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A grown-up debate

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Stephanie Flanders | 23:13 UK time, Wednesday, 17 June 2009

Whisper it softly, but there was the beginning of a grown-up debate about financial sector reform and public spending in Wednesday's two big speeches at the Mansion House.

Alistair Darling and Mervyn King at Mansion HouseWhen it comes to better regulating the banks, Robert Peston has flagged up the key points of difference between the chancellor's speech and governor of the Bank of England's, including the governor's pointed call for the Bank to have more powers to match its new responsibilities.

Mervyn King quoted an American economist saying: "[i]f some banks are thought to be too big to fail... then they are too big." Whereas the chancellor said in his speech that "the solution is not as simple, as some have suggested, as restricting the size of the banks."

It sounds like a pretty straightforward disagreement. And these two sophisticated men will not be surprised to see it written up that way. But as Robert notes, on this point the difference is one of tone more than of content.

The truth is that both are right. That is what makes this stuff so hard.

In effect, Mervyn King said in his speech that it was not sustainable to allow banks to grow big doing reckless things, all in the knowledge that if things get too tough, the government will bail them out. "Something must give."

He's right. But the chancellor is also right that there aren't any easy solutions.

If banks stay small, you might avoid the too-big-to-fail problem - most of the time. But you might also raise the chance of individual bank failures, by making each bank less capable of absorbing shocks for themselves. And if the past few years teaches anything, it is that if every bank has made the same mistake, they are all going to get bailed out by the government, regardless of how big they are, and regardless of the stern warnings politicians might have given out in the past. Governments don't let entire banking systems go to the wall.

Both the chancellor and the governor know this. They also know that how well different countries' banking systems have fared during this crisis seems to have had very little to do with the structure of banking regulation in place before the crunch.

Australia, Canada and Singapore have all come out of this rather well. Each came into it with entirely different regulatory set-ups, with the central bank playing a greater or lesser role than here in the UK.

There is much more to be said on this topic. Suffice to say here that this is a difficult and profoundly important debate which isn't going to be over any time soon. Given the recent history, I'd say it's no bad thing that it's being held in the open.

It's probably too much to hope for a grown-up exchange of views on public spending as well. Certainly we didn't get it in Prime Minister's Questions on Wednesday, as the prime minister once again banged the drum on Tory cuts - even at the cost of mis-describing the government's own plans for public investment in the years ahead.

He suggested that such investment would continue to rise until the London Olympics in 2012. Yet the Budget Red Book clearly shows capital spending starting to fall from next year. Downing Street later "clarified" the prime minister's remarks, suggesting that he was also including expenditure on the Olympics itself, and the proceeds of future asset sales, which have yet to be specified. Hmmm.

Darling had a pro forma attack on the opposition in his speech. He said that "to attempt to balance the books now, simply by cutting public spending across the board... would be sheer madness". To my knowledge, that's not exactly what her Majesty's Opposition has proposed, but you get the idea.

The most striking thing about the chancellor's speech was his refusal to enter into a debate - with his own party or with the Conservatives - over what would be cut or what would be saved.

"Given the uncertainties ahead," Darling said, "it would be a mistake to try now to set in stone detailed spending plans for individual departments five years ahead." As Nick Robinson was quick to point out, that's a message for Ed Balls as much as for George Osborne. For now, at least, the chancellor does not appear to want to enter the fray.

Mervyn King had his own comment on the budget in his speech, to the effect that the government needed to show clearly how public borrowing will come down in future. Famously, he has said that before, in his testimony to the Treasury Select Committee. But since then, we have had a Budget in which Alistair Darling probably thinks he provided just such a plan. Apparently the governor disagrees. But who knows, maybe one of these days they can have a grown-up debate about that as well.

Comments

  • Comment number 1.

    Not a lot to debate, really. Once we get rid of the crooks in charge, things will improve.

  • Comment number 2.

    If banks are too big to fail then they should be directly publicly supervised or even owned - in the national strategic interest. In other cases why not some form of Ofsted 'raid' without warning to go through the books and report to parliament. Finance should be the handmaiden to the real economy of personal services and things.

    Of course the government is being parsimonious with the truth on cuts and living off the uncertainty they have created themselve but they will eventually be caught out!

  • Comment number 3.

    We will not get the calls for banks to be too big when the larger Chinese & Indian banks compete on a global scale. What we are seeing is a working out of the globalisation of banking. Small local banks could likely not compete on a world stage but larger extra territorial banks would be too big to fail , regulate or fund. If banks depend on a local regulated deposit base to bolster capital to achieve global scale then that suggests they would not be allowed to take the risks/transactions of scale associated with truly global banking.

    You have to applaud BO as he attempts to regulate CDS, hedges other instruments etc but that is sure to drive them elsewhere than USA. Difficult too to regulate such instruments on a global scale - no longer can we expect USA to create a market for these and expect BRIC's to sign up on the dotted line.


  • Comment number 4.

    Here is my twopennyworth...

    1. Bankruptcy is a very effective way of returning overpriced assets to productive use - whereas bailing out 'dead' banks and companies has the opposite effect.

    2. Interest rates are critical to the crash and the recovery: (The arguement is complex!) Undoubtedly the proper pricing of credit moderates the excesses of market exuberance. The problem over that last decade is that a huge error crept into the calculation of the necessary interest rates. That error was the exclusion of asset price inflation from the calculation. This combined with Chinese imported deflation (another calculation error) gave rise to too low interest rates. This combined with ignores asset price inflation gave rise to a bubble housing market. Also the fact that interest rates were too low prevented banks from making very much money as margins were tight due to the excess of cash slopping about the market. This gave rise to the conditions that led to the almost necessary creation of a variety of credit consolidated instruments and associated (tradable) default insurance. So we now have an asset price (housing) boom, insanely easy credit and exotic tradable instruments (of complex risk) all due to too low interest rates. Further we still have too low interest rates and any recovery cannot occur until interest rates are far far higher.

    3. "Too big to fail = too big." As much as I despise Mervyn King what he says is perceived as true - however this is a matter of perception. See point 1 above - if it is dead the bank MUST be allowed to fail and go bankrupt otherwise the assets it holds are not returned to their full productive potential and the recovery is postponed.

    In summary:

    1. Interest rates up to 4 percent NOW.

    2. Force the big banks into bankruptcy one by one and release the latent potential of their asset holdings, at a proper (lower) price so that the productive potential of the economy can be revitalised.

    PS Chancellor stop the PFI/PPP erroneous accounting too....

  • Comment number 5.

    Darling is playing the same Tory card in saying "it would be a mistake to try now to set in stone detailed spending plans for individual departments five years ahead" - so fairs fair in the world of politics.

    The too big to bail argument of having smaller banks and hence more competition has plenty going for it. Allowing regular but small banking failures to happen rather than allowing a Lehman Brothers type monster to develop is far more manageable.

    The problem with regulation is that it can foster even greater devious activities.

  • Comment number 6.

    When Barings got itself in a pickle, it was sad, as it was a respected British institution. However, its demise did not threaten the economy at large, or the life savings of companies and households, as Barings was purely a merchant bank.

    Therefore, keeping investment banking and commercial banking operations separate is the best way.

    Merchant investment banks should take risks, that is their business.
    They should be allowed to borrow on the commercial money markets, but should not get themselves over-levered. Over-levered could be defined as more than 5 times underlying assets. We certainly don't want a return to gearing of 20 times assets.

    Commercial retail banks should not take risks, but instead focus on safeguarding the nation's life savings, and providing sensible personal loans. These banks should not be able borrow on the commercial money markets.

    To me, it is as simple as that.

  • Comment number 7.

    Hi Stephanie,
    Quite right that we need a grown-up debate. We did have an early warning system operating. It did not work and the public need to know why and who was at fault rather than it be excused. You can compare us with Australia, Singapore and Canada. I dont care about them, I care about why this country was left so exposed. The City prided itself as the leading global financial centre. We would have therefore expected greater, not lesser, standards of prudence in both analysis, early warning, regulation, supervision and governance. Mr King made some very important points. Its not just a question of making banks more resilient but the wider economy needs to be protected from these over-large global players who rely on us to bail them out.

    The UK was extraordinarily vulnerable to finacial sector shocks. Mr King said banking as a proportion of GDP was 5 times larger in the UK than in the US. Our risk exposure is that much greater when our masters of the universe needed sovereign bail-out and their deleveraging hurts us disproportionately. That's where he was coming from. I think Mr King has the finger on the pulse. Politicians are working out how to win elections and not admit their own policy failures.

    Finally, Mr King flagged up the continuing under capitalisation of banks ( even now) and impaired credit markets stifling recovery. When, and who, is going to address this head on?

  • Comment number 8.

    Surely, this is a time for statesmanship not political posturing. I have read it observed that quantitive easing and the unprecedently low interest rate are an attempt to stave off the true damage wrought by the too big to fail bankers until the next election. The incoming Conservatives will be confronted by the results of a deliberate scorched-earth policy and be forced into even more draconian measures than had the nation's interests been properly stewarded.

    The Labour government is borrowing at massive levels and the reckoning will have to be confronted in the form of cuts and tax increases by any future government. Labour doesn't expect that to be its problem.

    King is right and knows precisely what game is being played.

  • Comment number 9.

    So things were different here than elsewhere with different regulation. That would suggest that what went on here was directly related to the banks here and how they both self disciplined themselves and reacted to regulation. The fact behaviour varied under different regulation is neither here nor there because the bank self discipline is important in the outcome under the environment here at the time. There is at least one major bank operating in the UK which has been largely unaffected, relatively speaking, by this jamboree - HSBC. It appears to have excercised some self imposed discipline - other than credit cards in the USA which look to be likely to go sour. Perhaps you should interview HSBc and ask just what they did that was so different and what is needed to make other banks behave more like them. Perhaps the culture and the guys at the top is the answer.

    The issue then despite being complex mainly is to do with banks internal behaviour and effective rules that allow regulation. There is the issue of political encouragement of wayward commercial policy - which simply says that governments are plain useless at understanding commercial risk. The logical conclusion of governments wanting to benefit from engaging in commercial activity is that the government should nationalise the banks, the lot of them, and run them, but there does not seem to be much enthusiasm - so the upshot is the government should stick to regulation, which is its job. The chancellors - move along now theres nothing to see here - type message is just plain daft. There clearly is plenty to see, in particular what role HMG has had in this mess.


    There are many ways regulation can apply and many levels, including public announcement of concern of an individual banks behaviour and performance, warning shots to the markets. markets tend to react to bad news which then forces policy change.

    Fundimentally there is something wrong about a multinational bank with a book bigger than the UKs GDP taking risks in other countries or relating to other countries markets and then asking the UK taxpayer to stump up to fill the hole.

    I have now asked this question many times, and only recieved a deafening silence from banks and bank workers. In what way does a UK bank have liabilities due to domestic mortgages in this country? The house buyer who seeks a mortgage has to have insurance against problems as part of the mortgage. Any shortfall against repossession and subsequent sale is met from the banks point of view by the insurer who then pursues the ex houseowner to bankruptcy. In this country it is not possible to throw the keys over the counter and walk as it is in the USA due to 1930s legistlation still on the statute book there. In the case of small businesses it is usual practise for banks to secure loans against directors personal assets, ie property. So where have these black holes on the banks balance sheets come from and what have they to do with the taxpayer. Credit cards and big business. Hmm, I would have expected care in risk assessment and charges to cover the risk of default. Again what has it to do with the taxpayer. Accepting or encouraging fraudulent applications, eg some self assessment, in what way has that got anything to do with the taxpayer. Knowingly behaving in a self harming manner, taking on high risk loan applications. What has that to do with thtaxpayer. Banks playing games with CDOs, well what has that got to do with the taxpayer, thats gambling. It just gets more and more ridiculous.

    The bottom of the food chain is consumer credit and how is it difficult to control that when all details are online. The only difficulty is saying no to the consumer applicant. I understand that a bank that cannot flog debt has a problem but that is at the heart of the matter. if it is difficult for an individual to move sums about in the region of approximately 1500 GDP due to terrorist funding alerts in what way can it be difficult to control access to debt.

    I would be more impressed with King if he had opened his mouth a couple of years ago. I cannot remember any great warning then, and he had the same mouth available, and there remain the reports of concern at the BoE of the way things where going several years per the bubble popping. The fact remains that the BoE and the MPC are part of the development of the jamboree we have seen. Whatever restrictions where placed on the BoE all King has shown is there is scope to get an adverse message out if there is the desire. The only adverse message from the MPC was David Blanchflower's, repeatedly, and he was viewed it would seem as breaking protocol by speaking out. So rather than looking to what King is saying after the event the question needs to be asked of David Blanchflower as he got it right - what was it that lead you to your conclusion and what was it that motivated you to speak out - so this sort of behaviour can be embedded in the future. There is no point in employing guard dogs and muzzling them.

  • Comment number 10.

    The trouble is, Stephanie, that 90% of the population have horizons about as far away as that of hodgeey, the first commenter to this post. The modern world's fundamental social problem, and it's getting worse, is that getting elected requires politicians to do the wrong things. You talk of a grown-up conversation - most of the population wouldn't know a grown-up conversation if it came up and bit them in the a*se. But however major a stumbling block this is, it's minor compared with the fact that supposedly cerebral politicians have surrendered the supremacy of intellect to the crass ignorance of the masses.

    It's like taking 10 teachers, a school of 1,000 seven- to eleven-yesr-olds, and suggesting that the children must dictate what to do because there are more of them. Total lunacy.

  • Comment number 11.

    Too big to fail = too big ?

    Maybe the real question is where does the corporate entity of a bank end ?

    At the momemt it is clear from behaviour of both government and the largest institutions that the corporation is not delimited by its shareholders but by the community at large.

    The question IMHO should be rephrased. How can we redescribe banks in a way that truly limits their liabilities to their shareholders ?

    The tacit underwriting of banks by taxpayers has been proved unsustainable - if breaking up banks is the best way to achieve limited liability then Mervin King is correct.

    The alternative is to accept that the largest banks are defacto underwritten by government, and so tax payers must expect both a premium to be paid, and to have executive power in their running ( irrespective of whether they hold stock ).

    Tough decisions,especialy given a week prime minister, vested elite and volatile international economy.

  • Comment number 12.

    @10 ExcellenceFirst

    "getting elected requires politicians to do the wrong things"

    Now there is a really perceptive view! Actually I agree.

    Perhaps our entire system needs replacing, as it has been hijacked by crooks; we are governed by a duopolistic dictatorship who are concerned about themselves more than the rest of us.

    Brown has known all along what is happening and he has gone along with it as has his predecessors in #10. This financial crisis was no accident; it was a racing certainty.

    The fundamentals have not been addressed, so it will happen again, worse next time.

    Brown and the rest of the crooks and their co-conspirators in banking and finance are solely concerned about their personal wealth and future prospects.

    As I say, once we get rid of the crooks in charge, things will improve.

  • Comment number 13.

    CARELESS IN THE COMMUNITIES

    ExcellenceFirst (#10) "It's like taking 10 teachers, a school of 1,000 seven- to eleven-yesr-olds, and suggesting that the children must dictate what to do because there are more of them. Total lunacy."

    Wrong word - it's the organized chaos much loved by Ludwig Von Mises and friends in the Austrian and Chicago Schools, except some (including SF I suspect) consider the promotion of anarchism by people such as Thatcher, Reagan and Blair et al. so inconceivable that they use the word lunacy or appleal for grown up talk instead. The truth is that legislating for and sustaining anarchism is extremely hard work as people trend to call for order/government, which, of course, is anathema to anarchistic/Bolshevistic politicians. They forget that Stalin purged the USSR and Comintern of these types. They were just agents of the German High Comand in WWI to remove the Tsar/State. That is how they operate in the UK and USA and EU today. That's how bankers make money.

    I'm not joking, so it's not going to chnage much. To see the true nature of this system one has to try to look at it through the eyes of N Korea or Iran, and that of course is seriously discouraged :-(

  • Comment number 14.

    Well scrapping the 4000 quangoes would really help cut costs! What do they do anyhow?? As for the banking system, I think we need to consider outside of the box ideas like, do we actually need banks?? It's clear that banks do very well by the existence of tax payers but I fail to see how we benefit from banks!

  • Comment number 15.

    hodgeey (#12) "As I say, once we get rid of the crooks in charge, things will improve."

    There was an excellent documentary on neo-liberal Russia a few years ago where a leather jacketed Russian movie-maker/entrepreneur was shown followed by a clip to his parents, who neatly turned out in their almost matching woolly jumpers said to the camera in a rather bemused way that their son was now called a businessman, whilst 20 years ago he would have been called a criminal, i.e. an enemy of the people.

    The thing is, they were good people. The question is, is George Reisman. and would he understand why the question was being asked?

  • Comment number 16.

    Comment 13 : JadedJean

    I'm having a bit of difficulty working out which of us is a step ahead, and which a step behind. To use my school example, you're, I think, suggesting that the decision by the Board of Governors to transfer power from the teachers to the children was not a badly-thought out, but well-meaning, attempt to enhance the outcomes of school democracy, but a conscious attempt by the Governors to strengthen their own supremacy by sabotaging the power base of their main rivals, the teachers.

    So my idea of the Blair/Clinton Third Way as being an ill-considered grab for votes could more accurately be thought of as a deliberate policy for power-retention aimed at destroying the influence of the intellectuals. Interesting!

  • Comment number 17.

    I find it STRANGE that MERV wants MORE POWER over the BANKS.

    Merv reckoned that when HALIFAX PLC WERE FACING A WINDING UP PETITION

    THAT IT was NOT a MATTER for the B of E???

    THE BANK OF ENGLAND SAID IT WAS NOT THEIR PROBLEM!!!

  • Comment number 18.

    " Banks too big to fail, too big" flows like a Roubiniism

    Nevertheless, Mervyns poetic efforts at the mansion house are a work of Enlish genius rarely seen since the pregordonion lake poets.

  • Comment number 19.

    With Post #8 here ..I think there is more to this than just a bit of white-tied, stuffed shirts chucking bread buns at each other.

    Of course the 'invest into a recession' thing is fine ...if there is money to invest.

    Thinking very hard and dreaming up pretend money (quantative easing) isn't real money however hard we wish it to be...so what's happening at present isn't 'investing': it's just propping up a rickety edifice with a very fragile support ...which will be okay for the Government just so long as it lasts until May 2010.

    Then the butterfly brained voters (us) will have forgotten all that has passed because of a 6 month window of illusory mini-boom.

    I think King's subtext is that IF the delay between rhetoric now and action in July 2010 was of no matter then why worry? But if this delay is going to make a bad situation materially worse, then lets stop talking and start acting now.

    Or put another way; ".....I need more powers" = "I have no powers, it's going to get much worse but don't blame me when it does"

    The differences between the Bank of England and the Treasury are coming around more and more frequently.

  • Comment number 20.

    That on-going question: Does size matter? A global economy, which for some reason after catostrophic failure, is not in question, only the financing of it. National interest, that should include the economic interest of the citizens, have been minimized for the industrial and corporate interests. What should be discussed is the philosophy of governments and if the policies are consistent with that philosophy. The pseudo-sciences of economics and finance apparently have a disconnect between the methods and the ourcomes. What we have learned is that we must regulated human behavior. Power and greed played out in an ethicless governmental and corporate environment eventually leads to diaster. The welfare state has moved from the poor to the rich and no one seems to bat and eye. The arrogance is that neither governmental for financial leaders have every offered any kind of apology or accepted any responsibility for their malfesance. They are school boys wanting to be sent to their room so they can aviod the whipping they deserve.

  • Comment number 21.

    ExcellenceFirst (#16) "So my idea of the Blair/Clinton Third Way as being an ill-considered grab for votes could more accurately be thought of as a deliberate policy for power-retention aimed at destroying the influence of the intellectuals. Interesting!"

    Yes.

    I'm constantly surprised that far more people don't see that this is what has obviously been engineered for years, but I suspect they are too depressed. The way that Thatcher's influence on Civil Service Specialists (professionals) was described by those on the receiving end of the purge in the 80s was that they were effectively being 'topped'. It should also be clearer that this has been the effect of increasing the numbers going into Higher Education from 5% of the cohort to 50%, as has feminizing the curriculum - which further reduces the likelihood of the country producing anything as females are not creative in that way. The mass education program has benefited those making loans and rentals etc, but it ha salso weakened the inteligentsia whilst swelling the lower half of the Gaussian curve through delaying motherhood amongst the brighter females. This has been further exacerbated by mass low-skilled immigration from Africa and S.Asia, people who, whilst grateful. and less discerning in what they buy and eagerly vote for yet more anarchism (sold to them as freedom through education which si alie as education doesn't raise intelligence because it's mainly genetic).

    Those doing this (and one main party is as bad as another) know that the main cost is rising crime, hence all the Home Office legislation over the years. The Prison population has doubled since the early 90s, and everyone knows about gun and knife crime etc. What free-marketeers don't wnat is any government at all which regulates what they do as regulation is bad for business.

    What we are seeing is a systematic anarchistic campaign against statism at the expense of those it was created to serve and protect.

    That many people don't see this is so can be ascertained by so many asking for something to be done by 'the government' when in fact they have tacitly elected governments on the ticket that they will do less and less governing! You even see Brpown and Cameron arguing over the Dispatch Box as to who regulated the least!

    PS. If you look at the humour most people have self-destructively lapped up since the late 70s, it's been predictably anti-statist - i.e. anarchistic.

  • Comment number 22.

    Dear Stepanie,

    The only problem is that they are talking about the wrong problem.

    The correct bureaucratic architecture needed to regulate banking is certainly a worthy subject (though if, like me, you have long observed how mandarins like to play with structures and ignore the vital detail you might conclude this was but another power-play for a bigger empire). I wont, however, argue away the need for a match referee for the Finance industry even though Im doubtful how effective it can be in a global economy.

    Broadly, no regulator of note anywhere in the world, whatever the system, foresaw the impact of the credit crisis on the real economy which is all that really matters. The consensus appears to be that a greatly expanded bank and shadow banking system pumped out too much credit and subsequently panicked at the first sign of default. The panic set up a negative feedback loop that nearly destroyed the system itself. Feared defaults of, say, 7% total loans didnt lead to a paper loss of 7% but a near collapse of the entire system only prevented, lets concede, by our much-maligned Prime Minister. That wasnt expected, of course, but the real issue is how quickly that impacted on the real economy. Presumably Finance then removed significant volumes of trade credit from the real economy and hit production hard but Im not convinced this was the only transmission mechanism. I think changes to the relative value of building land and productive industry at home before the onset of the credit crunch contributed to the redundancies. Also, oil prices driven up by hedge fund speculation impacted on costs and gave mandarin Mervyn, among others, an excuse to delay appropriate slump-avoiding action. The media and the opposition also did their bit to make a difficult situation nearly impossible and transmit the panic to consumers. All these might help explain the startling speed at which growth actually dropped.

    So far, though, everyone who rises above the political side issue of public expenditure seems to think the neglected problem was the boom. Actually, though house prices and US medical costs, for example, inflated much too sharply, there wasnt a universal consumer boom at all.

    Which leaves us with the real issue - the mechanics of the bust.

    A well-designed system doesnt allow self-reinforcing negative feedback. To concentrate on avoiding a boom misses the point you need to think about the panic phase and its mechanics else you are back to elevating the idea of removing the punch bowl before the party gets going to policy and how long would that last?

    Booms in particular areas will occur again. There is too much money demanding gains over and above Treasury rates to prevent that entirely. If, however, there is anything in market theory they will sort themselves out eventually rising prices will reverse. Some will get caught (you pay them a risk premium after all) but we shouldnt allow it to impact much wider.

    More importantly we have to contain financial panics to the financial world and avoid contamination of the real economy.

    Im sure they really ought to look at the world of heavily leveraged buying and selling of paper assets. Its trading that needs onerous regulation, not banking. Nowadays there is no practical limit to trading volumes just click and enter to bust the bank. Neither is there is any cultural pressure on risk-taking. There certainly isnt any concept of the common good to balance cause and effect of profit making. It is here, on the virtual, unsupervised, trading floor that the negative feedback loop starts. Sell short and talk down (or vice-versa) makes big money that can be justified (under rational market dogma) as simply anticipating the inevitable. It (and daft accounting regulations) was the mechanism that led to the lay-offs.

    Short selling, harmful derivative trading and un-backed speculation really cant go on as they are. As we write, speculation is driving up oil prices again. I do hope they start debating the real problem soon.

  • Comment number 23.

    I think legislative splitting of large banks is messy and will do more damage than the status quo. Instead, a system of graduated regulation should apply to financial institutions depending on the type of functions they perform (functions being utility, lending, investment and reading).

    Ask the risk and consequence of failure increase the necessary capital levels and similar regulations would increase. So an institution that does all of the functions would have a much higher capital requirement than an institution that only did utility and lending.

    This would effectively change the profitability of large institutions to the point that large scale institutions become unprofitable as combined entities. Then it is up to these companies to find the best means to re-organise themselves most likely leading to splitting into more manageable parts. The key is that the market and business works out what works rather than some guess by legislators.

    An added bonus is by including consequence of failure capital requirements for very large institutions can be made larger to reflect the impact of their failure in effect making being overly large unprofitable as well.

  • Comment number 24.

    jj

    The key issue is those supposed to be regulating do not appear to have regulated sufficiently. They appear to have got too close to the commercial operation, ie seen too much of a benefit from the tax revenues from the commercial activity they are responsible for regulating.

    The only way around this is to have clearly stated regulations and reporting of the policing of regulations. It has been suggested somewhere, although it has not be discussed much, that there was some HMG leaning on the FSA to take the light touch route, around about the time there was a wobble in the economy and things might have been slowing (circa 2005).

    There were repeated attempts it would seem by the banks and tacitly by HMG to keep the housing market on the boil. none of it can be described as accidental. Everytime things slackened there was another trick produced. Extending ratios on income, BTL when FTBs where being priced out, self assessment. The outcome was that when a collapse came it was all the worse because the fall had to be further.

    I don't see it has much to do with the civil service. This is basically those decision makers at the top of banks and HMG twisting the market to their short term benefit. I therefore do not expect either the banks or HMG to say - look what we did. Of the two parties the biggest default is by HMG whose role is to regulate. It is the nature of business to exploit so it is not unexpected that business behaves in an exploitative manner. HMG however has drifted towards the situation of the local bobby who indirectly benefits from a boom in local crime, the very boundary that must not be broken.

    There are many groups that influence political events and the likelihood is an aging population will have more impact in the future than the group you focus on. There are imbalances everywhere.

  • Comment number 25.

    22 Garthking

    You are basically talking about gambling activities. The only way these can be ultimately controlled is by those who gamble having to shoulder the cost of gambles that go wrong. Not bailing them out on the basis they somehow are infrastructure, because they are not infrastructure. Nor should what are essentially infrastructure activities be allowed to be used to fund gambling operations, ring fencing is required. But is HMG up to it, not likley based on Ali D in da House's comments.

  • Comment number 26.

    JJ there is a circularity to the anti-statism.
    As you know, before Thatch the senior civil service were almost exclusively Oxbridge - you may say the intellectual elite. You may equally disagree and that the arguments against government running things is that taxpayers don't like paying tax as a start and certainly didn't accept handing over tax to an elite that told the public what was good for them (and sought to protect the position of their establishment).
    So do you argue for a state that is monolithic, self serving, and arguably class based as per the 60's-70's Establishment or do you favour a meritocratic state that eschews populism and reaches a policy consensus (democratic? how do you suggest this is decided) and governs effectively.
    I actually disagree with those who criticise the emergence of management and dare I say accountants within the health service - in the surprisingly recent past there were very few qualified accountants in NHS and government - still very few in the Home Office I believe. Good organizations depend on management and information to provide feedback - the tension with those who claim deity in the NHS will ebb & flow and needs checks and balances.
    What is your take on the unchecked growth of the legal establishment? A monopoly that even Thatcher balked at tackling and Blair has perpetuated.

    re humour Was Basil Fawlty anti-statist? he was certainly anti-riff raff?

  • Comment number 27.

    glanafon (#24) "I don't see it has much to do with the civil service."

    Thanks for sharing what you think.

    The Civil Service is the state. The Civil Service is the executive arm of government. These are the people who once regulated. The fact that much of it has been turned into Agencies or QUANGOs is just part of the rolling-back process of anarchism initiated by Thatcher and continued under Blair and Brown. See Paul Mason for the nobbling of the FSA by Blair. See Treasury for Brown's directiove of light-touch self-regulation.

    You are not seeing the wood for the trees. Nor, it would seem, will you be shown the wood. How might one know that what I'm saying is so, and has been strategic?

  • Comment number 28.

    tonyparksrun (#26) "So do you argue for a state that is monolithic, self serving, and arguably class based as per the 60's-70's Establishment or do you favour a meritocratic state that eschews populism and reaches a policy consensus (democratic? how do you suggest this is decided) and governs effectively."

    Monolithic yes.

    Yes the senior Civil Service G5s and above) were mainly Oxbridge, but there were Red-Bricks there too. But back then we sent 5% to niversity not 50% and it was still largely males who worked and females brought up families. That has been sabotaged to all our cost, though many don't see the fatal consequences of below replacement level birth-rate.

    The Civil Service selection and promotion process was quite rigorous and it was meritocratic. Class is largely a function of genetic ability (both 'g' and 'conscientiousness'), except that's been undermined in recent decades by those who have abused human diversity in order to secure power for themselves (more accurately, the weakening of state power in favour of the markets and profit). They have displaced those who prevented this in the past.

    The British Civil Service Code was honorable. Today, the Civil Service is corrupt. It was corrupted by Thatcher and those who came after her. To have any hope of fair and equitable government we would need an Old Labour style government (purged of New Labour subversives) and without a subversive, anarchistic Opposition. We would also need the USA off our backs - a tall order. We would have to get out of the EU or else Stalinise it (another tall order?), and we would need a highly selected Civil Service again, along with a purge of what we have now. What we have now is hopelessly unmanageable by design.

    Changing all this is a tall order indeed - in fact it's pie in the sky. To me, the future looks rather bleak :-(

  • Comment number 29.

    "In effect, Mervyn King said in his speech that it was not sustainable to allow banks to grow big doing reckless things, all in the knowledge that if things get too tough, the government will bail them out."

    If one examines the above statement closely, one will find it provides a significant clue as to the cause of the current crisis.

  • Comment number 30.

    JadedJean # 28

    "To have any hope of fair and equitable government..."

    JJ, I congratulate you: you are the consummate comedian!

  • Comment number 31.

    29 LibertarianKurt - Great observation. They all knew - and were complicit in it!


    I also agree with a number of the comments here too ... including

    * ghostofsichuan (post 20):

    "... What should be discussed is the philosophy of governments and if the policies are consistent with that philosophy. The pseudo-sciences of economics and finance apparently have a disconnect between the methods and the ourcomes. What we have learned is that we must regulated human behavior. Power and greed played out in an ethicless governmental and corporate environment eventually leads to diaster. The welfare state has moved from the poor to the rich and no one seems to bat and eye. The arrogance is that neither governmental for financial leaders have every offered any kind of apology or accepted any responsibility for their malfesance ..."

    * glanafon (post 25):

    ".. You are basically talking about gambling activities. The only way these can be ultimately controlled is by those who gamble having to shoulder the cost of gambles that go wrong. Not bailing them out on the basis they somehow are infrastructure, because they are not infrastructure. Nor should what are essentially infrastructure activities be allowed to be used to fund gambling operations, ring fencing is required. But is HMG up to it, not likley based on Ali D in da House's comments."



    Poweromics is prevalent and Ignoromics allows it to be ... and I think it will have to get even worse before enough people take sufficient interest and decide to do something about it ...


    David Clift, a Future 500 Leader


    * Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed. You can take a look at http://poweromics.blogspot.com for more information & help do something about it e.g. ask for 'People Democracy' at http://petitions.number10.gov.uk/peopledemocracy

    ** Ignoromics = People are either effectively ignorant of the situation (e.g. the overall environment) or not prepared to take responsibility to make sure it changes for the better.



  • Comment number 32.

    Banking is, and always has been about analysising and allocating risk. The problem in the last few years was that very few people in banking analysed risk, as long as they got flog it to another mug, the actual risk was irrelevant.

    This was made worse by Basel II which allowed banks to base the amount of capital they need based on their own model of risk - given that there was so little actual analysis of real lending happening, this became simply computerised.

    Whether banks or too big or too small is a side show. Unless they are willing to do meaningful analysis of the actual risks they are taken they will remain an accident waiting to happen

  • Comment number 33.

    I my view, we currently have three major questions to debate.

    The first one is 'what should government do, can the country afford it and what tax raising mechanisms should be used'.

    For example, can we afford final salary pension schemes for public sector workers?, what is our entitlement from the NHS with an aging population?, should government be involved at all in 'broadband for all'?, do we need to rebuild schools or colleges?, are handouts, grants or tax advantages to some industries preferable to fewer overheads for all businesses?, and do we need identity cards and collection of phone records and email transactions etc? Basically what outputs do we want?

    The second debate is about how we get the outputs we want from the financial sector. This can be considered by considering the impact of failure on stakeholders. We now understand better the outputs associated with not managing these properly. This debate should consider the potential impact on domestic depositors, domestic borrowers, bond holders, shareholders, commercial depositers and borrowers, lenders of last resort. I am fairly confident that we would find that most of the mechanisms for reducing the impact on all the stakeholders exist but that they were not applied nor the impact of failure made transparent. That is, the procedures were in place but not in use. So the debate needs to focus on proper implementation, transparency, monitoring and penalties for failure. We could start the debate by considering the impact of SIVs and SPVs and whether shareholders have sufficient information regarding these vehicles to assess the impact of their 'investment'. We could consider how we publicise the capitalisation of banks to the widest audience.

    The third debate is about how we maintain affordable energy supplies for the forseeable future because without these, neither of the above is worth debating. I am not talking about climate change or CO2 emissions. I am talking about how we heat, light and power our homes, schools, offices, factories, shopping malls, just in time production and delivery, ATMS, banking records, water treatment facilities and anything else that depends on gas and electricity. We cannot fucntion without these supplies.

    Stephanie is right that serious debate is required, even if the topics might be different.

    We need to do more than just move the pieces about

  • Comment number 34.

    LibertarianKurt (#30) "JadedJean # 28

    "To have any hope of fair and equitable government..."

    JJ, I congratulate you: you are the consummate comedian!"


    What you fail to grasp is why individualism leads to social sorting, polarisation and predation i.e. because of inequality. To prevent that, one needs benevolent dictatorship i.e. statism.

    In passing, perhaps you can explain to me why Murray appears to write in favour of Liberatarianism? He's not a psychologist.

  • Comment number 35.

    jj 27

    Are you really suggesting that civil servants have opposed the political rulers in the past. They have doen as instructed, that is why they are called civil servants. The issue is the degeneration of the political system not civil servants.

    You did lecture in law and politics didnt you.

  • Comment number 36.

    JadedJean # 34

    You have a disturbing problem JJ: You don't recognise the value of the individual. All you see, through your "rose-tinted" statist spectacles, is one big amorphous social blob that can be economically manipulated to suit the socialistic culture of the ruling political elite.

    I know Murray is neither a psychologist nor a libertarian (as he proudly proclaims); he's just a warmed-over statist, that's all.

  • Comment number 37.

    34 jj

    ..''To prevent that, one needs benevolent dictatorship''..

    Contradition in terms unfortunately.

    Something about power always corrupts.

    But an alternative view is always worth seeking. Must go and read some of Andrew Brons' opinions. Bit alternative.

  • Comment number 38.

    I found the article useful in highlighting the complexities involved in sorting out banking regulation. Undoubtedly the knee jerk reaction is to create draconian regulation, yet, as the article shows, there is little if no correlation between regulation and failure in the current crisis. This is crucial for the UK as London is a world player in banking and financial services and could play a key role in world economic recovery so long as it is not placed in too tight a regulatory strait jacket. We should not forget that HSBC and Barclays have not resorted to the public purse and Lloyds would not have done but for playing White Knight in bailing the Government out of Halifax. Unfashionable as it may be, there is good reason to champion the UK financial services sector and argue robustly against inappropriate regulation. That is not to ignore that there are lessons to be learned, but there are still no precedents to suggest that governments or civil servants are the best people to run banks.

  • Comment number 39.

    funkyblogger # 38

    "...but there are still no precedents to suggest that governments or civil servants are the best people to run banks."

    Or, indeed, that government and civil service bureaucrats can "run" or "manage" the whole economy either.

  • Comment number 40.

    leanomist # 31

    The point I am making is that the retail banks would have never have done the reckless things that they did had it not been for the fact that government would stand ready with bailouts (taxpayers' money); that the central bank stood ready to "pump up" the reserves and that the FSA's so-called regulation failed so miserably. This is the moral hazard implicitly contained in Ms Flanders's statement quoted at # 29.

    All banks are businesses, and no matter who they are or how big they are, they should be subject to "sink or swim" free market forces. If they are insolvent (which, if one studies the nature of fractional reserve banking, they always are anyway!) or bankrupt, then they should fail all of them.


  • Comment number 41.

    A Grown up Debate ? with an Economist ? I dont think, I have never seen it before, but OK I will give it a try. There are 6,000,000,000 people on this planet. If every one of them were in productive employment how much stuff would we produce ? Answer too much, way too much ! So why do we persist with a financial system, that was invented pre-machine age, that says unless you work you shall not eat ? The usual answer is a childish Puritanical : its not fair that some people work and some do not. But today Steph says we are going to be grown up and so it is time to recognise that we only need 10 percent of the population to work : thats 600 million or can we get everything done with only 60 million workers ? The next question is, if we only need 60 or 600 million and we dont use NEFS Net Export Financial Simulation www.worldnews.blog-city.com ,then what how else are people going to get money without doing unnecessary work?

  • Comment number 42.

    From the The Great Fall 2009-18 ISBN-300-3994-3888 (2026).

    Immune in the delusion that he had played no part in the proceedings, GORDON BROWN managed to throw fuel onto the fire in a desparate attempt to resurrect the economy through Quantative Easing.

    The most of the naive commentators were beholden unto his spell, proclaiming the end in sight. Little were they to know of the 9 years of famine that lay ahead.

    In 2022 Brown was sentenced to 15 years in jail by the English Court of Supreme Justice, for "introducing a Tripartite system favourable to his own aims at the expense of the Working Person"

  • Comment number 43.

    "A grown-up debate" I'm puzzled by this phrase. Does this mean that other debates are childish or adolescent? Or does it mean that debates start out as children and then mature into adult grown-up debates?

    ""Given the uncertainties ahead," Darling said, "it would be a mistake to try now to set in stone detailed spending plans for individual departments five years ahead.""

    What kind of socialist country doesn't have a five year plan? Even in the worst depths of depression and war, the USSR had a five year plan. I'll bet North Korea and Cuba have a five year plans. What has Britain come to when it can't even afford a five year plan. Without a five year plan, what's left for late night TV, "Agriculture UK?" Is Britain thinking about turning over sovereignty to create five year plans to Brussels along with everything else?

  • Comment number 44.

    "The truth is that both are right. That is what makes this stuff so hard."

    Nothing hard about this. THe simple fact of the matter is that both of them made statements with defined parameters and, therefore, the statements can be taken to mean whatever the listener wants them to mean. Perhaps a more defined set of statements will make better sense.

    MrTweedy, #6, makes the case for merchant banking and commercial or retail banking should be kept separate and this is the crux of the matter !! Many of the too-big-to-fail lame ducks were commercial operations playing/gambling in the merchant banking sector. I use the term "operations" because I include the "non-banking" financial operations like building societies and pseudo-banks e.g. Northern Sponge (sorry, I mean Rock) !!

    I have yet to see any distress signals from HSBC, perhaps the biggest bank on British shores !! Hence, this defeats to the supposition that it is the size of the bank that caused/ can cause the failure !!

    What I think should happen is that merchant banks and other gamblers, e.g. hedge funds, etc. *should* be allowed to fail and retail banking should be kept separate and rigourously regulated, especially with regard to their capital adequacy and debt ratios !!

    Then again, I'm not an economist, so what do I know about banking !! Maybe I should go back to 'A' levels and study Geography, as a poster in the previous blog pointed out !! :-)

  • Comment number 45.

    GlenisDevereux (#41) "There are 6,000,000,000 people on this planet. If every one of them were in productive employment how much stuff would we produce ? Answer too much, way too much !"

    Hold on, productive employment is not about making things. What about doctors, police, teachers, road-swepeers, postal-workers, plumbers, toilet-cleaners, 'sex-workers'.. even economcs journalists ;-) ? 80% of the UK economy is Service Sector, including ...Financial Services.

    Productive - bad word.

    "So why do we persist with a financial system, that was invented pre-machine age, that says unless you work you shall not eat ?"

    We don't. We have lots of people on benefits.

    "The usual answer is a childish Puritanical : its not fair that some people work and some do not. But today Steph says we are going to be grown up and so it is time to recognise that we only need 10 percent of the population to work : thats 600 million or can we get everything done with only 60 million workers ?"

    There may be 6 billion on the planet, but half a females and in some countries a very large part of the population are children. Then there are all the people who are too old to work. Then one has to consider ability being normally distributed. Then what work is available becuase labour is cheaper elsewhere.

    So many grown up things to consider - how many have you considered?

    Where does SF say we only need to have 10% of the population in work? If 50% of the population works (i.e excluding non-working mothers/wives, children, the elderly and physically/psychologically infirm) but unemployment goes up to 3 million, what percentage unemployment is that?

    Politicians (and journalists) are like magicians. Lots of grown-ups don't do maths and science so are easily foxed by magicians.

  • Comment number 46.

    MarcusAureliusII (#43) ""A grown-up debate" I'm puzzled by this phrase. Does this mean that other debates are childish or adolescent?"

    Yes, and I have explained (explicated?) why for anyone interested.

    Look up the term intensional (a bit like mental) and read this classic. You see, since then, many have grasped that science is the only way we get to know things reliably (albeit with a degree of likelihood rather than absolute truth). Science does not proceed by debate. It does advances through empirical research.

    It informs us of facts. It eschews debate in fact. It knows it to be prone to the intensional.

    See foredeckdave and LibertarianKurt etc for love of debate.

    Warning: this line tends to go with the diaappearance theory of truth, and its extremists are prone to eliminativism. ;-)

  • Comment number 47.

    "Science does not proceed by debate. It does advances through empirical research."

    Surely it evolves by a combination of the two ?

    WVO Quine needs to be read alongside Karl Popper, Wilfred Sellars, Thomas Khun, Paul Feyerabend, Alan Sokal &Jean Bricmont, Michael Polanyi,Patricia Churchland, and David Hume...............

    We may wish to build our science on 'facts' but do we only end up building it on tautologies ?

  • Comment number 48.

    superiorsnapshot (#47) "Surely it evolves by a combination of the two ?"

    Life is short, so pay attention. You don't debate evidence. ;-)

    Does the earth spin one way, and then another? You are just a victim of anarchistic (Jewish) thinking and publishing interests. Even Feyerabend was only setting up a dialectic with Lakatos so the latter could shoot him down (alas he died). You'll find nothing in Lakatos (or Kuhn who nicked the last third of Two Dogmas and wrote a book!) you won't find in Popper and you won't find anything in emigree Popper that you won't find in Quine. Quine and Skinner did a Machian, austere, two-hander. The Churchlands and Sellars were just tinkering with the superstitious current modus vivendi that most people are stuck with - just an empirical explication of error.

    Quine and Skinner both thought the majority of philosophers and psychologists nuts. They are. Economists are worse. It's a closed-shop - see Kahneman's Nobel 2002 and the etnicity of most Nobel Prizes in Economics vs population/planet base rates. It defines all the evidence, even that from IQ, but that's politics (and the Null Hypothesis) folks.

  • Comment number 49.

    Stephanie, I am very sorry but I dont agree at all.

    I accuse both the BBC, Government and very particularly the banks/financial institutions of See no Evil, Hear no Evil and Touch no Evil.

    The truth is the financial system in the UK is that big, the interests by the "Elite" that powerful and politics so intertwined that all resources go into finance at the expense of every living soul in the UK.

    When I look at the galactic gulf between support for the financial institutions and industry in the UK you have to state it is unsustainable. If the world regulates against the UK "view" of finance, this country will go down the pan. Do you seriously think that other countries will hand the UK a living made off the back of the rest of the world ?

    A grown up conversation requires grown ups, those who take responsibility for their actions, who listen and take actions in the interests of everyone.

    This country is full of "Elites" whos first action in a period of turmoil is to take their money abroad and pickup the pieces when they can make another killing.

  • Comment number 50.

    Comment 46 : JadedJean

    "science is the only way we get to know things reliably (albeit with a degree of likelihood rather than absolute truth)."

    And yet this is completely lacking in so many people's thinking. The idea that we should seek the most likely explanations is swamped by those who deny that this process is even possible, and so insist on the prevailing opinion being the one that can be made most popular.

    There's a theory, isn't there, that many adults never reach Piaget's Formal Operational Stage. I'm an amateur in these matters, but is it asserted that this happens because they're incapable of getting there, or that they're not educated well enough to do so. Also, is this theory generally thought of as a bit wacky, or is it taken seriously - and if so what is generally felt to be the best way to run a world in which a large number of people are not able to understand the processes by which this has to be done?

  • Comment number 51.

    Erratum (#48) Several typos, but for 'defines' read 'defies'. One could say that Kant's answer to Hume (and Popper's somewhat anarchistic one too, note his 'Open Society and its Enemies' was second only to Hayek's in Thatcher's favoured readig list), were really non-answers. Quine was a realist, a pragmatist and an extensionalist, where this comes down to a) working with a critical mass of evidence and b) improving prediction and control. You won't find that in anarchistic economies by design (see King's speech).

    Skinner and Quine probably made themselves unpopular because Skinner's approach to behaviour management is far more suited to socialist regimes like that of the PRC and pre 1953/6 USSR. Much the same can be said of Keynesian economics, which should all be pretty obvious when one think's about it (use Reisman to highlight this, just be sure to see through his anarchistic spin - National Socialism was left-wing though). For similar reasons, you'll find that the later Sartre helped to inspire the 1979 Iranian revolution (he was a Maoist). Oddly to some, Sartre and Skinner had much in common.

    Note how Britain's government is currently described by Iran's Supreme Leader (see BBC NEWS). Look about you and ask who the evil-ones really are.

  • Comment number 52.

    ExcellenceFirst (#50)

    "There's a theory, isn't there, that many adults never reach Piaget's Formal Operational Stage."

    Piaget is a bit too 'cognitive' and wordy. It is much esier to look at these matters based on attainment data as IQ proxies - we have that on 90% of UK kids. Take our SATs at 7,11, 14. They are normally distributed. They are basically IQ tests and are standardised with a mean of 100 and SD of 15 (2/3 of the populaton fall +/- 1SD around the mean). That means that at least 16% of the population has an IQ of below 85. This makes some reading material totally beyond their grasp. The truth is that 100 isn't enough for much complex reading/analysis.

    Now, think of this in terms of ageing. Some people plateau at say 11. Tests get harder as one moves from KS1 to KS4 (7 to 14). The QCA/NAA has been making tests more 'inclusive' in recent times.......... this means standards have been lowered/feminized. Ask any KS3 maths teacher what it is like teaching probability to most kids in state schools. Even if they can work to the test, they are hopeless at applying it to novel cases.

    Note, the mean IQ of sub-Saharan Africa is estimated from standardisations to be in the low 70s, i.e. two SDs below European mean. That of South Asia (Indian sub-continent), is at least 1SD lower than the European mean. The East Asians are about 1/2 SD higher. We can not improve IQ through education. What are the consequences?

  • Comment number 53.

    FadedJeans #46;

    If you are going to explicate, take it outside;

    Tor-ree-a-door-a don't spit on the floor
    Spit in the cuspidor
    Dontcha know what it's for?

    If you are having intensional distress, I'd suggest you visit a pharmacy for some over the counter remedies. If that doesn't work, see a doctor.

    If you want something to eschew on, try gum or tobacco. I don't think they will give you intensional distress.

    Why did you bring foreskin dave into it? What's he got to do with anything?

    Did you say you want a grown-up debate? You're in the wrong place, this page is about economics. Any resemblance between economists and grown-ups is purely delusional.

    Harry Truman once said he wished for once he had a one handed economist. When asked why, he said that whenever he asked an economist a question, after he got an answer, it was always followed by; "on the other hand."

    If you can take anything an economist says seriously after they insisted on the very policies that bankrupted the entire world and now promise us they have one sure fire solution after another to fix it, you're crazier than they are.

  • Comment number 54.

    MarcusAureliusII (#53) "Harry Truman once said he wished for once he had a one handed economist. When asked why, he said that whenever he asked an economist a question, after he got an answer, it was always followed by; "on the other hand."

    "I gave them the state they asked for, but they're all still here." is something else Harry Truman said after having recognised Israel (contrary to George Marshall's advice). There is, amongst this group, it would seem, a slightly higher prevalence of some dispositions which are no doubt found also amongst all human groups. These behaviours are not at all condusive to grown-up debate, in fact, my educated guess (as explicated elsewhere), is that it's symptomatic of arrested development. The way to deal with this is to highlight these behaviours in order to humanely contain them.

  • Comment number 55.

    So one of the boys from Brazil did survive - I claim my prize !

  • Comment number 56.

    superiorsnapshot (#55) "So one of the boys from Brazil did survive - I claim my prize !"

    Do you think there's any difference between groups which preferentially breed within their own group? If not, how do you account for differences between species? Within species, do you see any differences between different birds, dogs or cats? Is it any different for humans? Do some families have higher risks/frequencies for some medical problems than others? Do some groups (cf. BRAC1 and BRAC2 and breast cancer, look into that one especially). What about other phenotypes? What about behaviours?

    Do you much about behavioural genetics? Is behavioural genetics a taboo? Is grown-up intelligent talk a taboo? Why? Is it political?

  • Comment number 57.

    Addendum (#56) The idea seems to be to have lots of people chattering about (debating?) things which really don't matter. What does that do apart from increase blog traffic/use of the web? Why does the UK, EU and USA want to see regime change in Iran, N Korea, China, Burma etc? Is it because free-markets (anarchism) make it much easier to target consumers?

  • Comment number 58.

    #14 "Well scrapping the 4000 quangoes would really help cut costs! What do they do anyhow??"

    They keep the unemployable in pseudo-employment !! No one else will employment them at that kind of money for doing nothing !!

  • Comment number 59.

    Well, let's get back to the topic of this thread! The real answer is that both Darling and King are wrong.

    Go and ask anybody in the street in the UK who caused this mess and the overwhelming response will be the bankers. If any of the parties really want to cpture the popular vote at the next election then their manifesto MUST contain a clear and precise promise to reign in and control the excesses of the The City. It almost does not matter what form of control is exercised or who by (Treasury/BoE/FSA) provided that it is seen by the pulic to work!

    On to other matters:

    #48 "Science does not proceed by debate. It does advances through empirical research." What an absolute load of rubbish! Debate is an essential element of the scientific process before, during and after the experimentation.

    #53 Why bring Truman into any conversation?

  • Comment number 60.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 61.

    JadedJean # 57

    "Is it because free-markets (anarchism) make it much easier to target consumers?"

    The above really encapsulates your stupefying inability to even remotely comprehend what a free market actually is. In displaying your badly misunderstood concept of free, voluntary exchanges of private property between free people, you resort to an inchoate mixture of artful manipulation, statist rhetoric, fallacious argument and logical inconsistencies to hoodwink those who you think are malleable enough to be persuaded by your dark philosophy.

    In the words of one of your heroes:

    "I trust no-one, not even myself."

    --J.V. Stalin

    If you cannot trust yourself JJ, then it is not surprising that you would be able to trust others to live their lives free from state interference.

  • Comment number 62.

    foredeckdave # 59

    Dave

    What caused the "excesses of the City"? What caused the banks to throw money at everyone and anyone who could sign their own name on a loan contract?

    The Austrian School business cycle theory provides the framework in which to fully understand the cause and the effect of the current economic crisis and all other crises that preceded this one. To paraphrase another blogger (rwolff):

    "It is blindingly obvious!"

  • Comment number 63.

    JadedJean (#57) "Is it because free-markets (anarchism) make it much easier to target consumers?"

    LibertarianKurt (#61) "The above really encapsulates your stupefying inability to even remotely comprehend what a free market actually is. In displaying your badly misunderstood concept of free, voluntary exchanges of private property between free people, you resort to an inchoate mixture of artful manipulation, statist rhetoric, fallacious argument and logical inconsistencies to hoodwink those who you think are malleable enough to be persuaded by your dark philosophy."

    'Austrian School mentalese' to 'Straight Behavioural English' Translation: YES!

  • Comment number 64.

    LibertarianKurt (#61) "I trust no-one, not even myself."

    --J.V. Stalin

    If you cannot trust yourself JJ, then it is not surprising that you would be able to trust others to live their lives free from state interference."


    It is true for all. You evidently don't see that, which is a tad worrying. The problem resides within verbal behaviour (overt and covert) as you have now been shown. Of course, you ignore this, what else would one expect? It's why Skinner was given such a hard time I suspect, i.e because he, along with Quine, exposed a very profitable ruse. If one can corner the market in an intensional language one can play it any way one likes so long as others don't see that there's no logic to the language-game. Hence, I suggest, the disproportionate representation of Jews in professions which exploit this indterminacy/inscrutibility. That is a fact.

    Stalin learned this harsh lesson with Trotsky and his supporters. The latter could argue in the language of Marxism, and of course Marx came from a rabbinical family. Stalin was a Christian seminary student to start with. After his 'purges' of the COMINTERN in the 1930s to establish Socilaism in One Country (remarkably like the Old Labour Party programme of 1945), Stalin was about to do the same in the 1950s. Was he just paranoid? Is the Supreme Leader of Iran? Is Ahmadinejad? Is Abass? Is there not a very long history? to this including Luther and the Catholic church?

    The interesting thing about narcisissists is that they are very like psychopaths. They lack empathy. They don't think that they're doing anything wrong, so when their self-esteem is threatened (as it often is when they frequently hurt others) they emotively make out that they are the aggrieved party or are being persecuted, i.e. that they are the victim. It really is quite odd to see this behaviour emitted (we saw a sample of it earlier in the year over Gaza), but many will have encountered it at work or home to their cost. Whilst this behaviour is found throughtout all human groups it may be a bit more prevalent amongst Jews just as some other specific diseases are (it's a function of endogamy). Hence the disproprortionate preoccupation with psychiatry/psychpathology as well as non-empirical economics?

    Something like this may surely explain the very high disproportionalities observed given such a small group of 14 million amongst 6000 million? Is it a curse or a blessing?

  • Comment number 65.

    If I can provide energy for free, and I charge you all a very small fee, you will pay it. I will end up having more than all of you. I will invest that in keeping an army, to make sure that I retain control of the free energy. You will all enjoy using my free energy, and you will pay me a small 'tax' for this abundance. I will use my position of social control to make sure that this energy is not wasted, to make sure that energy does not become completely scarce again, to make sure that everyone still can afford and want what I have to offer. Ultimately I become a new form of government.

    This is the free market.

  • Comment number 66.

    JadedJean # 64

    You make too much of the ideological differences between Stalin and Trotsky. There weren't any! Despite your fascination with the Stalin-Trotsky schism, it was far more an intra-bolshevik personal and factional squabble than any sort of ideological betrayal.

    As Mises noted:

    "The truth is that Trotsky found only one fault with Stalin: that he, Stalin, was the dictator and not himself, Trotsky. In their feud they both were right. Stalin was right in maintaining that his regime was the embodiment of socialist principles. Trotsky was right in asserting that Stalin's regime had made Russia a hell."

    Stalin and Trotsky are not different. They create faux ideological battlefields as the means to decide which faction receives the rent payments for the next four years. In the end, a coin flip would be just as effective: heads, Stalin gets the spoils; tails, Trotsky does. Regardless of the selection method or its outcome, our rent payment to the Treasury is still due as before.

    Statism by Stalin or statism by Trotsky; there is no difference!

  • Comment number 67.

    FrankSz # 65

    "If I can provide energy for free..."

    Frank, you inhabit a world of fantasy! Free energy? How does that work?

  • Comment number 68.

  • Comment number 69.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 70.

    You can also google for "BLPIndependentReport", all one word. I can't link to it as it is a pdf

  • Comment number 71.

    FrankSz # 68

    "As to whether zero-point energy may become a source of usable energy, this is considered extremely unlikely by most physicists, and none of the claimed devices are taken seriously by the mainstream science community."

    http://mises.org/story/784

    http://mises.org/story/479

  • Comment number 72.

    LibertarianKurt (#67) "Frank, you inhabit a world of fantasy!"

    'Sheeesh, like...stop encouraging him to study Pixie and Dixie Economics!'

    Mr Jinx.

  • Comment number 73.

    Comment 65 : FrankSz

    "I will use my position of social control to make sure that this energy is not wasted, to make sure that energy does not become completely scarce again, to make sure that everyone still can afford and want what I have to offer."

    In which case, you won't have much left for doing whatever you can to put difficulties in the way of anyone trying to get into a position to supply energy in competition to you. I don't know, but I'd have thought this consideration was a tad higher on the minds of most producers than just an afterthought. Wouldn't you? Or is this a thought that is so unhelpful to the maintenance of the modern world as to be verboten?

  • Comment number 74.

    #71

    Regarding Blacklight's process, most mainstream physicists disagree with the founder's own Grand Unified Theory and concept of Hydrino, referring to it as bunk, but the scientific community does agree that BL is producing large exotherms that cannot be explained by normal chemical processes. In addition, the acid test has been confirmed in that BL has signed two commercial clients producing up to 250MW. It would be interesting to see how these clients are faring.

    Physicists who have looked at BLP's process claim that the energy is a result of Casimir cavities, taking advantage of Quantum Vacuum energy, which does not require alterations to Quantum Mechanics. This is the basis of the research by Jovion, a spinoff from some university.

    In any case, as those Mises articles pointed out, investment into solar would over the long term provide essentially free energy. The main problem is setting up the right framework of incentives to make that happen. Investment in terms of 'money' doesn't really make sense..

  • Comment number 75.

    #73

    Well you see, once energy is abundant, you don't need to think in terms of money. If energy is abundant, we can do whatever we want. What does become important, and scarce, and therefore the subject of negotiation/money, are "ideas". Everything else, raw materials and power, can be quantified in BTUs or kJ. Mining the moon, or Venus, or taking things from the core of the Earth, just becomes a question of energy.

    Take a far fetched but arbitrary example, missile defence - what would it cost to build an array of high powered lasers with missile tracking around the border of a country, capable of zapping any kind of incoming aircraft? These lasers would require phenomenal amounts of energy to operate. Construction and deployment can be mostly semi-automated, including mining the raw materials, which would take a lot of upfront energy. The only 'scarce' resources at present levels of technology are land and the manual labour needed for the unautomatable tasks in the supply chain. The land requirements are minimal- a laser is not a military base - and people requirements not infeasible either. The remainder of the inputs can be seen in terms of kilojoules. If kilojoules are in limitless supply, suddenly everything seems possible, and money is irrelevant.

  • Comment number 76.

    FrankSz (#75) "Well you see, once energy is abundant, you don't need to think in terms of money."

    Pre-requisites for grown-up debate: a) Stop reading LibertarianKurt's Jewish anarchistic propaganda, and b) stop watching Jewish anarchistic TV propaganda e.g. Star Trek! It's all based on counterfactuals aka intensional conditionals aka mentalism.

    This is a 'feminine' snare.

    PS. Humans (Dasein) are adapted to Being-in-the-World (gravity etc). There is lots of (cosmic) radiation and other odd conditions elsewhere. Humans are not adapted to this. When away form Earth their bones begin to be absorbed becasue of changes in gravity. Venus is a long way off and not like Earth/Kansas at all.

    PPS Skinner/Herrnstein and Quine are not like the Moonies - The Austrian School is!

  • Comment number 77.

    Frank,

    You are forgetting a major strategic problem withyour laser example. So you produce your abundant energy and then yo defend it with your lazers. But your opponents now develop counter-measures against your production and defence. So a new lazer-wars 'market' is developed which ultimately consumes more and more of the abundant energy. This has a knock-on effect as higher charges then have to be levied for the power that is left availble or domestic and inustrial/commecial use. And the beat goes on...

  • Comment number 78.

    #76

    We don't mine Venus by sending humans! Any fool can see that we would do that using robots. On the other hand, with abundant energy, we don't need bones. We transplant our consciousnesses* into machines the size of planets and go on a galactic rampage of Klingon carnage. Dammit, we could get Quine's DNA and colonise an entire star system with clones of him. You pick a Quine clone and have a relationship with one, and be happy for all eternity. You gotta admit this beats capitalism or socialism, eh?

    (* you might disagree that consciousnesses exist, but once yours is transplanted you'll agree that it's quite real)

    #77
    That's no problem really because we have so much energy we could zap each other to toast in a nanosecond. The real plus though is when those little critters we found at Roswell decide to come back in force to avenge their brethren from the 50's, Earth will be so bristling with mega-lasers we'd send their little green backsides packing back to Andromeda. Also, the threat of extinction by asteroid goes away. I mean, if you think about it, it's laser utopia really.




  • Comment number 79.

    JadedJean # 76

    "a) Stop reading LibertarianKurt's Jewish anarchistic propaganda, and b) stop watching Jewish anarchistic TV propaganda e.g. Star Trek! It's all based on counterfactuals aka intensional conditionals aka mentalism."

    "PPS Skinner/Herrnstein and Quine are not like the Moonies - The Austrian School is!"

    You're getting rather desperate now, aren't you JJ?

    ;)

  • Comment number 80.

    On a more serious note though, the BL company has announced 2 commercial deals licensing production of up to 250MW using its zero input cost process. http://www.blacklightpower.com/recentadvances.shtml

    Can anyone verify or does anyone have any info what these companies are doing and how they are satisfied with this energy source?

  • Comment number 81.

    It appears the discussion after the next blog entry was a debate that never grew up. The children threw so much mud at each other, the sandbox had to be closed. What a shame. I missed it. Like most people I enjoy watching a good fight even if it is among toddlers. I expect only feelings got hurt and there are no lasting injuries :-)

 

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