A New Bretton Woods? Where is Keynes? Where is Dexter White?

I think that what you are pointing at here is very interesting and kind of reinforces the sense I have that Kondtratieff's long wave predictions are applicable to all this. There will now be a winter downturn after the autumnal boom of the last 25 years which will probably go on for another 10-15 years. The last time that happened the state was obliged to step in in all sorts of forms from the New Deal to Schacht's cartellisation plans as well as a deepening of Stalinist planning. Whatever the free-marketeers on here think of all these plans they were a product of an over-accumulation of capital and a crisis of over-production which necessitated a big shake out. The plans which were hatched were spontaneous reactions to long-term trends in capitalist development and not part of some wider conspiracy. The long downturn of the Second Great Crash is now upon us and what we have to think about now is how economic policy has to take on a political dimension in order to prevent the worst sorts of social upheaval issuing from it. This is the time to restore the primacy of politics over that of economics.

And yes, that will almost certainly mean the re-establishment of some sort of Bretton Woods structures and international coordination and regulation. The global interest rate drop yesterday was probably one of the first straws in the wind of that.
Of course, the recovering trot in me thinks that the free-marketeers might be right and we should just let the whole system collapse and then reap the revolutionary whirlwind, but as I say, I have recovered enough to realise that is probably the worst of all solutions. If we don't intervene though, it is what is likely to happen.

You wrote:

How to move between - an "economic system based on high debt instead of high wages; deregulation instead of prudence etc"

"high debt instead of high wages"

Is it really true that the opposite of "high debt" is "high wages"? Logically the opposite of 'high debt' is 'low debt', not 'high wages'.

Why do you suppose that the opposite of "deregulation" is "prudence" similarly the opposite of deregulation is regulation etc.

However it is very apparent that the present good and great of the economic punditry are so wedded to the (now) failed philosophy of economic management that they will not change.

(Assuming the very reasonable and well proven sociological phenomenon that a person holds to a view for as long as they have already held it even in the face of quite obvious factual contradiction - this has been experimentally established in the scientific field relating a paradigm change - and I am well aware that economics is hardly a science!).

Quite obviously new people are needed now. The problem is that as the establishment is constructed to promote like minded people there needs to be a 'revolution' in thinking to adopt any new/different philosophy - this may be what we are witnessing in this economic turmoil.

However there are a large number of suitable people who have well founded, but contrary views - judging by your blog!

One example is the question of the value of money and interest rates: Interest rates were lowered yesterday - this was in support of the failed economic philosophy. A few voices were heard on the TV and Radio (and on this blog) that said 'yes but'. In the medium term this is the wrong thing to do as it reinforces the processes that got us into the condition we are in today. Money needs to have a reasonable value again. Mortgages for example should be be limited to a maximum multiple of income (3.5 times).

It is still a problem that international currency flows of hot-money can very easily destabilise any currency and this needs to be addressed in the form of regulation. (I know of no other way other than exchange control of some sort, but there may be better ways.)

Bretton Woods came after the Great Depression and after the war. Some 14 years after the start of the depression and perhaps it is necessary for the passing of such a length of time (a generation say) for the old school of economic managers to pass on (die) before anything positive and alternative can take place. They are making almost the same steps today as they made in the late 20's and early 30's and for, I believe, the same sociological reason that those who are running things are stuck in the failed economic thinking.

I think the events of yesterday deserve a wartime analogy.

This is genuinely a '1940' moment for Britain. Either these moves stave off the 'threat of invasion'- for which read the collapse of the banking system - or they don't. Given the reception by mainstream economists I suspect there is a fair chance this will be realised. But 'staving off an invasion' is a long way from 'wining a war', as it were. The economy survives - we're not in the strange Icelandic world of national bankruptcy – but turning this around will require huge further shifts, which almost no-one in power seems presently to even be prepared to contemplate.

What the economists call a structural adjustment is required - a different way of running the economy because it's broken for most of us. There is no way of getting there painlessly and we can certainly expect higher prices, more unemployment and lower standards of living.

Eventually, of course, a 'new peace', to stay with the analogy, will require a new Bretton Woods. But first, as Paul suggests, we have to get rid of the leaderships which brought us to this situation. Here the 1940 analogy breaks down because it is a lot more complicated that replacing Halifax with Churchill. There is almost no-one in any leadership position in any major Western country who isn't, in some way, implicated with going along with the neo-liberalism which brought us to this point.
So I'd say unless the BRIC countries discover a hitherto well hidden capacity for global leadership (and America is too enfeebled to prevent them exercising it) we'll wait for a generation for any new Bretton Woods.....

WHEN ALL IS GUESSWORK

You need a man who can fool all of the people all of the time (including himself) armed with nothing more than charisma and oratory.

Yes: it is time for the second coming of Tony Blair. (Why else would John-the-Baptist Mandelson be wandering the banks of the Thames?)

All this big big cash to ‘save the banks’.

Yet Banks don’t build houses, people do
Banks don’t grow food, people do.
Banks don’t have children and bring them up, people do
Banks don’t run machines and computers, people do.

But in this economic activity, there is nothing about making sure that people are okay.


It has at last been realised that price increases on basics are hitting old age pensioners doubly hard because that’s all they spend their bit of money on.
Young people’s jobs and future have had no priority at all in the cheap labour rush, so what's that about?
Women (who want to contribute in working) can’t get the sort of conditions that allow them to work and have babies, so they don’t have babies.
The crazy priority in ‘public services’ is dividends to rich overseas shareholders.

But we are all out saving the banks.

Am I missing something?
Or are the paid politicians, elected to serve people, not doing their job ie they are serving big business, not 'also' but 'instead of'?

The ones I’m seeing up the front are completely untrustworthy and not worthy to be in those positions. And that is, as you point out, very depressing when they are making the decisions, obviously on the wrong basis.

And its not acceptable.

But where is our rallying point for change?

Answers on a postcard? The best answer gets a ‘community consultation grant’ of a million pounds.

Paul

you are close with your uncertainty about the situation.

I went to Tayside Police (Scotland) in October 2006 to report a number of serious offences including fraud, money landering which were committed with the intemntion of bringing down UK economy.

Tayside police decided as the offences were criminal they were outside their juristiction and could not investigate.

Nevertheless Tayside police will be able to confirm that 2 years ago they knew the UK economy would collapse, when it would collapse and the amounts involved.

They couldn't have had a more credible source as I was the advisor to the Government from whose work the agenda for the 2005 G8, climate change and Africa was derived.

https://www.mp2.worldfriend.com/sustainable_development_forum.htm

Now removed from Gov website but placed here for reference. Note also concerns on credit and western economic policy though from 2002

here for more backround

https://thecelticlion.blogspot.com/2008/01/well-ex-chief-scientific-advisor-to-uk.html

here is £250 billion of the UK shortfall, the Government don't dispute the facts. This from 2006, at £50 billion per year now gives £350 billion, more or less the amount the Gov had to borrow/lend yesterday.

https://petitions.number10.gov.uk/ecodome/

In December 2007 Austin Macauley

https://www.newstartmag.co.uk/about_us/The-Team/

editor of Newstart a magazine for economic development professionals
asked me to produce an assesment of the Scottish Government's economic development strategy. As I knew the UK and global economy was about to crash I put a warning in the final paragraph

'The Lion Rampant' was published on Friday 18 January 2008. On Monday 21st on cue global markets crashed.

Austin will be able to supply article as it is under Newstart copyright etc.

As a company director I have certain legal obligations re fraud, economic sabotage etc. I disclosed these to my accountant and company secretary in May 2008.

We were constrianed by Scottish Law. having gone over the evidence, it was placed in the safe at the registered office, together with the letter from Tayside police, outlining their decision not to investigate the 2006 report of economic sbaotage as it was outside their jurisdiction.

That week I also contacted one of Scotland's largest law firms. They advised same. As long as I had reported to the Scottish police an act of economic sabotage against the UK economy, even if they decided not to take action, I had still fulfilled all my legal rsponsibilities.

Even if Scottish police decided not to act, they suggested I report the facts to the FSA. I contacted the FSA immediately to report serious criminal offences likely to collapse the UK economy. They didn't know who dealt with this and said they would phone me back. The never did.

Nevertheless the FSA knew about the present situation in May 2008, they also decided not to act, also allowing the situation to occur.

None of the measures taken by the Government will work as all the experts are making decisions and expressing views, without full knowledge of the facts. A series of criminal acts were committed with the deliberate intention of bring down the UK economy.

Those involved have got way with their action due to a loophole. Scottish Law cannot invetigate criminal acts even against its own economy and financial institutions if they are committed in England, if they are deemed criminal.

None of the financial measures will work because the true cause of the situation has remained not investigated.

Roger Thomas
Celtic Lion Ltd

EXPECT A LOWER STANDARD OF LIVING (#4)

Would that (lowering) be measured on the 'Wrecker' Scale of rubblization, in a world where living standard is directly proportional to the amount of the planet irreversibly converted?

Might it be possible, even now, to establish the Phoenix Scale for standard of living; where we look at what a bloody mess we have made of just about everything, allow ourselves to accept our part in it, and re-order life from there?

On the Phoenix Scale, just BEING on the planet, without DOING stuff all the time scores high in terms of living standard.
We have more than enough ashes. It is the 'rising' bit that is going to tax us, especially with the current approach to choosing our leaders. . .

"Where is Keynes? Where is Dexter White?" Too busy working in a Hedge fund earning an 8 figure salary?

Would a new Bretton Woods really be any use? Doesn't the world move too quickly for something so static to work. It took about 20 years or so for Bretton Woods to break down, how long would it take for BW2 to follow suit? Isn't the real problem that the financial markets adapt too quickly to regulation and that politicians and regulators are always behind the game.

Three areas stick out for me:

- Derivatives. Warren Buffet's 'financial weapons of mass destruction'. It seems to me that everyone just hopes that these won't blow up but one day they will unless regulators get a grip.

- New unregulated markets. I was amazed to find out that the Credit default swaps (CDS) market is larger than the global economy and entirely unregulated. This from wikipedia:

"Originally used as a form of insurance against bad debts, these instruments became a tool for financial speculation when the US Commodity Futures Modernization Act of 2000 specifically barred regulation of these trades."

- Hot money. The Economist recently reported on the effect of huge capital inflows into emerging countries and their relation to ensuing economic crises since 1980. A couple of quotes:

"In all of them vast current-account deficits were financed by huge capital inflows. The afflicted countries saw housing speculation, asset bubbles and cheap loans followed by a credit crunch and the seizing up of the financial system."

"But overall, most countries that suck in foreign money show the classic signs of an economic bubble. Using a subset of 66 countries for which there are more detailed figures, the authors show that share prices rose by more than 10% in real terms in the two years before what they call a bonanza, then fell relentlessly for four years, ending below where they started. House prices went up by more than that—15% in real terms over four years during a bonanza—before falling back.

So why would countries seek out foreign money at all, if its impact is so malign? The answer is that it is not so much the amount of investment that is the trouble; it is its volatility, and especially its tendency to dry up."

The remarkable thing about the problems that we are facing - that are "unprecidented" and "unforseeable" according to our leaders - is how predictable they were if you aren't focused on winning elections in four year cycles.

How are we to suppose that a generation of politicians who have overseen, designed and propagated the economic system based on high debt instead of high wages; deregulation instead of prudence; macroeconomic tweaking instead of intervention etc can suddenly come up with a blueprint for a new economic stability based on the opposite course of action?


Precisely. New Labour MPs argue that Gordon Brown is the best person to lead this country through this problem because of his 10 years' experience as Chancellor. In other words, having created the mess, he's the best equipped to sort it out. Fantastic logic. In the private sector, he would be summarily dismissed and someone competent brought in - more than likely at great expense - to turn the problem around.

One of Mr Brown's greatest personality flaws is his inability to recognise that he has done anything wrong or made any mistakes. Indeed, it wasn't until a few weeks ago that he finally muttered some sort of acknowledgment of the problems caused by scrapping the 10p tax rate, and there was unequivocal, imperical data to prove that! So that took, what, 6 months? And I suspect he only did it at the strong insistence of the New Labour spin doctors as part of his Autumn re-launch.

Sorting out this country's problems is going to require somebody very special. As yet, nobody in the political spotlight strikes me as the right person, although I have to admit I was quite impressed by George Osborne on Andrew Marr's show on Sunday - he actually sounded like a Chancellor-in-waiting, which he hasn't done until now (too busy trying to score political points, I think). Perhaps we should go for one of the excellent political satirists who entertain us on the small-screen. Rory Bremner, anyone?

there are economic models that work long term and those that don't. These models have been around for ever and are just rehearsed again and again.

So we have the 'Quaker' model of finance and the Gordon gecko model of finance [greed is good].

Many financial institutions were created through the Quaker model ie if you needed a loan you had to have a an account with several years history, a deposit etc. People from the 1950 -60's would recognise that model of the 'all powerful local bank manager' as the norm. Lets call this the 'safe' model. This works long term.

Then we had the 'Gecko' high risk model. Which doesn't work long term because its just pyramid selling. How many people met the bank manager in their sunday best to get a loan in the last 20 years? Now you meet some teenager on a computer whose job is to sell you more 'extras' regardless if you need or can afford it? This is a short term model.

like a clever temptress the gecko model seduces those drunk with greed again and again into having a party where the party go ers wake up with a hangover and skint.

wealth is created by industry. so by creating new industries like the two way grid the uk can work its way not only out of trouble but accumulate capital. But are politicians who are mainly short term lawyers up for it?

POST 7: CELTIC LION LTD (Roger Thomas)

Mr Thomas sounds frighteningly sane to me, Newsnight. I shall go back and follow all the links, but right now that post has the feel of 'Architects and Engineers for 9/11 Truth' ref. Twin Towers demolition.

Dark forces at work?

#10

True to a point but you forget (some, less polite than I, might say ignore...) the fact that the main player of the official opposition - Cameron - was an adviser in the last Tory Govt, the very same party who put in place this now discredited fiscal model. This might actually be one of the reasons why Vince Cable gets listened to, he is untarnished by either having being part of the design nor part of the management team and he has real world industrial experience behind him to boot (having worked in the real world before entering politics) - unlike your suggested Chancellor-in-waiting.

Now for a random thought; Whilst Keynesian thinking had it's faults it never truly imploded in the years prior to 1980, like Thatcherism, monetarism, Friedmanism (call it what you wish) thinking seems to have done so in the last 12 months or so, what we don't know is if in this world of almost instantaneous communication the same would be true. Back to the Future could be our saviour but what we might need is not just new faces but a whole new fiscal system that doesn't have greed at it's centre...

FOOLS GOLD (#13)

Vince Cable has the aura of a good guy with a good head; one instinctively likes him. So what drew him to party politics and Westminster? And what fault of character enables him to put up with the idiocies of both, without rebellion?
Therein lies golden Vince's tarnish. We must look elsewhere for an Arthur-reborn, to be our rallying point against false democracy and rank hypocrisy.
So much for instinct.

#13

I think you'd be hard pushed to call what's been happening in the last 10 years monetarism (which is the control of the supply of money). When was the last time you saw money supply figures mentioned by the chancellor? Casino capitalism seems the best term to me - the antithesis of montarism.

Whilst it helps to learn the lessons of the past it's worth bearing in mind that the Quakers, Keynes, Bretton Woods and Thatcher were addressing the issues of their time. The world moves on and the solutions to deal with them need to move on too.

I would agree with post #10 that the special person who is going to come up with these solutions is unlikely to be found in our Houses of Parliament.

#13

"I would agree with post #10 that the special person who is going to come up with these solutions is unlikely to be found in our Houses of Parliament."

The problem is, unless we have a coup, the person has to be found in Parliament - at least in the short term!

So if you're having a day off does that mean I can go to bed early tonight or are you going to be popping up on Newsnight later anyway.
What is remarkable, although hardly surprising is the complacency of all the political leaders regarding what we should do to those responsible. Millions of people in this country and others face either months of uncertainty and worry or massive losses despite the guarantee on bank deposits. Ken Clarke the other night said that the payments to the top executives were a feature of how the system works and so we just have to put up with it. Well, I don’t think we do
Everyone from the middle class and below faces lost jobs, re-possessed houses, declining pensions and a massive contribution of our taxes to socialize the losses made by a bunch of Tony Sopranos. Meanwhile the capos of the banks who have got us into this mess will no doubt be keeping all the money they have hived off which is now turned into houses worth millions all over the globe, precious metals, government bonds etc.
Paul could you do another of your back of the envelope sums and add up for each of the top 10 banks in the UK just how much they have paid to their top executives over the past 5 years and how this compares to the amount of money we are giving them. It could help us taxpayers realize the full extent of the injustices done to us. And while you are at it could you do another sum showing how much tax they have paid.

it's hard to answer the points paul raises until the full fallout of this crisis is known. will the entire global banking system have to be nationalised? will the dollar collapse? will china suffer its own meltdown?

whatever the outcome, i don't think we are looking at a "paradigm shift" - i.e. international free markets and privately owned banks (at least in the long term) are here to stay. no g7 government will view the nationalisation of banks as anything other than a temporary stabilising measure. we are not moving long term to a more statist paradigm. just a free market one that is more closely monitored and controlled (until the next big crisis..)

imo, the following salient points will guide the regulatory reaction to this crisis:

- creating a policy tool (other than interest rates, which will need to stay focused on cpi inflation) for preventing systemic overleveraging / asset price bubbles; more specifically:
@ much stricter accounting rules for banks re "off balance sheet" treatment, asset risk weightings and "trading book" assets - much of basel 2 will need to be overturned
@ extension of capital adequacy rules to all leveraged institutions (insurance, hedge funds, spv structures, etc)
@ possibly a countercyclical element to regulatory capital rules that is managed globally
- limiting reliance on short term financing (other than deposits) for long term assets
- addressing the enormous moral hazard inherent in derivatives / securitisation (i.e. that they pass risk from those that understand it to those that don't) via higher disclosure standards (with clearer criminal liability for the seller), and by better regulation of the rating agencies' role (including delinking their remuneration from the ratings they give out)
- greater transparency and reduced counterparty risk in the derivatives market by bringing it under a central registry / clearing house system
- reform of employee compensation in financial services, probably with a focus on making bonuses dependent on employees remaining loyal to their firm (which would also indirectly greatly moderate overal compensation levels), and the permanent elimination of golden parachutes
- much stricter lending rules, with a greater fiduciary responsibility of lenders to borrowers (i.e. criminal liability for irresponsible lending), and possibly direct caps on LTV / debt service ratios (though these can be fairly blunt instruments)
- international policy cooperation will only extend to (i) regular discussion forums for regulators / central banks to ensure coordinated policy responses both long term and in future crises, (ii) unified accounting rules, (iii) backlash against offshore jurisdictions that do not play ball

Barriesingleton

Thank you for your comments #7.

Yes I am sane.

As regards your "Dark Forces", a very well respected professor of ecology once said to me

"Never attribute to maliciousness what sheer incompetence can achieve on its own".

I do appreciate your intro to comment #8

"Would that (lowering) be measured on the 'Wrecker' Scale of rubblization, in a world where living standard is directly proportional to the amount of the planet irreversibly converted?"

This is what I am writing on now for a follow up article for Newstart. This is part of my initial unedited draft. I am trying to say what you said but to get the concept across to a more general audience that may not have your insight, then later show how the conversion you write about can be used to predict trends in socio-economic systems.


"Some will be familiar with the most basic idea of societies relationship with the larger planetary ecological system, 'The Womb Model'. Our socio-economic system is a circle within the larger circle of the earths ecological system. All our resources, food etc. come from the natural environment and ultimately our pollution and waste is returned back into it.

Live by the sword, die by the sword, is a proverb from Matthew 26:52 that can be as easily applied to organisations or societies as well as the individual. The way revolutions come in can determine the way they go out. In the UK in 1991 there was a recession, chaos and disruption similar to what we are experiencing now. What was the best way to evolve from this situation in a sustainable way. Einstein said, "No problem can be solved from the same level of consciousness that created it."

To resolve the problem and outcome of the 1991 recession the next level of consciousness needed to be looked at. From our Womb Model this is the planetary ecological system. At its most simplest, life or evolution is the creation of complexity and stability from the more simple chaos of the universe. Life on Earth has evolved over billions of years to create us, the other higher mammals, the forests, a complete planetary self supporting ecological system.

Economics at its most simplest is the conversion of this complexity and stability into goods and services. Atoms of a gas could be randomly moving about in the atmosphere, taken in by a tree utilising energy from sunlight and converted into biomass. This supports a beaver. The beaver is killed and made into a hat. A hat though traded in the economic system is far less complex than a sentient mammal, part of a mature ecosytem."


You may appreciate where I am going with this. We have a wrongly perceived 'credit crunch'. The Government makes available £400 billion to the banks. The 'financial experts' then appear in the media telling us we can now borrow more. The way to ensure stability of the economic/ banking /financial system, is for us all to go out and spend on the High Street.

You have identified the problem here. This method of stabilising economic systems, destabilises the larger planetary ecological system. When this crashes people don't wake up one morning and find shares have crashed, but the entire planet's life support system has. A slightly more serious situation than the FTSE and Dow bobbing up and down.

I have to assume from your posts you have some knowledge of thermodynamics and systems.

This is the one page summary of the 2001 Millennium Dome project.

https://millenniumprojecttwo.blogspot.com/2007/01/millennium-dome-2001-proposal.html

Some more of it can be found here. From 2006

https://www.mp2.worldfriend.com/about.htm

This may interest you this is an initial attempt I started a few years ago to explain to a lay reader the prediction of ecological systems.

https://www.mp2.worldfriend.com/basicguide.htm

What the Dome project of 2001 was intended to do was provide that rallying point similar to Stayingcool #6 called for.

Had the project been chosen, then the £2 billion to implement it was provisionally lined up. This unfortunately depended on it being the winning proposal.

Celtic Lion is now intending to do this as an independent none affiliated project. This is the next incarnation of the Millennium Dome bid.

All comments would be appreciated!

moritat @ 17

having worked at an investment bank myself i can well understand the anger people now feel. i thought the amount people (admittedly including myself) were being paid simply did not make sense. and it's not just top executives. a 6-digit income is quite normal for an investment bank mba recruit after their second year. 7 digits after about 5-10 years.

i do think that most bankers are very talented people, and in many respects i think they did a much better job than they are now generally credited with (blaming bankers for the credit crisis is like blaming used car salesmen for urban air pollution). so imo they do deserve relatively high pay, but clearly what they have been receiving was grotesquely out of proportion.

i think it is important for us to understand the reasons why it was possible for people to be so disgustingly overpaid. i would put it down to the following factors:
- the credit bubble created an enormous boom in financial services, so the supply of talented bank employees never kept up with the demand
- financial transactions became ever more complicated, so there was always a huge premium paid to the few people that were at the cutting edge of this complexity
- the jobs market was far too competitive - it was normal for employees to get a job offer from a rival bank each year to use as a negotiating tool in the annual bonus round
- as a truism, if you work in a chocolate factory, it is easy to pocket a free supply of chocolate

the last point is inevitable. but i think the first three points will be addressed by the regulatory reforms i highlighted in post 18, meaning that imo the era of mega-bonuses is well and truly dead.

MONEY OR YOUR LIFE

'Life' on earth travelled most of the way here without the gaudy cherry on top that is us, and we have come most of OUR short, additional journey without falling foul of money. Every time Homo Sapiens invents, life gets potentially worse. This is where the need for wisdom becomes apparent. But the paradox is that while elegantly applied wisdom gives a thrill-beyond-price to the mature being, clever stuff, excites the child, and before we can grow up, we must all be children.
Once hijacked by the clever stuff that money can buy, we REMAIN children. Further, as I have described elsewhere; we elevate (by default) some of the most disturbed and driven juveniles among us, to be our 'leaders' - and look where we have been led! I can do no better than re post:

OF BEDS

As the oyster yields a pearl
man invents.
Neither realises their fecundity
is rooted in irritation:
of one - the body
of the other - the mind.
Man kills the oyster
for its pearl.
And kills his own World
for that eureka moment of invention.


While we 'fix' money the rest goes unfixed.

The bankers have been gambling with our 'take home' pay and in the process bankrupted our banks.
Now Gordy is gambling with our taxes (and future taxes) on trying to save the bankrupted.

When do we get to have a go?

Oh dear!.... the pot's empty now!

Oh dear again!.... they've pinched the pot as well!!!

Moral of the story.......'Those who gamble with everybody elses money will never get caught short!'

PAYMENT BY RESULTS?

No one in an objective frame of mind can state any reason for our existence. Should we go extinct at the next global cataclysm, we will join countless species who died out previously, whose presence was not crucial either.

To my mind it follows that the only positive course is to optimise life, as expressed through us, purely as 'something to do'. The alternatives are suicide or the mess we have now - that you wouldn't wish on a Martian.

Paying a lot of money to those who make a lot of money out of manipulating money just does not compute in my mind.
I suggest we might OFFER high remuneration to those who do the most for mankind in terms of freedom from angst, and maximum contentment. I say 'offer' because, of course, such individuals will decline! (:o)

I've been trying to understand the underlying causes of the current problems. Obviously the the lack of regulation in many areas of the finance sector is a key cause, as has been much discussed (the growth of unregulated hedge funds, allowing banks to get round capital adequacy regulations using CDOs, SIVs and the like). I broadly agree with benagyerek's proposals at #18.

However I also think there are also some other underlying problems that have contributed (particularly in the case of the UK)

- A huge trade imbalance resulting from Sterling being over-valued for many years. This is partly the Government's fault due to using the high exchange rate as a means of hiding the underlying level of inflation. But I also feel uncomfortable with the system of floating currencies without exchange controls - it just doesn't seem to be a self-righting system which can lead to a stable equilbrium. Perhaps we would be better off just pegging exchange rates at purchasing power parity?

- The growing gulf between rich and poor (or between the very rich and the rest of us). Thus most people's real disposable incomes have not increased, despite working longer hours. It's hardly surprising that people have resorted to borrowing, though that was never a sustainable situation. I think a much more progressive tax regime is needed now to help ordinary people pay off those debts.

- The introduction of student loans. This was also a really good way of getting young people into the habit of being in debt.

- The use of interest rates as the sole means of managing the economy. This has always seemed a bad idea to me. High interest rates are great for the City (keeps Sterling overvalued, brings in foreign funds), but bad for the rest of industry. It sees a bit of a conflict of interests. Perhaps it would be better to keep interest rates fairly fixed (eg 1% above inflation?) and use other means to control lending etc.

Re: #13 Boilerplated


True to a point but you forget (some, less polite than I, might say ignore...) the fact that the main player of the official opposition - Cameron - was an adviser in the last Tory Govt, the very same party who put in place this now discredited fiscal model. This might actually be one of the reasons why Vince Cable gets listened to, he is untarnished by either having being part of the design nor part of the management team and he has real world industrial experience behind him to boot (having worked in the real world before entering politics) - unlike your suggested Chancellor-in-waiting.

Now for a random thought; Whilst Keynesian thinking had it's faults it never truly imploded in the years prior to 1980, like Thatcherism, monetarism, Friedmanism (call it what you wish) thinking seems to have done so in the last 12 months or so, what we don't know is if in this world of almost instantaneous communication the same would be true. Back to the Future could be our saviour but what we might need is not just new faces but a whole new fiscal system that doesn't have greed at it's centre...


I'm afraid I have to reject pretty much all of your post!

Cameron: I was truly disappointed when he was elected leader of the Conservatives; to me he was just Tony Blair II, and I never liked the original! Well, his populist approach to politics, anyway. Ken Clarke was my man hands down. Perhaps his day will still come. However, Cameron has, over the last year, surprised me and begun to win me round. I don't think he is anywhere near as shallow as New Labour like to paint him, and once the election is caled I'm sure we will finally learn the policies that they have no longer been working on since he became leader. To keep bringing up the fact that he had a minor role in the Treasury at the time of the EMF crisis is a bit cheap, IMHO.

Vince Cable: Of all the MPs, he had earned my respect regarding the economy until he advocated nationalisation of Northern Rock. The BofE, as per its duty as Lender of Last Resort, should have simply continued providing the funding support needed while NR reduced its mortgage book (basically, what has been happening since it was nationalised). Nationalising it may have been expedient (especially politically) short term, but it will simply lead to some BIG headaches longer term. Furthermore, Mr Cable was recently publicly advocating an interest rate cut. I have gone on at length (before and after the event) why this is the wrong action to hvae been taken.

Thatcherism/Monetarism/Whatever: Under the last Conservative Government, how many recessions did we have? And under the current New Labour Government, how many recessions did we have? THAT is the problem. We had a dotcom and (nascent) credit bubble in the run-up to the millennium: the dotcom bubble burst, and threatened to burst the (considerably smaller at that time) credit bubble and lead us into a nasty recession. Rather than allow the natural economic cycle to develop, efforts were taken to prevent a recession and artifical growth generated through excessively low interest rates and massive public (over-)spending. This allowed the credit bubble to continue and created a bubble in another asset class: property. Now that bubble has burst and interest rates are again being slashed, while public spending is on a scale never previously dreamt of (hundreds of billions to shore up the banking sector). This will simply lead to ANOTHER asset bubble, probably commodities. All asset bubbles are a manifestation of inflation, but a commodities bubble (oil, food, etc) will REALLY hurt. We have already had a taster over the last couple of years, and the failure to recognise how much worse inflation is compared to recession means the future is very bleak for EVERYONE.

One last point: the conditions that allowed us to get into our current mess were an extended period of excessively low interest rates. Without that single condition, it would not have been possible for the massive debt levels to have been built up. It certainly would have prevented the sub-prime mortgage market even coming into existence. You can't really blame the banks for exploiting the conditions they were given: that's their job (and I'm certainly no fan of banks).

Rant over 8-)


PS I'm no economist or historian, but are you saying that the 1970s are evidence of the success of Keynesianism?

#21 barrie singleton

how true and what a paradox.

Recent days and weeks have been filled with politicians and 'experts' talking about every issue regarding money and finance. Discussing some contents of a bubble that has nothing to do with the real reality.

All that matters is life, without that there is nothing. Even the universe cannot see itself without the mirror of self relective consciousnes.

Perhaps the time has come to ignore the politicians and the fixers of money and the entourage of meaningless nothing they bring with them. They are not leading us they are forcing us into an evolutionary dead end and extinction.

Let us focus on what is important, the continuation of the journey that is life.

the eye of the panic is in the british bankers assoc [who are outside govts] who set the libor?

either they know something everyone else doesn't or they are psychologically pannicky people?

good article on libor here called

Libor Holds Central Banks Hostage as Credit Freeze [bloomberg]



summary

1. The concept of a centralized dollar rate set outside the U.S. emerged in the 1970s when the Soviet Union and Arab oil producers invested export revenue in London to prevent it from being confiscated by U.S. authorities.

2. Libor is set through a daily survey by the London-based British Bankers' Association. As many as 16 banks, including UBS AG, Citigroup Inc. and Bank of America Corp., report the rates they think they can borrow at in 10 currencies and maturities ranging from overnight to one year.

3.Central bank efforts to tame Libor have had little impact because instead of lending the extra cash, banks are holding it on deposit with the ECB at a loss. On Oct. 6, banks borrowed 13.6 billion euros from the ECB at its emergency rate, which then stood at 5.25 percent. At the same time, they deposited 42.6 billion euros overnight at 3.25 percent.

....

no 3 shows its just hysteria. They have enough money. Someone needs to get all these people in a room and snap them out of this psychological collapse?

20. At 2:59pm on 09 Oct 2008, benagyerek

I do confess that most of my education on the mechanisms and machinations of the banking profession comes at the hands of 'Alex' in the Telegraph.

Like 'Yes, (Prime) Minister' it used to seem an amusing fiction.

Other than our cheery PM (Hor! Another bank's gorn t*ts up on my watch... hor!) and his media 'Village people' cheeryleaders who dote on his every sprinkle of fairy dust (Look... the new cut of the jib, the quality of the cloth, the deftness of the riposte... the steeliness of the eye glint..), I am unsure who is still laughing, mind.

Feel free to mention that next time he swings by to be interviewed... oh, yeah, right. It's just US aspiring VPs who we take to task for not doing that.

23 Payment by results barrie singleton

I would say there are reasons for our existence. But I do not believe they have anything to do with money.

Money has become the means and the ends. I agree paying money to those who make money by manipulating money is complete insanity.

Douglas Adams would put them on the 3rd ark with football agents and similar.

At this present moment in time we live in a society run on money. I need £2 billion to stop the extinction of our and all life on earth. I do believe there is a purpose for life.

If it was offered or any contribution to that I would take it. It is what is done with the money which is important. (In my opinion)

The money would be a means to an ends, of a better world, where money, as it is, may become extinct in the natural order of things.

Having said that I do fully understand your arguement. Which should be doing good for doing good not for the money. To be offered money for doing good would be an insult and should be declined.

What is different is taking money that is offered to be able to do good. To bring about a situation where good is done, because the money facilitaed that process in the first instance.

Its just the activation energy in the entropy of life. Once the magnesium ribbon is lit, it burns brightly on its own. In the case of this analogy brightly for all eternity.

Perhaps it should be the money can be taken if offered, (to do good), but not demanded.

#25

"I'm afraid I have to reject pretty much all of your post!"

Don't worry about it, the feeling is mutual.

Oh, and about your last point regarding Keynes, no I'm not saying that the 1970s are proof that Keynesianism works - actually the 1970s wasn't very Keynesist - my point was that Keynesianism (with all it's faults) worked much better than the 'Boom and Bust - Dog-eat-Dog' fiscal model that you are putting forward (also known as Thatcherism)!

My question was, would Keynesianism actually work as well as it did, and better that what followed, in the modern world with all the modern communications - many of the problems of today have been caused not by Govt. policy but the instantaneous communications that now exist - billions can be wiped off the economy in a split second on the back of a rumour from the squawk box.

SEERS AND ARK LIGHT (#30)

You only have to invoke Douglas Adams and I am made new. He threw light on many things. Humour - the antidote to being human.

Hi Roger! Are your 'reasons for our existence' laid out anywhere' (this is hardly the place).
'Good' money is vexing, especially when it comes from bad sources.
There is a world-saving enterprise called FREdome (another dome) run by one Greg Peachey, and he is hoping for Lottery funding. I frown at him.
I regard the Lottery as the last (first?) refuge of scoundrel government. I would rather fail than use money from that source.
Then we get into charities that employ spin doctors to enhance their take, and so it goes. The common factor is money itself of course. The Bible did not get it right.

Yummycarolkirkwood ( excellent name, incidentally)

Why do you believe a Tory administraton would not equally have attempted to continually re-inflate the credit bubble over the last five years ? I've got no reason to believe an administration led by Hague/Howard/IDS would have been interest -rate raising 'stabilisers' .

Moving on, for the last five years various Conservative thinktanks have been holding up Iceland as an economic model, which tells you we might be faring today instead.

If we really do have to select our 'special person' from parliament (#16), I nominate Jo Swinson, though I confess I'd never heard of her before just reading the article at https://news.bbc.co.uk/1/hi/uk_politics/7657465.stm
Here's an extract:

Nearly 50 MPs from all parties, including Lib Dem Treasury spokesman Vince Cable, have signed Ms Swinson's early day motion calling on the government to do something about the "static" levels of happiness and "adopt a more sophisticated method of measuring well-being than straightforward GDP".

More fool's gold (#14), no doubt. I can only plead that I've been tending my allotment and may have exposed myself to too much sunshine, today.

Enjoy your evenings, everyone. Hakuna matata!

to return to point 1 ; There's also no reason to believe the Tories wouldn't have tried to re-inflate the bubble by other means ( despite the fact they had already committed to Labour's spending plans anyway), and means less socially beneficial than public services.

As I say, the fondness for Iceland on the New Right over the last couple of years should tell you more broadly where we might be instead.

It's also important to distinguish between the effects of public spending per se, and public spending grafted onto a pre-existing thatcherite model. Do Sweden and Germany, with proportionally much higher public spending over the last decade , find themselves where we are today ?

#33

I don't think a Tory administration would have run up such large budget deficits and expanded the state in the way that Labour has. Much more likely is that we would have had a mild recession in 2002 and some of the air would have gone out of the bubble leaving us in a slightly better position than now. But that's getting off the point which is the previous economic is broken - what should replace it?

HAPPINESS OR WHOLENESS? (#34)

I read the article Wontbedruv. (:o(

Young women are designed to have babies -many don't.
Women with babies are programmed to mother - many don't.
Babies are 'all need'; they should have high access to mother and security - many don't.
Men feel 'right' when they hold the position of provider - many don't.
Children need to learn to BE before learning to DO - most don't.

In consequence, insecure attachment is rife, and general confusion the norm. Our population is 'losing it' en masse. Mental health is declining and 'props' - legal and illegal, psychological and substance, - are in widespread use, overuse, and abuse.

I fervently hope the politicians never apply their self-serving methodology to this problem. 'Happiness targets' would be the end.

I'll get me tin hat.

#37

Hang on, until this finance crisis blew up since Xmas the PSBR under labour was actually less than the figure they took over from the Tories. So please, no more suggestions that the Tories were any better at maintaining an even Kele!

As for 2002, I doubt that any western Govt. would have, if at all possible, allowed a recession then only 12 months after the turmoil of 911 - for all their bluster the Tories would have done much as Labour have, and lest face it this finance crisis is not just about what the UK economy has done but what deals have been done in trading rooms and the state of the worlds economy.

Re: #31 Boilerplated

Oh, and about your last point regarding Keynes, no I'm not saying that the 1970s are proof that Keynesianism works - actually the 1970s wasn't very Keynesist - my point was that Keynesianism (with all it's faults) worked much better than the 'Boom and Bust - Dog-eat-Dog' fiscal model that you are putting forward (also known as Thatcherism)!


OK, my very, VERY basic understanding of Keynesianism is that it is "supply-side economics", in other words that the Government ramps up borrowing and spending during an economic downturn. This again seems to me like another attempt to defeat the economic cycle and avoid recessions. The economy would become dependent on public spending: effectively, a pyramid scheme.

My understanding of Thatcherism is basically a free-market economy. However, when the State controls the currency, it is clearly not a fully free-market economy, so anything based on such an assumption is inherently flawed. But yes, a "free-market" economy with appropriate controls is the best solution we have given the current level of development of human nature. I am sure that the appropriate controls can eliminate the worst (if not all) of the boom/bust cycle which is so damaging (I have benefitted from it, but am very disillusioned with it).

As I said, I'm no economist so no doubt I am a little wide of the mark?

A BAD MISTAKE

Being curious, I just went looking for Jo Swinson. I found her on Wiki, standing behind a lectern emblazoned with: 'MAKE IT HAPPEN'.
What sort of mentality feels the need, or thinks it knows the value of these slogans? What manner of intellect will stand behind such banality? Vince Cable - are you listening? We must be in 'the age' of something - let's see . . . "THE AGE OF VACUITY" - got it. I LOVE a natty turn of phrase - deftly used. What other ages might we investigate, now that Gordon has done 'CHANGE' and 'IRRESPONSIBILITY'?
THE AGE OF AGE (work till you die). THE AGE OF SMALL CHANGE (all you have left after paying the bills or indulging in saving). THE AGE OF EMPTY BLOGGING (that way lies madness).

Re: #33 2001Oysters

Why do you believe a Tory administraton would not equally have attempted to continually re-inflate the credit bubble over the last five years ? I've got no reason to believe an administration led by Hague/Howard/IDS would have been interest -rate raising 'stabilisers' .

Moving on, for the last five years various Conservative thinktanks have been holding up Iceland as an economic model, which tells you we might be faring today instead.


OK, let me start by saying that I'm no ardent Tory supporter. Given the choice, I would like to see the Green Party in Government (of all the party manifestos I read in Metro prior to New Labour's second win, theirs was the only one that impressed.) However, while I'm happy to vote for the Green Party, I'm pragmatic enough to realise the country is sadly not ready to make the sacrifices to their consumerist lifestyles to elect them, so I accept that the next Government will be from one of the three main parties. And until recently, the Conservatives have looked wanting, but IMHO they are increasingly sounding the best choice.

Anyway, regarding your first question, the simple answer, as ThereYouGoAgain wrote, is that the Tories would not have gone on the populist (stealth) tax/borrow/spend binge that New Labour did. The State has become way too big and our economy has now become dependent on public spending for "growth". Basically a pyramid scheme. Public spending will need to be cut back considerably and the economic effect will be magnified. There would have been a recession in 2002 which would have stamped out the credit bubble.

As for the various Conservative Think-tank findings over the last however many years, I don't think you need to worry too much about them. Parties in opposition have the luxury of considering crackpot ideas.

I suppose it is natural to look at the present political parties for the 'leadership' and guidance in the future, but as both of the main parties essentially believe in the same laissez-fair unregulated free-for-all capitalist model I find it difficult to see any of the present 'personalties' being any good.

I foresee a political realignment between the pragmatists of the centre who will try to return to the old model and be the cause of the next ten years a depression and the right wing rump and a new left of centre coalition. I feel (fear) that there may be another SDP moment!

Political denial and impotence was a feature of the 1930s and I expect history to repeat itself in the 2010s. I would be interested to read any reasoned explanation why we shall not repeat the 1930s.

The IMF's Chairman today extolled cooperation today much in the same was as was one in the 1930s. He suggested regional cooperation (i.e. the EU) could be an important agent for calming the commercial and trade environment. (Incidentally let us hope the UK adopts the Euro quite soon as it will offer one of the few protections for our economy.)

I am not at all happy about the way in which 'we' see complete solutions or a short term fix of swapping Cameron for Brown - I do not believe either of them is capable of the necessary thinking to appreciate the nature of the changes that must be instigated. Anyway both will be retired before we are out of this slump!.

Already we are seeing the vicious beggar-my-neighbour competition between Iceland and the UK with Brown using Anti-Terrorist legislation against Icelandic assets in the UK - this is an exact copy of the 1930's attitudes and actions I believe.

YummyCarol, re public spending and the size of the state in principle ; I would stress again look at Sweden and Germany today compared to us, and look at their spending ratios and states. They've had lower growth, but now find themselves in the stronger position. Surely a Green sympathises with this more sustainable model ! ;) Spending in their case wasn't grafted onto a Thatcherite economic model.

Thereyougoagin ; I definitely take your substantive point, that we'd be be better off focusing on the future rather than squabbling over who bears which responsibility for a failed model, which is the point of the thread . I would say just once more , though, that I strongly suspect the Tories would have attempted to sustain the run just as hard, by rapid, breakneck expansion of the financial sector in relation to the rest of the economy (this is explicitly what some tory commentators and politicians have asked for), which could have left our current situation looking like a picnic.

Anyway, back on topic - the point several that there tends to be a potentially destructive time lag before a "new paradigm " emerges, because of the absence of a new set of thinkers, is really well taken I think . I think new ideas are as likely to come from mainland Europe as anywhere.

#40

You still seem to have missed the point of my original question (could Keynesianism work in era of the internet etc.) but never mind, the rest is pure battle ground politics, you prefer a dog-eat-dog world, I prefer to have the odd tether and leash around so that the weak, ill and poor don't get fatally muled.

We will just have to agree to disagree I guess.

Paul, you're having a day off... in these circumstances... that's shocking!




Joking of course, you seem to have been really earning your share of the Licence fee recently!

#43

re what political model should govn. us

If the UK goes into deep recession or even depression then I see only two prospects (due to the fact, as you say, that there is little real difference between the main stream parties), either a revival of the centre left (Socialism) or the formation of a 'National Govt. formed by the current main parties - why do I say a revival of the centre left, because the status quo will be seen as failed yet both the right and left extremes have to much ugly history.

Benagyerek #20

You write that bankers deserve relatively high pay. Relative to what? Plumbers, electricians, midwives, doctors, computer programmers. If I count digits the same as you then after 2 years in an investment bank it is not unusual for an individual to be earning between 100,000 and 999,999 rising to over 1,000,000 after 5 years. The average UK salary is somewhere between 25-30G so there is something very wrong here.

Beside the hundreds (or is it thousands?) who earn those sort of salaries we also have the likes of Richard Fuld who has pocketed a cool 484,000,000 dollars.

Fuld and his equivalent in the UK with very large pockets can quite rightly say they haven’t done anything wrong. They are working within the rules set by successive governments that have allowed disparities in wealth to increase dramatically while letting a banking and finance system run out of control. The ministers and head bankers know what was going on and it is no use them saying the result we are now seeing is the working of the invisible hand of the market. They are responsible for this mess. The justification for the high salaries has always been that they are crucial to keeping the economy growing.

I can’t pretend to understand the inner workings of the banking and financial markets. Similarly I don’t expect bankers to understand my skill and profession but I know if I don’t do it right and fail to abide by professional standards people will get harmed, potentially killed. If I am negligent I should get sacked and be forced to pay compensation or fined and jailed if it can be shown that I have been criminally negligent.

We pay surgeons 6 figure salaries and therefore don’t expect them to mess up to the same degree that the banks have. If they did they could well be jailed. The rules of the game have been set by successive governments which is why Gordon Brown should re-think his answer to Paul’s question and not the other way around.

Maybe the proposals you outline could control the markets, I dunno but it’s a hell of a lot more than has come out of the government so far and to be honest I really don’t expect anything other than a few soundbites from the conservatives.

By the way just how big do you think a chocolate factory worker’s trousers are. Need to be very big to hold 6 figures worth of chocolate ;-)

#32 Barry Singleton

Yes I do have laid out 'reasons'. They are similar to, but derived entirely seperately to Douglas Adams. Things to do with probability etc.

Lottery: I have never even bought a ticket let alone applied for funding.

#34 wontbedruv

I appreciate what you say about Jo Swinson and happiness etc. She is though 6 years behind the times. A great manny consultations took place in 2002 within Gov re the question of GDP and economic growth. The Treasury and DEFRA, Cabinet Office are all aware of them.

This relates to Barry Singleton work and questions. I made a very strong case for entropy, or rather negative entropy to be used. (not the place to go into the maths or physics here).

Well being is not enough, we have to take into account the overall stability of the planetary ecosystem.

This may be an introduction. The Government knew in 2001 via the Dome competition that catastrophic flooding was imminent in the UK.

They decided not to do anything about it. The source of the agenda of the 2005 G8 has already been posted here. This is part of the work I did for the UK Cabinet Office in 2002.

https://celticlion.wordpress.com/category/resources/

What I tried to do was utilize and improve their initial attempts at producing a coherrant sustainable development aspect of Regulatory Impact Assessment. I did this by using the example of dealing with the flooding, models predicted would occur, but nobody was doing anything about.

it is not the complete answer to the increasing % growth GDP. I don't want to take over Paul Mason's comments section.

My work would have strange attractors from chaos theory determined by negative entropy analysis of global systems. Ultimately far better, more simple, more accurate for predicting future problems-and then avoiding them-and more real than traditional economics measures when understood.

Its just another model, belief system paradigm but far better than the one we have.

Unfortunately it would expose the stupidity of money systems that many contributors have passed comment on.

Would the establishment want such progress?

#38 and #41
Sorry, if I alarmed you BS. I did say it was, no doubt, more fool's gold (is there any other sort?)
I share the rationale you describe so succintly at #23, and think contentment seems a more appropriate term than happiness. But, I am also a pragmatist and recognise that many MPs, managers and others seem unable to manage (in all senses) without targets. So, if we must have something called happiness targets, in order to start to progess, I could live with that (though it would make me wince, to be sure).
Martin Seligman has done some interesting reseach into what makes people happy/contented. Bizarrely, I understand former president Blair engaged his services at one time, with a view to using his findings in policymaking. I imagine TB would have been horrified when he discovered what that would actually entail; for example, banning most forms of advertising (weapons of mass discontentment).
By the way, I don't agree with your bi-polar model of men and women. Humans are far more complex than that allows for (I'd better declare that I have inside information, having lived part of my life as a man and the rest as a woman, though I'm not 100% of either). The causes of widespread personal insecurity and confusion are many and varied, IMHO. Many people may be beyond help but others are not. I have been privileged to witness some amazing turnarounds in some people's levels of contentment, including my own. We all need far less than most of us realise but I think you know that :)

celticlionltd - sorry, your post at #49 had not appeared (ie was awaiting mod's approval) at the time I was drafting my last one (#50).

LA-LA LAND

Barrie,

Why are jokes made about one half of the population only wanting to hear nice things said about them? Does that also mean that this group tries to just say nice things about themselves regardless of whether or not what is said is factually true?

Assume one can just eradicate such behavioural 'stereotypes' by classing 'jokes' and derisory remarks about it as 'sexist', and what's likely to happen as the original behaviour spreads like a virus through the workplace?

And if the same were to be done with respect to racial 'stereotypes'?

What do actresses do for a living? Is it for real?

People are still not looking at the true scale of the consequences which flow from what is now a pandemic of dissembling.

There's a bitter irony to the widespread public response to recent economic events. Back on September 11 2001, people asked 'why'? Today, they know why, but still won't put it together. If you looked at the ETS report (and video clip at their site), you'll have noted that they issued a warning (and they are not anti-American or terrorists). Many others have done this after looking at the trend data.

Too many have, for too long, been seduced by 'light-touch regulation' of truth and reality.

Holywood.

Re: #45 Boilerplated

You still seem to have missed the point of my original question (could Keynesianism work in era of the internet etc.) but never mind, the rest is pure battle ground politics, you prefer a dog-eat-dog world, I prefer to have the odd tether and leash around so that the weak, ill and poor don't get fatally muled.


Sorry, I thought it would be clear that I simply don't know enough about Keynesianism even to have an opinion on your question! And no, I do not prefer a dog-eat-dog world. I am very much in favour of meritocracy, but that does not mean unfettered behaviour by any means. For example, there is no moral justification for richer people to have enormous carbon footprints at the expense of the poor, or that the poor shouldn't be able to afford to feed themselves or heat their homes. I would have thought that was clear from my previous responses?

It concerns me that so many of your respondents talk about this or that being likely happen, such as a more Left model, as if it will just come about.

Well it won't unless people make it happen.

Today was an example of what happens if people don't make things happen.

With all this concern among people about economy - what did the Govt do? Use the confusing times as a smokescreen, a good time to bury bad news, to shove through an expansion of 2 airports ( Stansted and City), ignoring what people want and totally irresponsible in terms of Climate Change.

So people need to get a lot more proactive.

And Gordon Brown needs to grow up, fast.

NOT WHAT IT SEEMS

YummyCarolKirkwood (#53) "I am very much in favour of meritocracy"

Have a look at Michael Young's dystopic satire 'The Rise of The Meritocracy' (1958) by Michael Young (he coined the term and complained about people using it incorrectly). To see the dire consequences of a meritocracy, seee Herrnstein's 'IQ in the Meritocracy' and later book with Murray 'The Bell Curve' (1994).

If we are largely what we are not through our efforts, but our genes, what are we rewarding and punishing, and what can meritocracy effect other than exacerbation of class division?

Re: #55 JadedJean

If we are largely what we are not through our efforts, but our genes, what are we rewarding and punishing, and what can meritocracy effect other than exacerbation of class division?


I shall bow to your superior knowledge, but aren't you in effect just describing Darwinism/natural selection?

#45 Boilerplated

First as a northern lad who grew up not far from Paul Mason's Wigan. I served my time as an engineering apprentice and worked in a boiler shop.

"You still seem to have missed the point of my original question (could Keynesianism work in era of the internet etc.) but never mind, the rest is pure battle ground politics, you prefer a dog-eat-dog world, I prefer to have the odd tether and leash around so that the weak, ill and poor don't get fatally muled.

We will just have to agree to disagree I guess."

Well we could always get Cesar Millan The Dog Whispher in, we wouldn't need tethers and no one would be eating each other. There are always other solutions.

As this mornings events have shown, what is being done is not working.

I refer back to my first post
#7 The present UK and global economic sitruation is due to deliberate criminal acts committed in England intended to bring the current situation.

These were reported to Tayside police Scotland in October 2006. They knew economies would crash, when they would crash and the amounts involved.

The decided the events were criminal and could not be investigated as they were not under the juristiction of Scottish law.

This entire situation could have been avoided. No measures will ever work because the true causes, ie deliberate criminal acts, were committed in England so cannot be investigated. Some bizarre loophole.

Until there is a criminal investigation chaos will reign over global systems.

How can anybody fix the problem until they know thw cause?

I did my bit and complied with all legal responsibilities. I reported 2 years ago UK and global economies were intended to be brought down due to criminal action.

The police could not avert the situation due to limitations of Scottish law. I cannot make them investigate.

I have gone over the evidence with accountants and company secretary responsible for our legal responsibilities. We are in Scotland so cannot do anything.

Therefore the true cause remains hidden. Every opinion on the current situation is a waste of time, because no investigation has been undertaken into the true causes.

All the UK Government has done is throw £400 billion at a problem they do not understand the cause of.

Yummy carol kirkwood and jaded jean

Covered Andrew Youngs Rise of meritocracy in Scociology unit when doing Environmental Studies degree.

Try Sociobiology Edward O'Wilson to resolve differences you may think you have.

In (animal) populations as socoety becomes more complex then altrism plays and increasingly greater role in the development and running of the society.

Think of how ants work together for the benefit of the colony.

Darwinian "fittest" is that best adapted for survival. In the case of horses trapped in a blocked canyon it will be the "smallest" horses which survive and pass their genes on.

In terms of complex society such as ants or humans, it is a form of cultural altruism which will be the "fittest", allowing the whole of society and life in general on the planet to survive.

Though Newsnight do not know it, it was me who correctly advised PM Tony Blair on the outcome of the 2001 Foot and Mouth epidemic and the timing of the election. It was based on the Newsnight special at the end of March.

https://celticlion.wordpress.com/2008/01/15/foot-and-mouth-assessment/

If you just scroll down to the conclusion and ignore all the FMD work, you will see it is still applicable to the complex world of economic crisis.

Politicians are not dealing with the situation by taking an objective stance outside the 'economic' box.

UNNATURAL SELECTION

YummyCarolKirkwood (#56) "I shall bow to your superior knowledge, but aren't you in effect just describing Darwinism/natural selection?"

There problem there is the word 'just'. The Gaussian normal distribution (bell curve) is indeed central to this, but the important part of Herrnstein and Murray's book was Part IV ('Living Together'), i.e about politically dealing with the adverse consequences of IQ and meritocracy.

The politics of 'light touch regulation' only serve to exacerbate socio-economic class division, i.e polarisation (hence gated communities in the USA and classes becoming more polarised since deregulation in the 80s).

Young complained that Blair didn't understand how to use the term 'meritocracy' and whilst Murray is at the AEI, the word is that he isn't a Neocon. As you read this transcript, see if you detect a problem. On the one hand, it was David Miliband writing the New Labour manifestos, yet Young made it clear that Blair was misusing the concept of meritocracy.

In his 2001 article, Michael Young said: "Ability of a conventional kind, which used to be distributed between the classes more or less at random, has become much more highly concentrated by the engine of education."

That is key. Education does not raise IQ as it is largely genetic. Populations geographically sorted, ie migrated, long ago. Given the 'choice', why would 'affluent' members of the cognitive elite move into impoverished, high crime rate, areas? How do those of little ability, get out?

In my view, Miliband egregiously politically abused the meritocracy concept (almost as a Lysenkoist term), and although, this could have been oversight, I somehow doubt that given his New Left (Trotskyite) heritage. Michael Young was Old Labour. New Labour has been swelling the underclass (through immigration and dysgenic/differential fertility) i.e. through education, education, education skewing the birth rate, and thus exacerbating class division. This is in my view, predatory (debt-slavery/sub-prime) politics.

It's Austrian School, Chicago School anarcho-capitalist/Friedmanite/Neocon 'light touch regulation' which has been responsible for destroying statism, and with it, unleashing the iniquities of current predatory lending/casino-capitalism. It benefits a minority, an impulsive cognitive elite. Note, a minority cognitive elite.

Conscientiousness (but sadly, some of the darker behaviours common to Axis II Cluster B Personality Disorders), also has significant heritability.

We have been rewarding the wrong behaviours, as sadly, many females find the darker, predatory behaviours more sexually attractive (and 'snakes in suits' do well in the workplace because they take greater risks and break more rules (if their lobbying hasn't managed to get them de-regulated).

The Brown Supremacy

I don't see anyone going to jail regarding the meltdown - only those within companies who have broken the laws on company accounting. In matters like this law is a moveable feast and it will shortly seem perfectly right that the UK used anti-terrorism laws against Iceland.

We are coming to the end of a linear technological growth period - the period of Moore's law in computing. From left field a number of totally disruptive technologies from genetics and biological engineering are going to remake out civilisiation. The transfer of economic power from the West to the East will mean that the West will fight back with new disruptive technologies so that the "smoke stack" electronics industries are overtaken by new bionic and genetic technologies. Open source developments will kill Microsoft and the like - the music industry is in its death rattle and we are moving to an environment where copyright is a failed protection mechanism.

I anticipate that the Government funds for preference shares in banks will eventually become the underlying basis of personal pensions in the West - with compulsory savings to pay for them.

Shyster

We dont need another Keynsian system - we need to get back to a gold standard and follow the Austrian economics model - with sound money backed by gold.

But that is unlikely to happen as they try to patch togther a broken system.

My guess is that China or Russia will be the first to introduce sound money - and the balance of power will shift (actually it already shifting) to the East.

First off I am not in favour of nationalisation per se, aprt from institutions that are paramount to the national good. Obviously that would include times of war and this is economic war. As an ex-banker I have espoused for years that private banks and any central bank in particular will never act in the public good. It is the nature of the beast. There is absolutely no reason why why Government Treasury cannot print the currency first off. If it can print a bond and guarantee it, then it can print the currency.

Secondly with a "National Bank" there is no reason why interest rates, in the case of the UK need be constant in each area of the country. Rates could vary on a regional basis and attract money as needed for PRIVATE capital projects within that area. It would be an easy job to cut the inflow (read Northern Rock) when capital inflows met the desired level. I am talking about guaranteed above market levels of interest on, say, certificates of deposit. This would be for a minimum of whatever time frame equates with the capital project time-lines in each area, on a needs basis thereby avoiding continual inflows and outflows of "hot money".

Dead cats bouncing and void CDS auction agreements

When is the FTSE going to hit bottom? Not before 23rd October on which day it is likely to drop like a stone again. The reason? WaMu's CDS auction takes place that day - which is going to be just as bad as Lehman's today.

Why did nobody realise that CDS was insurance and the writers of them had to be capitalised like insurance companies? In the UK we had Emile Savundra in 1967 with his Fire Auto and Marine Insurance - the great David Frost interview where he was accused of "Trial by television". This led to legislation which says that anything that is an insurance contract which is not written by an organisation which is capitalised to the requirements of the legislation is void. What this means is that CDS contracts in the UK are void !! But nobody appears to have told the bankers and other financial advisors who wrote them or dealt with them.

Shyster

THE AGE OF SYMBOL DEXTERITY DETACHED FROM TRUTH

Barrie (#41) When IQ tests are constructed they are so with the knowledge that the sexes differ in mean verbal vs spatial ability so they are subjected to Item Analysis to remove these 'biases'. Except they are not biases. Males have higher spatial than verbal generally, and females the reverse. One needs both skills for high mean scores, but a lot hinges on the balance. The physical sciences require applied mathematical skills, so there is some basis to the stereotype that those with good engineering skills treat those with high verbal skills with a healthy caution.

There can be little doubt that in recent decades, the expansion of higher education both in terms of more females going to university than before the 60s, and in the verbal emphasis of so many courses, has tilted our culture/economy towards a high demand for verbal dexterity - an expansion of the service sector. But has it done so at the expense of truth and logic?

I think it has. I think we are now suffering the consequences.

KEYNES WAS ONE OF THE GOOD GUYS

diamondzaare (#61) A few problems:

1) Apparently, "the total amount of gold that has ever been mined has been estimated at around 142,000 tons.[6] Assuming a gold price of US$1,000 per ounce, or $32,500 per kilogram, the total value of all the gold ever mined would be around $4.5 trillion. This is less than the value of circulating money in the U.S. alone, where more than $7.6 trillion is in circulation or in deposit (although international banking currently practices fractional reserves)."

2) The Austrian School spawned Hayek, Thatcher's mentor. 'The Road to Serfdom' is one of the bibles of anarcho-capitalists, Neocons/light touch regulators.

3) Sharks have to keep swimming just as anarcho-capitalists have to have constantly growing economies/free-markets or else...?

Yes, reluctant and late are the key words here. The last thing Darling and Brown want to do is nationalise the banks. They are free marketeers and have gone along with 20 years of de-regulation and a financial system that has helped to massively increase inequality within and across countries.

Look at the headlines and announcements of the last few days. ‘Brown to punish bankers’ and yesterday driving home from work PM reported that Brown was demanding the oil companies pass on the drop in the price of oil to petrol consumers. Like the cut in interest rates and the re-assurance to savers that their deposits are safe the statements on banker bonuses and petrol prices are aimed to re-assure the electorate. They will not solve the crisis.

They are the government, they could just determine the price of petrol, set the rate of pay for the top bankers, remove tax havens and exert direct control over the money markets but they will not because fundamentally they think the system works and have no real idea how to fix it. They are still wedded to the idea that governments should stay as light as possible and every move they make to control the banking and finance system is timid. They are happy to provide cash and guarantees but very little yet to control.

So far at the G7 meeting there doesn’t seem to be anything on offer except vague promises of united action.

We are looking into a very deep dark hole. For the past 20 years we (UK, US) have been producing less and less and spending more and more fuelled and encouraged by a de-regulated finance system that has allowed our leaders to provide, much like the roman emperors of old, games and entertainment to keep enough of the population happy enough to vote for them. It’s still crumbs from the table but bigger crumbs than we’ve been used to before.

On Monday Newsnight is going to look into who is to blame. Seems pretty obvious to me and the topics to cover are….
The increases in inequality over the past 20 years. Show and quantify who has gained and lost.
The specific policies of western governments, and particularly ours, that have let finance capital run amok.
The failure of governments to do anything about controlling the massive increase in speculation in sectors that have burgeoned with the growth of IT (eg CDS).

It hasn’t finished unravelling yet and so far at work and play it hasn’t really hit too many people that I’m in daily contact with. But it will

In a previous post Paul has mentioned about a new Bretton Woods. The old one only came about after a massive depression, 2 world wars and the threat of revolution. If the new one is going to be drawn up in Beijing and Delhi then the road there is certainly going to be a rocky one. We've just turned onto it now