Contrary to widely believed French claims, the protocol was neither a demand for a general veto, nor a manifesto for light-touch regulation. Instead it covered more technical guarantees to address British gripes across 20 or more pieces of regulation in the Brussels pipeline.

In some areas, such as bank capital rules, Britain even wanted to be tougher than the European Commission is proposing. Other measures covered threats that had yet to even materialise.

The Robin Hood tax itself is no answer to either speculative investment or raising extra tax funds. It would merely move the gambling off shore while the tax on transactions would be passed on to the majority of us through higher charges to our pension and insurance funds (these make up about 70% of daily financial transactions).

Instead if you want to reform the system then split investment banks away from other banking and impose higher capital requirements and stricter regulatory control. Raise the tax on banks’ profits to 50% and up the tax on incomes over £100,000 to 75% while outlawing the payment of bonuses in shares which are only liable to capital gains tax.

But the creation of credit or a pyramid of credit was a solution to the structural impasse of capitalism in the 1970s: over accumulation of capital, over production of goods and the decline in the rate of profit. You had to create more demand while cutting real wages and credit was the answer. The credit bubble grew and grew with the help of deregulation and complex derivatives until it bust. It is not banking but capitalism which is at the roots of the crisis. The long period of expansion after the early 80s was sustained by credit and more and more layers of it while production moved to the East where there is a higher rate of profit. We substituted services, finance, housing and to some extent public services built on debt for our declining manufacturing base.

The only answer for capitalism is the mass destruction of a lot of capital. This can be done by a deep recession and a survival of the fittest or though world war as happened in the 1930s. Only then can the rate of profit be restored while avoiding an over production of goods and over accumulation of capital.

The future is not about replacing a nasty banking system with a nice one but replacing a system which has within it the dynamic of periodic crisis which capitalists and their political allies try to avoid by using tools such as credit with has within it the seeds of mass wealth destruction.

Over the ten years prior to the outbreak of the credit crisis in August 2007 our annual deficit between what we brought collected in taxes and what we spent was running at about £45 billion a year. Our total public debt was less than £500 billion and it had taken ten years to August 2007 to double. In just three years since August 2007 our public debt has doubled again to over a £1,000 billion (a trillion) and the annual deficit ballooned to up to £170 billion a year. Why did this happen?

Well, we directly put £180 billion into bailing out the financial system of which we will only every get back £65 billion (this is the value of our shares in Lloyd’s TSB Bank of Scotland and RBS which is currently worth just £30 billion!). We put up another £45 billion in the form of subsidies to stop a deep recession turning into a depression. We lost another £145 billion through declines in tax revenues and increases in welfare spending as we experienced the deepest recession since the 1930s. The UK economy lost from its peak 5.7% of its value at the bottom of the recession in 2010. Unlike most other major developed economies that have regained by now nearly all their lost wealth UK has only regained 2% of its loss. The deficit that the government forecast for 2011/2011 was to come in at £122 billion but now looks set to be around £150 billion as their cuts and a global slowdown sees in 2011 the UK economy stagnating at almost zero growth when they initially forecast over 2% growth.

But despite all this there is still plenty of money slushing around Britain that means there should be no need for cuts or tax rises for the majority of us. Unlike in country’s such as the USA and France where sections of the wealthy and rich and parliamentary parties have raised the option of the rich and wealthy paying more tax to help these countries as whole there is a deathly silence on the subject in the UK. Even multi billion business people and entertainers such as Warren Buffet and Barbara Striesland and the head of the L’Oreal family in France have said they would not mind doubling the taxes they paid to help provide public services and pensions.

In the UK for example just the richest 1,000 people have over £400 billion in wealth that is not taxed as income. An annual 5% rich tax on unearned wealth on the richest 10,000 people in the UK would raise £40 billion a year. Every year the wealthiest 20% of households earn 16 times the income of the poorest 20% of households. Since 1979 the top level of tax has been cut from 83% to 40%. Reintroducing a progressive income tax where the rate of tax you pay increases the more you earn would raise a further £30 billion a year. A similar local income tax to fund local services would generate £20 billion a year.

The UK has just reduced corporate taxes to 26% with further tax cuts to 24% planned. This will see corporate tax cut in half since it was introduced in 1965. This is to motivate enterprise and investment. But all the studies show that cuts like this make no difference and reduce the national income for public expenditure. The driving force for investment is the rate of profit on pre-tax profits. In the US a major financial firm committed to increasing its workforce in New York by 500 people and saw its corporate tax rate reduced to 33.3% in return – still way above the rate we currently have. These are the types of incentives we need in the Uk were creating jobs and delivering more personal tax revenues is rewarded with a reasonable tax rate. Moving to such a system in the UK would generate an extra £25 billion a year to public spending.

One of the most successful countries in Europe is Norway because it captured a large portion of it oil wealth rather handing it over to Oil multinationals. North Sea oil is generating profits of £50 billion a year of which only £12 billion is going to the public purses. Taking the industry under public control and ownership would generate an extra £38 billion a year for public spending.

Finally a great amount of personal and corporate tax is escaping via tax avoidance schemes. There are a range of estimates as to how much this is worth. But using official estimates a conservative £20 billion a year of extra tax could be collected by closing these schemes.

In total here we have generated £173 billion extra tax per year which is far in excess of the coalition’s austerity proposals. We could have no cuts, no VAT tax rises and no tax rises on middle earners and still have money left over to create jobs for young and old alike.

Who said there was no money?

Stock markets discount the future and they can now only see falling company earnings and dividends. The stock market has to be re-rated to bring it into line with these new expectations. This means that investors or rather the organisations that mange investments – over 60% of the world’s stock and bonds markets are held by us indirectly through our pensions and insurance funds – will sell some of their stock holdings and switch it to assets that offer a less risky and a more guaranteed return. Over the last week the Financial Times estimates that $50 billion of stocks have been sold globally and put into safer money market funds – similar to bank deposit accounts. This was more money than was moved out of stocks during the height of the Lehman’s financial crisis in September 2008.

Two things have shifted perceptions for the outlook of the global economy. The first has been a raft of economic data from across the world that shows that economies have stagnated in the second three months of 2011 with even some shrinkage in Asia. Second, the Euro and US debt crisis has dented consumer and business confidence. Recent surveys from Europe to US show that confidence in the economy has slumped to even levels below that measured during the height of the last financial crisis.

The fear is of systemic risk in the financial system which could be triggered by banks’ exposure to countries public debt woes. Systemic risk is where for example you have three banks A, B and C. If bank A fails, bank B may make big losses on transactions it has with bank A which could lead to bank B failing. Bank C has transactions with bank A and B and takes big losses and fails. In the real world instead of three banks you have tens of banks and tens of countries!

All this would lead to a contraction of credit and a deeper recession. This is a re-run of the last financial crisis with the difference being that the weaker speculative banks and financial institutions have been taken out and government and central banks now better understand the web of inter-connect complex transactions in the financial system. They know what interventions to make and where and this time they are willing to make the intervention quickly to avert a financial meltdown on the scale of Lehman’s. But it does not mean that a deep recession can be averted.

Such a recession will see governments’ debt and deficit targets being blown away. The clamour from the likes of the UK coalition government and other governments will be for more cuts which will of course only deepen the recession as we have seen in countries like Greece, Ireland and Portugal.

Our pensions will be worth less to and the gap between the value of public pension funds (assets) and value of their future liabilities will widen. This gap in the UK was estimated prior to the latest stock market fall to be £1000 billion. The gap has appeared because over the last 11 and half years the UK stock market has fallen 45% in real terms when the forecast was for 10% a year growth. This is the real reason for the attacks on public pensions’ funds which will only intensify after this latest stock market fall. Ten years ago over half our pot pension funds where made up of UK stocks.

There is an alternative to all this insanity:

A collective agreement by global governments on a debt default programme that minimises the damage done to the financial and economic system;

Rather than own the banks but not control them and give them vast amounts of money to cover losses and lend to speculators (quantitative easing), take control of them and make direct investment through them to finance huge social projects that would benefit the public and private sectors creating jobs;

Taxing the world’s wealthy who have seen a huge transfer of wealth to them over the last 30 years from the bottom 50% of society; and

Collectively as society provide for people’s retirement instated of letting public pension funds and individuals bear the risk and cost of failing stock markets.

This is the rationale alternative to the boom, bust, crash and burn that currently lies in store for all of us.

The public debt crisis that is currently at its deepest in the Eurozone has its roots in the general crisis of capitalism. To attempt to solve capitalism’s crisis of the 1970s and the dynamic path it has followed since then vast amounts of credit were made available over the last three decades.

The Roots of the Crisis

This was carried out to ensure:

that there would be no deep over production of goods after capitalism’s long post war boom and expansion, that is consumers had increased spending power to buy these goods;

to counter the flow of investment capital to Asia which led to varying degrees of structurally weak western economies;

to offset the declines in wages and real spending power as capitalism sought to restore the rate of profit in the west by cutting real wages; and

to offset to the redistribution of wealth from the mass of consumers to the wealthy and corporations.

Public spending was used to support structurally weak economies as a result of capital flowing east and the credit bubble was exacerbated by the US cutting interest rates sharply to lessen impact of the dot.com bubble bursting and the resulting recession at the turn of millennium.

A European Twist to the Tail

There was a specific manifestation of this phenomenon caused by Euro. Weak economies with weak currencies entered the Euro – Greece, Portugal, Ireland & Spain. This made their domestic economies less competitive and this was compensated for by taking advantage of being able to borrow at low German Interest rates leading to differing outcomes. International and local banks took advantage of this new market for lending.

These different outcomes were:

•          borrowing took place at low rates to increase public spending;

•          a private housing bubble were created;

•          a consumer Credit boom grew; and

•          speculative bank lending took place.

In summary a credit led boom not corresponding to the growth in real production and wealth.

Each country in the Eurozone followed this route to varying degrees of emphasis. The table below shows the variation across the so called weak PIGS (Portugal, Ireland, Greece, and Spain)’s countries and Germany for comparison.

Of course the credit bubble bust and what followed was the deepest global recession since the 1930s. This led to a bailout of the financial system by governments, the propping up of economies with stimulus measures with the costs borne by governments and the recession led to lost tax revenues and increased welfare spending. All these costs were crystallised into record levels of public debt. This was the case right across the western world. The debt crisis in the US and the UK as well as the Eurozone is a result of this.

The bailout for the PIGS is a bailout of the financial system not the PIGS’s countries’ themselves. Public money is being syphoned through the European Union (EU)/International Monetary Fund (IMF) and European Central Bank (ECB) to gives loans to the PIGS’s countries. These loans are being used by countries to pay off loans and interest to private banks and take out new loans with the same banks. They are a further indirect bailout of the banking system. They are not a bailout of indebted countries’ economies. All this is happening because governments fear another Lehman’s, a credit crunch II and second deep recession that could lead to a depression

Another Lehman’s?

What is the scale of the problem? Lehman’s was a $631 billion loss. European private banking exposure to each of the PIGS countries and Italy’s public & private debt:

Greece                         $130 billion

Ireland                          $463 billion

Italy                               $783 billion

Portugal                       $194 billion

Spain                             $642 billion

US & UK banks have to sold $100s of billions of insurance on this debt.  A default could led to a domino effect with the losses much greater than Lehman’s with a second contraction in credit and recession – essentially a depression.

Greek Crisis Not Over Yet

The Greece is far from not over yet. The banks are being asked to accept a $50 billion default on Greek deficit. It uncertain that they will accept this in enough numbers. The EU claims this is a one off and will not be repeated in Greece again or in other PIGS’s counties. The financial markets have shown that they think otherwise. A shortfall in accepting voluntary defaults and the fact that banks are not all willing to take losses will lead to big disagreements between Germany and France/ECB/IMF.

The next deal will be difficult to broker without more money from governments (more debt). On top of that there is quarterly review of Greece’s progress in implementing austerity measures and privatisations to see if next instalment of bailout is released. The Euro 50 billion from privatisations that Greece is expected to raise completely unrealistic. The austerity measures are driving the economy into a spiral of decline actually increasing the deficit. This mean there will be a quarterly debt crisis with eventually an involuntary default occurring either through non-payment, bond holders not accepting losses or a credit downgrade from the credit rating agencies. We are likely to see the same cycle repeated in Ireland and Portugal.

Spain too big to fail and too big to bail?

Spain has a huge housing bubble that has partially burst and has further to go with an oversupply of one million houses and 85% of Spanish homes having mortgages. Exposure to this bubble his held by local building societies (Cajas) and losses will be in the Euro 250 to 500 billion ranges. National Spanish Banks are exposed to construction and real estate companies to the tune of Euro 439 billion and Euro 100 billion to Portuguese private and public debt. Spanish public debt is 400% of tax collected and interest payments will grow from 18% of taxes collected to 23% by 2015. In addition there is a Euro 150 billion of debt held by the regions. This situation is not sustainable and a bailout looks inevitable in the next year but is likely to break the size of the European bailout fund (Euro 450 billion).

US and UK up their eyes in debt to

The debt crisis is real not just in the Eurozone but in the US and the UK as well. The roots of this crisis are the same in the US and in UK. In the US there is the added issue of US government bonds (debt) being held widely by the global banking system as a “safe haven” for capital. These bonds are used as security in global financial transaction and as a cheap source of generating instant liquid cash for banks. A downgrade of US government debt by the credit rating agencies is inevitable even with the debt ceiling being raised as this like Greece merely postpones the problem. This will lead around the world to higher borrowing costs and less capital being made available just when the global economy is slowing down.

In UK public debt is now over 80% of real GDP and annual interest payments are sucking up 12% of our centrally collected taxes – set to grow to 15% by 2015. The deficit is not under control and looks to be heading to £150 billion for 2011/2012 compared to government forecasts of £122 billion. Comparisons to the post war period are irrelevant. We were bailed out then by the US to the equivalent at today’s money of £250 billion on very favourable terms in exchange for the US becoming the dominant global financial and military power. That is the nature of the UK’s special relationship with the US. The debt to UK GDP ratio only looked so bad in the 1940s because the economy had completely collapsed when war production ceased. Expansion of the economy was rapid as it was rebuilt form the ashes of the Second World War and capitalism boomed with high rates of profit allowing public debt to be paid off over a period of thirty years. This very different from today’s stagnant declining economy built on a credit system now frozen and competing with the huge emerging economies China, India and Brasil.

Need to face realty and develop an alternative to austerity

The left is in danger of leading us blindly into a brick wall if they continue to ignore or downplay the debt crisis. We are rapidly moving to some form of credit crunch II with all that implies. The answer to this from the right will be more cuts and austerity. The left must develop a radical critique of the crisis and radical solutions that solves the crisis in the interests of the majority, that starts by taking the banking system under popular control and ownership and redistributes the wealth  from the wealthy and corporations to the less well-off all around the world. Otherwise we face a decade of hardship and poverty.

The writers views are his own and not those of any of his current or previous employers

It is clear to most in Europe think – both financial experts and lay people – that the punishment being inflicted on Greece is not sustainable. Only the Greek government, the European Union (EU) leaders, the International Monetary Fund (IMF) and the European Central Bank (ECB) continue to hold their heads in the sand and demand more blood from the Greek people.

At some point soon there will be a default (non-payment of interest on a loan or of a loan itself) on Greece’s debt. The best case scenario is that it is under the control and direction of the Greek people and not the bankers and politicians.

We can see that austerity does not work. The cuts in jobs, wages and services coupled with taxes on the poor sections of society and the goods they must buy has pushed the Greek economy into a spiral of decline. In the 2010 and 2011 the economy will have declined by a combined 10% when most economies are showing a recovery albeit modest. This has the effect of making the deficit wider between what Greece spends and the taxes it collects as unemployment rises leading to tax revenue losses and increased social security payments while spending also declines.

This simply leads to more debt with higher rates of interest and more austerity demanded by the EU, ECB and IMF. These institutions and membership of the Euro are simply mechanism for extracting money from the Greek people to pay off the loans owed to Europe’s banks. Rather than bailing out the Greek economy and the Greek people they are bailouts of the financial system.

This is because while Greece on its own– it has about $130 billion of loans to European banks and there is some $40 billion of insurance on these loans sold by US and UK banks – cannot bring the world financial system down they fear a domino effect. Ireland, Portugal and Spain have public and private loans of $463 billion, $194 billion and $642 billion respectively to European banks. And on top of this is hundreds of billions of US dollars of insurance on these loans sold by US and UK banks. All these countries are likely to follow a similar cycle to Greece and defaults across them would bring the world financial system to a halt. The Lehman’s losses were $631 billion in total so that you can see we are looking at something potentially bigger than Lehman’s and the deep recession that followed its collapse.

While the Greek government passed the austerity budget and privatisation bills they are likely to be unable to implement them fully. The Greek people will not let them make all the cuts and tax rises. Greece too will not be able to raise the Euro 50 billion in privatising its national assets. Most analysts think this far too optimistic – who would buy a business that operates in an economy in decline.

This means that when the EU/IMF/ECB make their next quarterly visit to Greece in September to see if Greece has met its “targets” for more loans to be released to pay the banks back they will likely be failed.. Greece will be faced with an involuntary default.

Even before then there is likely to be a hick up as a new loan of up to $175 billion to Greece must be found to cover its financing till 2014 – for pay all its interest on loans , repay loans and take out new loans.

Some northern countries – Germany, Netherlands and Finland – are demanding that the private bond holders of Greek government debt must take a loss. But this would spark losses across the world from banks that hold Greek government debt and banks who have sold insurance on it.

These countries are demanding Euro 30 billion from the banks and the banks have hatched a plan to do this that they think avoids a loss. But the credit rating agencies think this will qualify as loss making and the plan could spark a reduction of Greece’s credit rating to junk status sparking off insurance and bonds losses to banks. Even then not enough banks are likely to participate in the scheme to reach the Euro 30 billion levels demanded.

If the default happens involuntary it would be a complete disaster for the Greek people – the biggest holders of Greek government debt are the Greek banks and the Greek pension funds. Their banking system would be frozen with huge losses and their retirement provision decimated. That is why they must take decisive action to avoid this.

A plan to avert this disaster would be:
• Ring fence the financial system by taking it under public control and ownership
– Cancel internally held public debt which is the majority of the public debt
• A debt and wealth audit
• Default where it is determined after the audit that debt is not sustainable
– With an order of default least worthy (banks first and pension funds last)
• Provide alternative retirement through nationalising the pension system and the free provision of all basis needs after a certain age
• The last two demands will offset losses from defaults to a country’s banks and pension funds as most public debt is held by domestically
– Leaving the smaller proportion of the debt owed to foreign banks, pension & insurance funds
• A tax on the rich and wealthy and corporations
• An end to corruption and tax avoidance
• A sharing of the work equally between all those who want to work
• Building a sustainable green economy based on meeting people’s needs
• leaving the Euro :
– As a means to putting an end to the austerity attacks
– Restoring competiveness and boosting exports
– Lifting the burden of debt repayments
– Allow the economy to recover and develop by orientating demand towards the internal production that meets peoples’ needs in a green sustainable way, this would with the boost in exports offset the inflationary pressure of devaluation.

Just cancelling the debt repayments and clamping down on tax avoidance and corruption would alone eliminate the deficit at a stroke. This programme if implemented by the Greek people would inspire all of us across Europe who are fighting the same type of austerity attacks. It would be the start of the building of a different type of society – one determined by the people for the people which puts an end to the greed of the bankers and politicians.

The views expressed are the author’s own.

It is essentially part of a way of turning the reckless losses incurred by the financial system – bank losses; public money supporting the embattled economy; lost tax receipts and increased welfare payments from the deepest recession since the 1930s depression – into public debt and reducing this debt by cutting services and pensions while increasing taxes.

This UK public debt has doubled mainly because of these reckless losses to over 1000 billion (one billion is 1000 million) over the last three years having taken 10 years prior to that to double. This is part of the reason for the attack on public pensions. The coalition is covering up this real reason for the cuts in public pensions by saying they are too generous and the country cannot afford them any longer. Where the reality is that they are making those in society who had no responsibility for the financial crash and the recession it caused pay for it.

The second attack from the financial market is the way that the system has attempted to fund our retirement. Our pensions are in effect deferred wages that are set aside to provide for us when we retire. Rather than set aside sufficient funds to meet our retirement needs successive governments and public authorities have invested a smaller amount of money in stock and bond markets in the expectation that the money would grow to meet the funds that are required when we retire. The balance between the “sufficient funds” and “the smaller amount of money” has been given away over the last 25 years to the rich, wealthy and corporations through tax cuts.

This strategy has proved a disaster with the real value of UK stock market investments falling by over 40% in real terms between 1999 and 2009. Bond valuations have fallen to as interest rates have been kept at an all-time low to deal with the dot come crash and then 2007’s credit crunch. This has meant that the gap between the value of assets held in our pension funds and the value of what the government have guaranteed to pay us is huge. Estimates range from £875 billion to £1000 billion and this deficit is adding more each year to the public debt. In other words the government and public authorities have gambled our pensions on the financial markets and lost. Now they want us to pick up the bill!

We are right to oppose these attacks on our pensions; there is plenty of wealth in the banks, rich, wealthy and corporations to pay the bill for the crisis of their system that they have benefited from. But it also gives an opportunity to look at a different way of providing for our retirement that does not depend on a gamble on the financial markets. One where society as a whole takes a collective responsibility for ensuring that we all enjoy a retirement free of financial worry where all our basic needs are met free of charge.

The views expressed as solely the author’s.

The high rate of unemployment and the fact that most mortgages in Spain are variable and are linked to the one year Euribor money market rate which is currently at 2%. The European Central Bank is likely to raise short-term interest rates by 2% over the next years which will mean that the one year Euribor rate will rise further and be close to 5% by the end of 2013. On the average Spanish house price of Euro 147,600 this will see repayments per month climb by nearly 40% per month. This will affect nearly all of Spanish society as private home ownership stands at 85% of all homes.

High unemployment and increasing mortgage repayments will see a rise in repossessions and missed mortgage payments. Most of the Spanish mortgages are issued by Cajas – similar to a building society. They currently make or value all their mortgages at the value of the loan. They are already sitting on in reality Euro 250 billion of losses based on the average house price decline and the number of private houses in Spain. The government implausibly estimate this to be Euro 20 billion while others estimate this to be closer to Euro 100 billion. A further fall in house prices and an increase in repossessions would see real losses easily reach Euro 500 billion. On top of this Spanish banks have loans to the construction and real estate sector of Euro 439 billion and a further Euro 100 billion exposure to Portuguese government debt and bank debt.

It looks as if the Cajas will need a massive bailout to keep them solvent and that Spanish banks will need one to make good losses on loans to the construction and real estate sectors and Portugal.

What are these numbers like in relation to Spain’s public sector debt? The debt to GDP debt ratio is misleading at 62% at end 2010 because nominal GDP is used. Nominal GSP use unadjusted prices for inflation and bear no relation to the health of the economy. The UK government use this misleading approach when quoting public debt/GDP ratios while the EU, IMF and Financial Times use real GDP. Real GDP adjusts the value of goods and services for inflation to show the real increase or decrease in goods and services goods being produced. It is real GDP that is used to measure GDP growth.

More meaningful than real GDP is central taxes collected. Spain’s current public debt is Euro465 billions or 400% of centrally collected taxes.. More worryingly because Spain has borrowed at higher rates and the annual interest payments alone are 18% of centrally collected taxes. This will grow to 23% by the end of 2015. This is clearly unsustainable on its own.

In addition to the national public debt there is Euro150 billion of regional debt.

If you add the bailouts that will necessary to save the Cajas and likely bailouts for the traditional banks then Spain will need to be bailed out in the next year to stop it going effectively bankrupt. The scale of this will be in the region of Euro 500 billion to Euro 750 billion.

Spain is too big to fail as it would crash other banks across Europe who have exposure to its’ public and banking debt. But it could also be too big to save as the European Union/International Monetary Fund may not the resources or be able to gather the resources to save it. The consequences of that are unimaginable – a likely second credit crunch and global depression. It is up to the Spanish youth to stop that happening.

The views are the authors own and not those of any organisation.

The resignation of the Strauss Kahn as managing director of the International Monetary Fund (IMF) because of his arrest for an alleged sexual assault on a hotel chambermaid raises issues around the murky secretive world of the IMF and the macho culture of society that he came from.

Kahn was from France where every establishment male politician is expected to have a powerful libido. His previous aggressive behaviour to women was thus tolerated and not challenged. Of course such an attitude has much deeper consequences for women in French society. Only 10% of rapes are reported in France compared to 55% in the USA and only one in ten of them result in a conviction. Women in France are paid 27% less than men and hold fewer elected positions than in other large European countries. Segolene Royal was accused of neglecting her children when she ran for the presidency in 2007.

But what is the IMF anyway? It is a club of loan sharks established in 1944 in Bretton Woods (USA) by fort-five countries to stabilise the international finance system. Now over 200 countries are members and they each pledge a nominal amount of money in proportion to the size of their economies. If a country runs into financial trouble they can borrow up to a certain multiple of their pledged money and the other countries have to turn part of their pledges into real money for the loan. Countries votes within the IMF are based on these nominal pledges – the USA has 17% of the votes and Europe 30%.

The loans agreed to countries are made in return for the countries agreeing certain conditions – called structured adjustment programmes (SAP).. IMF inspectors monitor and make regular visits to inspect the borrowing country’s finances to ensure SAP conditions are being met. These SAPs will typically include cuts to public services, wage cuts and privatisation of national assets and services and opening up of the economy to international corporations and finance.

Prior to the financial crash most of the IMF’s time of the last three decades has been taken up with the debt crisis of developing countries – itself caused by the lending practices and terms imposed by Western countries and banks. This saw loans forced on the poor south at exorbitant interest rates and the solution of the IMF was to lend multiplies of these loans to these countries just to service the interest rate payments while imposing SAPs with severe conditions.

Of course since August 2007 the IMF’s attention has switched to the developed world as the bailing out of the world financial system, the global economy and the cost of the deepest recession since the 1930s has fallen onto governments. This has meant huge rafts of public debt have been racked up right across the developed economies. The weakest countries’ – Greece, Ireland and Portugal -economies public finances have deteriorated to the point where they are effectively bankrupt. In stepped the IMF together with European Union with fresh loans to pay off the original loans. That was to stop huge losses being carried by the international banks that held the original loans and avert another financial crisis and recession.

The current battle ground for this fire fighting is Europe with Spain the next likely candidate and Belgium and Britain not far behind. Britain has never accumulated these levels of public debt during peacetime and attempted to pay them off after a deep recession while the economy is stagnating. Britain was bailed out in 1976 by the IMF after a severe recession and increasing inflation meant that it had difficulty servicing its public debt.

So will Kahn’s resignation open up the door for a managing director of the IMF from the developing world? Not likely as the IMF director has always been from Europe and the IMF’s sister operation has always had a North American one. These positions are nominated from member countries but are in effect always ratified by the USA. Previously they have rejected nominations that do not meet their requirements. The IMF number two is always from the USA to. The USA calls the shots and wants to ensure the world financial system which it dominates is stabilised.

Since the crisis the IMF has been trying to stabilise Europe so it will be a European who is chosen to be the next head. Kahn was ideal for the USA because he was able to get the periphery countries to buy into the IMF’s austerity terms and keep Germany on side for providing bail out loans through the EU. That is why they are likely to go for another French candidate. German Chancellor Merkel is under pressure from the German electorate to be tougher on the bailout conditions and if necessary let countries default and essentially go bankrupt. But Washington fears this would be the start of domino of defaults across Europe leading to a new banking crisis and world recession.

The USA and the IMF may be more careful who they choose as individual but it will be business as usual who ever takes over at the IMF; making the poor pay more for the mistakes of global finance and propping up an unfair economic system.

The views are the authors own.

This wealth which includes land, property, art, race horses and shares in companies is underestimated because it excludes the money held in bank accounts (liquid cash). Of course much of the “money” they have made is not down to anything clever they have done in 2010 but simply from the rise in the stock market, expensive property and land that we have seen in 2010.

Some people point that we are all actually pretty wealthy – the average wealth of a UK household is around £200,000. But when you a looks little closer this is not really the case. 70% of this average wealth is the value of our houses but we don’t really own them as they have been bought with borrowed money the majority of which has not been repaid. The same applies to the cars we “own” and the balance is our pensions which is part of our deferred wages. When you look at net wealth which is our assets minus loans and take away the value of our pension you are left with an average figure of less than £5,000.

The wealth of the super-rich is net wealth – they don’t have loans on their assets. This is the wealth that we should be taxing to help reduce the public debt – after all it is the rich super wealthy that have benefited from the financial bubble economy not us. A 10% annual tax on their wealth would eliminate the need for any cuts when combined with taking North Sea Oil under public control and ownership. They would not have to even sell anything just use the billions they have hidden away in their secret bank accounts to pay the annual wealth tax.

Interesting in Scotland the second wealthiest person is Ian Wood who has estimated wealth of £1,119 million. Here is a man who has made his money out of the profits from North Sea Oil, money that really belongs to the people of Britain and Scotland. Money that should have been used for useful public services.

In Scotland one of the Scottish National Party (SNP)’s biggest backers, Brian Souter, has a personal fortune of £650 million made from privatising public transport. At a time when the SNP have frozen the council tax for five years leading to a real loss in local public spending of £240 million they are quite happy to take donations from Souter and keep transport private while freezing the wages of public sector workers in Scotland for two years. This is in effect a 10% pay cut with consumer price inflation running at over 5% a year.

There is the real chance that Scotland will become independent in the near future and if that is the case we have to make sure it is an independent republic. The two biggest land owners in Scotland are Dukes (Sutherland and Buccleuch) who are related to the Royal Family and their families were “given” their estates centuries ago. Their combined estates are worth £760 million.

Most of the wealth of the richest people is sitting idle doing nothing. Any consumption these people have is mainly luxury consumption providing few jobs or the creation of useful products and services. Their wealth does very little to benefit the economy and help create jobs and increases tax revenues.

On the other hand the majority of us are useful consumers buying things on mass that are basic necessities that create jobs and services and tax revenues. That’s why it is ludicrous to freeze our pay when the economy needs a boost and let the rich off tax free. It’s time we turned that on its head.

The views expressed are the author’s own and of no other person or organisation.