Article: Windfall Tax on Banks
MMJ 20231220
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Windfall Tax on Banks
In the UK Positive Money their MMJ is pursuing a windfall tax on banks to get back some of the guaranteed profits there are creaming off the economy every year. In UK banks annual profits come rain or shine is GBP44 billion pa. In Malaysia its RM44 billion pa.
MMJ's Comments
The IMF and the Central Banks still wants us to believe that raising interest rates will keep inflation down. What is their rationale?
1. They believe Companies will not borrow when interest rates are high.
The business owners and those who have been in business will tell us that interest rates have nothing to do with whether a company borrows or not. If you are a company you will not forego an investment if interest rates are currently high. You will proceed with the business if the debt capital is available to you. Decision to proceed with project depends principally on whether the borrowing is available. It is hard enough for a company to obtain a bank loan they will not decline a bank loan if interest rates are currently high. In any case there is the variable rate loan which solves this problem.
2. The belief that companies will not plan new investments if current interest rates are high. A decision to proceed with a Project depends on the viability and availability of the project alone, very little to do with interest rates to borrowings. If a business opportunity arises the opportunity will be grabbed if good and safe enough, interest rates are irrelevant unless the interest rate differential is between 3%pa and 99% pa.
So why do these people still harp on changes in interest rates as economic solutions. It has more to do with people not realizing what was the motive of the people who originally designed our banking and monetary and economic system.
The default set by the original designers of the banking, monetary system is to keep the rich, rich ; to ensure the rich remains rich.
How do they do that? First ensure the system is based purely on debt and interest. Equity thrown out of the window for companies and business searching capital. Risk must highlighted as the worst possible disease to inflict mankind ; people must be made to recoil in horror at the mere mention of this four letter word.
This they have succeeded par excellence. Islamic banking which is the natural proponent of equity financing have totally failed in this mission being pummeled by central bankers, unimaginative Islamic bankers, and totally lost Shariah Advisers into merely Islamic debt duplicate of the conventional system. Every financing debt based, but with Arabic names.
Knowing the Islamic Legal Maxim /Qaiddah Fiqhiyyah of AlGhunm bi AlGhurm, rewards only with risk, a Muslim is not entitled to a reward unless he is willing to face the risk, they must have managed the algorithms so well this Legal Maxim is completely hidden, unknown in Islamic banking. Heck, we even have to stomach the existence of Islamic banking risk management!
Nobody says risk cannot be managed but let us be clear it is risks in equity financing that can be managed. Not so risk averse that you prefer to be a Chettiar giving personal Islamic Loans instead of financing that goes to the real sector. The fact that banks overall gives only 35% of loans/financing to the real economy is testimony to this pontianaking of risks. A clear and present failure of the current system.
A conscious move to reverse banks total lending/financing from 70%:30% personal sector real economy to 70%:30% real economy : personal sector, will overnight increase economic output, reduce unemployment and plummet inflation. But no, this solution must also be hidden from society, never debated, algorithmed it to the dungeons, and how nice when the executive say we leave such decisions to the absolute discretion of the Central Bankers. A declaration that surely leaves those in the know in abject tears.
And the other expectation of an increase in interest rate to reduce inflation is the expectation that because interest rates are high, employers will dismiss workers to save costs, creating a lot of unemployed people , thus reducing the general Consumption of a country, and thus reducing inflation.
We have described this expectation as like lifting and moving a house to change a light bulb! But even if its true and will happen, if ever it will, aren’t they concerned with the human aspect of unemployment. That why we say this is an insensitive system meant to keep the rich richer, to hell with the poor.
It is 2023, are we still a prisoner of our thoughts, fearful to question and change the wrong, merely because the wrong is entrenched misknowledge for the last 100 years.
Leave alone the issues we raise above, when are Economists going to rewrite the basic Economics textbook to correct the fact that banks are not neutral movers of funds from deposits to loans, that banks create numbers money when they give loans/financings, that banks have abused the trust the nation have given them as money creators, that their greed and havoc money creation have stolen wealth from the country to enrich themselves?!
We don’t ask for immediate reform ; we will be grateful for just an immediate pause and an immediate reflection and rethink of what we say.
And for that matter, what a new world of monetary reformers are saying.
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Dikemaskini [Updated]: Sam Ahmad 20231220