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Stanley
Local Historian & Old Fart


36804 Posts
Posted -  11/01/2009  :  06:04
New Year, new topic. If you want to see the old one do a forum search for same title but 2008.


Stanley Challenger Graham




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Stanley
Local Historian & Old Fart


36804 Posts
Posted - 29/09/2011 : 16:05
Thanks Brad. You see I wasn't wasting my time while Orange was AWOL!


Stanley Challenger Graham




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Stanley
Local Historian & Old Fart


36804 Posts
Posted - 20/10/2011 : 06:57

STRAWS IN THE WIND

Of late I have become more and more convinced that there is something wrong with our economic models. I don't think anyone could argue against the fact that the 'experts' have managed to get us into a mess. What bugs me is the fact that they seem to be blaming it on us and not the system. As someone said the other day, it wasn't the workers who broke the banks.

The nearest I have got to a view on this is that the post 1960 de-regulation of the financial systems unleashed a torrent of greed and speculation that led to 2008, in effect a re-run of the 1920s. The obvious answer would seem to be more effective regulation but something Nigel Lawson said the other day got me to thinking. He said he was all in favour of separating casino banks from core Main Street banking services but thought it was useless to try to 'regulate' the casino. He said that there were more brains in the banks than the government and any attempt at regulation would be playing catch-up and doomed to fail. Far better to structure the system so that all losses were born by the gamblers, no more bail-outs. This is obviously attractive but I begin to wonder whether this would work, the Lords of the Universe could still do immense damage.

Human beings have always tried to see into the future, there is an enormous history of divination and prophecy, the most respected men in Judaism were always described as 'The Prophets' and were looked to for guidance. Signs and portents like comets or other natural events were sought for and 'interpreted'. I think we have moved beyond this now but I still take note of straws in the wind, little snippets of information that impinge on me and eventually seem to indicate a pattern. The main source of these for me are random reports from commentators. Of course no commentator (even me!) gets things right all the time but patterns can start to build.

Recently I am seeing a faint pattern emerging, I seem to hear more and more suggestions that perhaps the basic problem is that our systems are wrong and we need a radical alternative. It seems to me that as long as I can remember the basic dichotomy in economics has been between the advocates of Keynes, particularly the acceptance of deficit-financed spending to stimulate activity together with a large measure of central control and Monetary theories a la Friedman which advocate freedom for the markets to govern economies and the pursuit of 'Sound Money'. That's about the level of my knowledge of economic theory and whilst I have recognised the value of the Keynesian model in two world wars, my personal economic management has always been on the Micawber Principle, don't spend more than you possess, in effect 'Sound Money'. So what would an alternative system look like? The short answer is I haven't the faintest idea, don't look to me as the Second Coming. However, I am encouraged by the fact that some people seem to be asking these questions in the groves of academe, who knows, they may eventually come up with an alternative.

Meanwhile, in the real world we seem to be looking at a scenario that is, in effect, some sort of melt-down. Every indicator I have seen is going South, even the economic miracle that is China is in trouble. During all this my impression is that our Lords and Masters are floundering. We hear blame being cast, individual countries being used as scapegoats and a hidden assumption that the situation is manageable using existing models. I'm afraid I don't buy it, I think we are watching a global train wreck in slow motion. So what do I think is missing?

During my life experience has taught me that certain strategies work. One of them is Worst Case. If you are faced with a developing process with an outcome you can't predict one way of planning is to start by assuming that the worst may be about to happen and plan for that outcome. In this case it is failure of states and institutions. Perhaps we should abandon all thoughts of control, accept the situation that faces us and instead of waiting until chaos overtakes us, start by managing chaos on a small scale. For instance, instead of throwing phantom money at Greece, accept default and manage it. The same applies to the other problems. The EU thinks that $120billion would ensure that the EU banks exposed to Greek debt survived. The market analysts suggest $300billion to $400billion. Who are the markets going to believe? Should we be looking at the management of controlled failure of these banks?

I don't want to push this any further, I'm not qualified to do it. We get to the stage where we can't see the wood for the trees, it all gets too complicated for any government or world body to manage. My suggestion is that there may be merit in splitting the chaos into lumps we can understand and manage and start now by controlling them by allowing them to happen and coping with the adjustments we have to make. There is an outside chance that this would stimulate deeper thought and perhaps even modifications to our systems. At the very least it would be positive management of reality and could inspire more confidence by the markets towards our Lords and Masters. It could be that this realistic process might produce some new thinking, a new economic model. If so it would have the merit of being based on reality and hard facts, not phantom money and exotic algorithms.

SCG/20/10/11


Stanley Challenger Graham




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Tardis
Regular Member


453 Posts
Posted - 20/10/2011 : 14:30
it wasn't the workers who broke the banks
Technically, I would query that assertion.

I would agree that it was banking policy with regard to fractional banking that precipitated the financial crash, but it was the periods of time over which this cash was loaned, and the unrestricted asset inflation that government policy allowed, principally from the period after Clinton's repeal of the Glass Seagal (spelling?) bill.

The issue of our banks is liquidity, which was then compounded by a loss of confidence in the markets (rates rose) and that lead to bad debts as the market fallout began.

Then we had unrestricted cheap credit, which pushed up asset prices because the 3rd way stipulated that it was a necessity to remove those people from the benefit structure.

As to breaking the issue down to manageable portions, I'm afraid that would be too simplistic a notion. We are where we are, and to remove many of those instruments would be like removal of the wheel from any engineering project.

The problem is not the system, it is the people who operate those systems and the framework within they operate. Machines, algorithms etc do not make conscious decisions.


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Stanley
Local Historian & Old Fart


36804 Posts
Posted - 21/10/2011 : 05:13
Query away, it was a quotation and demonstrates exactly the syndrome whereby consumers are blamed for 2008 and not the banks who manufactured the dodgy credit to make money in fees from people who saw an opportunity to get unsecured credit.

You are completely wrong about the role of algorithms, they don't need to be 'conscious' to  operate and cause problems. A good analogy is a computer virus. It makes no 'conscious' decisions but can bring systems down. They call it logic.

"As to breaking the issue down to manageable portions, I'm afraid that would be too simplistic a notion". As for being simplistic, that's the whole point of my thinking, we've tried clever and it hasn't worked. I am suggesting that it might be a good idea to try simple. Think sideways, ever heard of 'divide and rule'? Breaking down to manageable proportions is exactly what the EU is trying to do with the problem of Greece. Problem is that they are afraid of cutting the Geordian Knot and advocating default because of the affect this would have on the EU banks.


Stanley Challenger Graham




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Bruff
Regular Member


479 Posts
Posted - 21/10/2011 : 09:52
I don't quite understand the reference to the Third Way there.  Is it the contention that the TW magnified the scale of the pickle we are in?  As I understand it, the TW was an attempt to reconcile the desire by some centrist/centre-left administrations to maintain at least some semblance of social justice in the face of their surrender to big finance and prevailing Thatcherite/Reaganite economic models.  Thus as noted, one manifestation was easy money and rising asset prices as the balm that soothed the masses who in reality were seeing their wages etc decline in real terms.  That is, most of us weren't in reality any better off, but we all thought we were.

 
But my question is well fair enough, but fundamentally where does the problem lie here?  With the centre/centre-left's TW policies, or 30 years of 'deregulated', unrestrained capitalism?  I ask because I am not not convinced we would be in any better state if New Labour and their TW had never existed.  Wasn't it the now SoS at Education who noted 'we are all the heirs to Blair?', or something like that?

 
As for the Glass-Steagall Act, one could argue that the repeal of this was a 'done deal' after the American banks increasingly piled into London following 'Big Bang'; Clinton just happened to be the incumbent at the time the decision was made.  Again, would any none-TWer have done anything different?

 
There was a spread on 'Big Bang' in The Observer two weeks ago, interviews with those around at the time and the like.  Very interesting.  I was amused by this snippet involving a thrusting young Lehman Brothers tyro by the name of Dick Fuld who was sent over by the (then) rather minor players Lehman, to set up a London operation.  The London people suggested an office in Frankfurt too, to which Fuld exploded: 'No way are we going behind the Iron Curtain!' 

 
Richard Broughton



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Tardis
Regular Member


453 Posts
Posted - 21/10/2011 : 10:34
At the heart of the 3rd way was a method to ensure that people who worked, and invested in their property would then be able to "spend" this cash reserve should they require social care later in life.

To ensure that this "mission" would be complied with, it was necessary to ensure that there were effective cash restraints on people who could claim, what were until then the Universal benefits. (means testing).

Thus, high house prices mean that home owners have lots of cash and social care could say "you're on your own".

Meanwhile, however, human instinct decided that it was not worth saving because this would deny access to some care plans.


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Tardis
Regular Member


453 Posts
Posted - 21/10/2011 : 10:40
I do not agree with simplistic Stanley, simply because by implication you first have to dismantle the complicated and have a risk management strategy in place to avoid the inevitable chaos that would ensue.

The simplist policy that the world could introduce is a simple recognition of the value of resources through "a fair wage for all". What is fair? Equal pay for the European worker, and Chinese?

I would argue that gaining an agreement on merchant shipping with regard to standards and rates of pay would almost eliminate overnight much of the inequality of cheap imports and increase the safety of those who chose to work in that line of work.


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Stanley
Local Historian & Old Fart


36804 Posts
Posted - 22/10/2011 : 06:02
Richard, Glass Steagall 'repeal' was a bit of a misnomer as it was being chiselled away round the edges almost as soon as it was passed in 1933 as the US Banking Act.

I never really understood 'The Third Way' it seemed to me to be a mish mash of populistic asprations, very popular with Blair, concepts that grabbed headlines but no substance. If you want a genuine 'third way', get hold of a copy of Macmillan's 'Middle Way', written at the same time as the GS Act. Brilliant attempt to get some ;ogic and fairness into the way the country is governed. Our modern politicians would do well to read it and learn some lessons.

Michael, you've missed the point. Chaos is coming anyway, heven't you noticed? We need to manage it. I'll stick with simple. Time will tell.


Stanley Challenger Graham




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Tardis
Regular Member


453 Posts
Posted - 22/10/2011 : 10:30
You may have missed it Stanley, but the chaos is here already


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Stanley
Local Historian & Old Fart


36804 Posts
Posted - 30/10/2011 : 05:08

AM I AT LAST STARTING TO GROW UP?

Life is strange. At various times I have thought that I might be a grown-up at last but then something happens to make me wonder. I suppose I feel like an adult (about time when you think about it!) but secretly have always considered myself child-like and perhaps naïve about some things. Of course this might be part of the human condition and I'm no different than anyone else.

What has triggered this off is the awful realisation that I listen to right wing commentators advocating monetary views of the economy and find that I am agreeing with some of their more moderate statements. This as bad news for someone who has always considered themselves to be a left of centre social democrat.

I suppose that the simplistic view, Keynes Good, Friedman Bad, was always naïve but it fitted my beliefs best and I stuck to it even though, in the management of my personal economics, I was definitely an advocate of the Micawber Principle, you can't take more out than you put in. I still work that way and it serves me well. I suspect that this confusion reflects the low level of my understanding of economics!

So, am I going to make any radical changes? No, because for one thing it is too late and it wouldn't do any good anyway. I shall continue to watch in awe as our political masters advocate strict monetarism and borrow or manufacture phantom money like drunken sailors to shore up their creaking policies. At the same time I shall monitor my spending and try to save money on my pension. My mind goes back to the old days when Vera and I were raising kids on an income of just over £30 a month when the loan repayment on the farm was £15. We used to sit down at the end of each week and allocate all our income. It worked and I see no reason to start doing anything different.

This NOP is confused, I know that and it may be that recognition of the confusion is perhaps a sign that I am growing up. I am reminded of the old union official who was asked if he had learned anything when he ditched his Communist beliefs and switched to the Labour Party. He said “Beware of certitude!” I think I know why he said that!

A funny for you heard on World Service this morning: “Never eat in a restaurant that has more items on the menu than place settings, they have a big freezer”.

SCG/30/10/11


Stanley Challenger Graham




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Stanley
Local Historian & Old Fart


36804 Posts
Posted - 08/11/2011 : 04:45
I'm happy to report that I have reaceived reassurance from my mate Bob. Here's his response to my query:
I think you are quite wrong, Stanley, and history would show that,
especially the history of deflationary policies in 19th and 20th (and now, I
fear, 21st) century America. Before government acquired so many
responsibilities, the main cry was sticking to the gold standard, where
(they claimed) money was real money and not mere paper. J P Morgan,
during the 1890s depression, broke the country on Cleveland's devotion to
the gold standard. Cleveland borrowed money to buy gold from Morgan who
immediately presented government securities to buy the gold back, further
depleting the government's gold reserves and forcing Cleveland to borrow
more money to buy more Morgan gold, and every time JP made a big profit on
the exchange, on the interest, and on the commission for the gold sales.
Eventually, it got so bad that they didn't even bother moving the gold from
Morgan's strongrooms to the government buildings. Meanwhile, producers
(farmers and workers) were getting less and less for their product, so they
produced less and less. Most economic historians (never mind the
monetarists) believe that the deflationary cycle was broken only by the
discovery of gold in the Yukon, and perhaps the increased gold production in
South Africa (interrupted by the Boer War)..

The national economy is not a household economy, certainly not a
conservative household involved mainly in providing for its own security.
If anything, it's more like a mega corporation, needing to maintain a
productive and a cash flow lest its citizens (employees) suffer. So the
difference is that we are citizens, not employees, and in a democracy that's
a big difference.

Or should be.

There is one sense in which the monetarists may have a point but I have long
since forgotten what it was.

Cheers, Bob
Thank God for that. I don't mind being confused or childish but I'd hate to be a Friedman Monetarist!  I loved his last sentence....
 


Stanley Challenger Graham




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Stanley
Local Historian & Old Fart


36804 Posts
Posted - 19/12/2011 : 07:10
I think everyone who has read my posts knows what my opinion of the Iraq incursion has always been. We made a mess in the Inter War years when we forcibly integrated the old kingdoms of Mesopotamia into Iraq, completely ignoring religious and tribal divisions. (See GERTRUDE BELL) I have always been of the opinion that when the dust settled, the occupying forces left and the Iraq 'government' took over, the most likely scenario was religious and tribal division and conflict and the eventual break-up of Iraq into somethinmg like the original three kingdoms complicated by Iran taking advantage of the chaos.

News this morning is that just as the last US forces were crossing the border to Kuwait on their way home, a warrant has been issued for the arrest of the vice-president and the Sunni contingent in parliament has walked out. You could pardon President Obama if he went on the air and issued a two word statement, "OH SHIT!".

Of course I could be completely wrong but if anyone thinks that Iraq can now be left to develop as a 'democratic state' on its own, forget it.  We may not yet have seen the denoument of the Bush/Blair foreign policy disaster. The death toll among Iraqis is reckoned at over 100,000 dead and countless wounded and maimed, the infrastructure is in a mess and it may be that what we are seeing is a new phase of pain for what should be a wealthy country.

Politicians in charge of the world? I'll leave you to ponder that one!


Stanley Challenger Graham




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Whyperion
Regular Member


122 Posts
Posted - 19/12/2011 : 12:27
If the people in the banks are all so clever , how come they even directly invested in Greece in the first place?  It could be logical for GER, FRA , UK to jointly borrow at a low interest rate and jointly loan to Greece, Italy and Spain at a higher rate with control over some of those countries' assets for direct repayment and control over general taxation policy.


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Whyperion
Regular Member


122 Posts
Posted - 19/12/2011 : 13:41
I think we might be talking ourselves into a situation worse than it need be, and our local and national politicians are not helping us at all.

With Hindsight the allowance of merger of banks in the UK particulary Bank of Scotland / Halifax  should not have been allowed. [RBS/Natwest was a more merger of equals] , and when I found out that the acquistion of ABN-Amro was not subject to a full due diligence investigation the shareholders got all they deserved and should not have been funded at all by the UK taxpayer but allowed to fold up.

 Slight good news on economics in that Honda in Swindon are back to full planned production and are looking to take on 500 staff in 2012 , not a lot but its a move in the right direction and a small sign of confidence.

If UK govt were serious about getting UK deficit down ( the plans are for tiny cuts in a planned cash increase over the future ), then simple increase now the retirement age for public sector staff to age of 62 ( this gives a 40 year working life , which is reasonable ) and to 67 for rest of population ( reason for difference do you really want a 65 year old nurse ; refuse collection operative , police constable or teacher ? ).  Saving on pensions. Increase the number of council tax bands by at least three , decreasing the amount of central govt grant to local authorities.

Partially spend savings on Further Education/ Degrees and Apprentice programs as well as paying down deficit .

Worldwide probably not a lot we can do while Islam is divided Sunni/Shia but from the West's point of view be grateful: a united Islam could be dangerous , otherwise keeping the divide and rule actually keeps most of the problem out of our areas. 


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Stanley
Local Historian & Old Fart


36804 Posts
Posted - 28/12/2011 : 08:01
"I think we might be talking ourselves into a situation worse than it
need be, and our local and national politicians are not helping us at
all
."

Funny thing that Whippy. I was sat here thinking about the New year and remembering what Roosevelt said about it, "The only thing we have to fear is fear itself". I decided to climb on my soap box and lo and behold, you were there before me.

It looks as though I have survived my 75th Xmas. I hope the rest of you have done the same, avoided family rows and marital strife and not overloaded your credit cards too much! 

We all start to look forward to the New Year and as Whippy says, the first public pronouncement we hear is Nick Clegg's video for his party telling us all how bad things are. Perhaps it's time we took a leaf out of Roosevelt's book and considered the positive. I am warm, happy and apart from the usual penalties that come with old age, in fairly good nick. The water still runs out of the tap, I shall not be hungry today and the lights are on! I can remember times when none of these applied and I don't think I am alone.

Some time ago, when we were talking about 'austerity' I suggested that the people who will survive best are the Crumblies who can remember other hard times. We learned vital lessons in those days like eating cheaply and well and how to keep warm in the worst winters. If all else failed we went to bed! The point is that we survived worse conditions than even the worst Jeremiah is forecasting. I know that there are families who are not doing at all well and I sympathise with them but wonder how much has been done to pass on to them survival techniques we learned all those years ago. 

I heard a news item the other day which was the result of a survey by the Halifax Bank to find the 'best place to live' in Britain. They came to the conclusion it was  Hart in Hampshire. The question is of course what were the criteria? From what I understood it was largely based on disposable income. In other words, the measure was the ability to consume. It seems to me that this is one of the basic problems we face today and permeates much public and political thinking. There is a further complication in that when a politician considers these things it is usually the key voters they are targeting and I'm afraid that my impression is that this is the 'upper and middle' classes, the people who control the most disposable income. This was made blindingly obvious when the austerity measures were introduced by the ConDem Coalition, the target was overwhelmingly the poorest in the land.

Don't worry, I'm not going to bang on about that, you all know my views on that subject. My point is that our Lords and Masters should really get back to basics  and try to bolster confidence by alleviating the condition of the worst off and let the capital holders look after themselves.  Forget old-fashioned class concepts of Left and Right and recognise that the long term survival of our society depends as much on the well-being and satisfaction of the 'lower classes' as on the comfort of the wealthy. The riots and looting we saw in Autumn were the tip of an iceberg, the policies that are being pursued are widening the gulf between the haves and the have-nots. This is the real danger and it is high time we found politicians and policies that start with sympathy and compassion for the people who are really suffering. Apart from anything else, in economic terms this the most productive way to raise domestic consumption and reduce the drain on the public finances. It makes sense in so many ways.

There has to be a change in the strategies to lift us out of this mess. They have tried the straight austerity route and it hasn't worked. Time for some imaginative and positive thinking. Remember Roosevelt!


Stanley Challenger Graham




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