FOREX NEW YORK COMPANIES

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Larry Elliot (Comment, 18 June) misses the major problem that caused both this crisis and the Great Depression – an excessive and unsustainable rise in private sector debt as a result of excessive growth in commercial bank lending. This resulted in an asset price bubble that has burst and is being followed by necessary attempts by the private sector to increase their savings to pay off their debts. This has lead to contraction of the money supply and collapse of demand.

The real crisis is the failure to understand this core of the problem, and that the solution, as with the Great Depression, is to reverse the contraction in the money supply and collapse in demand through deficit spending supported by central banks. Only by running public sector deficits can demand be restored and private debt levels decreased. Misguided attempts to cut deficit spending while the private sector is trying to reduce their debts are doomed. The problem cannot be solved by improving competitiveness and thus increasing exports. We cannot all increase our exports and decrease our imports simultaneously. Attempts to do so will simply encourage protectionism.
Professor Anton van der Merwe
Sir William Dunn School of Pathology, University of Oxford

• Only the bankers of the money-markets and the wealthy benefit from this austerity. Let's remember that money in the form of paper or credit is only a way to harness the energies and skills of a people by paying it as wages or salaries to provide the goods and services a nation needs – food, clothing, housing and the staffing of factories, schools, hospitals and so on -  a sort of lubricant for society to enable it to function. To take away much of it will make things to grind to a halt, needlessly and pointlessly.

The bankers gambled away vast amounts of the nations' money supply without any apparent benefit to the economies of Europe and America; governments should replace this lost treasure by printing money or providing credit and distributing it directly, via small businesses and government projects, to workers as wages and salaries, without giving it to the banks, which so far have only sat on whatever has been provided or reluctantly parted with it at high interest rates. Printing and distributing money like this would no doubt evoke cries of "inflation" from economists and politicians (who know nothing and have learned nothing) – but so what? There has always been some inflation in capitalist societies – look at the price of bread or of housing over the past 50 years. The money held by banks and the wealthy may then lose some of its buying power, but it would be fair to let them suffer a bit of austerity instead of passing it on to the workers. But the eurozone's bankers have a stranglehold on governments and are unlikely to let them do anything to help the people out of this austerity trap – even if right-wing governments wanted to – if they might lose the chance of making a fat profit.
Tony Cheney
Ipswich, Suffolk

• Does anyone else think the proposed £80bn to be given to British banks on the alleged condition they "pass it on to businesses and households in the form of cheaper loans and mortgages" is simply another government bail-out for a failed and failing banking system? This seems to be another £80bn to throw down the black hole where the other £800bn went at a time when people get jittery at Spain for requesting £100bn. If the government was serious about helping smaller businesses, surely a grant system would make better sense that throwing more money at banks where it, if past history is any indication, will merely be used for bonuses or to benefit shareholders.
Nathan Wild
Beverley, East Riding of Yorkshire

• Why is the government lending the banks more money at a special low rate so that the banks can lend it at a higher rate to the business sector to stimulate growth and thus make extra profit? Why not cut out the middleman and have the government lend it directly to those who want help? I recently heard Professor Steve Keen explaining the weakness of the whole system or, as he put it, the whole ponzi banking system.
David Walters
Oakamoor, Staffordshire

The results of the Federation of Small Business's latest Voice of Small Business Index are not altogether surprising (Squeeze on small firms tightens, 18 June). SMEs want to grow and banks say they want to lend, yet credit still appears to be unavailable. This is not entirely the fault of the banks. They are increasingly constrained by stringent regulation and the effects of the eurozone crisis as well as a depressed demand for any type of finance, caused by negative reports that it is unavailable. The government's conflicting messages of "batten down the hatches" and "invest to boost business growth" are simply incompatible, and SMEs are rendered immobile, not sure where to turn.

Our own statistics show that almost one-third of SMEs have no plans to invest in growth this year. This can't go on. Government, banks and businesses need to wake up to the idea that the traditional bank lending of the past is no longer the only option for business finance. There are other established alternatives such as invoice and asset based finance as well as private equity and business angels. The sooner they stop focusing on quick-fix credit, the sooner SMEs will be able to grasp other opportunities for funding and growth, boosting their own businesses and the wider UK economy.•
Peter Ewen
Managing director, ABN AMRO Commercial Finance

• There is little reason to believe that merely injecting money into the banks will do much to shake the grip of the recession. So far the most notable investment made by the effectively state-owned Royal Bank of Scotland was to finance Kraft's heavily leveraged takeover of Cadbury's. Predictably the deal resulted in both direct and indirect job losses as labour was shaken out to pay for it. At one stroke tax-payers became social security claimants with no perceptible benefit to the real economy of the UK, and British taxpayers, including those rendered unemployed, financed it. There is a sublime lunacy in this misuse of resources and we are about to see more of the same.

Is it so unthinkable that RBS could be turned into the first British state investment bank and the funds injected used to create useful enterprises creating stable employment, stimulating the wider economy and generating tax revenue? Europe is faced with a crisis on a scale rapidly approaching the second world war. The national response to that was the effective mobilisation of capital and labour, highly progressive taxation and an enormous and ultimately transforming economic and social effort. Much of that effort was directed towards the destructive power of the state and resulted in massive losses of life. Could we not devote a similar effort to creation and life enhancement
Phil Turner
Malvern, Worcestershire

The UK government should be spending more on catching cybercriminals instead of splurging taxpayers' money on antivirus software, tech boffins have said.

Blighty goes through around £639m a year trying to clean up after attacks or prevent threats – including £108m it spends on antivirus – but the country is only spending £9.6m on techy law enforcement, a University of Cambridge study found.

"In fact, a small number of gangs lie behind many incidents and locking them up would be far more effective than telling the public to fit an anti-phishing toolbar or purchase antivirus software."

The Cabinet Office said it welcomed "this latest contribution to the debate on cybercrime".

"The government believes the threat is serious and needs to be tackled and that is why we have rated cyber as a Tier 1 threat. Raising awareness and building capacity to resist threats continues to be our focus," a spokesperson told The Reg in an emailed statement.

"That includes investing in law enforcement capability to detect and apprehend cyber criminals. But we also think it is important to make sure people have the information they need to take steps to protect themselves."

The study, which was started after a request from the Ministry of Defence, also said that the amount of money the UK was losing as a result of cybercrime was being exaggerated.

"For instance, a report (PDF) released in February 2011 by the BAE subsidiary Detica in partnership with the Cabinet Office’s Office of Cybersecurity and Information Assurance suggested that the overall cost to the UK economy from cyber-crime is £27 billion annually," the research said.

"That report was greeted with widespread scepticism and [was] seen as an attempt to talk up the threat; it estimated Britain's cybercrime losses as £3bn by citizens, £3bn by the government and a whopping £21bn by companies. These corporate losses were claimed to come from IP theft (business secrets, not copied music and films) and espionage, but were widely disbelieved both by experts and in the press."

Using figures ranging from 2007 to 2012, including some which are "extremely rough estimates" based on data or assumption for the reference area, the study reckoned that all the costs of cybercrime both direct and indirect came out at around £11.7bn.

UK.gov – Cybercrime is expensive

The Cabinet Office spokesman said that Detica was best placed to explain its own methodology, but still disagreed somewhat with the study's conclusions.

"The Cyber Security Strategy was clear that a truly robust estimate would probably never be established, but that the costs are high and rising," he said.

"That said, we think there are grounds for believing that the true cost is higher than the £11bn quoted by Cambridge University.

"For example, the authors say that they can't find any hard evidence of the cost of IP theft and have therefore concluded this doesn't impose any costs beyond the defensive measures they refer to elsewhere in the paper. However, there are suspected cases of IP theft in the public domain and the costs are not nil.”

Aside from differing opinions on the cost of cybercrime, the research team also reckoned that some existing meatspace crime was moving online and being tallied up as part of the cyber cost.

The study pointed out that fraud in the welfare and tax systems, which now often takes place online, is probably costing Brits a few hundred pounds a year on average while card and bank fraud cost a few tens of pounds a year per citizen.

However, what they call 'true cybercrime', scams that completely depend on the internet, are only costing a few tens of pence a year, while the cost of antivirus software can be hundreds of times that.

Basically, the indirect costs of folks trying to protect themselves from cybercriminals actually end up costing them more.

"Take credit card fraud," said Richard Clayton, expert in the econometrics of cybercrime in Cambridge’s Computer Lab. "Direct loss is clearly the monetary loss suffered by the victim.

"However, the victim might then lose trust in online banking and make fewer electronic transactions, pushing up the indirect costs for the bank because it now needs to maintain cheque clearing facilities, and this cost is passed on to society.

"Meanwhile, defence costs are incurred through recuperation efforts and the increased security services purchased by the victim. The cost to society is the sum of all of these," he explained.

The research team concluded that there should be less spent on antivirus and firewalls and other preventative measures and "an awful lot more" on catching and punishing the perpetrators.

The study (PDF, 346KB) is due to be presented at the 11th annual Workshop on the Economics of Information Security (WEIS), which takes place in Berlin on 25 and 26 June. ®

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