Archive for November, 2019

We have just passed yet another general election cycle where voters had to decide which lies they believed the most

As the purse strings are loosened in order to bribe voters there has been comment on the rising levels of public spending and the impact this will have on total borrowing, resulting in greater national debt.

Should it be needed to remind us, this raises the fundamental debate of justice at the heart of government spending plans. The cutting or expanding of public services are touted as the principle factors for how effectively a nation manages it national debt

If debt reaches proportions which are too high, service cuts are said to be the main remedy in restoring market confidence and being able to pay down total debt. This is the same sentiment used by the IMF when it looks to safeguard it foreign loans by insisting on public spending restrictions

Perhaps Ahmed Thompson articulated the deceit best in the tweet captured below

The greatest threat to debt levels have always been compound interest payments due to reckless borrowing in the first place. This compounding cannot be managed or paid off, but it can be written off by those who artificially created it in the first place

And therein lies the rub….we choose to cut spending for the most humane causes which will make no impact on the compounding interest built up but are utterly unmoved by the choice to retain financial commitments which exist on paper yet cause real world suffering. The choice is made to cause hardship in the name of keeping the monetary system afloat in the fallacy that it would cause a much greater impact if it were to sink….how can we loose something that was never real in the first place

The financial crises was an example of choosing not to let confidence (which is manipulated) drain away by signing blank cheques for quantities never heard of, yet the cutting of essential services to the vulnerable was fair game.

The host asks all the right questions….and there are some very telling answers in my opinion….Mehmet Asutay provides some incisive contributions which I always have time for

My initial response to some of the defence given for the industry is as follows;

• In terms of risk sharing, this is an oft cited defence but can easily be broken down further, these transactions are not between equal sized parties with relatively similar assets at risk; the ownership of one house being the largest asset an individual owns compared to a bank which has a significant balance sheet (even the smaller ones) and can absorb the loss of one property is not exactly the type of risk sharing which it is always prompted as

• Regarding the investments in halal products, there is talk of how resilient these have been during the financial crises, however this doesn’t cover some important facts which should be stated. If an investment is low risk, it will typically make less of a loss in times of downturn and correspondingly make less of a return during an upturn too – this is a basic understanding of risk and return, but is not mentioned when talking about the performance over the last deep recession.

Another important point with halal investment assets which should be considered is the ethical dimension and how any definition of what is considered halal and ethical will differ based on preference. Although there are ways to standardise these when it comes to retail offerings, there will always be valid opinions which depart from this standard practitioner view. To add to that, how can something not be compromised in some way? Everything within this monetary system must be contaminated in some way, and this cannot be ignored – there is no parallel financing system in place.

Can trade not be organised in any other way – has it not been so in history? The underpinning of this economic system in exploitation and the shedding of blood is a truth that cannot be avoided. Does money make us happy or ignorant, is this what changes the world, or what qualities have changed the world?

Any discourse on the nature of progress cannot be exercised in a limited manner, it must consider broader perspectives than just a narrow reading of economics and statistics….