Steagall Act of 1933 will either be insignificantly small-scale, easy to circumvent or will trigger the very collapse it is intended to avoid.
The inflationary bubble money that tens of thousands of traders gamble every day is inextricably linked with the real economy, and is proportionately much bigger than in the years preceding the great crash of 1929-33. How else do they get their Porsches and yachts? How else have 24,000 JP Morgan traders recently received bonuses averaging $380,000 each? There are several hundred generic types of derivative fund, and thousands of actual funds. The inflationary and the real cannot be separated so easily.
The root of the problem isn’t simply that so much accumulated bad debt hasn’t yet been written down or written off, but that the outstanding amount is unknowable. It is the uncertainty infecting the whole greedy business that they should fear. Even if Obama’s bill doesn’t die the death of a hundred Senate cuts that his health bill suffered, something much more radical is needed.
Our alternative should connect the widespread feeling of outrage at what the world of finance has become with resistance to the all too real onslaught on our jobs and living standards that managers and governments are relying on to get themselves out of their fix.
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