Bank reform: 'The nutters in the tent'

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I am glad that the Bank of England is partly waking up to the results of its profligacy. It now admits it knew that in effect its monetary policy management was woefully short of the mark for the last decade or more, but yet it still says that there are good reason why it cannot at this time correct its errors. They may be right in the short they, but the fact remains that the Bank is now in the worst position in its 350 year history and hasn't a clue how to correct the problem. All they can say is Irish response If I wanted to get they (financial solvency and a proper value for money) I wouldn't start from here.

In essence we have been living of tick for the last decade or more and we will have not to pay up. You say that we have lost 7.4 tn how about thing of it as wiping out the value of our housing stock - which given the origin of the CDOs that destroyed us is fair.

Somehow money has to get valuable again (that is it must pay actual interest). The Bank's problem is that whilst it knows this it is like a rabbit in the headlight transfixed by the problem. In short they must start raising benchmark interest rates or we are all doomed, but they know if they do borrowers on absurd multiple's of income mortgages are doomed.

So Turner has a crystal ball and will be able to predict over heating? If so he will be most popular.

Whilst I agree with the general consensus here that more radical action is required I am sceptical of anythign that can be manipulated by politicians and influential bankers once in place. There are too many people with vested interests for the imposition of actions when something is spotted. We need a fixed rule such as glass segal and preferably a change in the size of these corporations that can put us so at risk.

My Boss always says he doesn't get too upset when someone makes a big mistake, as long as they firstly admit that they made it, and secondly look for reasons why it happened, and then modify their behaviour to make sure it doesn't happen again.

It appears that UK bankers have not got as far as the first step on the mistake correction pathway.

Perhaps my Boss should be in charge of UK banking - it would be hard for anyone to do a worse job than our "self-regulating" bankers.

Perhaps one reason politicians are not shouting louder about off balance sheet accounting is things like PFI, PPI?

Just a thought....

"Well, if you believe that the big cost is the economic growth that's been permanently lost in the worst recession since the 1930s, the number that emerges is so huge as to defy comprehension."

Yes Robert - but you will find an army of politicans, bankers and general capitalists who will insist that this isn't the case. It is your job to ensure the public is not fooled by these anarchic lunatics.

"Since most of us don't have £148,000 to lose, you might wonder if Mr Haldane is overstating it a bit."

Oh - but we don't have £148,000 yet - it's our children who will pay

"It is more than a theoretical possibility that as and when the state guarantees and loans to the banks are unwound, and after taxpayers' stakes in Royal Bank of Scotland, Lloyds and Northern Rock are sold, the public sector's account for all this will be in the black - taxpayers will have made a profit."

...and the losses suffered during that 'unwinding'? - who is picking up the tab for that? - oh that would be good old "joe le tax-payer".

"which some bankers would characterise as the "nutters in the tent"."

Better be nutters in the tent than crooks in monkey suits.

"Most bankers believe that if they're forced to hold a bit more capital as a buffer against future losses, if they stock up their holdings of liquid assets as an insurance pot against runs, and if they shed some of their instinctive irrational exuberance, well then everything will be alright again."

Familiar story? - cast your mind back to 1990 when we heard "no return to 5x income lending on a mortgage" - if you believe it this time you truly are a mug.

"(this characterisation is not that of some Marxist extremist by the way, but is the FSA chairman's), but that politicians are yet to acquire that immunity (which some would say is to do with the traffic in jobs between banking and politics, especially in the US)."

Oh so we can appreciate that 'bought politicans and regulators' are not good for us? - well done for bringing this to the attention of the public.
I find it amusing that anyone who is not wearing a cowboy hat and spurs is basically a 'marxist' - when all they have left is crazy insults - they are truly afraid.

...and we haven't even started 'smashing the banks' yet - you wait until they see the brick...

The bourgeois in turmoil; how wonderful.

Robert. Your comment which some would say is to do with the traffic in jobs between banking and politics, especially in the US is very important and begs the question as to why there are no regulations or incentives/disincentives in place to prevent this.

Liquidation and a return to sound money is the answer, but in order to get there we will have to endure enormous pain. This is not something that any politician is going to propose except when it is the last resort.

We need a free banking system that promotes investment based on savings (ie. reduction of consumption) rather than credit expansion.

We need to remove the tools that allow this expansion that's caused the problem in the first place:
- central bank support
- depositor protection.

Banks need to compete with eachother rather than be allowed to operate as a cartel underpinned by the Bank Of England and the taxpayer. They need to be allowed to go bust when they get it wrong like any other business that overstretches.

In a free-market, competitive, un-supported banking system interest rates would reflect propensity to save and risks taken. This would promote matching of economic resources with genuine market wants, rather than phoney investments in unsustainable capital projects.

This will more than likely never happen because there are too many vested interests. What they will do is tinker around the edges of the system until they realise that the people have huge houses and offices but no food and no way of earning an income.

A Banker: "thankfully we no longer have to worry about debt or bad-debt at all, because taxpayers will always have to bail us out and there's nothing the politicians can do about it."

Poor Person: "I have nothing to eat, my parents have died from disease, my sister looks after me, we have no shelter, I'm 6 and she's 9."

A Banker: "So?"

The Voter: "I just want the truth, the facts, so I can make up my own mind."

The Politician: "We couldn't tell you the truth, you wouldn't vote for it - that's the truth."

Headline: "World problems mean Bank Reform sidelined, no longer priority as consensus proves elusive."

You: "what do I know, all I do is like a drink and a laugh."

Me: "It isn't funny any more."

Ideology is irrelevant given the current circumstances. You can't eat dogma, wear it to keep warm and dry, or live in it. It is no more than a perception.

The authorities have dropped us all in the smelly, sticky stuff and are just wringing their hands as there seems no solution according to their lights.

This is a time for pragmatism, practicality and knocking down each issue at a time. This is not the time for a blue funk or, in the case of Mr. Brown a pink funk with fuzzy edges.

There is a need for a reform of the banks. I have said it often enough and it is simple. It should be conducted ruthlessly and immediately so that the economy can stabilise and money can be put to work rather than into speculation. Any banker who argues needs to be told in simple terms what they need to do.

We can all speculate as to the apparent cost of the banking crash and the subsequent bail out. A lot of the money only ever existed in the virtual sense so lets not get too bent out of shape over it. What has happened has happened: just get over it.

We have a big enough bill to deal with as it is. By restructuring our economy we can deal with that but it will take time. Yes, we are all poorer but we still have each other and the power we have forgotten how to use.

I have inherited the family pitch-fork: so I am ready for the next peasant's revolt or will it be in my case the pedant's revolt!

Forgive me for being ignorant, but is it not the case that all parties need to ensure the share price of these institutions continues to increase in order that "we" get our money back and hopefully more when we come to sell the shares?

If this is the case then is it not the case that it is in everbodys interest to let the Banks continue in the same vein as before by blowing up another bubble and inflating their share price at the same time?

Will it then not follow that a canny chancellor could sell the shares at the top of the market, regain and make some money for the public purse, sell the shares to the greedy lot who make and take risk?

Then when the bubble bursts again do what we should of done in the first place and let them all go the same way as Lehmans

"The greedy bankers cause The global probelm in the first place"and because they have so much power us the taxpayer, have to foot they bill. The bankers are just crooks and con men, who use the law to run countries and ruin small business, and make familys homeless and get away with it, We need many new laws and reg s' to stop this happening again We are the ones who are the mugs ,to allow them to walk free with a massive bonus? they should all be in {jail pennyless}.

It is good to know that Lord Turner at the FSA seems to have some sensible ideas about how to run the banking system in the future. Let us hope that, if a Tory government is elected, they do not carry out their threat to wind up Lord Turner's FSA and hand regulation back to the more banker and City friendly BoE.

There needs to be sufficient money and credit available to keep the economy well oiled. Not too much and not too little. The mistake that led to the 2008 disaster was to rely too much on credit provided by the wholesale capital market, which according to the then conventional belief in free markets, was the best mechanism for the job. We have now learned better.

The efforts to persuade the banks to resume their role as very generous providers of credit have failed. The reason is that after the trauma of the credit crunch they are naturally much more cautious.

The solution to the problem requires two elements. Credit should be to permanently restricted, by imposing a minimum reserve ratio on licensed banks, and for governments to fill the money supply gap that will result, by unfunded budgetary deficits, giving them through the BoE, who would use QE for this purpose, more direct control over the lubrication of the economy.

Unfortunately the leaders of our main political parties are not sufficiently able to "think outside the box" to understand that if they regulate banks more tightly, then budgetary deficits should be allowed to be larger than was thought wise in the past.

although you won't be surprised to know that bankers have told me that the recovery in their share prices shows that all this "hysteria" about how they have to change their ways has been massively overdone

Confirmation of their brain power?

What you might deduce is that King, Haldane and Turner have somehow acquired immunity from a dangerous prevailing liberal-market ideology that is actively promoted by the banks and bankers who profit from it (this characterisation is not that of some Marxist extremist by the way, but is the FSA chairman's), but that politicians are yet to acquire that immunity (which some would say is to do with the traffic in jobs between banking and politics, especially in the US).

You are the journalist and this is election time? Phone them up and get them on telly. 10:00 pm would be good - seems the two main contenders don't want to talk to Paxman so it is down to you to save the country Robert.

2. At 11:25am on 15 Apr 2010, John_from_Hendon wrote:
Somehow money has to get valuable again (that is it must pay actual interest).

Interesting choice of words. There is a sense despite the lack of hyper-inflation that money is somehow less desirable.

Savings down to an all time low
Borrowing falling fast
Personal debt being paid off
The fall in pension values and contributions

I think it's a good thing and if it is a real phenomenon and not just part of the cycle it spells trouble for the banks.

Wouldn't it be great if we could work, not for money, but directly for the things we need to live ?

If you accept that we are standing to lsoe £148000 due to the crisis, what have we unfairly gained due to the boom?

If the economy is cyclical, you cannot just pine about the downturns without equally accepting that the upturn was free cash in our pockets.

Lets not forget, thjere are some people who have benefitted immensly between 1997 and 2008 who are not bankers, do not earn mega bucks and are not historically born into riches.

Think of all the buy to let landlords, all the baby boomers with tasty final salary pensions etc?

There are hundreds of thousands of average joes who have done extremely well out of the bubble boom pre crisis, that was not legitimate wealth creation

quid pro quo!

9. At 12:24pm on 15 Apr 2010, Wardy29 wrote:

"We need a free banking system that promotes investment based on savings (ie. reduction of consumption) rather than credit expansion."

...but you can't - all profit diminishes over time - and the only way to maintain the growth from which 'profits' can be extracted is to extend credit.

It happened in 1988 as well as the current fiasco. No matter what the bankers say it's the same fundamental problem over and over again

The contradictions of Capitalism don't simply disappear because you name it differently each time.

You can either have a boom / bust economy (as we do) - or you have to remove the surpplus value extracted from production - which contributes to the diminishing returns.

Even if you allow banks to fail - you will still get boom and bust. In fact a truly free market would result in chaos every 10 years or so as your savings disappear because you were unlucky and kept them in a bank which failed.

Robert, I guess I am one of many who often follow your blog, who have become far more interested in global economics and banking since 2007.

Years back when I first saw documentaries about executive housing being built on man-made islands of sand off Dubai, I was interested in the engineering side of it. But financially I thought those involved were nutters.

Little did I know that crazy developments like this around the world were being funded by banks that my taxes would then be used to bail out.

We now have massive global banks that I would summarise as being involved in 3 major functions.
1) Creation of money through lending/debt (based on reserve ratios etc).
2) Regular banking for the every-man.
3) Casino investment banking.

Now surely its vital that 1) is massively under the control/regulation of the government. And that 3) should be allowed to blow up with only the shareholders held at ransom.

If this doesn't sort itself out, I can see 2) ending up being provided by a totally different form of money. It would be quite possible for a large company like google or facebook to create a virtual money, which by being accepted worldwide could form a basic currency, which citizens started to use instead of traditional currency that was at the whims of the bankers.

Addendum to my point in #20. By "massive companies" referring to Google and Facebook, I mean companies with massive/wide reach in terms of users. Not the financial/employee numbers at the companies.

Can someone explain why we need banks in the first place?

They pool resources from investors (in the form of exchangeable money) - then allocate resources through lending of Capital to businesses.

Now in the past they had a function - which was to assess the viability of the borrower, whether it be for a business, homebuyer or something else. This was a useful purpose because it meant we didn't randomly allocate resources to barmy business ideas.

During each cycle the desire to borrow becomes less and less - when this happens the criteria for lending gets lax and just about any fool with any half baked idea can get a loan (and in fact as we have seen, criminals find it easier to circumvent the checks and balances)

The question you all need to ask is why? - why do banks get so lax? - why do they start taking crazy risks?

With the demand for borrowing falling, and consequently the profits diminishing at the bank - the banks are forced to lend to maintain market share / profitability

Eventually it has to collapse - and collapse it does.

If anyone thinks for a minute - logically - they will see this makes sense. Banks act in their own interests - it's not in their interests to collapse the system - but they cannot see the long term detriment - only the short term gain (profit).

The reason why this can never work as a free market is that the banks hold all the worlds resources (in the form of money) - which is why they are too big to fail.

Banking is like a cancer - it needs to be removed by operation - but the Doctors do not want to begin the operation for fear of killing the patient.

However everyone knows what happends if you put off operating on cancerous cells - and the banking / Economy relationship is no different.

All the talk of regulation is merely to distract people from thinking about the real cause of the crisis. It can never work.

Listen to what King and Haldane say? How absurd! Why pay the slightest attention to the men more intimately connected than anyone else with banks and banking throughout the economic crisis? Why pay the slightest attention to the men who know the most? That is what Britain has become.

The pygmies who are our politicians, and who could not collectively run a brothel effectively, certainly aren't going to listen to such people. They are much too busy posturing and having photo opportunities than running the country properly. Out with them. To the scaffold with the worst of them.

You can't reform the existing political system. It is beyond repair. We need a new Cromwell, new ideas, and a period of rather terrifying change to create a new Britain.

16. At 1:04pm on 15 Apr 2010, copperDolomite wrote:

"You are the journalist and this is election time? Phone them up and get them on telly. 10:00 pm would be good - seems the two main contenders don't want to talk to Paxman so it is down to you to save the country Robert."

Hear hear - why don't you invite some of these "conspirators" down to the TV centre and ask them why they are so indebted to the very beast which nearly killed us.

...I will be happy to to the interview for you Robert - but I should warn you, I take no prisoners and I expect a succinct and clear explanation of where profit comes from.

17. At 1:08pm on 15 Apr 2010, DevilsintheDetail wrote:

"Wouldn't it be great if we could work, not for money, but directly for the things we need to live ? "

Well, already on my estate we are setting up a 'no reposession' covenant - where despite the law and the power to enforce it - all residents will refuse access to any bailiff intending to repossess on behalf of the banks.

It's as simple as that - watch out for us in the news when the first one comes along. You can do it on your street - protect your neighbours.

The banks have no moral hazard - so why should we have one?

The real nutters in the tent are the utter idiots that think it is brilliant and wise to have their economic paradigm modeled around the constant expansion of a debt based, fiat money supply (continuous growth), set on a planet with ever dwindling natural resources and an oil dependent world population that is multiplying at an exponential rate. (To them, this insane and blind stratagem equates to success, lots of slapped backs, champagne and super yachts all round.)

Unfortunately for us humans, that's pretty much the whole of our political and financial elite.

Now Gordon Brown has said that when he was Chancellor and was thinking about reform for the banking system and a new series of checks and the like, every adviser he spoke to said the banks are fine on internal regulation and nothing could go wrong. I paraphrase a bit, life is to short.

Now if out of ideological or even on practical grounds he was right and the whole industry and influencers around parliament are now proved they were wrong in their ideas, It reckon it is time for the banks to wake up to the new world.
After all I now trust a man at the door selling me a new drive more than the banks. These adverts selling services on how good they all are, well really! Do the marketing departments think we all, the public who have accounts, have memories as long as goldfish?

The news might come and go quickly these days overall, but trust? That will take a long time to get back

The underlying issue is that the way we have been managing the money supply for the past 40 odd years (post Bretton-Woods) has suddenly gone drasticly wrong.

The solutions outlined in Robert's blog all seem to start from the basic premise that debt-based money is still the way to go - it just needs more regulation to counteract 'irrational exuberance'. The debate is on how much regulation - the politicos and bankers say not much, Adair Turner seems to say that almost every transaction needs to be inspected.

The sound money advocates who post to this blog form another camp - which is that we need to go back to either government managed supply, or a money supply tied to an arbiitary external quantity such as gold.

None of this really seems to look at what caused the money supply to get out of control - in my opinion a lot of this can laid at the door of leveraged speculation. The idea of debt based money is that it grows naturaly ahead of growth in the economy due to money being created 'just in time' for investment - it doesn't consider that money will be created just to gamble.

Adair Turner's approach seems to be an over bureaucratic way of attacking the effects of this rather than the cause.

The politicians approach just ignores it completely.

And sound money would stop it - but would lead to all the problems of inability to deliver economic growth that it had before.

18. At 1:18pm on 15 Apr 2010, Anand wrote:

"If the economy is cyclical, you cannot just pine about the downturns without equally accepting that the upturn was free cash in our pockets."


...except it wasn't in everyones pocket - and it was disproportionately in the pockets of the rich.
Surely you've heard the phrases:
"It takes money to make money"
or
"The first million is the hardest" (implying that the next millions are easier)

So yes, those who did not benefit greatly during the boom and who are suffering as a result of the bust have every right to complain.

"There are hundreds of thousands of average joes who have done extremely well out of the bubble boom pre crisis, that was not legitimate wealth creation"

...so you admit that speculation on asset prices rising is not legitimate wealth creation? - but isn't that all banks do?

As for the thousands of 'ordinary joes making a packet' - I think the revelation that distribution of wealth has worsened over the boom is testament to this not being true.

20. At 1:24pm on 15 Apr 2010, jonearle wrote:

"Years back when I first saw documentaries about executive housing being built on man-made islands of sand off Dubai, I was interested in the engineering side of it. But financially I thought those involved were nutters."

I love this - when people who have not been interested in finance, sit down and consider how it works - and come to the sensible, common sense conclusion that it's absolute madness.

Only those who have a vested interest in maintaining Capitalism can't see this common sense. I suppose when your ideas of value come from a paper money manipulated system - you're already in fantasy land so truth and logic is hard to recognise.

Clearly your background in engineering tells you that it's not possible to build a good house without good solid foundations - sadly in banking they believe they can - and in fact they did.

So how to fix it?

More regulation perhaps?

The financial industry has been regulated in the past by the following:
The Bank of England
The Financial Services Authority
The Financial Ombudsman
The Treasury
The Basel ll Agreement
The European Union

That’s an awful lot of people doing an awful lot of regulating.
And let’s face it, it’s hasn't worked has it.

The creation of money in private corporate hands = Debt slavery for the majority.

The plain truth is, if the state (which is us) does not control the creation of money as debt, then the state (which is us) can only ever be at the mercy of those who do.

We need a state bank, we need control of the creation of money.

And finally I apologise for banging on about this and repeating this post.

26. At 1:49pm on 15 Apr 2010, warwick

A quality summary.

I don't know if anyone saw the Jon Snow interview with Gordon Brown a couple of nights ago?

Brown was answering about his solution to the banking crisis. He said 'to save the banking system we had to recapitalise the banks and we will have to do it again.'

...'and we will have to do it again.'

I hoped Jon Snow would pick up on it. He didn't.

My question would be : Why?

The current financial system in this country often leads the average working Joe and Jane into either debt slavery or destitution.

Forget politics, forget economics, it’s all about mathematics.

Uncontrolled fractional reserve banking leads to ever increasing amounts of debt, and for many, destitution.

And the funny thing is, as hard as they might try, all the regulators in all the world can’t control it.

It is uncontrollable, and results in destitution and misery for many.

Here is a moral hazard for you:

Based on the assumption that there are going to be tax rises in the very near future.
And if you’re still in work, you’re going to get hit by these tax rises.
Now it’s possible that you have a mortgage.

And it is also possible, that because of the increased taxes you have to pay to fund bailing out the banking sector you may no longer be able to keep up with your mortgage payments.

So the banking system you have bailed out, now takes your house off you.

After reading this I have to wonder why anyone would want to run this country for the next five years.

We are still coming off the back of the biggest credit boom ever known and there were and still are many people who sold out at the top of that pyramid and feel wealthy because of it.

It is partly this that has made the effects of the recession feel much shallower but as this money is losing its value through inflation and there is less to spend commonsense should tell us that maintaining growth is not a given.

Don't be so surprised, Robert, at the extraordinary divergence of opinion raging between bankers, regulators and politicians. They will find a million and one reasons that a thing cannot be done and put considerable energy and zeal into remaining stuck with this mess. It works for them to delay and procrastinate.

Where are the first signs that anything has been done to prevent a repeat of the bust? No-one has been prosecuted yet and never will be.

Being an idealist is what gets you labelled a nutter in the tent, as John F Kennedy found. He was the one who made the decision to do something, not because it was easy but because it was hard.

The problems we currently face stem from 2 things: a massive loss of confidence by and in the banks upon realising just how poor their chances of getting back money they had loaned out unwisely were followed by a failure on the banks' part to play their role in restoring confidence by taking public (i.e. our) money and refusing to lend it out to perfectly sound businesses, heck, withdrawing loans and agreements from said businesses.

While most of the problems hence lie squarely on the banks' doorstep, some blame must also go to the politicians who handed out vast amounts of our money without any strings attached.

And the third villain of the piece? The media, who talking us straight into recession by gleefully telling everyone how poor the banks' position was and not giving them any room to do anything about it before - like poor Northern Rock - the creditors were banging on the doors.

When the Northern Rock story first appeared on BBC Breakfast, dearly beloved and I said in one voice, "Ho Pak" - referring to a run on a fictional bank caused by a rumour spread maliciously in James Clavell's novel "Noble House."

Andrew, there is another reason why the likes of BoE and FSA might be showing radicalised tendencies. Everyone now seems to be coming around to the fact that the regulators have to take the lion share of blame for the financial and economic crisis caused by bankers. They were simply found sleeping on the job.

So there is a bit of reawakening there but the real reason is that if the Tories were to take power they will hive off the supervision from FSA to the BoE, which the former does not want and the latter probably does. Hence, this uncertainty to their future is probably why they are each casting themselves as formidable forces when it comes to them dealing with bankers in the future.

@23

"The pygmies who are our politicians, and who could not collectively run a brothel effectively, certainly aren't going to listen to such people."

I must take issue with this comment. You are being very unfair to brothel madams.

...$200 trillion loss of world GDP( I think this is one reason why BOE expects a lot less inflation than I, but...), out of a $640 trillion total(cash = credit) world GDP might not be that bad. If we take cash world GDP at about £60 trillion, a lot of the $200 trillion might be losses at very small margins i.e. 1% or less(Hello to ''former northern Rock''.
So we could have lost ''only'' about $2 trillion cash, or about 3% overall.
Of course some countries/individuals will have lost considerably more, and there will be some who have gained.

Indicates why Ftse at 5800. I'm still worried about 5% inflation in 2011 though Mr King*.

[Who knows Best.???/ Wink.]

Robert wrote:

"Well there is the most extraordinary divergence of opinion between those who run the banks, those who run governments, and increasingly those in charge of regulation - which some bankers would characterise as the 'nutters in the tent'."

-----------------------------------

When you sometimes believe that you are the only one going nuts, you normally tend to be quite sane.

The moment you start thinking that everyone else are the nutters, that's the time to start worrying.

It's time to start putting the real nutters into straight jackets!

33. At 2:26pm on 15 Apr 2010, Mushroomhair

This isn't the first time either - he mentioned 'another bailout' when interviewed on Radio4 a week ago.

You see the truth always comes out in the end - there is going to be another one - just look at Ireland. A similar debt / growth problem and they actually impressed the markets with their 'austerity measures' - we haven't even told the markets what they are yet!

The equities market is overheating for 2 reasons. The first is the lack of places to put money to get a return (because of the ulta low interest rates)
The second is because large business has been lying about their earnings (as shown by Robert / Stephanie recently). When the losses start coming back again there will be panic - the markets will be twice bitten, twice shy.

Luckily the Greek bailout worked a treat - 30 Billion Euros bought them........well about 3 days was it?

https://news.bbc.co.uk/1/hi/business/8622835.stm

36. At 2:58pm on 15 Apr 2010, starry-tigger wrote:

"Being an idealist is what gets you labelled a nutter in the tent, as John F Kennedy found. He was the one who made the decision to do something, not because it was easy but because it was hard."


....and so determined to keep the status quo - they assasinated him.

Is it any wonder that politicians don't have the cahooners to take on the 'dark forces' who control our lives?

I mean history teaches us rich men will stop at nothing to retain their advantage (despite the claims of Capitalism being 'survival of the fittest')

#34 "Uncontrolled fractional reserve banking leads to ever increasing amounts of debt, and for many, destitution."

Total and utter rubbish. Banks do not force you to borrow, you make that decision all by yourself. I borrowed to buy a house, not as an investment but a place to live, I borrowed to buy a car because I needed one and then I made sure I paid off the borrowings as fast as I could. I do not borrow otherwise. If people end up in destitution because of their borrowings it is because one of two reasons, either they could never afford the debt in the first place (in which case they deserve it) or they were hit by an unforseen change in circumstances such as illness, loss of job etc (in which case they are unlucky and deserve help).

I can think of nothing worse than govt/civil servants directing how much is lent and to whom. At least in a free market we have had the first absolutely massive recession for 70 years (and lots of little ones roughly every 10 years), the experience of state run banking (eg China, Russia etc in communism) is you end up with permanent recession for 70 years - if Chinese banks applied western accounting to the loans made to local Chinese companies particularly those favoured by provincial govt officials I suspect that the Chinese banking system would be in even bigger crisis than the western banks.

37. At 3:00pm on 15 Apr 2010, Megan wrote:

"When the Northern Rock story first appeared on BBC Breakfast, dearly beloved and I said in one voice, "Ho Pak" - referring to a run on a fictional bank caused by a rumour spread maliciously in James Clavell's novel "Noble House.""

...but what was fictional about the spike in LIBOR which required NR to borrow directly from the Government?
Would you prefer the BoE secretly handed out money to banks without us knowing?

Should we assume (knowing what we know now) that all problems will be handled by the executive?

I think NR has shown us anything but this is true.

"19. At 1:24pm on 15 Apr 2010, writingsonthewall wrote:

...but you can't - all profit diminishes over time - and the only way to maintain the growth from which 'profits' can be extracted is to extend credit."

Who said growth should be the goal? Not me.

I know you know this already but wealth is not the same as money; nor is capital. Increased leisure time, better standards of living and happier individuals are all 'profits' in that they represent an increase in wealth. Equating wealth with money is a big part of the problem. If money is lost from the economy its purchasing power increases. Its just a commodity: albeit one currently created out of thin air!

"Even if you allow banks to fail - you will still get boom and bust. In fact a truly free market would result in chaos every 10 years or so as your savings disappear because you were unlucky and kept them in a bank which failed."

If you had truly free-market banking it would make sense to use a commodity money such as gold, with banks issuing their own notes, redeemable in gold.

They wouldn't necessarily need to keep 100% reserves but they would need to match maturities of their payables and receivables, otherwise a bank run would put them out of business. In fact, it would make good business sense for other banks to expose their competitors mis-matches in order to force them out of business.

"22. At 1:35pm on 15 Apr 2010, writingsonthewall wrote:

The reason why this can never work as a free market is that the banks hold all the worlds resources (in the form of money) - which is why they are too big to fail."

The banks hold all the money, which we all know is very much overvalued. We need to liquidate this over-inflated monstrosity.

"28. At 2:04pm on 15 Apr 2010, MisterGC wrote:

The sound money advocates .... we need to go back to .... a money supply tied to an arbiitary external quantity such as gold."

The use of gold isn't arbitrary: it evolved over centuries in many diverse locations all around the world, when 'in real terms' the world was much bigger than it is now.

"31. At 2:19pm on 15 Apr 2010, Dempster wrote:

We need a state bank, we need control of the creation of money."

We've got state control of the creation of money. The problem is the state is controlled by the banks; not the electorate, who are mostly too dumb to see what's going on.

The way to prevent bust:

ALL people must stop living beyond their means and stop taking gambles and risks.

Consumers must stop buying if they are unable to afford
Banks not to lend to those who want to borrow
Goverment to not spend more than they have

Somehow, I just do not see that happening any time in the next millenia

31. At 2:19pm on 15 Apr 2010, Dempster

A lot of people, yes. You know, we have a lot of people enforcing the criminal law. I don't see why corporate and financial law doesn't desereve the same effort to do what can be done to ensure public safety and to punish those who cause harm.

It amazes me that our Trading Standards, the kind of business police are so under-resourced (like so many other similar agencies), while the police forces that take care of joe public criminals provide so much work, use so many toys and gizmos... ours are planning piloting taser torture devices in the city centre. I'd like some police with tasers marching up and down between desks down at Canary Wharf - Cost Benefit Analysis would be a truly worthwile endeavour!

(PS. Well done Simon Singh)

Isn't it amazing that no one is to blame? After the banks gambled away retirement accounts they asked the government to tax the people to replace the money they lost, which was of course the money of the people to begin with and the government componded the losses of the people and the banks replaced none of the money in the retirement accounts. Now the bankers lobby, and have elected supporters, not to change the rules. Of course they don't want them changed. If you could be unethical and gamble away your monthly pay and have the government take it from someone else and give it back to you would think that is a good situation too. Any member not voting for stricter banking regulations and controls should be un-elected. These are the questions to ask during the campaigns. Where do you stand, specifically, on stricter banking regulations? No answer, no vote.

Whilst we're on the subject of "things bankers just don't get" - I wonder if the credit default swaps on airlines include the risk premium for a 'black swan event' - like.....I don't know....lets just say an Icelandic volcano grounding all european flights for the whole summer?
(the last time this baby went off - it ran for 8 months)

Ah but they are so clever, they will have accounted for "all the european airlines hitting simultaneous trouble" - won't they?

Like John Merriweather said - this is a 'once in a lifetime, or a once in 100 years event' - but oddly these seem to be happening a lot in my lifetime....

It's all fools gold.

34. At 2:32pm on 15 Apr 2010, Dempster wrote:
And if you’re still in work, you’re going to get hit by these tax rises.
Now it’s possible that you have a mortgage.

And if you can't find a job (perhaps you trained as an economist, a social worker, a welder, or are one of the 50% of PhD graduates who can't find a position according to one local party, ready yourself for church hand-outs (if you are a believer of course) and prepare to beg/negotiate/fight for Poor Laws once you've moved into the shanty town coming somewhere near you soon. What else could giving away responsibility aka DC possibly mean? If you've got work, your donations to the church/charity will be all that is will stop the poor starving because while you bail out the bankers £65 a week is just too expensive.

There but for the grace of god go I....

6. At 12:00pm on 15 Apr 2010, writingsonthewall wrote:


Oh so we can appreciate that 'bought politicans and regulators' are not good for us? - well done for bringing this to the attention of the public.


It’s funny you said that, as the idea of lobbying of parliament or other political group, is basically a form of corruption. It is corruption of both the system and the people. If we are to have any change of changing things, then we need to get of the corruption merry-go-round and get honesty back into the process.


While a politician is doing the work of the lobbyist, he is not working for the people, who are both employing and granting him his power.


Ultimately, this is what brought down the Roman Empire, and we are nowhere near as powerful or strong as they were. Look where it got them...

7.4 Trillion Pounds
7,400,000,000,000 Pounds
0,000,000,030,000 Your Salary


This is about 246,666,666 times your salary. In other words the amount of money involved is almost 250 million years worth of salary. As a timescale, that is before the existence of the dinosaurs. So, they evolved, dominated the world, became extinct, mammals evolved from mice like creatures and became all manner of animals. That is the kind of timescale we are talking about.


It seems to me that the numbers are so vast, that they are incomprehensible to all but the most savvy.

Who are the nutters - and who is in the tent?

It seem the body who will eventually 'control the world' seem to be a little concerned about the idiocy of banks.

https://beforeitsnews.com/story/32900/IMF_chief_warns:_Global_Banks_Setting_Up_New_Bigger_Collapse.html

The bottom line is we are ALL in the crap globally,I mean not just UK.
The banks have created a global problem that nobody can really fix.

1)If you put interest rates up to appese the savers(older generation) you screw up young couples with big mortgages that have bought over inflated houses and you will end up with thousands of foreclosures.Property will bomb in price, this has already happened in the USA.

2)Employers are sat waiting for things to pick up before they start hiring new employees, this action makes things even worse because no money is circulating though the retail outlets and manufacturing orders are then down.

3) Banks have squeezed everybodies credit down because of the mess they have created, eg using stimulus money to bolster profits and make everything look rosy when really its not.

4)Tax Revenues are down as more people are out of work and retail sales fall as the credit is simply not there to buy the over priced goods.
Consumption has ground to a halt and the big question is how the hell do you get it started again? Nobody seems to have the answer to that one everybody ducks and dives in the political arena.

5) An awful amount of stimulus money has disappeared some where and nobody really knows were its gone. Other than to shareholders as bank dividends and not to manufacturing companies wanting to expand.

6)The real cost to the global economy has to be in its trillions as western markets stagnate due to consumer demand fall off as credit evapourates.

I still think the banks has to be state controlled like in China, they have the most successfull economy in the world, why you may ask? Well stability is the answer no speculators to screw up company business plans and budgets. Some sectors of the economy do better when they are not subject to market forces. The free market free for all dam near bankrupted the western world and had to be bailed out by Communist China!

44. At 3:48pm on 15 Apr 2010, Justin150

So is a mortgage vs a home on park bench each night a choice?
I only ask because for most of the UK what other choice is there? If you are on a minimum wage doing essential work like cleaning a hospital could you afford a private rent?

Back to three families to a room is where we are going.

How can banks start talking about raising interest rates when consumption is not going to pick up? There is no need to raise rates because sluggish demand will keep prices down as businesses struggle to sell anything!
Stagflation is here and it will be here for a very long time while the debt is worked out of the system. Thats what worries the government years of low consumption and hence very low tax revenues!
House of cards my dear friends with the first card pulled out by the banks.

44. At 3:48pm on 15 Apr 2010, Justin150 wrote:

#34 "Uncontrolled fractional reserve banking leads to ever increasing amounts of debt, and for many, destitution."

"Total and utter rubbish. Banks do not force you to borrow, you make that decision all by yourself."

...unless of course you have to borrow to survive - I mean the US has 40 million people on food stamps - I would say that's a case where borrowing is 'forced upon you'. I realise in your little world all that is provided by some great bird in the sky - so for you borrowing is a choice.

"I borrowed to buy a house, not as an investment but a place to live, I borrowed to buy a car because I needed one and then I made sure I paid off the borrowings as fast as I could."

...and how did you 'make sure' - did you sign a contract at work ensuring that you could never lose your job - even in the severest downturn? - please tell me where you work so I can join.

"I do not borrow otherwise. If people end up in destitution because of their borrowings it is because one of two reasons, either they could never afford the debt in the first place (in which case they deserve it) or they were hit by an unforseen change in circumstances such as illness, loss of job etc (in which case they are unlucky and deserve help)."

...and how / who decides? Did the banks get hit by some unforseen change in circumstances which meant they 'deserved' to receive help (bailout)?


"I can think of nothing worse than govt/civil servants directing how much is lent and to whom."

...but you just said some deserve help so who can decide - the market?

"At least in a free market we have had the first absolutely massive recession for 70 years (and lots of little ones roughly every 10 years), the experience of state run banking (eg China, Russia etc in communism) is you end up with permanent recession for 70 years"

Errr do you have anything to show this? I think you're confusing political reform with economic recession. Besides - what's 70 years economic struggle when at the end of it you get to rule the world!

"if Chinese banks applied western accounting to the loans made to local Chinese companies particularly those favoured by provincial govt officials I suspect that the Chinese banking system would be in even bigger crisis than the western banks."

I bet the state ensures that loans are not made to 'Mr BTL landlord' with his 14 'borrowed to the max' mortgages.
Unlike the banks, the Chinese Government has to ensure that the loans are good for China as well as profitable for the banks.
Here we have only one criteria - can I make a killing - and that's why we're in sooooo much trouble.

It's no good trying to look for people to blame themselves. Banks have the capital to begin with - they are in control of the loan (I mean they accept your loan request - you don't accept theirs) - so how can you turn it around and say it's the fault of the borrower?

What you're doing is a classic self centred position - you are not forced to borrow - so your ickle mind tells you this must be the same for all people.

....or did you think loan sharks are fictional? I mean surely it's irrrational to borrow from people who will break your legs if you don't pay - or are you suggesting these borrower 'choose' to have their legs broken?

According to the Bank of England - or more precisely its executive director for financial stability, Andy Haldane - the cost of the financial meltdown on this kind of analysis is anywhere between one and five times the value of GDP, between one and five times the annual value of everything we produce

This assumes declines in output caused by the downturn are permanent, also that similar size systemic crisis occur every twenty years, both assumptions are clearly nonsense.

No own doubts that the crisis has been painful and will continue to be for some time yet, but claiming that the recession has cost us 5 times our total GDP (when GDP declined c5% last year) is daft.

Wrong assumptions lead to a false debate. The fact is that economies are volatile and cyclical. If output for 2011 increases by 5%, I don't think anyone will be arguing that a permanent gain of 5 times GDP has been achieved!

WOTW
'The equities market is overheating for 2 reasons. The first is the lack of places to put money to get a return (because of the ulta low interest rates)
The second is because large business has been lying about their earnings (as shown by Robert / Stephanie recently). When the losses start coming back again there will be panic - the markets will be twice bitten, twice shy.'
Oh, I dream of the day WOTW says something sensible.

The market is not 'overheating', two real reasons it is going up:
1. It is discounting Global recovery, and company earnings will surprise on the upside. Don't mistake 'the market' ie the FTSE as a warrant on the UK by the way, it is the international elements that are moving - miners etc. Look at UK retail stocks - down. There has been huge cost cutting, the US, which still makes things, will benefit from having a manufacturing base, and the better operational leverage....leading the markets up...qv..Intel...
2. Risk aversion has driven asset allocators into bonds, property etc. Equity allocation is at a 10 year low. Yes poor returns and higher risk here are reversing that trend. The liquidity squeeze will continue.
simples.

Predictible, student on a bike, conspiracy theory nonsense. What goes on in your head?
You live in a bipolar comic book world of evil white cat stroking Tycoons.
Bin the Spiderman pyjamas, I think we've moved on.

46. At 3:52pm on 15 Apr 2010, Wardy29 wrote:

"Equating wealth with money is a big part of the problem. "

Yes - so why is our entire economic system based on thie premise?

I agree that a gold standard would be a start - unfortunately returning to it would cause a rapid asset devaluation that would make this one seem like a tea party.

No FIAT currency system has ever ended in anything except total economic failure - not once, never, ever.

All Government action is to suspend the day of reckoning.

#45. WOTW

LIBOR spiked after the NR run and after the Lehman's crash.

The cause of NR going to BoE was because their funding matured, but investors were more cautious as they did not know how far subprime stretched and not changes in LIBOR

47. At 3:54pm on 15 Apr 2010, yam yzf wrote:

"ALL people must stop living beyond their means and stop taking gambles and risks."


...well that's banking out of the window then....

44. At 3:48pm on 15 Apr 2010, Justin150 wrote:
#34 "Uncontrolled fractional reserve banking leads to ever increasing amounts of debt, and for many, destitution."
'Total and utter rubbish'

I beg to disagree.

We have had uncontrolled fractional reserve banking.
It has led to ever increasing amounts of debt.
And many are currently being made destitute.

For example the price of property has increased significantly faster than wages because of the ever increasing debt being made available.

The end product is that many young people can no longer afford to buy a house.
And the burden of debt for many who have, is in many cases, crushing.

I own a house, unencumbered by mortgage, and thereby benefit from its rise in value.
But it would be selfish of me indeed, if I did not consider the younger generation who could not afford one as I profited by its increase in value.

In short I would rather see my house fall in value, than see the next generation struggle financially.

Therefore I am against uncontrolled fractional reserve banking.

45. At 3:49pm on 15 Apr 2010, writingsonthewall wrote:

Would you prefer the BoE secretly handed out money to banks without us knowing?"

Isn't this what happened to the tune of £60bn or so re RBS and £15-£20bn re Lloyds?

The debt mountain is the cost of our banking system. Investment bankinga nd retail banking should be seperate but greed means they never will be

Talking of everyone losing £148k reminds me of the statistic that if the current increase in the horse and cart in london during the 1800's continued until today, London would be under 11ft of horse manure by today. You cannot extrapolate a growth based on falsehoods for x number of years to pretend this is the amount people have lost. The problem with the credit crunch was the realisation that the boom was never there in the first place. There always has been economic cycles and there always will be.

Probably the biggest problem i have with the verousity of cycles is the redistribution of wealth it creates making the poor ever more dispropotionately poorer to the rich

Re 44. At 3:48pm on 15 Apr 2010, Justin150

While what you say is true, life isn't as black and white as this is it?
None of our children are taught how to manage money. There are no lessons in class, there are no programmes on TV.

All around them is 24/7 advertising tempting them to spend. The banks fall over them to give them student bank accounts, credit cards and overdrafts.

All around them are people enjoying material things. All their friends have a car, toys and go on holiday.

And so it goes. It takes an exceptional strong individual to reject all this and live within their means. And even if they can do this, can they expect the same attitude from their spouse and their children?

Everybody wants you to spend your money with them, and banks are trying to sell you money you haven't got so you can spend even more.

What do you expect?

As an aside I understand from a IT friend, that a large US based credit card company is attempting to compile a database of every UK child aged 14-16 to mail them details of a new student debit card that can be transformed into a credit card when they become of age.

Oh brave new world.

nutters? - or criminals?

https://beforeitsnews.com/story/32124/BOMBSHELL_Whistle_Blower_Comes_Forward_With_Solid_Proof_The_Price_Of_Gold_And_Silver_Is_Being_Manipulated_By_Major_Financial_Institutions.html

The poorly regulated banks engaged in reckless behaviour - the consequence of which is being counted in the Trillions...

But what if they had not engaged in the activity that caused the problem?

How much smaller would the banking sectors profits have been?

How much smaller would Gordon Browns tax take on those banks have been?

It is clear that the economy would not have boomed in the way it did - what would have been the lost output in that event? Are we not really just returning to where we should have been, had it not been for the recklessness? If so, the lost GDP as a result of the banking crises is not really lost, it is growth that we should not have anticipated.

Indeed, in blaming the banks entirely, has Gordon Brown managed to avoid the fact that he was equally culpable. Just as the banks enjoyed massive bonuses, thanks the Gordon Browns lack of regulation, Gordon Brown enjoyed billions in extra tax revenue, to support his economy.

What is worse, a bankers greed, or a Chancellors?

It is nice to speculate with the big numbers, especially to impress the public, but im certain that BOE analysis doesnt make much sence.

The growth during past few years has been fuelled by the unsustainable borrowing, as we all agree. So it would either end in a crisis (as it actually happened), or wouldnt start at all, if banks have been regulated more (sadly didnt happen). In both cases Britain wouldnt earn those mystical £7bn the BOE report projects in the future.

Robert - you were a very naughty boy when you caused the crash. Now go to your room til you have had a good think about it.

WHere's Megan? Where's Blog?

This election has a lot to answer for...

Greatest theft in the history of mankind and done with the blessings of governments. Future history will record this ear as: "When Bankers Ruled the World", subtitled, The End of the Illusion of Representative Governments.

Another ponzi time bomb....

https://financialgoodsite.info/2010/04/13/adrian-douglas-exposes-lbma-otc-gold-market-as-a-ponzi-scheme/

58. At 4:42pm on 15 Apr 2010, writingsonthewall wrote:
....or did you think loan sharks are fictional? I mean surely it's irrrational to borrow from people who will break your legs if you don't pay - or are you suggesting these borrower 'choose' to have their legs broken?

There was one enforcer in Scotland who was so good at crucifying people to the floorboards or doors when he wasn't slashing people who walked along the streets they made a film about him.

Some people just don't know any history at all, some people haven't lived while others simply don't want to see - like finding a lump on your body; the longer you ignore it, the more deadly the outcome.

Wasn't it quakers who did the right thing - by collecting the evidence to assess whether the poor were really at fault or not? They were shocked to find the poor were the last people to blame. How many times do we need to do this lesson in humanity? Are we really to believe that each and every peasant in the world is what the Americans euphemistically call 'food insecure' because they want to be? Food insecure! Do they really think we won't figure out that hungry = food insecure ?

Justin150. Head. Sand. Buried deep.

Here is a question have ALL Western governments been duped into providing financial aid to global corporations wh then use the cash to expand there operations in Asia?
The growth is over there not here in the west, so going to the government cap in hand was a ploy to get the taxpayer to fund there overseas expansion plans?
After all there is only so many punters to sell things too in the the west eg declining population, the growth figures in China with millions of people and low environmental rules means its rich pickings for the corps.

Greece puts it's big toe in the water of technical default today and the FTSE closes up, its pure madness the lot of it.

What's this ?
Lord Peston has come out in support of Labour's Economic policy.
Surely not !

75. copperDolomite
'Justin150. Head. Sand. Buried deep.'



Nah. Swap sand with Fundament and you're nearer the mark.

79-

Shoved in so deep he's reminiscent of an Ouroboros.

What happened to all those profits that were made during the boom years?
Can't they be channelled back into the economy?
They haven't gone for good have they?
[Unsuitable/Broken URL removed by Moderator]

69. At 5:13pm on 15 Apr 2010, writingsonthewall wrote:
nutters? - or criminals?

Nice one WOTW, I hoped you'd pick up on this.

It links in with "Browns bottom"!

Walter Bagehot has been recruited by commentators to justify action taken to 'save' the banks from the consequences of their own genius. But have we seen any recognition of his most prudent advice on the policy of central banks' re-financing of the private sector banks? This was that in extending large volumes of credit at 'appropriate' (high) interest margins to the system, this should be secured by the banks' lending against normal items of trade. As examples cited iron and wheat. Financial and property assets were not included.
I wonder whether the Bank's and FSA's proposals are the beginning of recognition of Bagehot's good sense. Arguably many of the financial speculative activities of the banks are beyond all hope of prudent and effective regulation. That being so the argument for separation is very strong. They are equity risk schemes whose promoters rarely back them with their own money - another reason that no one else should back them with lending.
Property lending should be secured with regard to rental yield (see 'A Childs Guide to Banking' page 1). A requirement for this to be valued and published by the banks in their annual accounts, together with reference to the validation of rental and yield used, would leave a system far more transparent to investors, credit valuation agencies, lenders and regulators. It would also leave the costs where they should lie - with the banks themselves. And the liability for foolish lending would be far easier to allocate.

It must be dawning on folk that there is a section of society that are using the rest of us for their own ends.
They have also got us competing against each other.
They probably think they are so clever.
Perhaps they are.
Meanwhile we just have to get on the best we can.

I have followed the Peston blogs for a few months and I am pleased to say my eyes have been opened to a few things, even if I don't necessarily understand all the arguments or know who to believe!

I particularly enjoy the comments of writingsonthewall who takes no prisoners,and of the people who stand up to him - it's always good to hear two sides of the argument, and IMHO, it shows why there will never be more than a peaceful revolt against the government or the banks despite what some people believe or would like.

One other thing:

54. At 4:31pm on 15 Apr 2010, writingsonthewall wrote:
Who are the nutters - and who is in the tent?

It seem the body who will eventually 'control the world' seem to be a little concerned about the idiocy of banks.

https://beforeitsnews.com/story/32900/IMF_chief_warns:_Global_Banks_Setting_Up_New_Bigger_Collapse.html

Suggest you don't just pick soundbites like this - it is 6 months old - despite what it says on that website - I bothered to check USA Today - obviously you didn't.

I'm not sniping, or even denying anything has changed, but if you want to be believable, don't quote from 2nd rate websites. The stories surfacing about gold and silver may be true, or they may be a big con circulatedby some disgruntled trader who has made his fortune from the same dodgy practices but hasn't been allowed in the club and wants his revenge. But unless you get your facts straight, who is going to believe it.

Keep up the good work!

84. At 8:46pm on 15 Apr 2010, prudeboy wrote

Absolutly....divide and rule!

https://en.wikipedia.org/wiki/Divide_and_rule

Fractional reserve banking has created too much money against too many promises to pay which are no good.

And no amount of regulation can ever contain it, because those who create the money profit from their creation of it.

Change it, and you get economic stability, leave it as is and you will be forever playing catch up and trying to clean up the mess that it leaves.

I accept that unregulated financial institution are the main culprits for the Great Recession and its consequential economic harm.
The Direct cost the the taxpayer of bailing out the banks was just to recapitilize them so that they would not become insolvent. (They were supposedly “Too big to fail.”)
As the guarantees and loans to the banks are unwound, taxpayers will not have a hope in H....of making a profit.
Why?
Because when you unwind the tangled derivatives and credit default swaps you will find bad debts (e.g. loans that should never have been made in the first place) in need of write-off. The taxpayer will be lucky to get 5% on the dollar.
And that is not a jolly thing!
Unfairly castigated?
The financial institutions were under-capitalized; they knew they were undercapitlized, but they continued along their greddy little way to make questionable loans which they then wound into derivative bundles which they proceeded to inload on unsuspecting buyers, including soversign nations. Contesting this irresponsibility is neither "hysterical" nor “massively overdone”.
Most of these nerfarious institutions had the further nerve to produce balance sheets that were not transparent, were in fact misleading (like REPO).
Yes, there is something very badly wrong with a banking system. It needs regulation. It needs stdardization. The smaller the financial institution the better, and the incestuous marriage between normal bnking practices and those banks that intend to gamble must be severed.
How to fix the bank mess: bank levy, preferaby a Tobin Tax on all foreign financial transactions. This will get us
1. an audit treail to nail the culprits;
2. revenue to spend on paying down the deficit and for social programs
3. justice from these unjust financial enterproises i.e. social responsibility for the economic chaos that they have caused.
German and American banks in particular are putting enormous pressure, via politicians and regulators, on the Basel Committee on Banking Supervision to back off certain elements of the proposed capital and liquidity changes that could erode their profitability more than they feel is comfortable.
Tough! Basel knows what it’s doing. Basel was used in Canada. Canada has faired well. The United States never even tried to implement Basel – NEVER EVEN TRIED!

"68. At 5:07pm on 15 Apr 2010, Crookwood wrote:

While what you say is true, life isn't as black and white as this is it?
None of our children are taught how to manage money. There are no lessons in class, there are no programmes on TV."

No, but I seem to remember that all children have parents or guardians. Perhaps they should have taught them in much the same way that I was taught??

What we have yet to have, is the answer to where the 200 Billion dollars has actually gone? If it has been lost, and it has gone - it has to have gone some where - Time we went and asked for it back isn't it? Simplistic? Or is it an admission that it was never there to begin with, and there was no actual money involved? Just a giant sale of property for money that never existed in the first place? Brings us back to a gigantic fraud that the entire western world had a share in. Countries like Australia, who avoided being involved in this whole debacle, have sailed through cleaner and stronger - Another good reason for those who can emigrate to the Antipodes to do so.

86. At 9:23pm on 15 Apr 2010, what-to-do-now

divide and rule - bosses do it, kids do it, governments do it (supposedly) and we all pretend we don't notice.

Notice those who have bought homes then lost them are obviously stupid while Cameron referred tonight to those who are working (well still working so far) and who don't want to sell their homes when they get old to pay for care have done the right thing. How many of those people have enough savings to see them through a period of extended unemployment? Can't be too many since UK isn't the saving nation China is. So those handed a P45 are somehow feckless while those lucky enough to escape a similar fate are upstanding members of our society!

How many dinner ladies can afford a mortgage? Will they still be able to do that as volunteers in the new Tory Utopia planned for us? We'll have the super-rich hero who won't get out of bed for less than a million while the cleaner will be labelled idle if she isn't interested in giving up her time for free rather than working some extra hours.

Another is this - notice all the complaining airport staff when the BA staff were on strike? Where were the complaints today? Amazingly, the world hasn't fallen apart just yet despite our entire aviation industry brought to a halt while if one airline has staff problems..... The difference is very striking!

It's all about keeping our noses out of things they want us to keep out of by keeping us busy - like where they are making their money, where they are getting their next nice job from, and what businesses will benefit from their policies and tax loopholes, all at the expense of the voter. Oh, FOI is and will be their nightmare just as the bloggers around the world are - no wonder they all want to control the Internet!

Mr Politictian and Mr Banker be aware we're not all 16 years old.

Now Robert, please do let us know when you will have each of the political leaders on line for you to quiz them about this blog post. Just why, oh why has it taken so long for the financial industry to be subjected to strict regulation - surely the financial industry ranks as danagerous as the nuclear industry?

Time to go home and get some sleep.

Does Brown want to reform a banking system that allows him to hide debt?
Please someone tell me I'm wrong on this one.... But I don't believe him

CopperDolomite, WOTW, there is an old saying that when you resort to personal insult it is because you have lost the argument. (Lord Mandy would do well to remember this)

These loan sharks and enforcers in Scotland did not cause the credit crunch, banks govts and the ordinary people borrowing for a lifestyle they could never afford did that all by themselves.

Personally I am deeply sceptical about the bail out of the banks and yes, CopperDolomite, I do agree that Cameron has it wrong on health care in old age. My parents are both in their 70s, fortunately still well, but I do not see why I should be inheriting anything from them, it is their money, their house etc paid for by their hard work and if they want to spend it all of themselves that is fine by me.

What most people forget (at least in UK) is that there is no divine right to own a house. There is nothing wrong with renting, in Europe it is much more common.

WOTW: of course when I took out a mortgage I was at risk if I lost my job. I knew that then but reckoned I would always find another job - and I always have done so. But of course I have real qualifications, experience and a rather old fashioned attitude to hard work

" BUT THAT POLITICIANS ARE YET TO ACQUIRE THAT IMMUNITY"

Fair point, wrong conclusion. Gordon Brown admitted the other day he bore some responsibility for the failure of banking regulation. I have been asking for a Public Inquiry on this from Day One of the crisis ( on this blog and others). You and Haldane are quite right to value this crisis in terms of lost output. Damage done for generations, as bad as that from wars previously fought.

This is the very reason why politicians run scared of assuming responsibility for regulatory failure. I heard soemone this morning talk of Blair's relationship with the US fostering an atmosphere where UK was ghosting as an American outpost. Wall St and the City were engaged in collaborative intermediation of securitised sub prime rubbish across the globe. I say collaborative, not competitive, because both were self interested in the common casue and common outcome.

Public Inquiry, please.

62. At 4:47pm on 15 Apr 2010, yam yzf wrote:

#45. WOTW

"LIBOR spiked after the NR run and after the Lehman's crash."

I think you need to check your facts - NR had to go to the BoE because the overnight rate became unobtainable for them.

"What led to the collapse of Northern Rock was not the retail run, it was the wholesale run – institutions refusing to fund this bank," said Mr Peston.

...or are you arguing with Peston too?

89. At 11:10pm on 15 Apr 2010, yam yzf wrote:
"68. At 5:07pm on 15 Apr 2010, Crookwood wrote:

While what you say is true, life isn't as black and white as this is it?
None of our children are taught how to manage money. There are no lessons in class, there are no programmes on TV."

No, but I seem to remember that all children have parents or guardians. Perhaps they should have taught them in much the same way that I was taught??
*********************

This is again too simplistic. Most studies show that a parents influence starts to dissapate after the child enters secondary school. While you can try and make your child have good social manners and a degree of self responsibility, the sheer number of organisations trying to woo their money ( and their future earnings) far outnumbers a parents power, unless they are with the growing child 24/7. Not very realistic.

The level of consumer temptation is incredible for a grown, rational person today. Imagine what it is for a child. There are no commercial morals that say "only try to sell to those who need, and can afford the goods", and as we have seen, there are no morals at the table of the money lenders, who fuel the consumerism.

You have to see that there are no quick soundbite answers to our problems. This country is acting like an alcoholic. The first step is to publically announce "We are Britain and we are alcoholic", then we need to start a long, lengthy path to restructuring our lives to minimise and ward off the tempation of consumerism. Until we and our leaders 'fess up, we will continue to live in la la land.

60. At 4:46pm on 15 Apr 2010, hootsmon wrote:

"The market is not 'overheating'"

Oh really? - isn't that what they said before the last crash?

"Predictible, student on a bike, conspiracy theory nonsense. What goes on in your head?
You live in a bipolar comic book world of evil white cat stroking Tycoons.
Bin the Spiderman pyjamas, I think we've moved on. "

No - I don't simply blindly 'follow the leader' as you clearly do, believing that fundamentals have been forgotten about as you swan around in your new paradigm of 'everything is going up forever' - which is exactly the belief you held in 2006.

Nobody is listening to the 'grvity defiers' anymore - you are discredited. Only Marxist analysis of Capitalism provides the answers, not 'funny money and funky formulas' which insist that the shift will be upwards and onwards.

If you have been watching carefully you will have noticed the 'smart money' has been coming out of equities (the banks, the investment houses) - the mainstream investor is currently piling into the market - a sure sign of topping.

....oh sorry - you don't know what the 'smart money' is doing? - well maybe it's because you're not one of them.

These students on bikes seem to leave you standing naked - again!

65. At 4:57pm on 15 Apr 2010, Wardy29 wrote:

"Isn't this what happened to the tune of £60bn or so re RBS and £15-£20bn re Lloyds?"

I honestly couldn't even tell you what they have put in anymore - but people still play the investment game as if the rules haven't changed.

The markets are slow to catch up (they're not that bright you know) - but when they do, they will do what they always do - PANIC!

75. At 5:53pm on 15 Apr 2010, copperDolomite wrote:

"Justin150. Head. Sand. Buried deep."

...and unfortunately - not alone either.

It's always easiest to blame the weakest - it's the cowards way. Never try to take on those above you - that would require courage.

85. At 9:13pm on 15 Apr 2010, CarreraVulcan wrote:

"Suggest you don't just pick soundbites like this - it is 6 months old - despite what it says on that website - I bothered to check USA Today - obviously you didn't."

...and what has changed in the last 6 months? - have we seen major banking reform?
I did take a short break - maybe I missed it....

"The stories surfacing about gold and silver may be true, or they may be a big con circulatedby some disgruntled trader who has made his fortune from the same dodgy practices but hasn't been allowed in the club and wants his revenge. But unless you get your facts straight, who is going to believe it."

I agree - and we must all be careful about the people manipulating the news for their own gain (especially in the commodity world) - but this isn't the first time I've heard this - which is why I bought physical gold you can touch, feel and trade for a motorboat!