Greece's debt problems - guess who is involved???

[blackcat]

Of course. But if there is no alternate prescription it really just amounts to hot air. "We need more regulation of the banks" is the easiest thing in the world to say. it's no wonder politicians say it so often. The punters lap it up and then you don't really have to do anything.

And round it goes.

yeah, but I dont got those intellectual chops to be Obama's economic advisor do I.

What they need is, competent regulation, not necessarily more regulation. And not regulation that is partial to influence. They need veterans who have made their dollar, moving into regulation. They do not need young bucks, looking to jump to the first offer from a rich hedge fund or I-Bank. They need finance guys who understand, they dont need lawyers, who could not pick out a brick from a CDO.

Basically, a reduction of Harry Markopolos.

They don't need Goldmans in gov't. And moving to gov't for prestige. And then back like Rubin to Citi for megabucks.

 

[TheBloods]

Of course. But if there is no alternate prescription it really just amounts to hot air. "We need more regulation of the banks" is the easiest thing in the world to say. it's no wonder politicians say it so often. The punters lap it up and then you don't really have to do anything.

And round it goes.

There does need to be more and better regulation. For example, elimination of the Glass Steagal act was a major factor in the US in creating behemoths too big to fail. No regulation in the CDS market was another disaster. The ability for banks to use shadow banking to by-pass prudential requirements is another. Many of these issues are highlighted as problems before they blow up, but banks have powerful lobbies.

Existing regulation and Basel II accord meant that the regulators relied far too heavily on the banks doing the right thing and monitoring themselves. Self-regulation does not work. I've witnessed the dichotomy between profit-making and prudent behaviour, and the former usually wins.

None of this takes away from Government responsibility, especially around loose monetary policy. But ignoring problems in the financial sector will also result in another disaster.

 

[Last of the Roys]

There does need to be more and better regulation. For example, elimination of the Glass Steagal act was a major factor in the US in creating behemoths too big to fail

Really??? You don't think that banks too big to fail existed in the US before that? From what I read I thought that Act pretty much brought the US somewhat into line with what Australia has allowed since the '80's - i.e. allowing investment banks to also take deposits. Yet Australia didn't have too many problems whatsoever.

Anyway, I don't think any company ever wants to fail unless it is being deliberately run fraudulently - and in the end they all get found out. These banks got found out by playing around with innovations they thought weren't that risky, but it turns out that was wrong. I don't think they will make the same mistake anytime soon, but I don't think the answer is more regulation to put banks in a straight jacket. I really don't think the US or anyone else should be making it a lot more difficult for banks to lend money given where the world economy is at.

Businesses should be allowed to try to innovate. Sometimes you win, sometimes you lose, but innovation is ultimately what drives living standards upwards.

Humanity doesn't have perfect knowledge and neither do bankers. The Efficient Markets hypothesis wasn't set up on humanity having perfect knowledge of everything, rather that markets reflect the information that is currently known.

 

[TheBloods]

Of course banks were too big to fail before that - every system has some of those - but the mega-mergers created even more and reached a size where they became even more damaging to the economy as well as being increasingly inefficient.

Australia has a very different system to the US.

You don't think banks will make the same mistake any time soon? They do it in every business cycle!!

Returning some regulations doesn't put the banks in a straight jacket. There have to be regulations and they have to be monitored effectively. They have been loosened too much.

EMH doesn't work and never did.

 

[blackcat]

There does need to be more and better regulation. For example, elimination of the Glass Steagal act was a major factor in the US in creating behemoths too big to fail. No regulation in the CDS market was another disaster. The ability for banks to use shadow banking to by-pass prudential requirements is another. Many of these issues are highlighted as problems before they blow up, but banks have powerful lobbies.

Existing regulation and Basel II accord meant that the regulators relied far too heavily on the banks doing the right thing and monitoring themselves. Self-regulation does not work. I've witnessed the dichotomy between profit-making and prudent behaviour, and the former usually wins.

None of this takes away from Government responsibility, especially around loose monetary policy. But ignoring problems in the financial sector will also result in another disaster.

but why do Rubin and Summers get a seat at the table, after orchestrating the removal of Glass Steagal? And Geithner has a history of failure. More failure is more evidence that their positions are emininently pliable to the banks wishes, = job.

 

[Last of the Roys]

Of course banks were too big to fail before that - every system has some of those - but the mega-mergers created even more and reached a size where they became even more damaging to the economy as well as being increasingly inefficient.

Australia has a very different system to the US.

You don't think banks will make the same mistake any time soon? They do it in every business cycle!!

Returning some regulations doesn't put the banks in a straight jacket. There have to be regulations and they have to be monitored effectively. They have been loosened too much.

EMH doesn't work and never did.

I agree that banks make mistakes in cycles - that's why they won't make any more huge mistakes anytime soon (not until the lessons learnt have been eclipsed by another long boom). It is also probably one of the biggest reason neither Australia's or Asia's banks made these types of mistakes. We had huge problems in the early '90's, and the Asian crisis was in recent memory.

I don't agree about the EMH, I just don't think most people understand it at all. The Banks thought they were acting in their best interest with the knowledge they had. No one really had any definitive knowledge that they weren't acting in their own best interest - not until after the fact. It turns out that their innovative products they were using actually didn't reduce risk as they thought, but they didn't know that at the time otherwise they simply wouldn't have done what they did. I think that is consistent with EMH - EMH doesn't assume humans are GOD's with absolute perfect knowledge of everything in the universe. I'm not saying EMH is completely perfect or without its problems, but I think it is a reasonable guide to what is happening a lot of the time.

 

[TheBloods]

EMH is rubbish. Banks made the assumption it is correct. EMH assumes that the market can be mathematically modelled as if it obeys the laws of physics - that is just a nonsense. Hence they built their entire risk system around expected losses using a gaussian distribution, a rational market and a deep market. Nothing to do with absolute perfect knowledge of the universe. It assumes that market prices must be correct because the market has gathered and correctly assessed all relevant information. Also a nonsense.

One of the reasons the Australian and Asian banks didn't blow themselves up is they couldn't get as involved as they would have liked. They saw the streams of money and wanted a share of it, but found it difficult to break into the market.

 

[blackcat]

Nassim Nicholas Taleb is scathing of the banks risk profiles, and their measure of value at risk, Schiff saying half the banks are probably insolvent because of their toxic assets not marked.

 

[TheBloods]

Most banks' measures of VaR is meaningless in a large market movement. That senior execs will talk about huge SD events many days in a row demonstrates the lack of understanding and inappropriateness of many risk management measures.

 

[Richo83]

It is a direct result of non skilled immigration.

Why do you think Australia has racial and religious vilifcation laws? SBS? Why did the UK suspend habeus corpus? Promote a corrupt copt to commissioner? etg etc etc

The two go hand in hand.

Psh, govs can easily enact such legislation via an appeal to fear of terrorism. We've had immigration for 50 years now on a large scale, have we had such gov and law problems?

Look at what the UK did. Why? Answer if obvious.

911, did that come from immigration?

That simply does not mean anything. It in no ways entails any economic benefit.

If the market knows best, and immigration helps markets, then yes it does.

Again this in no way means an economic benefit for the country. Going by your logic unskilled immigrants would be econmically better than skilled immigrants. We know this is not true.

Depends what the market needs.

You also need to take in to workforce participation rates, unemployment rates, welfare spending etc.

Again, is this a business problem?

So? Businesses also love being monopolies.

Neo-lib economics med, business and markets are most effective at providing economic growth.

This is correct and is the reason the min wage is so low in the US.

It's low due to big business pressure on Washington, and anyway, you've called for wage freezes before. Anyway low wages are a boon for business.

So why not let in 1m Chinese tomorrow? None of this means there is any economic benefit. GDP per head matters not GDP

Not to business.

Construction? What does that do for an economy? Ask the Irish and Spaniards. It produces stuff all benefit.

You think construction and retail are small fry? Come on med, they're huge industries.

Those business dont pay the associated costs. Taxpayers do.

It is also said that business helps taxpayers by providing an overall better economic environment, providing cheap goods etc.

You may as well argue in favour of monopolies etc.

See Adam Smith re rent seeking behaviour of businesses.

You keep this line of business (I find it strange you're arguing for the limits of business driven economic decisions but anyway) being a lover of monopolies but I'd say monopolies are a restriction of freedom of trade, yet I'd say immigration relies on freedom of movement.

If you want freedom then it's clear when business is acting for such.

It is wrong to suggest that what is good for business is automatically in the national interest. That has never been the argument of neo liberalism.

Don't buy it for a second, it's always been that the market will lead the way and create economic success.

It is two different situations ie one with stable population and one with immigration.

So isn't restricting freedom of movement well a restriction of freedom? If businesses need varying degrees of labor according to market demands why aren't we allowing a rolling population?

 

[Chronik Fatigue]

Greece's debt problems - guess who is involved???

Let me guess... The Jews!?!

 

[TheBloods]

Those business dont pay the associated costs. Taxpayers do.

You may as well argue in favour of monopolies etc.

See Adam Smith re rent seeking behaviour of businesses.

It is wrong to suggest that what is good for business is automatically in the national interest. That has never been the argument of neo liberalism.

Why are you arguing in this case against just letting the market take whatever course it wants to?

 

[medusala]

Why are you arguing in this case against just letting the market take whatever course it wants to?

Very simple. You have to choose.

You can have freedom of movement or liberal economics.

Not both.

Mass immigration leads to a larger welfare state, higher taxes, quotas etc etc.

Look at voting patterns of unskilled immigrants. They overwhelming favour statist parties. This is why Blair let the gates open.

 

[medusala]

Psh, govs can easily enact such legislation via an appeal to fear of terrorism.

Terrorism by whom?

We've had immigration for 50 years now on a large scale, have we had such gov and law problems?

Immigrants from where for 50 years?

911, did that come from immigration?

Yes actually. See Hamburg connections. Terrorism in the UK has been home grown (with a number of asylum seekers).

If the market knows best, and immigration helps markets, then yes it does.

Which business? Why assume that because some businesses want it all do? After all others will pick up the bill. The finance industry doesnt necessarily want mass unskilled migration. In a similar way the finance industry is all for the ETS whilst farmers and miners hate it.

Depends what the market needs.

Australia does not need immigration. There are huge numbers of working age Australians who dont work.

Neo-lib economics med, business and markets are most effective at providing economic growth.

True but Smith argued against monopolies, rent seeking etc. Neo Liberalism doesnt mean what is good (for some in this case) business in necessarily in the national benefit.

It's low due to big business pressure on Washington, and anyway, you've called for wage freezes before.

I am against wage freezes in the private sector. I said the min wage should increase at the rate of inflation to make it decrease as a % of the median wage.

Anyway low wages are a boon for business.

Price fixing doesnt work. The Accord delivered real wage cuts but didnt work due to its effect on productivity.

Not to business.

Exactly! My point entirely.

You think construction and retail are small fry? Come on med, they're huge industries.

Construction is big. Its too big. Having construction as a big % of gdp is asking for trouble. See Ireland and Spain. Rudd protects it due to unions.

You keep this line of business (I find it strange you're arguing for the limits of business driven economic decisions but anyway) being a lover of monopolies but I'd say monopolies are a restriction of freedom of trade, yet I'd say immigration relies on freedom of movement.

Neo liberalism advocates have never argued for a total absence of government regulation.

If you want freedom then it's clear when business is acting for such.

And the car manufacturers and TCF want tariffs. They argue out of self interest not some benevolent adherence to libertarianism.

Don't buy it for a second, it's always been that the market will lead the way and create economic success.

See Goldman Sachs.

So isn't restricting freedom of movement well a restriction of freedom? If businesses need varying degrees of labor according to market demands why aren't we allowing a rolling population?

See answer to Bloods. Cant have mass immigration and liberal economics.

Amazing stats re UK (though not that dissimilar to US)

http://www.ft.com/cms/s/2/12400596-16ac-11df-aa09-00144feab49a.html

Ipsos-Mori research suggests that at the 2005 election, only 3 per cent of British Caribbean voters and 2 per cent of British African voters supported the Conservatives.

 

[medusala]

EMH is rubbish. Banks made the assumption it is correct.

They know its wrong (though a few of the boffins will carry on about it).

They are heavily incentivised to risk take via moral hazard in the same way traders have a free option to try and knock it out of the park.

Goldmans are no fools.

They and others have gamed the system brilliantly.

Australia had few issues yet Mac Bank got Kev to subsidise them for a bundle.

 

[TheBloods]

Very simple. You have to choose.

You can have freedom of movement or liberal economics.

Not both.

Mass immigration leads to a larger welfare state, higher taxes, quotas etc etc.

Look at voting patterns of unskilled immigrants. They overwhelming favour statist parties. This is why Blair let the gates open.

So in everything else you want a totally unfettered market, with no government interference, but on this point you want the government to set quotas and restrict movement.

 

[TheBloods]

They know its wrong (though a few of the boffins will carry on about it).

They are heavily incentivised to risk take via moral hazard in the same way traders have a free option to try and knock it out of the park.

Goldmans are no fools.

They and others have gamed the system brilliantly.

Australia had few issues yet Mac Bank got Kev to subsidise them for a bundle.

Actually, most of them don't know it's wrong.

Yes, they are incentivised to take bigger risks, hence why more and better regulation is needed.

You can't let banks collapse as you seem to think.
You also can't bail them out as going concerns the way the US did.

 

[medusala]

So in everything else you want a totally unfettered market, with no government interference, but on this point you want the government to set quotas and restrict movement.

Not unfettered, minimal.

Noone argues for totally unrestricted immigration.

Why would you argue in favour of something that offers no benefit?

Why put ideology ahead of reality?

Do you expect me to argue for no govt interference in health provision as well?

You can't let banks collapse as you seem to think.

Sure you can. Why should bondholders be let off the hook?

You also can't bail them out as going concerns the way the US did.

You dont want to let them fold but you dont want to bail them out as going concerns. What does that leave? Nationalisation?

 

[TheBloods]

Bank collapse = massive economic problems. This is what occurred all through the nineteenth century and was a major cause of the Great Depression. The banking system is too important for the economy for people not to have confidence in it.

They can be rolled into new entities, meaning you get a change in management (so they don't benefit from the moral hazard issue) but you don't get a massive collapse in counterparty credit.

 

[medusala]

Bank collapse = massive economic problems.

Zombie banks = far worse economic stagnation ie Japan

Insure the deposits and let them go under (and limit market share).

 

[TheBloods]

Zombie banks = far worse economic stagnation ie Japan

Insure the deposits and let them go under (and limit market share).

Insuring the deposits and pay a certain amount of cents in the dollar on certain other debt if it is considered a systemic risk is what I suggested. Purely insuring deposits will not work for behemoths.

But you can't insure deposits without good regulation.

You can't have massive financial entities that are not regulated but will cause systemic risk - e.g. US bulge bracket firms.

And economic stagnation in Japan (whose solution is different to what I suggested) is still better than the 1930s Great Depression.

 

[medusala]

You can't have massive financial entities that are not regulated but will cause systemic risk - e.g. US bulge bracket firms.

They were regulated

And economic stagnation in Japan (whose solution is different to what I suggested) is still better than the 1930s Great Depression.

The depression of the 30s is not just due to bank failure. It was more to bad monetary policy, tariffs and idiot labour laws.

In the 20s depression the govt did nothing and the depression was over in 18 months.

People conveniently neglect this fact.

 

[TheBloods]

They were regulated

As I repeat again, they were not properly regulated. A lot of it was self-regulation. Next to useless - as demonstrated.

The depression of the 30s is not just due to bank failure. It was more to bad monetary policy, tariffs and idiot labour laws.

In the 20s depression the govt did nothing and the depression was over in 18 months.

People conveniently neglect this fact.

Of course it's not just due to bank failure - but without bank failure you do not get massive economic declines, as also experienced in the 1890s and 1870s. What do you think would have happened if the entire US banking system went bust in 2008?

 

[medusala]

As I repeat again, they were not properly regulated. A lot of it was self-regulation. Next to useless - as demonstrated.
Of course it's not just due to bank failure - but without bank failure you do not get massive economic declines, as also experienced in the 1890s and 1870s. What do you think would have happened if the entire US banking system went bust in 2008?

What was in place in 1907 and the 1920s? Nothing/very little. Better outcomes than the 30s by a long, long way. Yet everyone ignores that.

The entire banking system wouldnt have gone bust.

Every time banks are rescued the seeds are sown for the next crisis.

If LTCM had been let go and Greenspan not lowered rates it is unlikely we would be where we are now.

 

[TheBloods]

There was nothing in place in the 1930s either. In 1907 the system was failed by a bailout from JP Morgan. That would not happen now.

How often do we see massive bank failures result in a good outcome?

Seeds are sown for the next time only when banks are rescued as going concerns.