In the original version of this photo (above), Yezhov is clearly visible on the right of the photograph. The later version was altered by censors, removing all trace of his presence.John Whitting QC, in a powerful New Statesman piece (03 May, 2011) argues that:“The Conservative narrative has expunged the inconvenient contribution of the collapse of the banking system to our financial predicament so comprehensively, and so implausibly, it would have made a Maoist historian blush.”
He is right. Just as Nikolai Yezhov’s image was removed by Stalin from the above photograph, so the role the private banking sector played in a) causing the crisis of 2007-9, and b) dramatically increasing government debt, is steadily eliminated from public discourse. Instead, in an intellectual volte face, government and public spending (on welfare, international development etc.) is blamed for the crisis and rise in debt, and targeted for attack. Next, inflation is raised as the gravest threat facing civilisation as we know it.
This is not to deny that public debt or inflation are important and worrying.
Just that orthodox economists and commentators are relentlessly exploiting the opportunity of the ongoing economic crisis to distort reality, to first, attack government intervention (even as the private banking sector feeds off it), and second, defend the interests of the private banking sector (bankers and bond holders), for whom inflation is anathema, as it erodes the value of their assets (i.e. public and private debt!).
These views are then parroted and echoed by media commentators who know no better. By the constant repetition of these supposed threats, the role of the private financial sector in precipitating and exacerbating the ongoing crisis – is resolutely eclipsed.
This would be harmless idiocy, if it were not dangerous. By focussing relentlessly on government debt and inflation, we are ignoring the real threat facing the global economy: ‘financial armageddon’.
Martin Plender in today’s Financial Times warns that ‘we are already in dangerous territory less than three years after the collapse of Lehman Brothers. ”
Commodity prices are ‘overblown; developed world debt markets look seriously overpriced. US house prices have collapsed, those in the UK look far too high in relation to falling income. In equities there are new bubbles: in Facebook, Linkedin and Renren trading on absurd multiples of revenue.’ Lending standards are falling and ‘covenant-lite lending has staged a comeback’.
The rich world is still crippled with debt. The ECB and IMF are exacerbating, not minimising the EU sovereign debt crisis. ‘Policymakers are offering a liquidity solution to a solvency problem’. Then there is the increased concentration of ‘wholesale and investment banking business among a handful of systemically important financial institutions, including those that dominate the opaque derivatives business, part of which are highly toxic’
All of this could raise ‘the too big to fail’ problem to another level. Or as Patrick Pearson, Head of the financial market infrastructure unit at the EU Commission notes: ‘a clearing house failure could unleash “financial armageddon”.’
Above all there is the ‘inadequate regulatory response to the last crisis’. This should not surprise us. The sustained media-backed effort to obliterate the 2007-9 financial crisis from public debate and public memory has this as its goal: to ensure that the regulatory response is inadequate.
The effectiveness of the propaganda makes Stalin look like an oafish amateur. But it poses grave threats to all our futures.
