As opposed to the "Creative destruction" long heralded as Capitalism's (oxymoronic) driving force we appear to have met Capitalism's opposite and equal (possibly greater?) force - Destructive destruction. While elected politicians (or unelected technocrats) are furtively attempting to "manage democracy" in the quest for sovereign fiscal survival and implementing, brazenly political, social engineering - the financial institutions are betting against them succeeding in a knee-jerk quest for profit. Unfortunately, whatever the governments do the very financial institutions they are attempting to save will manipulate the outcome to their own short-term financial benefit even if this leads to their own eventual, predictable, economic downfall. Free-market theory demands that even when facing the distinct prospect that the world's economic system is collapsing nothing should or can be done to prevent it committing suicide.
Rather than Bulls and Bears what we have is a Mad Dog that won't let go of the bone. The same financial machinations that brought us to the edge of darkness are still out there Trading, Shorting, Hedging and generally trying to find a way to make money at someone else's expense right up to and until the lights go out. A sort of financial "Doomsday" scenario where they keep firing financial missiles until there is nobody alive to claim victory.
Lemmings going over the Free-market cliff.
We're facing a somewhat stark choice. Democracy, Liberal Democratic Capitalism or Managed Democracy, State Capitalism. The present trend is towards the latter duo. Certainly the present Merkel/Sarkosy manifestation of a Euro solution is anything but Democratic and an attempt to save themselves and their banks by denying others their right to choose. By inflicting austerity upon the less fortunate they imagine they'll be able to avoid the same fate themselves. For this the others will pay. Those with the most money to lose will set and impose the rules and woe betide those that don't obey. Somehow I don't think this is going to work. Aren't they missing something here? Haven't they got this backwards? Isn't it those who must obey that can spoil the plan by just saying no more surrender of democratic rights and ask for the UK model - in the EU but out of it. Sadly if the errant, fiscally irresponsible nations (who loaned them the money in the first place?), chose to go for a UK model they'll take the UK down as a result - banks and all. If you were looking to set up a brilliant "can't win" position this is it - a lose/lose situation.
So here we are entrapped by a system that we're trying to save whose very tenets prevent us doing just that - an oxymoron indeed. Or is the true oxymoron "Moral Hazzard"?
Showing posts with label France. Show all posts
Showing posts with label France. Show all posts
Tuesday, 6 December 2011
Tuesday, 15 November 2011
The Bankers' last Haka
We appear to be well into the Uncertainty Principle already - if the Market reaction is anything to go by. Germany and France are at opposite ends of this principle. Germany has stopped so it knows where it is and France has to keep moving to avoid finding out. Unfortunately the two of them have to come up with a compatible solution. Germany knows it has just about enough money to deal only with it's own problems but France hasn't. So France wants to keep the fiction going long enough for time to heal the wound while Germany - no stranger to overwhelming debt - sees no point in securing what amounts to France's, and the rest of Europe's, debt as part of any deal. Meanwhile the British are baffled - at the mercy of the banks that created the problem in the first place. The City of London runs the country via political proxy.
Seeing that most of the transactions take place Offshore beyond regulation any threat to withdraw from the City of London is pretty hollow. All the foreign banks are already outside most UK regulation and taxation which is why they came to London to begin with. The UK banks are only subject to UK authority on the money they earn domestically or repatriate - largely used to pay themselves. Regulating this is a bit of a problem as the whole convoluted system is designed to avoid oversight. It is also designed to avoid jail. Any solution, to the inequity of bankers' moral hazard being taken at the expense of taxpayers, would have to remove the Offshore ability of accumulating unregulated debt globally while the risk falls domestically upon those with clean hands. This would require the regulations to apply universally, bring offshore havens into the fold and remove any burden on the public purse to bail out banks and private financial institutions. This will mean reversing most of what has happened over the past 40 years. Not a bit of wonder that bankers won't tolerate the thought of it. To make the present financial behaviour illegal would see most of them end up in prison.
What is a decent salary for a banker? They already get a base salary that is well above the norm and, under the present circumstances, more than they deserve. The bonus culture is their way of winning the bet before the result is in. The bonus culture in corporations is not that much better than in banking. This time the fools that carry the risk are the shareholders. Guaranteed minimum 100% of salary bonuses, stock options, retirement plan contributions are all based on numbers manipulated by the recipients of this largesse. The growing importance and influence of CFOs reflect this apparent anomaly as they orchestrate the numbers. The movement of vast quantities of money into private retirement plans, under favourable government tax rules drafted on the advice of financial institutions, guaranteed rising stock price P/E ratios that allowed corporate management to falsify omniscience and overpay themselves. All very comfy until there is a market crash. At which time the shareholders take the hit and management continues to pay itself more than they are worth or are the recipients of, wholly undeserved, giant redundancy packages.
Economies run on infrastructure and spending - any money not designated to improve those should be dropped from the plan. The beneficiaries of this infrastructure should be properly and proportionately taxed for it. This would include equitably apportioning corporate and finance profits towards national prosperity rather than individual wealth. By this means the possibility of a popular revolution on the street may be avoided.
You're wrong about Libya being the first no troops (or very few) on the ground example of regime change by us. Afghanistan was rid of the Taliban with similar minimal help - unfortunately keeping it Taliban-free has resulted in many more boots on the ground than originally estimated and an open-ended obligation. We'll have to conjure up the war on terror though to justify our arrival in Libya in large, heavily armed, numbers. Not beyond the realm of possibility once the Libyan factions start a civil war. Syria will become our new best friend when US troops leave Iraq and Iran gains more influence there. Hence the lack of action against Assad Jr. - unless of course he looks like actually losing at which point we'll back the most friendly looking, non-islamic, alternative. There is an interesting Middle East dynamic developing where their democracy is a challenge to our democracy. Let's not forget all our oil bearing despotic arab allies fearfully eyeing the rise of democracy. We're in a bit of a conundrum.
By the time NZ won the Rugby World Cup I was prepared to support anyone else, including France, winning the bloody thing just to get it over with. You've got to start thinking that it is all a set-up with the winner pre-arranged on an as-needed basis (a bit like Formula One motor racing). I'll be truly relieved when the last flag, poster and sign of the World Cup is removed from every nook and cranny of this country. A country that, sadly, believes that rugby is the world's most important game and, even more sadly, is the only game their boys can play reasonably well. The Haka thing at the start of the game should be banned - a time-waster and unfair to those without their own Haka to perform. Although every nation that has more than 8 vowels in the players' names has one. When Tonga or Samoa play NZ they try to out-Haka each other. The French walk-up is only news-worthy because NZ (and the IRB) expects the other team to stand around doing nothing while on the receiving end of loud noises, rude signs and throat-slitting actions. My suggestion is that all teams have a pre-game dance routine. Highland dancing for the Scots, a Jig for the Irish, coal-mining movements for the Welsh and a Morris dance for the English. The possibilities are endless, Line-dancing for the Americans, Tango for the Argies, some sort of Ninja deal for the Japanese, Can-Can for the French - what the fuck the Canadians and Suth Ifricins do is up to them.
Seeing that most of the transactions take place Offshore beyond regulation any threat to withdraw from the City of London is pretty hollow. All the foreign banks are already outside most UK regulation and taxation which is why they came to London to begin with. The UK banks are only subject to UK authority on the money they earn domestically or repatriate - largely used to pay themselves. Regulating this is a bit of a problem as the whole convoluted system is designed to avoid oversight. It is also designed to avoid jail. Any solution, to the inequity of bankers' moral hazard being taken at the expense of taxpayers, would have to remove the Offshore ability of accumulating unregulated debt globally while the risk falls domestically upon those with clean hands. This would require the regulations to apply universally, bring offshore havens into the fold and remove any burden on the public purse to bail out banks and private financial institutions. This will mean reversing most of what has happened over the past 40 years. Not a bit of wonder that bankers won't tolerate the thought of it. To make the present financial behaviour illegal would see most of them end up in prison.
What is a decent salary for a banker? They already get a base salary that is well above the norm and, under the present circumstances, more than they deserve. The bonus culture is their way of winning the bet before the result is in. The bonus culture in corporations is not that much better than in banking. This time the fools that carry the risk are the shareholders. Guaranteed minimum 100% of salary bonuses, stock options, retirement plan contributions are all based on numbers manipulated by the recipients of this largesse. The growing importance and influence of CFOs reflect this apparent anomaly as they orchestrate the numbers. The movement of vast quantities of money into private retirement plans, under favourable government tax rules drafted on the advice of financial institutions, guaranteed rising stock price P/E ratios that allowed corporate management to falsify omniscience and overpay themselves. All very comfy until there is a market crash. At which time the shareholders take the hit and management continues to pay itself more than they are worth or are the recipients of, wholly undeserved, giant redundancy packages.
Economies run on infrastructure and spending - any money not designated to improve those should be dropped from the plan. The beneficiaries of this infrastructure should be properly and proportionately taxed for it. This would include equitably apportioning corporate and finance profits towards national prosperity rather than individual wealth. By this means the possibility of a popular revolution on the street may be avoided.
You're wrong about Libya being the first no troops (or very few) on the ground example of regime change by us. Afghanistan was rid of the Taliban with similar minimal help - unfortunately keeping it Taliban-free has resulted in many more boots on the ground than originally estimated and an open-ended obligation. We'll have to conjure up the war on terror though to justify our arrival in Libya in large, heavily armed, numbers. Not beyond the realm of possibility once the Libyan factions start a civil war. Syria will become our new best friend when US troops leave Iraq and Iran gains more influence there. Hence the lack of action against Assad Jr. - unless of course he looks like actually losing at which point we'll back the most friendly looking, non-islamic, alternative. There is an interesting Middle East dynamic developing where their democracy is a challenge to our democracy. Let's not forget all our oil bearing despotic arab allies fearfully eyeing the rise of democracy. We're in a bit of a conundrum.
By the time NZ won the Rugby World Cup I was prepared to support anyone else, including France, winning the bloody thing just to get it over with. You've got to start thinking that it is all a set-up with the winner pre-arranged on an as-needed basis (a bit like Formula One motor racing). I'll be truly relieved when the last flag, poster and sign of the World Cup is removed from every nook and cranny of this country. A country that, sadly, believes that rugby is the world's most important game and, even more sadly, is the only game their boys can play reasonably well. The Haka thing at the start of the game should be banned - a time-waster and unfair to those without their own Haka to perform. Although every nation that has more than 8 vowels in the players' names has one. When Tonga or Samoa play NZ they try to out-Haka each other. The French walk-up is only news-worthy because NZ (and the IRB) expects the other team to stand around doing nothing while on the receiving end of loud noises, rude signs and throat-slitting actions. My suggestion is that all teams have a pre-game dance routine. Highland dancing for the Scots, a Jig for the Irish, coal-mining movements for the Welsh and a Morris dance for the English. The possibilities are endless, Line-dancing for the Americans, Tango for the Argies, some sort of Ninja deal for the Japanese, Can-Can for the French - what the fuck the Canadians and Suth Ifricins do is up to them.
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