“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as the final and total catastrophe of the currency system involved.”

-          Ludwig von Mises, Human Action (1949).

 

“In a world of debt and deflation, inflation is our friend.”

 

-       Crispin Odey, Financial Times (28.1.2009)

 

“Not if you’re a saver.”

 

-       Anon (29.1.2009)

 

Re. your unauthorised overdraft

 

Dear Western banking establishment,

 

I notice that your unauthorised credit facility from international lenders of last resort now totals approximately $10 trillion. As a taxpayer and therefore your largest shareholder I would be grateful if you could repay this facility at your earliest convenience. I have charged you an additional £30 for this letter and a monthly unauthorised overdraft fee of £28. If you do not repay this facility shortly I will have no choice but to become further massively impoverished along with legions of fellow taxpayers for multiple generations to come.

 

I would also be grateful if the strategists and economists who work for you could abstain from publishing their unsolicited opinions about resolving the banking crisis within the financial media. I am sure you will agree that hearing from the same strategists who worked for the architects of such widespread financial destruction is likely to irritate those of us who were not actually complicit in the extraordinary and venal credit boom of the last several decades. There is an expression that if you’re not part of the solution, you’re part of the problem. Those of your employees who were the public face of the problem are, I think you will agree, unlikely to represent the solution, unless perhaps they are fired – en masse, from a giant howitzer, into an area where they can do no further harm. Alaska, perhaps. I would further suggest that the high profile commentators who work for you and who have implicitly played their part in marketing and then amplifying this catastrophe might consider quietly entering another field with superior ethics and enhanced value to society at large: perhaps as piano players in brothels. This note has been copied to the letters editors of The Financial Times and The Wall Street Journal (which I understand is shortly to be renamed simply The Journal on the basis that Wall Street no longer actually exists – as was noted this week by Messrs Wen Jiabao and Vladimir Putin at Davos. Don’t worry about not being there – you weren’t missed).

 

Since the start of the year is always a time for slimming and working off the excesses of the festive period, I wonder whether your industry would consider operating along similar lines. Just as there is no real need to have 18 different coffee bars all touting their wares along my High Street, there is probably no real need to have 18 different banks, not all of which are subsidiaries of Santander, clogging the High Street and busily not wanting to extend me back any of my own money so generously lent to them.

 

I would also be interested in your views as to the wisdom and efficacy of the monstrous pile of credit being shovelled at you and your peers by governments when it was overmuch credit creation that precipitated this crisis. I do not, of course, expect anything other than a self-interested response. But you may find the following observations pertinent. If they seem acutely relevant today it is because they were written in the early 1930s, by one Garet Garrett (and a grateful hat tip to M. Gandon):

 

“The general shape of this universal delusion [that is, credit] may be indicated by three of its familiar features.. First, the idea that the panacea for debt is credit.. The burden of Europe’s private debt to this country now is greater than the burden of her war debt; and the war debt, with arrears of interest, is greater than it was the day the peace was signed.. Debt was the economic terror of the world when the war ended. How to pay it was the colossal problem. Yet you will hardly find a nation, state, city, town or region that has not multiplied its debt since the war. The aggregate of this increase is prodigious, and a very high proportion of it represents recourse to credit to avoid payment of debt.

 

“Second, a social and political doctrine, now widely accepted, beginning with the premise that people are entitled to certain betterments of life. If they cannot immediately afford them.. nevertheless people are entitled to them, and credit must provide them.. Result: Probably one half of all government, national and civic, in the area of western civilization is either bankrupt or in acute distress from having over-borrowed according to this doctrine.. Now as credit fails and the standards of living tend to fall from the planes on which credit for a while sustained them, there is political dismay.. When [people] have been living on credit beyond their means the debt overtakes them. If they tax themselves to pay it, that means going back a little. If they repudiate their debt, that is the end of their credit. In this dilemma the ideal solution, so recommended even to the creditor, is more credit, more debt.

 

“Third, the argument that prosperity is a product of credit, whereas from the beginning of economic thought it had been supposed that prosperity was from the increase and exchange of wealth, and credit was its product.”

 

It will probably not have escaped your attention that the National Housing Federation this week urged the UK government and its wholly owned banking subsidiary, Northern Rock, to extend mortgages to people on lower incomes. “Given that Northern Rock has been nationalised it should now be made by ministers to take on a social purpose and ensure that those people on low-to-moderate incomes who can afford to buy a low cost home, and have a good credit rating, are given access to mortgages,” said NHF chief executive David Orr. Be careful what you wish for. The Nationwide building society, on the same day, reported UK house prices falling at an annualised 17%. Perhaps Mr. Orr wishes a whole new sub-class of low-to-moderate wage owners to be lured into a collapsing housing market. Nice one. Said wage owners should perhaps be grateful that the banking system is currently so dysfunctional (a.k.a. “finally prudent”) – it may end up saving them a fortune in lost housing equity.

 

Perhaps you, like I, find it richly ironic that members of the public still use your investment subsidiaries as a means to protect and grow their private wealth. I think you should promote the activities of these subsidiaries more widely. My idea for an advertising slogan: “When it comes to moral hazard, we’re Number One. We helped trigger the biggest financial and economic collapse in history through our imprudent lending and investment. Between 18 million and 30 million jobs throughout the world are almost certain to be lost. And more than 50 million jobs throughout the world are now in jeopardy. As a result of our investment expertise, we’ve lost billions, and those of us that still exist and aren’t owned by the taxpayer are technically insolvent. Now, how can we help you with your finances ?”

 

In any event, this letter is also to let you know that now that you and your members, in collusion with your governmental paymasters, are offering negative real returns to cash depositors, I am withdrawing what remains of my funds since I can find altogether better opportunities for the preservation and growth of my capital within high quality pockets of the equity and corporate bond markets, and I can get sufficient “insurance” for my increasingly worthless fiat currency in the form of gold. I appreciate that the withdrawal of my funds may send you spiralling into nationalisation. Sorry about that. And since you appear not to know the meaning of the word:

 

“Sorry. (“sQrI), a. Pained at heart; distressed, sad; full of grief or sorrow. In later use freq. in weakened sense, and often employed in the phrase “I’m sorry” to express mere sympathy or apology. But not by members of the banking profession.”

 

Yours sincerely

 

A. Customer.