Both the British Chancellor, Alastair Darling and the shadow Chancellor, George Osborne, have been on the radio this morning, resisting the idea that interest rates are political. Instead they have argued, vehemently, that the Bank of England is independent, and that the Bank must decide whether or not to lower interest rates.

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The Prime Minister, Gordon Brown, speaking on Radio 4’s flagship current affairs programme this morning, repeated something he says regularly: that ‘interest rates are low’ and that his government, through the Bank of England, kept them low. The question the BBC should have asked is this: if interest rates are low, and have been so, why on earth are people/companies/banks having such a hard time paying debts? Surely the Credit Crunch crunched, because debts - of banks in particular - became both too large, too expensive, and unpayable? Do small businessmen/women pay low rates on  investments? Mortgages? Credit Cards? Car loans? Does the PM live/work on another planet?

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In this big bad world of the Credit Crunch, powerful central bankers - civil servants all - have bent over backwards to help powerful and rich private bankers.

On one day, ‘debtonation day’, central bankers in Europe and the US pumped an eye-watering $150 billion into the financial system, to keep big banks afloat. According to Bloomberg, the US’s Federal reserve has ‘cycled $2.58 trillion through U.S. money markets since December’. (Bloomberg 8th August, 2008).

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Fulfilling my duties as a citizen, I am now confined to the Southwark Crown Court as a juror, so have little time to update the blog. However the effective insolvency of two US government sponsored banks or enterprises (GSEs) - Fannie Mae & Freddie Mac - will now impact not just all those US individuals, institutions and local governments that may have invested in these banks; not just on US taxpayers who are expected to bail them out; but also on you and I (our banks may well hold Fannie and Freddie securities); the central banks of the world that have bought their debt - confident that it will always be repaid.

Their insolvency now threatens a global systemic financial crisis, and their taxpayer-funded bailout of shareholders, bondholders and an incompetent management exposes the hypocrisy of much neo-liberal cant.

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The precedent of the United States’s great depression and Japan’s post-bubble collapse should haunt today’s G8 summiteers, writes Ann Pettifor in Open Democracy.

Japan hosts the G8 summit in the northern island of Hokkaido on 7-9 July 2008 at a time when its prolonged period of deflation and economic failure have rendered its politicians impotent. Philip Stephens notes that - despite Japan’s still considerable role in the global economy - the country’s politicians are the weaklings of global geopolitics. “Where is Japan?”, he asks. “The question is one of psychology rather than geography. Japan is still the world’s second most powerful economy. Politically, it is all but invisible” (see “Japan goes missing: invisible host at the summit“, Financial Times, 4 July 2008).

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The FT reports today on a debate economists are having with the Bank of England (BoE). To summarise: the Bank of England does not seem bothered by falling house prices; economists are.

This is a very important debate for all those that have debts - because while house prices are falling, the debts on those houses loom larger for owners. According to the Office for National Statistics in May, unemployment is rising, and unemployment makes it hard, if not impossible, to pay off any kind of mortgage. This is the context in which the BoE is preparing to raise interest rates above the current 5% and appearing relaxed about falling house prices.
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My friend the formidable economist, Mark Weisbrot put it most succinctly.

“Since the U.S. economy showed positive growth for the last quarter, some commentators in the business press are saying that we are not necessarily going to have a recession, or that if there is one it will be mild. This is a bit like the proverbial story of the man who jumped out of a window 60 floors up, and then said “so far, so good,” as he passed the 30th floor.”

On a day when Nationwide warned that in the UK “The pace of house price falls accelerated in May as more weak economic news added to the gathering momentum of negative sentiment about the housing market,” his point is a timely warning that while the UK lags the US, nevertheless the levels of household and corporate indebtedness and the scale of our housing bubble means we still have far to fall.

By Jo Jamison, 20th May 2008.

One in eleven people in the UK are in debt or arrears (that is separate from their mortgage) but for people with mental health problems, this figure rises to one in four says the Mind Campaign launched on 10^th May, 2008.

Worryingly, the research also found that banks are doing little to help. Of the 37% who told their banks they were suffering from mental health problems, 87% still faced payment harassment from those same banks. The report also shows that debt and mental health are inter-related; that one can cause the other. It is therefore a pertinent time in which these findings are released. As the credit crisis unravels, more people are missing debt repayments as banks raise their costs and tighten their lending due to losses on a massive scale.

So, as the middle classes join lengthening queues seeking debt advice, the question is how will the crisis unfold further and how will you be affected? Furthermore, what are we the general public going to do about it? As the burden of debt and mental health problems play a greater role in our homes, communities and national budgets, difficult questions will be in need of answering.