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You are here: Home / Credit / Why Credit Is Not Available According To Demand

By Jess Esemmens Leave a Comment

Why Credit Is Not Available According To Demand

Why Credit Is Not Available According To Demand

This article explains the causes of the failure to provide the supply of credit available to small and medium enterprises, as a result of the huge and excessive power of finance capital over public institutions.The answer that the bank gives to this question is that there is no demand for credit. That is, small and medium enterprises and households are not borrowing money. This is also the reply that the Spanish government has been holding. And to support such an explanation point to the low number of applications for credit by small and medium enterprises and by households.

This explanation, however, does not hold or barely. The fact that no more requests bank credit due to economic conditions it requires, with high interest rates. And one of the reasons for this situation is that banking is not profitable to these loans, which also considered risky because he knows that people are losing purchasing power, a result of lower wages. The bank can and does make a lot more money buying debt about exorbitant interest, to offering credit. And all this courtesy of the European Central Bank, lobby particular that lends money to banks at a very low interest (less than 1%), money to buy government bonds that give them a high interest (just over 6 % in 2012) in the case of Spanish bonds. Admittedly it’s a windfall.

The fact that the interests of the public debt are so high is that the ECB does not do what it should do, ie buy government bonds, protecting States against speculation in financial markets (ie banks). Consequently, the state is cutting public spending (including social, such as health, education and so on) to be able to pay interest to banks lush, and get credit. Only this year, the Spanish State will pay an amount equal to 3.86% of GDP in interest to the bank for having borrowed money.

What is shocking is that all these cuts could have been easily avoided, creating a public bank with all the money that has been paid to private. Adding the public debt interest plus bonuses that the state should sell the bank to get money this year, it is nothing less than an amount equivalent to 19% of GDP, which the state will pay to the bank this year. And that does not create a public bank is due to the opposition of banking, and its lobbies, both the ECB and the Bank of Spain, for that to happen.

But it is even worse. In fact, the ECB can not buy bonds Spanish state. But if you can, according to its statutes, lend money at low interest rates, as do private banks or public financial institution, such as ICO, Official Credit Institute. And he did. But the ICO, according to the official rules themselves (written by private banks to protect their interests) can not lend money directly. And it has to do, again, through private banks. That is, the ICO gives money to private banks to lend money in this economic conditions businesses and families, which are found with the same problem I cited earlier. They can not afford predatory criteria as banks demand. Thus, of the 22,000 million euros that had the ICO in 2012, only 25% was spent offering loans, which, again, can only offer through banking.

And for more scandal and embarrassment, if possible, of this 25%, most have gone to great companies such as Telefónica, Banco Santander and other entities that are the only ones that benefit from this influx of credit. And while small and medium enterprises are collapsing and creating a huge unemployment problem. And families, indebted to the core, can not get out of the hole. The children of these families no longer receive scholarships because it is almost impossible to get credit.

And the cause of all this is politics. That is, is the enormous influence that banks have on the state. Hence the escraches should focus not only in banking, but in the so-called representative political institutions that do not defend the interests of the public but factual groups, such as banking, that control them. So clear.

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