Something for nothing

I don't really know what the proposed $700 billion dollar bail out of the US financial services sector is intending to achieve, but I do know that no government should be handing taxpayers cash over to any business with no strings attached.

I know there are some strings, but from what I've heard so far, those strings are pretty loose and if I were any American taxpayer I'd be very dubious about them. The least I'd expect in return for this bail out is for the government to demand 50% of post tax profits from every recipient bank for the next 10 years - in other words 50% of their profit as well as the tax revenue.

What is certain, is that the days of cheap credit are over for all of us. That won't mean a return to 15% interest rates, but it will mean that loans and credit will be harder to come by generally - for the average man in the street and for the major business wanting to borrow several million pounds.

As I understand it, the fear is that unless something is done to free up the money market businesses will find it hard to borrow money and invest, but I don't really believe this will make any difference. I don't think this "bail out" will have much effect on the money market. It won't stop most major economies sliding into long deep recession - and that includes Britain.

It won't stop there being major job losses as many companies cut back and try to save money or as many companies fold. The only thing it will do is help to preserve the banking industry which, in my eyes as well as many others, simply doesn't deserve saving. The US government would be better off keeping that $700 billion to help the people and companies who are going to suffer as a result of the sheer greed of the banks.

However, I recognise that both the US and Britain have become heavily reliant on the financial services sector as a major part of the economy - Britain more than the USA. This collapse reveals the sheer folly of that policy because the financial services sector does not actually make anything - it just shuffles money about and charges others for doing so.

A national economy that is built on such a frail basis as that is asking for trouble - it is a very superficial industry and the belief that Britain could switch from being a manufacturing economy to a services based economy with success has now been demonstrated to be a false belief. London, which has prided itself on being THE finance capital, is particularly going to feel the pinch.

Personally, I think this will result in a rationalisation - a wake up call if you like - and will ultimately prove a good thing in the long run. I would hope that any future British government will see how foolish it is to put all your eggs in one basket and begin the process of rebuilding a British manufacturing base which will serve the national economy far better than the service economy ever could.

It would also be a far better investment of public funds than shovelling in money to prop up the corrupt banks.