Less than ten years ago it was a good bet to put your money in the bank. Not on deposit, stupid, but in owning the bank by being a shareholder. OK, there were a few that bit the dust – think Slater Walker, Barings and BCCI, none of which were proper banks, but the real banks paid great dividends and, although they no longer did it literally, printed money for their shareholders. Then it all went horribly wrong.
Ireland and Iceland took a real beating but shareholders in UK banks felt some pain too. Now they are getting back on their feet and, maybe, there will be good times ahead. But this is parish pump stuff. Let’s look at the big picture.
The banks’ banks are the ECB, the World Bank and the IMF. (Sorry, the Bank of England just tags along.) They really do print the money and their printing presses have been running hot. They rule all of us more than any elected government. They set interest rates and exchange rates. This means they can stimulate employment and growth rates, or dampen them – the latter hasn’t been a problem for a while. Because we are either ignorant, or we are informed and believe that these institutions are run by competent economists, we don’t by and large question what these unelected but powerful organisations are up to.
Do I hear you say that there are critics? Yes, but they can be labelled Loony Left, hitherto. Now there is somebody who wants to take control of their own economic destiny and will do so. It’s not a somebody it’s a country – China.
China by 2020 will be the biggest economy in the world. It will regain the position it held in 1820. Why should it kow-tow to America any longer? It has already put in place an institution that will rival and marginalise the World Bank and the IMF, namely the Asia Infrastructure Investment Bank. The UK, to George Osborne’s credit, was an early joiner putting American noses out of joint.
This is the first sign of the rise of China as a world economic power and I hope you will join me in welcoming it. China has a formidable and growing army and it is encouraging to think that it may use it to defend itself but use its economic muscle to expand its role internationally and establish the Renminbi as an internationally traded currency.
We, no doubt, looked down our European noses in the 19th century at the upstart and renegade Americans. However, in the UK at least, we developed a “special relationship” which extends now to letting them have a finger on our nuclear button. Our joining the AIIB in Shanghai is the beginning of our special relationship with China and Jeremy Corbyn, unlikely though it is, had a cameo role to play as he arrived at Buckingham Palace, spruced up, to meet President Xi. I think he is checking the seating plan in this picture.
