Massive bonuses for bankers. There is an alternative....

The news is full of announcements about the forthcoming round of bonuses for traders. JP Morgan is apparently going to hand out $10 billion in bonuses, meaning that on average, their investment bankers are going to get $370 000 each. Even the Royal Bank of Scotland, of which 84% is owned by the UK tax payer is apparently intending to reward its traders with hundreds of millions of pounds. The UK government is clearly powerless to do anything to stop them and has caved in completely.

This must stop. I believe that the problem is that the all powerful markets have the power to make even the most determined politicians give in. Essentially, they are able to say "If you don't slash public spending and allow us to continue siphoning all the money out of the system, then you will be next on the list of targets for the speculators". They've already had a go at Greece and Ireland and managed to get the governments of those countries to borrow colossal amounts of money at very high rates of interest. Next is Portugal and Spain - and if the UK government doesn't ply to their demands, they will let the speculators have a go. Standard and Poor's triple A rating will disappear and the country will have to pay much more to borrow money on the markets.

Yep, that's quite a threat. The UK government is already having to borrow gigantic amounts of money just to pay the interest on its debt. Imagine how bad things would be if the interests went up. That's a pretty convincing argument when the government tries to get the banks to play ball.

This weeks Canard Enchainé in France noted that on the 6th of January, the French government managed to borrow nearly 9 billion euros by emitting government bonds with 3.36% interest rate over 10 years. Not too bad. However, the rate that they had to offer was substantially higher than last years rate of 2.53%, despite still hanging on to a AAA rating. And it means that the French govenment (i.e. the French taxpayer) will have to find another €4 billion in 2011 to finance the debt repayments.

But yes, there is an alternative. A flat rate Financial Transaction Tax would allow both the French and UK governments to pay off all the debt rapidly, re-establish social programs and allow sanity to return.