My Swiss banker buddy is in a grumpy mood this afternoon. He tells me with a certain malice that the UK economy has a deficit of 110% of its GDP, and asks me what should be done about it. Im a bit dubious about this statistic but don’t have my John Lanchester book to hand so can’t really contradict him. He argues forcefully that the only way out of this mess is to cut public spending. I’ve obviously heard this argument a great deal over the last few months but it’s the first opportunity I’ve had to discuss it face to face with a managing director of one of Europe’s leading investment banks, ie. a genuine full-on capitalist bastard.
When he lets me get a word in edgeways I pose him two questions: where did all this debt come from, and who is it owed to? Because as far as I can tell the answer to both questions is the same: the banks. It seems to me greatly unfair that public services should be cut in order to pay the banks so as to deal with the horrible mess that the banks themselves created. I ask him what happens if, as seems likely, one of the debtor countries can’t pay or refuses to do so? His answer is intriguing, and suggests a slogan other than ‘Can’t pay won’t pay!’: in that case, he says, the holders of goverment bonds have to take a haircut. This simply means that their bonds lose value, and their holders lose money. But it’s not just financial institutions and wealthy individuals, he points out, it’s also private pension funds, insurance companies, and all sorts of other interests. Their investments lose value, they reduce spending in other areas, people lose their jobs, the whole economy suffers.
Now I’m no expert and I’m not really in a position to dispute the scenario he’s just outlined. Nevertheless I’ve never quite sure if I even believe in this thing called ‘the economy’. Surely there are different economies, with conflicting interests, some more powerful than others. But even with leaving Naomi Klein aside for a brief moment, it seems to me preferable to force bond holders to take such a haircut, with the risk that this apparently implies of an economic downturn, than to close hospitals, schools and homes for the elderly, essentially privatise universities, starve the unemployed into non-existent jobs and generally abandon the poorest and most vulnerable to destitution and misery.
I’m not about to convince Herr GeldSäcke of any of this. But it’s been a useful session which seems to have cheered him up no end and which has taught me two important things: one, bond holders will need to take a haircut soon, and two: orange jeans and a black cardigan with little white skulls all down the arms combined with a shiny brand new pair of crocodile shoes is evidently a very popular look for forty something year old investment bankers in Zürich this year. Rather him than me.