The report, entitled ‘Green shoots….of casino capitalism’, sounds the alarm that financial markets are once again starting to speculate on a new commodity bubble, thereby driving oil and commodity prices upwards and the economy downwards. With the European Central Bank (ECB) expected to provide tomorrow hundreds of billions of euros to European banks on a one year loan, ETUC calls on the ECB and other central banks to put into place the necessary instruments to ensure banks use liquidity for productive investment and not for speculation.
Banks seem to be lining up to ask hundreds of billions of one year loans from the ECB. This is a major subsidy to banks, which will be able to borrow from the ECB at a rate of 1.5% and lend it out at rates of 4% (government bonds) or 5% (mortgage loans) or even 8% (corporate bonds). Not the slightest obligation is put on the banks in return.
Moreover, there is the danger that banks may actually start using some of these hundreds of billions of euros to inject in commodities’ hedge funds. Quantitative easing is necessary to fight the spectre of deflation. However, is this really the way to do it?
ETUC General Secretary John Monks declared: ‘The positions of ETUC were always clear about that: we have asked for public money to support public investment, not “free lunches” for banks collaborating with speculators .’
Read the ETUC Discussion note 2009/03 on Green shoots... of casino capitalism