FOREX NEW YORK COMPANIES

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

BERLIN — Germany's finance minister greeted the conservative New Democracy party's projected win in Greek elections Sunday as a decision to "forge ahead" with implementing far-reaching reforms. Germany's foreign minister said it's important for Greece to stick to its agreements with creditors, but held out the prospect that Athens might be given more time to comply with them.

New Democracy party beat the radical-left Syriza party into second place on Sunday and immediately proposed forming a pro-euro coalition government — a development that eased, at least briefly, fears that the vote would unleash economic chaos.

Germany — Europe's biggest economy — has been a major contributor to Greece's 2 multibillion-euro rescue packages and a key advocate of demanding tough, and highly unpopular, austerity and reform measures in exchange.

If New Democracy's win is confirmed, Germany "would consider such a result a decision by Greek voters to forge ahead with the implementation of far-reaching economic and fiscal reforms in the country," German Finance Minister Wolfgang Schaeuble said in a statement.

The austerity and reform program aims only "to put the country back on the path of economic prosperity and stability," he added. "This path will be neither short nor easy but is necessary and will give the Greek people the prospect of a better future."

"In order to succeed, the program requires political stability," Schaeuble said.

Foreign Minister Guido Westerwelle told ARD television earlier Sunday, shortly after exit polls showed a neck-and-neck race, that "we want Greece to stay in the euro; we want Greece to continue wanting to belong to Europe." But he stressed that it was for Greece to decide on its future path, and said that "you cannot stop anyone who wants to go."

Westerwelle said it was important for Greece to form a pro-European government that sticks to the agreements with creditors.

Debt inspectors from the EU, the European Central Bank and the IMF who are managing the Greek bailout regularly check progress in implementing its conditions to determine whether Greece can secure further aid payouts. Westerwelle insisted that the substance of the bailout agreements must remain unchanged, but signaled some flexibility on deadlines.

"There cannot be substantial changes to the agreements, but I can well imagine talking again about timelines, against the background of the fact that, in reality, there was a political standstill in Greece over recent weeks because of the elections," he said. "But there is no way past the reforms — Greece must stand by what has been agreed."