A better economic and social contract

The following article from Reuters provides insight concerning the origin of our recent worldwide financial crisis:

http://www.reuters.com/article/businessNews/idUSTRE5A60NF20091107?feedType=RSS&feedName=businessNews&pageNumber=1&virtualBrandChannel=11604

There is a lot of liberal doublethink quoted in this article. Doublethink is a process defined in George Orwell’s novel 1984. Doublethink is defined as: Reality Control, the power to hold two completely contradictory beliefs in one's mind simultaneously, and accept both of them.

We must be aware that all doublethink propaganda is intended to provide the casual reader with will only the rosy scenario portrayed by the speaker. This is of course the intent of the speaker.

Consider the content of the Reuters article:

• World governments should consider urgently a levy on banks to fund future bailouts, British Prime Minister Gordon Brown said on Saturday, departing from London's longstanding resistance to a global tax.
  
• "We should discuss whether we need a better economic and social contract to reflect the global responsibilities of financial institutions to society," Brown told a meeting of financial policymakers from the G20 nations in Scotland.
  
• "There have been proposals for an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global transaction levy," he said.
  

“A better economic and social contract” is a liberal doublethink slogan that in reality means increased government intervention that will result in worse economic and social outcomes.

The purpose of this meeting is to promote the concept of a worldwide tax on financial transactions. This is being promoted as a method to prevent future financial crisis. The rosy scenario is that if a financial crisis is looming then the taxes collected will be waiting in a “rainy day” fund and these funds will be used to offset the effects of the crisis.

The reality is that financial institutions will accept more risk if they have an explicit guarantee of bailout. The recent crisis has as its root cause this exact mechanism, the belief in the “too big to fail” myth.

I am surprise to read that U.S. Treasury Secretary Timothy Geithner (king of bailouts) is opposed to this idea for exactly the reason stated above:

• In recent Congressional testimony, U.S. Treasury Secretary Timothy Geithner was cool to an idea from a domestic regulator who called for big financial firms to pay risk-based assessments into a fund that would be available for use if they hit trouble. Geithner opposed pre-funding bank bailouts on the basis that it makes banks less wary of risk taking.
  

The real motive behind this new global tax is revealed in this paragraph:

• Officials at the G20 meeting said a levy and the funds raised could be used not only to pay for future bank bailouts but also to fund development and other areas.
  

I am sure that this was an unintended admission by the bureaucrats. The real purpose of this new tax is not for a financial backstop but is instead a redistribution of wealth. The taxes paid on financial transactions will be spent on “development and other areas”. If this tax is put into effect financial institutions will be encouraged to engage in excessively risky speculation under the pretext that an insurance fund is available to bail out any failing firms. In reality the fund will be empty as it will be looted for spending on pork barrel projects.