March 19, 2008
Not on my watch
A lively debate has broken out on the blog between Mary Cunningham and “Danny” about whether the Bush administration bears any responsibility for the current financial crisis. They go into much more detail than I am capable of, so I suggest that readers take a look.
But let me make one simple point. This crisis is taking place in the eighth year of the Bush presidency. It must have very deep roots indeed, for the Bush administration to bear no responsibility.
In my original post, I used the phrase that the crisis happened “on Bush’s watch”. As Samantha Power pointed out to me at our recent lunch, this is a highly ambiguous phrase. Power was wearing one of those irritating little charity bracelets. This was a green one, carrying the phrase - “Not on my watch.” She explained that this is apparently what President Bush had written in the margin of one of her own articles, on the Rwandan genocide.
But, said Power, nobody was quite sure what Bush had meant by this. Did he mean that he bore no responsibility for this terrible event, because it had all happened during the Clinton administration? Or was he promising that nothing like this would happen during the Bush presidency? Or had somebody simply placed the article on his watch - and it was a polite request for them to remove it?
The responsible more than GWB is Osama Bin Laden because the 911 attack led the Fed to cut interest rates so much that consumers went happily in debt.
Or, we can say also, the responsibility goes for Alan Greenspen, Chairman of the Federal Reserve, who is the guy who promoted the Financial Bubble and, more important, didn´t watch out well what the Banks were doing with mortgages….
Posted by: Enrique | March 19th, 2008 at 12:06 pm | Report this commentThe catastrophe started with Clinton and it is his failed policies that caused this. Bush’s guilt, if it can be applied, is to hang on to Greenspan, and to fight the war without mass mobilisation to harness the resources necessary to win it and pay for it (see Stiglitz).
Let’s recap: Clinton raided pensions to pay for the tech boom: when the tech boom went bust, so did many pensions and a huge amount of wealth. In order to mask this catastrophe, the housing bubble was created to divert wealth and give the banks some money to play with again. This was a giant fraud.
Bush arrived in office to a massive conflict and attack. No president would have handled it that well. The seeds of economic destruction were planted by Clinton; sadly Bush has to reap the harvest.
Posted by: Bob Macdonald | March 19th, 2008 at 1:28 pm | Report this commentThis present economic crisis appears to me to better defined by Taleb’s very intriguing book and theory “Black Swan”…ie, it is a very unique significant event…. difficult to predict… yet afterwards everyone will offer up all sorts of theories of why of course it was bound to happen!… (I note “Black Swan” was a candidate for FT’s Best business book for 2007…it did not win …it should have…really original thinking)
The great economic minds gathered in Davos recently and most were very upbeat. Fred Bergsten, (Peterson Institute for International Economics) was quoted as saying “When the US catches a cold, maybe the rest of the world catches a sniffle, but certainly not pneumonia,” He also added that emerging countries now account for half the world’s economy, and these countries are experiencing growth rates of 6-7 percent, so a severe slowdown in the economies of the most developed countries would still leave the world with an annual growth rate of around 4 percent….therefore he did not beleive the world economy is going into recession and he even argued that the world may experience its first episode of “reverse coupling”, in which reasonably rapid growth in India and China and other economies will soften and shorten the US downturn. Well let’s hope so…but this all feels sooooooo NOT right!!!…
This feels like very new dynamics are in play …that we are in somewhat uncharted waters …perhaps we should be happy all those sovreign funds are around…of course, if push comes to shove and those funds become pivotal for keeping all of us afloat …well then, we really do enter a whole new geo-political era…
I think something significant is happening….and no one has a handle on it yet.
Moreover, that last person who can deal with this effectively is Bush. Not because he is bad or stupid, but more because he has proved to be a little man, with little to no imagination.
Posted by: Lisa-Helene Lawson | March 19th, 2008 at 1:58 pm | Report this commentMortgage backed bonds have been around since the late 70s early 80s. They nearly caused a meltdown in 1994 because of the linkage they caused with short-term rates and long-terms rates. Of course, that led to banks needing to raise capital which led to a sell-off of riskier emerging market debt which caused all sorts of problems, particularly in Mexico.
There is always a proximate “cause” in hindsight but the fact is that liquidity crises are the nature of the beast. All you can try and do is ameliorate the effect, make sure the overleveraged are punished economically and the impact to the wider economy is limited.
On a personal note, I have to say that what happened to Bear Stearns is good case of “what goes around, comes around” as they nearly caused the last major liquidity crunch by forcing LTCM into near bankruptcy and refusing to join in the rescue.
Posted by: danny | March 19th, 2008 at 2:14 pm | Report this commentLisa-Helene Lawson: You are indeed living in a new
financial situation. Its causes lie way back when people abolished regulation and allowed Commercial Banks to get involved in Investment Banking. (And the reverse.
To my mind two factors were of primary importance.:
(a) the debt bubble some activities of which Buffet characterised as “Toxic Kool Aid” (See B’s letter to the Shareholder)
(b) The other factor was the continuing polarisation of wealth and income in the US which
is destroying the middle classes and squeezing the rest into very low standards and debt.
Here is Eccle’s view : (from Wikipedia’s article on the great depression)
Inequality of wealth and income :
Marriner S. Eccles who served as Franklin D. Roosevelt’s Chairman of the Federal Reserve from November, 1934 to February, 1948 detailed what he believed caused the Depression in his memoirs, Beckoning Frontiers (New York, Alfred A. Knopf, 1951):
As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth — not of existing wealth, but of wealth as it is currently produced — to provide men with buying power equal to the amount of goods and services offered by the nation s economic machinery. [Emphasis in original.] Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.
That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers’ loans, and foreign debt. The stimulation to spending by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product — in other words, had there been less savings by business and the higher-income groups and more income in the lower groups — we should have had far greater stability in our economy. Had the six billion dollars, for instance, that were loaned by corporations and wealthy individuals for stock-market speculation been distributed to the public as lower prices or higher wages and with less profits to the corporations and the well-to-do, it would have prevented or greatly moderated the economic collapse that began at the end of 1929.
The time came when there were no more poker chips to be loaned on credit. Debtors thereupon were forced to curtail their consumption in an effort to create a margin that could be applied to the reduction of outstanding debts. This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world. This, in turn, brought about a fall in prices and employment.
Unemployment further decreased the consumption of goods, which further increased unemployment, thus closing the circle in a continuing decline of prices. Earnings began to disappear, requiring economies of all kinds in the wages, salaries, and time of those employed. And thus again the vicious circle of deflation was closed until one third of the entire working population was unemployed, with our national income reduced by fifty per cent, and with the aggregate debt burden greater than ever before, not in dollars, but measured by current values and income that represented the ability to pay. Fixed charges, such as taxes, railroad and other utility rates, insurance and interest charges, clung close to the 1929 level and required such a portion of the national income to meet them that the amount left for consumption of goods was not sufficient to support the population.
This then, was my reading of what brought on the depression.
What is wrong with Bush to day is of course his Keynesianism for the upper 10%
Enrique’s points about several Greenspan errors
Posted by: MP | March 19th, 2008 at 2:35 pm | Report this commentare mostly correct INHO.
If he was speaking in the context of the Rwandan Genocide, he should look no further than Democratic Republic of Congo or Darfur. So much for Africa being a success story under his presidency.
The reasons for current economic crisis are umpteen, be chief among them are rather simple to explain. The Bankers’ greed in running their businesses on a model that is not sustainable over a long term. This was coupled with complete lack of oversight on Fed’s part and availability of cheap and easy credit to make risky investments.
It’s difficult to direct the blame at either Clinton or Bush. Fed’s monitory policies under Greenspan and lately have been irresponsible. Another issue is taxation. Despite the much talked about Bush tax cuts, the corporate tax rates in America are the highest among the OECD countries. This makes them highly uncompetitive and far less likely to attract jobs or investment. The Wall Street was the only attractive investment for the Sovereign Wealth Funds, and with the current uncertainty in the Markets even that is likely to slow down.
Posted by: VKA | March 19th, 2008 at 2:55 pm | Report this commentWhat is remarkable is how much this problem is a problem of socialistic economic policies, not free market. The tech boom was orchestrated by raiding pension pots to build out the infrastructure; this was done in a sneaky way. Opening up borders to mass migration has been done under the principle of universalism. Yet this has driven down wages and caused extreme chaos. The UK has been under social democratic government for the past ten years, who have advised much of the world’s governments to follow their policies.
We wouldn’t be in this mess if people did old fashioned things like worked hard, saved, were honest, supported upholding the law and protecting borders, and let real free markets act.
Posted by: Bob Macdonald | March 19th, 2008 at 3:01 pm | Report this commentThanks MP and Enrique for proving my point about everyone being a genius in hindsight and being able to spot the proximate “cause” for liquidity crises.
PS MP rather than cut and paste why don’t you just make the link.
Posted by: danny | March 19th, 2008 at 3:08 pm | Report this commentBob, exactly how is a law that protects borders compatible with the “real free market” principle of the freedom of movement of labour (and capital)?
Of course, changing such a law causes chaos - almost all significant changes cause chaos in the short-term, since the world is not a perfectly flexible place. However, I struggle to find an argument from fundamental principles that supports limiting migration. And it is evaluations based on fundamentals rather than effects that allow one to distinguish between the short-term and the long-term worth of an action.
Posted by: Andrei Timoshenko | March 19th, 2008 at 3:14 pm | Report this commentIf we look at this crisis with a clear head (and I can assure you, as historians will looking back in 20 years), there will be a direct connection between the liquidity flooding in the economy, and the electoral machinations and triumphs of Blair’s New Labour project. By engineering a ‘boom’, the party was able to grab three terms, but in the process so goosing the economic system and unleashing huge distortions in employment and work, that it has finally come off the rails and the government is in a pickle.
Like a philanderer and braggard, he can get away with it for many years until one day all the lies and games produce an almighty disaster. Britain, if I continue my philanderer metaphore, is now suffering from three STDs, AIDS, has its suits chucked on to the pavement, joint bank accounts frozen, and can’t get the nice chap in the corner shop to look him in the eye. Oi, vey!
Posted by: Frank Fields | March 19th, 2008 at 3:17 pm | Report this commentThere is a big difference between the free movement of labour based on the law and demand, and a free-for-all that obeys no laws and over-supplies demand. Other countries manage their borders better: and the UK has realised this a little bit late in the game.
Posted by: Bob Macdonald | March 19th, 2008 at 3:21 pm | Report this commentComparing the Fed to the ECB, American interest rates look like a Russian Mountain going up and down every five years.
No matter if inflation is over 4% as inflation is not a priority to the Fed. When you pump so much paper and build such a bubble the result will be either a crunch, hyperinflation, or stanflation.
Is the Bush Administration responsible? Well, they are responsible for a very expensive War which needs permanent finance and, more important, the Bush Administration is responsible for the present sky-high oil prices which they were supposed to keep on hold as the Reagan and Thatcher Administrations did during the 80s establish the base for 20 years of low oils prices that so much help Western Economies.
Posted by: Enrique | March 19th, 2008 at 3:49 pm | Report this commentdanny: I am old enough to remember the fierce discussions that were taking place during the Reagan years and the points the opponents of deregulation were making about this kind of pathology. (The debt bubble)
PS The Wikipedia article on The Great Depression is huge. I simply spared you the effort of going through it .
Bob Macdonald: A state with all of its activities in a free market mode is a fiction cooked up by various dogmatists. The US has been practising “Military Keynesianism” for a long time.
Posted by: MP | March 19th, 2008 at 3:53 pm | Report this commentThe US Post Office has never been privatised –
for a good reason. There is at least 8% waste (in terms of gdp) because of private medical care.
(one of the reasons GM etc came to Canada to do a
a lot of their manufacturing. etc etc.
MP, I am not quite old enough to remember that but I know some of the people who were involved in the early(ish) days of MBS. When the crash happened in 1987, there were all sorts of excuses. When the UK crashed out of the ERM - something that is somehow projected by Labour as a “disaster” when in fact it was the best thing to happen to the UK in the whole of the 90s - it was obvious, when 1994 liquidity crisis happened it was obvious, ditto 1997 in Asia, 1998 LTCM, 2001 dotcom bubble, 2002 accounting scandals and now 2007/2008 “sub-prime” - actually all ABS are being marked down substantially in the market.
PS http://en.wikipedia.org/wiki/Great_Depression#Inequality_of_wealth_and_income
Posted by: danny | March 19th, 2008 at 4:15 pm | Report this commentThis was from Martin Wolf’s column on this website that sums up the cause of the current economic downturn.
“The systems of reward fail to align the interests of managers with those of investors. As a result, the former have an incentive to exploit such distributions for their own benefit.”
Posted by: VKA | March 19th, 2008 at 4:26 pm | Report this commentWhat we are looking at is fraud on a gargantuan scale: it has been perpetrated by politicians in their statistical lies (for example, inflation and unemployment), by brokers in their bogus financial games (hedge funds, debt re-packaging etc.), and by academics in their mountains of specious ‘evidence’ to support the whole exercise (all those fraudulant MBA programmes and business schools).
I would like to see public calling-to-account for these individuals, who are in the process of ruining millions of lives and a few countries to boot.
Posted by: Bob Macdonald | March 19th, 2008 at 4:34 pm | Report this commentMarx could not have put it better - Bob.
Posted by: Joesph | March 19th, 2008 at 4:55 pm | Report this commentI don’t think there’s any conspiracy here. And I still lay the current problems in the financial markets at Bush’s door and his actions.
Start an unnecessary war when there is not much slack in your labour force and you are going to get some inflation.
Start an unnecessary war when there is not much slack in your labour force *and* you are cutting taxes and you are going to get even more inflation and a bad reputation for economic management.
Start an unnecessary war when there is not much slack in your labour force and you are cutting taxes and you are raising non-military spending and your balance sheet is going to look very red. Your reputation falls further. People begin selling your currency and divesting themselves of your assets. (Remember you’re a big debtor because you’re fighting a war and you’ve lowered taxes.)
Furthermore make sure the war is in the world’s largest oil producing region; don’t forget that you are the world’s largest oil importer and is priced in the very currency you are trashing. (OK, it’s your own but you don’t care.)
No conspiracy, just incompetence.
Posted by: MaryCunningham | March 19th, 2008 at 5:45 pm | Report this commentWe have to think about the fundamentals of crisis rather than the names of current national leaders. The fact is that the US governmental policies created the rules of the “financial game” and encouraged the national and foreign investors to participate in the absurd financial speculations. Therefore, the US government headed by President George W. Bush is fully responsible for the current crisis and its possible resolution in the long term.
Posted by: Viktor O. Ledenyov | March 19th, 2008 at 5:49 pm | Report this commentMostly in agreement with the last four posts.
About a month ago i advocated on another blog
very drastic measures concerning S+P:
http://www.hotgrinds.com/dbmgmt/debate/debateview?article=427
In other words the problem is structural and there too many culprits. The Bush adminitration is simply one of the people who could have stopped this game of loaded dices.
In cases like this you fix the problem by changing thee rules of the game.
Posted by: MP | March 19th, 2008 at 6:31 pm | Report this commentWithout the explosion in liquidity, none of these leverage games could have gone as far as they did. The shock of the fall in the price of labour due to the emergence of China &tc. on the scene disguised the concomitant rise in the price of financial assets. Netting out, inflation seemed low, but the shock of low-priced Chinese goods wore off.
The demand for commodities was exacerbated by the fact these were priced in dollars. The very same dollars Bush & Co. were busy devaluing.
Oh! It all goes back to some very bad decisions made early in Bush’s first term.
Posted by: MaryCunningham | March 19th, 2008 at 6:40 pm | Report this commentMaryCunningyham:
There is liquidity, “liquidity” and mad queen’s
virtual ‘liquidity’.
The real question is how much of each goes into
witch’s brew.
Hint: Some of it is related to the social contract in place.
Posted by: MP | March 19th, 2008 at 7:44 pm | Report this commentMary Cunningham “Oh! It all goes back to some very bad decisions made early in Bush’s first term.”
Well, for sure he and and Paulson are responsible for the sorry condition of the US Dollar!!! I was not amused while in London last January, having lunch at Harrod’s Mo Cafe with a friend, and we found ourselves with a bill the equivalent of $102.00 for 2 cheeseburgers and french fries and 2 diet cokes!
What would or will happen if Lehmans (or another financial insitution )follows the fate of Bear Stearns? More bailouts? …perhaps nationalization?…there are so many implications and repercussions as a result of the remedies needed to prevent a meltdown, and these are implications and respercussions that no one is talking about …yet!…it is quite possible these repercussions may be as bad in some ways as a meltdown…
Posted by: Lisa-Helene Lawson | March 19th, 2008 at 7:55 pm | Report this commentMaryC,
Oh come explain…riddles are not my forte, but I am intrigued!
I don’t see a social contract in US today…maybe in Europe …but US???
certainly not below scenarios…
the government feels little obligation to the poor…
government and/or employers have little to no obligation to provide health care or retirement funds…
Owners and employee have little shared interest or vision or loyalty to each other….
So how are you defining your social contract?
Posted by: Lisa-Helene Lawson | March 19th, 2008 at 8:14 pm | Report this commentRe: social contract
Lisa,
That was MP
Not me
I just
Look at
Liquidity
(Using traditional definitions)
Posted by: MaryCunningham | March 19th, 2008 at 8:23 pm | Report this commentMP,
Woops, the above question on social contract is for MP! again not clear how you are defining social contract?!?!….(witch’s brew is easier to define)!
Posted by: Lisa-Helene Lawson | March 19th, 2008 at 8:27 pm | Report this commentOh….see…I am a woman with too much imagination! Everyone have a good day or night whereever you are!
Posted by: Lisa-Helene Lawson | March 19th, 2008 at 8:29 pm | Report this commentOpportunity 1: Thankfully Bush(and more importantly Cheney) is gone in less than a year
Opportunity 2:The world, lead by the Japanese, Germans, & Spanish today and hopefully by the US, Canada and many more later is at an inflection point that if handled correctly will allow us to gradually in the next 10 years change from an oil-based economy to an economy that is powered by many fuel sources including but not dependent solely on Wind, Solar electric(both PV and Directional), Solar thermal, Wave and Tidal power, Fast growing grasses and many more.
Opportunity 3: Let’s forget the past 8 years, welcome the one of 3(all of which will be much more talented than the Bush administration) that wins in November, and seriously spend time demanding through whatever channel one may have that the great changes of Opportunity 2 DO come to fruition by 2018. The world will be much more peaceful and productive and we will look back at this 8 year period as a sad blip.
Posted by: j p james | March 20th, 2008 at 10:39 am | Report this commentBush has bankrupted the country though a classic imperial adventure in pursuit of Iraq oil deals for his buddies (see today’s Financial Times article “Forbidden fields”). However, in the case of past imperial campaigns from the beginning of time, either the imperial power’s own citizens or the conquered colonial subjects were expected to pay for the costs of the wars one way or another. But the Chinese and other foreign powers are now paying for America’s folly. How much longer will they continue to do so?
Posted by: algasema | March 20th, 2008 at 2:23 pm | Report this commentMy apologies for misspelling “through”.
Posted by: algasema | March 20th, 2008 at 2:29 pm | Report this commentErm, 600bn over 5 years. Annual GDP of US is around 13 trillion. Never mind.
Posted by: danny | March 20th, 2008 at 2:36 pm | Report this commentThe overriding culprit, if that is the right word, is a complacency regarding conventional wisdom. Just as in the 70’s and 80’s the US and the UK began to challenge the conventional wisdom about the efficiency of government allocations of resources, now in the US there is an overreliance on the market to allocate resources.
This conventional wisdom lives in the white house (cf the petroleum policy–or lack of one– and the idiotic Cheney statement that “Reagan proved deficits don’t count”). Tell that to the poor fellow who has to stand up in front of cameras and say “we favor a strong dollar.”
We are not yet prepared to look forward to new solutions–perhaps a modicum of regulation to moderate the worst of financial-mob psychology. Maybe the crisis will allow clear thinking, courage and challenges to these current conventions gone wild.
Posted by: waltersimson | March 20th, 2008 at 2:49 pm | Report this commentIf you think islamic fundamentalists are going to disappear after the November elections, you are dreaming. This threat will continue unless several steps are taken: 1) reduce inward migration from muslim countries into Europe and the west, 2) continue to target extremist networks, 3) ramp up alternative fuel sources (including nuclear) so that the amount of money flowing into the middle east starts going down.
We should be concentrating most global economic flows between North America-Latin America-Africa-Europe-Asia. That can still produce massive prosperity for all.
Posted by: Bob Macdonald | March 20th, 2008 at 2:53 pm | Report this commentMP,
“There is liquidity, “liquidity” and mad queen’s
virtual ‘liquidity’.
The real question is how much of each goes into
witch’s brew.
Hint: Some of it is related to the social contract in place”
Please come back and define what you mean by “social contract”
Posted by: Lisa-Helene Lawson | March 20th, 2008 at 3:01 pm | Report this commentInteresting idea, Danny, that we can somehow afford the $600 billion that, according to your low end estimate, we have thrown away in Iraq (along with the lives of 4,000 US soldiers, hundreds of soldiers from Britain and other countries, and an estimated 100,000 Iraqi civilians). Well, as Cheney said, “Deficits don’t matter”.
And how many additional trillions are we throwing away on our bloated military around the world? Check out Chalmers Johnson’s books for some figures on that point. However, I will grant that the Iraq war may not be the only reason for our financial woes. During his term, Bush has let Wall Street run wild, fought tooth and nail against any regulation to stop rampant speculation or fraud, especially in the subprime mortgage lending industry, and generally done his best to return the country to the robber baron, gilded age mentality of the late 19th century, complete with an updated version of the “white man’s burden” to bring “democracy” at gunpoint to the “less advanced” people of the globe - that is, the less advanced people whose dictators do not happen to be our allies.
Since you are good at keeping track of figures, would you also like to share your estimate of where the battered US dollar would be if countries like China and Japan were to stop propping up our currency? And are you seriously arguing that there is no connection between the huge sums that we are wasting in Iraq and on keeping a military presence around the world, and our current financial woes?
Posted by: algasema | March 20th, 2008 at 3:09 pm | Report this comment“Rampant fraud”? Hmm, again I think someone is confusing Bush with Clinton. Bush CLAMPED down on fraud. The SOX legislation was on his watch, the crackdown on poor/”allegedly” fraudulent research was on GWB’s watch. “Speculation” - well I guess you must have held onto your Pets.com, stamps.com, webvan.com, com.com stocks because they are worth every penny of the billions they reached under Clinton. How’s those Enron and Global Crossing shares you bought panning out for your 401k? Or the structured notes Orange county and P&G had to sell on?
Chalmers Johnson? You not got some Chomsky to quote? Or Stiglitz? The US military “burden” is less than it was under Johnson and less than it was under Reagan and as a percentage of GDP a whole 0.7% more than it’s lowest point in the 20th century. 2007 expenditure was 600-odd billion - so that would be 0.6 trillions thrown away.
Posted by: danny | March 20th, 2008 at 3:29 pm | Report this commentoh and the “hundreds” of british soldiers is 145 and 100,000 thousand civilians is less than what Saddam killed putting down the shia rebellion in 1991 and less than the figure claimed for deaths under sanctions.
Someone else claimed Saddam wasn’t really that bad. I put the same challenge to you I put to him, what other dictator around today compares with the brutality and genocidal intent of Saddam? I can think of one Kim jung-il and he ain’t an ally of the US - in case you hadn’t noticed.
Posted by: danny | March 20th, 2008 at 3:33 pm | Report this commentBush certainly has to take responsibility for the present debacle, after all he cut taxes while engaging in an enormously costly war, but there is plenty of blame to go around. Alan Greenspan doesn’t look quite so brilliant now, having abnegated responsibility for prudential supervision of the financial system because of ideology (people seem to forget that he was one of Ayn Rand’s disciples. Financial institutions motivated by greed pushed credit to people who should never have purchased houses. Wall Street packaged loans with the argument that a package of bad loans was suddenly, miraculously, AAA. Credit rating agencies, never one to bite the hand that feeds them, went along with this fiction. Last but not least, we the public, in our greed, piled onto the housing locomotive arguing that “house prices have never fallen”. Oh and journalists who wrote glowing articles about Greenspan’s brilliance and how individuals made fortunes buying hundreds of buy to lets migh also look at their own contribution.
Posted by: Ian | March 20th, 2008 at 3:39 pm | Report this commentExcellent points Danny: Bush will not be seen as the demon some make him out to be. I believe he faced a horrendous security threat in the best possible way: by keeping casualties as far down as possible in a war by using technology. The complaints made by Naomi Klein et al about the start-ups who have been helping with the unseen war against islamic fundamentalism, do not hold up. Damn glad she wasn’t around in WWII.
Let’s be clear: we are at war, and for the most part, most of us have sacrificed little and have carried on with our normal lives. That is an impressive accomplishment.
Posted by: Bob Macdonald | March 20th, 2008 at 3:42 pm | Report this commentIan, 600bn USD over five years is not an “enormously expensive” war. In fact in constant dollar terms and in relative terms - ie as a percentage of GDP - it is dirt-cheap compared to WW2 - some third of GDP spent on that war - or the Vietnam War - was just under 10% of GDP - or maybe you mean military deaths, well 4000 dead soldiers is less than a tenth of the number killed in Gettysburg for example and in terms of rate of deaths better than Gulf war one.
As for the ignorant comments about the sub-prime, you forget what the AAA rating means. It is measuring the default rate on a bond ie - and pay attention - the chances of the bond not paying out the coupon and principal it promises in the prospectus. Now if a bond promises to payout a variable coupon and principal based on certain calculation then just because it is paying out less than expected doesn’t mean it has “defaulted” as long as the promised payout is reached. Again the issue here is NOT defaults, or that the MBS’s aren’t paying out, it is that no one wants to hold them and so under market to market rules those bonds are marked as zero which means under Basel capital adequacy rules they cannot be counted towards a bank reserve capital which is why those banks are looking a little less stable and why some are needing capital infusions. It is a liquidity crisis.
Posted by: danny | March 20th, 2008 at 4:10 pm | Report this commentYes, Danny, on second thought, thanks are due to you for explaining that America really can afford the Iraq war. This is so reassuring to know. After all, what is a mere $.6 trillion among friends - especially when the “friends” are large oil companies, that, as shown in great detail in today’s FT article that I mentioned above, cannot wait to get their hands on Iraq’s prime resource, no matter what the cost may be to America and the Iraqi people themselves in blood and treasure.
And, yes, there were rampant financial excesses under Clinton. One might also add that he was hardly an opponent of our bloated military or of our imperial ambitions either. Is this an excuse for Bush?
Posted by: algasema | March 20th, 2008 at 4:14 pm | Report this commentDanny, thank you also for your incisive explanation of the reasons for the subprime mess. What a pity that, evidently due to the fault of no one, the mortgage backed obligations somehow managed to become worthless all by themselves.
Posted by: algasema | March 20th, 2008 at 4:35 pm | Report this commentHmm, so according to danny 911 after all was just an accident as 3,000 killed is much less than Gettysburg and after all Insurance Companies (some of them European) paid most of the costs…anyway, cannot be compared to the 200,000 Japs killed in Hiroshima and Nagasaki.
Posted by: Enrique | March 20th, 2008 at 4:35 pm | Report this commentBack in the Glass Steagal days when lenders actually had to know a wee bit about credit we learned the following: they;re still good and haven’t changed:
The 3 C’s of credit:
Capacity
Collateral
Character
Collateral is impossible when lending to sovereigns. Capacity and Character thus become more important.
Bush failed on capacity:
*lowered taxes while fighting an expensive war
and failed big on character:
*lies over WMD,
*bellicose actions in the runup to Iraq
*his (and his advisors) own unique stupidity which is too depressing for me to fully recap.
(But deliberately choosing to fight what turned out to be a prolonged guerilla war in a region which accounts for the world’s largest oil reserves when you are the world’s largest oil importer…words fail. They really do.)
The US has the future capacity to repay its foreign creditors but in devalued dollars, although presently its capacity might be somewhat diminished. Who knows how much its superrich have lost in the credit debacle? They have been the largest investors in hedge funds. (Oh man! Bush you should have taxed them when the returns and the cash was there.)
So back to the creditors. Will they wish to buy more overleveraged financial assets? Will they be *allowed* to turn their devalued dollars into brick and mortar?
We’ve already had one run on the dollar. Another ill-advised war and there’ll be another. Come to think of it, that is the most optimistic thing I’ve written in days! Bush & McCain might be constrained by finances from any more ill-conceived ME ‘adventures’. (That;s certainly what happened to Britain but that is another story).
Posted by: MaryCunningham | March 20th, 2008 at 4:38 pm | Report this commentEnrique, I do not know the reason for your reference to “Japs”. Even if it was meant sarcastically or humorously, this term has no place on an FT.com site and I am hereby requesting that your comment be removed.
Posted by: algasema | March 20th, 2008 at 4:39 pm | Report this commentC,mon danny–don’t preach, doesn’t suit you. You know the problem is not the mortgages per se but the fact they are leveraged ten/twenty times, The problem has been in the markdown, if the thing is marked down say 10% and you’re leveraged 10 to 1 then you’ve wiped out your capital. And I think Carlyle was leveraged 30 to 1. God knows what the real figure for Bear was.
Posted by: MaryCunningham | March 20th, 2008 at 4:43 pm | Report this commentalgasema
English is not Enrique’s mother tongue. I don’t think he meant to offend. And I quite liked his rejoinder re Iraqi deaths.
Posted by: MaryCunningham | March 20th, 2008 at 4:47 pm | Report this commentWith “Japs” i just meant for Americans those 200,000 Japanese mothers and children (not men who were in the Battle front) were cosidered unhumans, without worth.
Posted by: Enrique | March 20th, 2008 at 4:50 pm | Report this commentWhy has no one mentioned that the US had a huge surplus under Clinton, which surely would balance the financial excesses of that time. Oddly, the idealogues who attack Clinton fail to mention that huge surplus.
Why has the surplus disappeared? Ah, yes, the war on terror, which is in reality a war on oil-producing nations and is quite costly. It is also an attack on our rivals for oil, China most importantly. China can not be happy that they are helping fund the US war via the falling value of the dollar, especially since they compete with the US for that oil. If China won’t decouple from the dollar, they will pay in other ways.
Danny should volunteer to drive one of the trucks that are targeted by IED-planting Iraqis. Then he might understand that he values his own life for more than the monetary tags assigned to other people’s lives.
Posted by: myrna | March 20th, 2008 at 5:34 pm | Report this commentDanny should volunteer to drive one of those trucks targeted by the IED-planting Iraqis. He might discover that he values his own life more than the monetary tags he seems to find appropriate to value other people’s lives.
Why is it that the people who complain about Clinton always fail to mention the huge government surplus the US had in that era?
The US war of choice in Iraq may also be a proxy war with China. They are helping fund their rival’s competition for resources with the falling value of US bonds. They refuse to allow the yen to float and this is the US answer. Take that China?
Posted by: myrna | March 20th, 2008 at 5:44 pm | Report this commentI have just read through all of the posts on this page. (Yes, I know. Gardening leave, actually. Don’t ask.) The tone of the posts is, in my opinion, a little too shrill.
Some advice for the major players:
Double-barrelled Lisa, Mary and MP: Find a room, and please, for the love of all that is sacred, spare us any more of your amateur poetry.
Enrique and algasema and MC/MP: Put the Che Guevara T-shirts back on, head over to Trafalgar Square, and join one of Red Ken’s many rallies. Stop paraphrasing Chomsky and Stiglitz (we Americans have all heard this a hundred times by now), and generally stop making sweeping statements about a US economy you don’t seem to particularly understand. (I don’t care if someone pays you to, or if you were lucid during the Reagan years; you are very obviously out of your element.)
danny: Don’t be so defensive. This is just typical yank-baiting. I’ve have do live with it for years. They’re just irked that they frittered away their empire and have consequently lived the majority (if not entirety) of their rain-soaked lives in a world dominated by what they consider hopelessly vulgar yanks.
The truth is, the Iraq war hasn’t been cheap, but is it the cause of the global liquidity squeeze? Of course not. danny is right. It is small as a percentage of US GDP, although it probably wouldn’t hurt to have USD600bn sloshing around at the moment (but wouldn’t, by any means, be a panacea).
The war has also been violent and hard to watch (especially since it’s been the most heavily televised war in history), but is it an unequivocal disaster? Well, anyone who’s read any history at all knows it’s actually much too early to judge whether the US strategy in Iraq has been effective (anxious as some of us may be to do so). It is not Vietnam, and it is most certainly not WWII. To even make this comparison is, I’m sorry, to minimise the significance of our own history.
Are CMOs and low interest rates the root of all evil? Absolutely not. Even considering the effects of the current situation, tens of millions of people in the US have perfectly respectable homes and mortgages who likely wouldn’t have without the help of Lew Ranieri and his crew of truck drivers from Brooklyn. MP, as a connoisseur of the Reagan years, you’ll certainly know what I’m talking about (or will you?).
You can all be forgiven because the news coverage of the current volatility (no, it is still not a “full blown crisis”, much as the daily headlines scream at us that it is) has consisted primarily of superlatives. What we need to do now is to stop sifting through the CDO offering documents and look at the broader economy. Those who do will make a bit of money on the upside–and it just may be dollar denominated.
Posted by: Dave the American | March 20th, 2008 at 5:45 pm | Report this commentEnrique, I realize that there was no intent to offend, but that, rather, you were expressing sympathy for the Japanese atomic bomb victims. Also, as Mary Cunningham has suggested, English may not necessarily be your first language.
None of that is any excuse for using offensive language, however. I am sure that my Japanese wife would agree, as well as the numerous FT readers thoughout Japan. There are certain words that are inherently so offensive that they are beyond the pale, no matter what the context.
I still hope that, in order to preserve its own integrity, FT.com will consider removing your comment from its website. Matte imasu (”I am waiting”).
Posted by: algasema | March 20th, 2008 at 6:16 pm | Report this commentDave The American…”Double-barrelled Lisa, Mary and MP: Find a room, and please, for the love of all that is sacred, spare us any more of your amateur poetry.”
Well “Dave” it is hardly surprising that someone who cannot not tell the difference between poetry and a riddle, would then make light of the current credit crisis…
““There is liquidity, “liquidity” and mad queen’s
virtual ‘liquidity’.
The real question is how much of each goes into
witch’s brew.
Hint: Some of it is related to the social contract in place”
and MP, again, please come back and define what you mean by “social contract”…really there is no solving this riddle without it!
Posted by: Lisa-Helene Lawson | March 20th, 2008 at 6:50 pm | Report this commentDanny the American: If you really want to get down to considerations of casualties in Iraq consider this discussion by Jonathan Steele and Susan Goldenberg:
http://www.guardian.co.uk/world/2008/mar/19/iraq.
The real numbers far exceed what you mentioned.
However right now i am exceedigly busy to go into a refutation of all the things you mention.
My first duty is to Cuningham and Lawson to whom i owe an explanation about an elliptic comment i posted.
PS I don’t like sanctimonious lectures and bad manners.
Posted by: MP | March 20th, 2008 at 7:04 pm | Report this comment“Dave the American”, I haven’t the foggiest idea where Trafalgar Square is, not having visited London for almost half a century. I do know something about where the World Trade Center was, however, as I am a third generation American whose grandparents came here well over a hundred years ago, who was born in New York, and who has lived here most of my life. Accusing people of being foreign radicals merely because they have legitimate complaints about the Iraq war, the subprime mess, or George W. Bush’s government by, for, and of the rich is not worthy of FT.com comment. I think I can suggest another website, however, where your views might fit in better. Rupert Murdoch’s New York Post may have a site that you might find more to your taste.
Posted by: algasema | March 20th, 2008 at 7:35 pm | Report this commentBush and his administration are directly responsible for the current financial bubble crisis. Seven years of unregulated, unbridled greed can be laid directly on Bush’s doorstep. For those (such as danny) who think Bush is the paragon of virtue please see the following excerpt:
(the whole article is at the following link)
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html)
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.
Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.
In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.
And, so, dear danny boy, Bush and his oily henchmen are indeed largely responsible for the current mess.
Posted by: gchamberlain | March 21st, 2008 at 12:20 am | Report this commentYeah predatory lending is the cause. Forcing people to take out loans at unrealistically cheap rates to buy properties that they thought were going up. Next you’ll be telling me that ordinary people have been allowed to buy shares. Of course Spitzer is an **unimpeachable** source - well at least in this instance. Once again, the issue is not with “sub-prime”. Look at LIBOR, this is the rate banks are lending to each other OVERNIGHT. Look at where the spread was over base.
PS 2008-2003 is five not seven but like algasema, counting is clearing not your strong point.
Posted by: danny | March 21st, 2008 at 12:35 am | Report this commentMaryCunningham and Lawson:
The new Social Contract: (The Reconstruction deal)
It must :
Abolish the present tax scales and re-introduce progressive taxation. The reaganite reduction (in seven years), from 70% to 28% for the upper bracket
made the US poor. The end result was for the US to become the greatest debitor on the Globe.
“Trickle Down Economics” is a fiction. Look what the rich and their brokers did with all that money they had in the last two years.
The mother of these events (current crisis) started with the S+L debacle:
http://en.wikipedia.org/wiki/Savings_and_Loan_crisis
So, the sharpies now, assume that they will be bailed out and they will not have to face losses.
This should not happen: The FED should set a shop
to vet finacial products similar to the FDA.
The Glass Steegal act should be brought back.
(Instead we now have Greenspan advocating socializing losses of Banks. Look what happened to the admirer of Ayn Rand!!)
Moral Hazard is Moral Hazard. If the US taxpayer is to pick up the bill for the mess it should get
equity stake dollar for dollar.( at current market prices. )(Incidentally a similar event happened in Sweden in the nineties with the implosion of a real estate bubble. The banks were then nationalized)
The mad queen`s logic of running and standing still at the same time was duplicated by some banks who set up SIVs to put their risky stuff and appear as if they were abiding by the Basel rules. You cannot get more post modernist than this. (You have and have not capital adequacy)
It should be disallowed.
The Hedge Fund business should change. (See Martin Woolf 19 March).
2) Set up a public health system: It would make the US more competive by economising at least 8% of gdp per annum. (Infant mortality rates are those of poor countries. 100K die in ambulances in search of ERs to receive them!!)
3) A reconstruction bank (Federal) should be set
up to fix the infrastructure (bridges etc) that are falling down. Latest statistics indicate a need for $2trn fix. Have this bank issue bonds to
private individuals to rebuild the country.
4) Bring the army home and stop messing in other
people`s pots. You do not know how to cook their dishes or their habits.
PS Liquidity (for banks): funds available to carry on plain vanilla banking. “liquidity“ is presumed assets from CDOs, LDOs etc.
PS2 Your Glass Steagal piece is dead on.
Posted by: MP | March 21st, 2008 at 12:46 am | Report this commentMP,
Thank You. You have given me a great deal to ponder and even more to agree with!… I shall be back with some thoughts but for now it is my evening and getting ready for a spiritually eclectic weekend!…
Posted by: Lisa-Helene Lawson | March 21st, 2008 at 1:27 am | Report this commentYeah Sweden’s a great example:
http://www.clevelandfed.org/research/PolicyDis/pdp21.pdf
As for Glass-Steegal, already given over and over a long list of far more difficult economic crises that have occurred under Glass-Stegal, including the S&Ls.
Also the US had a greater deficit relative to GDP under Johnson than it did under Reagan.
Yes a public health system is a panacea, look how well it is working in the UK and whilst you are at it add ANOTHER 2 trn USD to the US debt just in case there is any chance the US will stop being “the greatest debitor on the Globe”.
Posted by: danny | March 21st, 2008 at 10:01 am | Report this commentdanny, the US certainly has the ability to regenerate itself, but–who are we kidding?–American macroeconomic stability is poor, probably the worst in the OECD. The trend of American macro indicators have steadily worsened since 2000 and you have to lay it at Bush’s door.
http://www.weforum.org/pdf/Gcr/profiles08/UnitedStates.pdf
And the above survey was conducted in 06/07, the interest spread, gov’t debt, and inflation are all worse.
If we’re talking about the last 8 years just look at the trend of short interest rates: funds from 6.5% (?) to 1% back up to 5.25% and now at 2.75% heading back down to 1%, I wouldn’t be surprise.
That’s not just monetary policy, that’s monetary policy on steroids! Now, for once the forex market are behaving efficiently. Poor Obama! He’s is going to inherit a poisoned challice from George II.
Posted by: MaryCunningham | March 21st, 2008 at 11:45 am | Report this commentchalice
Posted by: MaryCunningham | March 21st, 2008 at 11:51 am | Report this commentDouble-barrelled Lisa, MP, and the rest of you: Viva la revolución!
Lisa, don’t quit your day job (unless it involves trying to appear clever in writing).
MP: Try complete sentences. We wouldn’t want our British friends to judge us by gems like this:
“If the US taxpayer is to pick up the bill for the mess it should get
equity stake dollar for dollar.( at current market prices. )(Incidentally a similar event happened in Sweden in the nineties with the implosion of a real estate bubble. The banks were then nationalized)”
algasema: Try living abroad for a decade or so. It will give you a new appreciation of your own country, a view that the “progressive” set in New York might have missed.
I am not making light of the current credit crunch, as Lisa says, I’m merely trying to bring some perspective to the argument. The kind of measures that MP and others are proposing are a perfect example of how people can use this kind of thing as an excuse for reactive legislation that can do more harm than good. This needs to be approached with cooler heads, few of whom appear to be present on this board.
I know, I will soon be accused of ‘minimising’ the issue. Actually, I think many here are using it as a jumping off point for all manner of pet causes. This is precisely the wrong approach, but ironically, it is one we are in danger of falling into now in the States.
Posted by: Dave the American | March 21st, 2008 at 12:48 pm | Report this commentDave the American: You have responded to none of
arguments i made:
Consider for example this evidence from UC Berkeley’s Saez:
http://elsa.berkeley.edu/~saez/pikettyqje.pdf
Go to page 5 of the paper.
This is simply income reported to IRS!
Huge amounts go unreported because of loopholes.
Where do you think Soros’s Quabtum Fund is domiciled?
It is obsene to have hedge fund honchos paying less tax than their cleaning ladies. This happened in the UK.
The remuneration of Peterson and Schwartzman of
the Blackstone group is just?
In arguments like the one we are having you must
be analytical and and to the point.
You simply sloganeer ande hurl hysterical accusations. Get to the point.
Posted by: MP | March 21st, 2008 at 4:18 pm | Report this commentDave the American:”reactive legislation that can do more harm than good”
On this I will agree with you… why you feel you have to be insulting instead of just coming on an offering up your ideas is a bit unfortunate…and more than a little silly…this blog afterall is wonderful venue for an exchange of ideas, information, and opinions not a “pissing contest” of blowhards which appears where by your tone you want to take it!
but in any event, I agree with you … “reactive legislation” should be a concern…especially in a national (US) election year…
I really think what is needed is a global response at this point ….especially as there will be policy measures that will need to be agreed upon and implemented globally to stop the tailspin we are in ….perhaps the IMF should take the lead instead of the US?
Posted by: Lisa-Helene Lawson | March 21st, 2008 at 9:23 pm | Report this commentIt’s mandate is to promote financial stability and economic growth, it has a global membership…I don’t think the world should just DEPEND on the FEDs at this point…
MP, I assume you really mean that Private Equity - not Hedge funds - honchos pay a lower MARGINAL RATE of tax than cleaning ladies, because as your statement stands it is patently untrue. Even the corrected statement is false as most cleaning ladies earn a minimum wage and so are paying a marginal rate of around 7% income tax, or at least they were until this budget when Brown got rid of the 10% starter bracket in the latest budget.
As for Peterson and Schwartzman they built a premier private equity firm in a fiercely competitive market over a number of decades - so yes they are worth every penny and like the Swedish banks you have managed to pick a singularly inappropriate example. Of course if you were to look at the performance of Ferguson’s SVG capital, you - and he - would be absolutely right…. It IS a disgrace they guy has a job let alone a well paying one.
Posted by: danny | March 22nd, 2008 at 10:07 am | Report this commentdanny, The money manager who was paying less tax
than his cleaning lady was reported in the FT.
He Might have been a PE character. However the non-dom story is well known. There is widespread
resentment against this situation:
(i) consider this well written piece written by the
very conservative Eric Reguly of the Toronto Globe and Mail:
http://www.theglobeandmail.com/servlet/story/RTGAM.20080320.wreguly0321/BNStory/Business/?query=
(ii) Martin Wolf calls these whining characters “Helmsley) people after the the rich (and obnoxius) lady who made the statement “only stupid poor people pay tax” She was thrown in the
klinker after being caught by the IRS.
The point i am making is that too many rich are paying derisory taxes. The result is poor public services and unwise use of their wealth.
PS the report you quoted from the Cleveland FR
is instructive. In the March 24 issue of Business
Week there is a special mention of the Swedish model for this kind of workout.
There is no question that the cental banks have been and will be involved.
My point: There is moral hasard. The interrest of the taxpayer should be protected in the “nationalization” process.
Also have a look at the blog of Munchau (on the
Posted by: MP | March 22nd, 2008 at 4:16 pm | Report this commentFT) if you want to see something really draconian.
This very well written article in FT (weekend edition) by John Authers (Longview)”It’s the death of regulation as we know it, again” …speaks to me…and for me…at this point and time…
http://www.ft.com/cms/s/0/e2f4862e-f7b1-11dc-ac40-000077b07658.html
Posted by: Lisa-Helene Lawson | March 22nd, 2008 at 7:10 pm | Report this commentLisa-Helene Lawson: I enjoyed Authers. Mostly i agree.
Currently, the global financial system also includes the Reserve Banks of Asia (aggregate reserves $3.5trn), the ME oil money and the Reserve
Bank of Russia as well as the SWFs.
These people have a lot of dollars in their drawers. So as the dollar depreciates they will
demand their pound of flesh.
But this is another story.
Thanks for the reference.
Posted by: MP | March 22nd, 2008 at 8:32 pm | Report this commentGlad to see Ferguson’s speech has now mutated. If you thought about for more than a second you know what you are saying is untrue. A cleaning lady on minimum wage would be paying around 700GBP in tax, you honestly believe that Mr Ferguson - a UK resident - is managing to get millions out a year on less than 700GBP tax? If so can you give a detailed explanation of how, so I can follow it. PS He IS a [mediocre]PE person, no MIGHT about it.
Widespread resentment against non-doms? Really where? There is widespread resentment against the level of tax the current Labour government has raised and the perception that tax has not generated much in terms of improvements in Public services - shock, horror. This is despite a rather pathetic campaign by “tax justice” lobby groups.
Sweden - again for the slow - made massive losses over the period of nationalisation and sold the banks at a loss in real terms - note just like NR in the UK, the government took on a unlimited risk in a field they knew nothing about. Brilliant, brilliant model. Compare this with the Bear Stearns rescue, shareholders - including a substantial portion of the management - heavily punished and strictly limited guarantee by the government.
The point I am making is that it isnt the government’s money to decide if the rich are using it “unwisely”. Given your rant against the wastage of money in the Iraq War and bailing out banks, I am amazed that you can turn around and immediately say that the government will spend it so much more wisely than say the Gates foundation or how Rockefeller did. If you really think that genuinely regressive tax system - one that takes from the rich and gives to the civil service, with trickle left over for the poor - then you should move to a socialist paradise like DPRK, Syria or China. No pay differentials there, just wise use of funds for the benefit of their people.
Problem with being a broad strokes person like MP is that in the end it is the DETAILS that count.
Posted by: danny | March 23rd, 2008 at 12:24 am | Report this commentdanny: I suggest you click on the TG+M article and then respond to Reguly’s remarks.
You should then get hold of Martin Wolf’s article on why Hedge Funds much change some of their practices.
Do you read the FT? If not i will adjust my narrative. (this is where the story of the cleaning lady showed up)
You also misread my reporting as to what the FR or other institutions are doing , or are considering. (See today’s FT)
Who is Ferguson?
Internal Merrill Lynch research distributed to customers is also advocating a consideration of the swedish workout. (March/20)
We are dealing, in technical terms with chaotic,
non-linear events. They are characterised by huge
uncertainty.
What i want, is for those who committed fraud to get a haircut and for the taxpayer not to bail out fatcats.
Socialism is irrelevant to this issue.
Posted by: MP | March 23rd, 2008 at 3:40 am | Report this commentDanny: I found a story on an interview by Ferguson.
Is it a factual statement? Read the FT story i found. You are of the opinion that a 30K sterling charge on those making millions is not acceptable?
What do you think would happen if all British citizens deposited their savings in Gibraltar?
story:
http://search.ft.com/ftArticle?queryText=Nicholas+Ferguson&y=4&aje=true&x=9&id=070604000780&ct=0&page=2
Posted by: MP | March 23rd, 2008 at 4:11 am | Report this commentUnless you live in the UK - where for political reasons and incompetence - NR was bailed out then “fatcats” WEREN’T bailed out. One such fatcat - Joseph Lewis - lost 800million USD in the “bailout”….
If Mr Ferguson’s cleaning lady is paying hundreds of thousands of pounds of tax - ie ten percent[this is LOWEST figure quoted in the article] - then I want her job. If Mr Ferguson is so genuinely outraged, then he can pay more tax but not using the legal and legitimate techniques to minimse his liabilities. For the record if he did really say what is quoted then yes I think it is false
If all the British citizens deposited their savings in Gilbratar then Mr Brown wouldn’t be able to throw it away appeasing unions.
“Internal Merril Lynch research”??? This from the same people who got a multi-million dollar fine for the quality of their research? Guess you nailed me there. I better rush out and buy some Pets.com stock at 400USD, whilst I still can.
“We are dealing, in technical terms with chaotic,
Posted by: danny | March 23rd, 2008 at 9:58 am | Report this commentnon-linear events. They are characterised by huge
uncertainty.” - ah the appeal to pseudo-science. If you had the tiniest clue what these words meant you wouldn’t be so confident that [over]-regulation would be the global panecea.
danny: this discussion is getting nowhere.
You seem to believe in “the minimal state theory”
Aristotle characterized people who do do not need
a state, “gods or wild beasts” (Politics 1253a).
We have a fundamental disagreement on values and
in addition you are insulting.
discussion has become useless.
Posted by: MP | March 23rd, 2008 at 4:59 pm | Report this commentThe discussion is going nowhere because your statements are either a) false - and obviously so or b) nonsense.
I don’t think I have been insulting at all, I believe I have shown alot of patience with someone who believes that cleaning ladies make 100s of thousands of pounds - I would also note you clearly didn’t have a clue about the background of the person making this statement[”Who is Ferguson?”]. You have claimed the Swedish model was somehow a brilliant success when all it did was increase the state and bank losses and perpetuate the losses until the banks were resold into the private sector again - at a loss in constant Kronar terms. You are perfectly happy to make pseudo-scientific statements and pseudo-economic and financial statements when it quite clear you haven’t got the first clue what they actually mean. Let me give you a brief example “chaotic” => “non-linear” and they aren’t “characterised” by “uncertainty”, in fact they are utterly deterministic and so there is no “uncertainty”, rather “chaotic” systems have limits on “predictability” and if they were “chaotic” systems then you would not be able to control them and so regulation would be useless.
Love the quoting of Aristotle, a man whose main claim to fame is having impeded any advance in science for nearly 2,000 years. Great hero. I prefer Gallileo and Newton who decided to try and find out how the world really worked as opposed to demanding it work the way he would like it to and having his view of the world inflicted on people by fiat, but I guess that is the real “difference in values” between me and you.
Posted by: danny | March 23rd, 2008 at 5:25 pm | Report this comment“You also misread my reporting as to what the FR or other institutions are doing , or are considering”. You mean this?
http://www.ft.com/cms/s/0/a233faa2-f789-11dc-ac40-000077b07658.html?nclick_check=1
Methinks another good reason to move my savings to Gilbraltar. Note only one European Central Bank thinks this is a good idea - no prizes for guessing which one. Note that it is a socialist government that wants a government bailout not a capitalist GWB one.
Posted by: danny | March 23rd, 2008 at 6:00 pm | Report this commentGeorge W. Bush is a symptom, not a cause. When a major country becomes decadent, the reasons are very complex, their roots are hard to trace.
My favorite example of this complexity is the theory that Rome’s decline was brought about by the lead pipe plumbing of the Roman patricians that caused their women to become infertile. Following the Roman model, Bush is Caligula’s horse.
Finding the reasons for America’s decline is something that will provide thesis material for generations of Chinese historians.
Posted by: David Seaton | March 23rd, 2008 at 8:37 pm | Report this commentInteresting link today posted by W.Munchau:
www.voxeu.org/index.php?q=node/989
The Euro could surpass the dollar within ten years, by Jeffrey Frankel (18 March 2008)
….and still there is not a British in the Executive Board of the European Central Bank (E.C.B.)….
Posted by: Enrique | March 23rd, 2008 at 9:18 pm | Report this comment