You would be hard pressed to find anyone who thought economics and politics were not related, yet too often we don’t discuss them as such. Instead ‘the economy’ is referred to as a separate entity that we are all subjected to.
This is apparent in the way the Credit CrunchTM is debated. By constantly waiting for the ‘storm clouds to blow over’ or praying for a ‘V-shaped recovery’, we end up missing out how people go about shaping the recession as they survive, drown and profit from the situation.
It has emerged that over a million Britons are using credit card loans to pay for rent and mortgages. It is a vulgar development. Banks were bailed out with taxpayers money, and interest-rates were reduced to a whisker over zero by the Bank of England. This gave banks a favourable environment to lend cheaply in and, in theory, start a consumption-fuelled recovery. Instead they have used the money to swell their balance sheets and, as is shown here, have profited from the lower interest-rates by deliberately failing to pass on the decrease to their customers.
Now these same banks can use more lucrative credit card loans to squeeze poor people further and, when people are unable to repay their loans, use the harsher conditions of credit card lending to ramp-up charges and repayment rates. Alongside this, there are the significant penalty fees that banks command ($20.5 billion in the US, I can’t find UK data) through credit cards.
It is a political and economic (political economy, you could say) scandal that it can happen and shows, once again, how fruitful stronger unions in the financial sector would be for the majority of savers and borrowers.