bring back building societies

Well, some of the mutuals never went away, but people chose to invest their money in other places paying higher interest rates – see my point above about lack of risk… put risk back in the equation, and the responsible mutual building societies were one of the safest investments out there!

yes TSY even under communism you would still be a tart

Well I’m in then!

Junky – apologies for not replying to your mail. I am still on for the 200 miler.

The problem with all human societies is neatly encompassed by Easter Island.

History Easter Isalnd,

We are f***ed. We will destroy ourselves in the end.

Our races development and evolution under captialism is just far too stunted, war may have gotten us this far.

However humanity faces the choice of work together and create a set of circumstances with more potential than the useless idiocy that currently governs this world!

Or vanish from the face of creation like so many other complacent, delusional, visionless species!

A few thoughts:
1. No system is perfect, they all have their faults
2. Communism whenever it’s been imposed on a country by a minority (China, Russia, Eastern Europe, Cuba) has eventually been rejected. I don’t think you can describe China as a communist country. It’s also involved the ruling powers murdering their citizens, sometimes in the millions let;s not forget. I don’t think capitalism at it’s worst can have that criticism levelled at it.
3. Capitalism reflects nature – so anything else is essentially forced
4. Communism seems to be able to work where like-minded people agree to it. No evidence of it working when imposed on a country AFAIK
5. Capitalism has periodic shocks built into it, usually by people forgetting the lessons of the past. The current situation and threads like this reflect a lack of confidence/unquestioning faith but IMO do not mean the system is unrecoverably bust. My Dad helpfully pointed out that we have some kind of crash every 20 years or so. Better we just remember this and live/plan accordingly IMO. Maybe go less nuts next time? We never abolished boom and bust. That was a scarily delusional thing for our PM to say esp one allegedly so well-educated on economic matters…
6. Just because the world power is moving from West to East doesn’t mean capitalism is over. China, India, Brazil and the emerging economies aren’t getting more power by adopting a new system, the global system will still be capitalism. It’s just that we’re not going to be top dog anymore. Which is ok in the grand scheme of things isn’t it?
7. a good pt made ^^ IMO is that we don’t live in the UK in a pure capitalist society so can;t say the system’s bust when we’ve not properly tried it
8. Maybe this shock we’re experiencing will encourage us to be a bit more thoughtful and less selfish/more co-operative? I swear London Village has become friendlier in the last few weeks. Kind of needing a big group hug 🙂

Capitalism reflects nature

Eh? Just because city types regularly appropriate the language of social Darwinism (“it’s the survival of the fittest, the weak get eaten”), it doesn’t necessarily make it so.

+1 the point above

Communism whenever it’s been imposed on a country by a minority (China, Russia, Eastern Europe, Cuba) has eventually been rejected.

half your list still exist as communist countries – not sure that proves your point tbh.

No evidence of it working when imposed on a country AFAIK

nor of western liberal capitalist democracies – see iraq, afghanistan libya and parts of africa after the empires left and more recent attempts at the same.

we don’t live in the UK in a pure capitalist society so can;t say the system’s bust when we’ve not properly tried it

no one ever will as it is socially undesirable – dark satanic mills etc. Even the most avid capitalist wants a state to protect them from the masses and foreign enemies [ they have much to loose obviously] so we have taxation and the public sector. Eventually the poor force the state to do other stuff as we grumble about it and they expect us to go to war for them.

Social democracy – retain the capitalist means of production but all infrastructure managed by state.

One of the more sensible posts so far. Socialism / communism / collectivism / trade union type policies remove the rewards for hard work, taking risks and trying out new ideas. So no one does these things.

However, some things are a natural monopoly, like water, gas, electricity, broadband, trains. You can’t have 20 lines going into every house. The current system is so full of regulations and rip-offs its almost comical. Who can make the cheapest TV, beer or cornflakes is different.

All of history has been steps towards a better future

no it hasn’t,, as a species we can’t even get past killing each other, although to be fair we have got much better at that, to the point where we can murder millions with the press of a button.

Humans are dumb Mofo’s who will continue to muck it up until we wipe ourselves out through either over population or war.

It doesn’t matter what happy shiny world we try to live in or what system we would love to run the world for the betterment of humanity, we are royally screwed until you can stop the human urge to behave like a hunter gather and fight over territory/resources rather than a become a mindless drone like hive animal

Zulu-Eleven – Member

Capitalism relies on the freedom to fail

<snip>

Capitalism does not work without risk – risk is the necessary counterbalance, remove it, and the “invisible hand” disappears, the system does not work. We have managed to combine the worst of capitalism and socialism into a hotch potch bastardised system that rewards recklessness.

It proves neccesary to state the bleeding obvious here… The groundwork for the banking crisis happened many years before it came to a head, and long before the idea of banking bailouts became a reality. Do you believe that financial institutions sat around making risky plans but “hey, it doesn’t matter because the government will bail us out if we fail”.

The idea that the risk was taken away and that they then failed just doesn’t stand up to any examination. The reality is that they took enormous risks, and paid a price for them. The price wasn’t total destruction, in most cases, but it still had a huge impact.

The bailouts have not been a get-out-of-jail-free card. The bailouts were a response to those risks and failures, not a contributing factor- cause traditionally comes before effect. They did not in any way contibute to the courses of action that led to them. Trying to blame the government response for the initial crisis is silly.

tazzymtb – Member

me: All of history has been steps towards a better future

no it hasn’t,, as a species we can’t even get past killing each other, although to be fair we have got much better at that, to the point where we can murder millions with the press of a button.

Steps towards, not steps to. We’re not there yet. But would you rather be a medieval serf or a slave or a victorian servant than what we have now? In the west you almost certainly don’t spend your days scrabbling to survive with every hour you have, before dying in your 40s. Is that not better?

Do you believe that financial institutions sat around making risky plans but “hey, it doesn’t matter because the government will bail us out if we fail”.

you’re looking at completley the wrong end of the spectrum

I use the words personal reponsibility for a specific reason! its the people who put their money in those banks that were insulated from risk (and have been for many years now) – if they thought there was a risk, they would have been more careful about where they put their money, and the customer would therefore treasure the bank with the safest portfolio, not the highest return (which can only be founded on riskier investments)

People don’t like taking personal responsibility – so vote in politicians that promise to insulate them from it… Economics is far too important to leave to the politicians.

“MORE people have climbed out of poverty in the past 50 years than did so in the 500 years before that. Life expectancies across the world have doubled in the last one hundred years. The global poverty rate has fallen from 25 per cent in 2005 to 12 per cent today. By 2015, it will have halved twice in twenty-five years. More women (and men) can read and write than ever before. Travel is cheap. Information is becoming free. And free market capitalism is the reason why.

But the Eurozone is collapsing and the Western economies are stagnating. Nearly every politician of every party believes that corporate bailouts, economic crises and long-term stagnation are inherent to our capitalist system, and that our future prosperity needs planned from above. But what caused the 2008 crisis, what is holding us back now and what is sowing the seeds of the next crash is not too much capitalism, it is too little of it.

Capitalism is change. At its core, it is every person trying to better their condition by engaging in exchanges with others.

Everybody has their own talents and ambitions, and only they know how to make the most of them. Top-down plans made by experts in government ignore this – they’re about directing people towards the planner’s goals, not their own ones. In economies that are planned by the state, to any degree, change is disruptive and bad. In capitalism, change is progress.

The free market provides a structure where experimentation is encouraged and rewarded, with all the failures and false starts that experimentation requires. To get the successes that capitalism has delivered so well, we need to endure the failures and adapt to changes.

Every successful change disrupts established practices and firms. Capitalism’s great strength is that these disruptions give people better living standards and better hopes for their children. The benefits of economic change are enormous: the doubling of global food production in the last 50 years, mobile phones that now cost a day’s wages instead of a month’s, real wages in the UK tripling since 1945. But these can also be invisible and dispersed. The costs of disruption, meanwhile, are often visible and concentrated – easy to lobby against.

As a result, the biggest threat to free markets is no longer anti-capitalist ideology, but protection for special interests against competition – corporatism.

The struggle for free trade in the 19th century pitched a few believers in capitalism against the powerful landed interests of the time. The Corn Laws protected landowners against cheaper foreign imports, impoverishing the many but enriching the few. It took a broad social movement to overcome them and allow the forces of change to bring cheaper food to Britain.

Defenders of capitalism today face similar challenges. Across the economy, entrenched special interests use the state as a weapon to protect themselves from change and competition. Some banks have been given huge bailouts since 2008. Farmers are protected by tariffs and £3bn of subsidies every year. Planning laws protect property owners from developments that would increase the supply of houses. In countless other areas, established interests are protected by the state.

Like free trade, the controversial subject of free movement of people would disrupt the existing economic order and understandably meets fierce opposition from people at risk of change. But radical as the idea now seems, the productivity of a low-skilled service worker in London is around twenty times that of one in Lagos. A recent review of economic studies of open migration found that world GDP could increase by between 67 and 147 per cent if barriers to migration were lifted. The same spirit that possessed the free trade campaigners of the 19th century should invigorate open borders campaigners today. Capitalists have to be open to extraordinary changes to unlock the extraordinary power of humanity.

Corporatism in finance has brought ruin onto the world. Letting banks fail is messy, disruptive and ugly (though not as much as people think). But bailing them out creates moral hazard – it gives a blank cheque to reckless banks. Unless bad banks are allowed to fail, good ones cannot take their place. Preventing failure is good for established banks, but bad for everybody else.

Cheap credit created by central banks inflated the housing bubble that burst in 2008. The combination of artificially cheap credit and banks expecting a bailout led to the crisis. Money should emerge from markets, not be imposed by governments. Without radical changes to money and banking policy, we will sleepwalk into the next crisis, and it may be even bigger.

Somebody needs to speak up for the freedoms of the many against the protections of the few. Corporatism – not capitalism – was at the root of the last crisis and it will be at the root of the next one. Britain needs to reject protections for businesses. It needs a free market revolution.”

Zulu-Eleven – Member

I use the words personal reponsibility for a specific reason! its the people who put their money in those banks that were insulated from risk (and have been for many years now) – if they thought there was a risk, they would have been more careful about where they put their money, and the customer would therefore treasure the bank with the safest portfolio, not the highest return (which can only be founded on riskier investments)

This doesn’t make very much sense. The reason large banks are deemed “too large to fail” is has little to do with personal savers. And the reason that individual savers can’t accurately assess a particular bank’s security has nothing at all to do with government protections.

I’ll tell you a little story that might illuminate this… My brother worked for a large bank, let’s call them “RSB” to protect the innocent 😉 When the banking crisis began to arise, part of his job became “Finding out what happened to all that debt we packaged and sold”.

As you might know, one of the contributing factors of the financial crisis was the “financial innovation” that led to debt being resold as investments- effectively rehoming and hiding financial obligations and risks. So Brother went off and started following deals and paper trails and discovered that a number of these packages had been sold and repackaged and resold and regraded so that, in the end, RBS had bought back their own debt. Yet when they sold the packages out, that was marked as a revenue and also a reduction in debt, whereas when they bought it back that was marked as an investment and a smaller increase in debt. In some cases, they’d bought back an old debt for more than they’d paid for it.

To put it simpler- the company had little idea of their own exposure. They’d joined in the system that enabled debt to be treated as an investment, thinking they were being clever, and they’d then bought the same debt back. They’d happilly said “We’ll buy AAA rated packages, they’re good investments” while the people selling them off were saying “Quick, get rid of this poisonous debt in a AAA rated package to some other mug”

Against this background you expect individual savers to make informed decisions about risk?

None of the major banks were considered risky investments 10 years ago.

The fact that the company had no idea of their own exposure is exactly why they should have been no protection for investors

That way, the situation would never have arisen, as the important selling factor for a bank to seek investment, was that they didn’t partake in all sorts of nefarious activities like that – would you invest in a bank that didn’t know its exposure?

The reason individual savers invested, is because they offered the highest rate (alarm bells!) but knew they were safe to do so… Instead they’d be putting their money in the sort of banks that didn’t play around with ‘financial innovation’ – or for that matter, the type of banks that didn’t offer people 125% mortgages at five times their income.

Zulu-Eleven – Member

would you invest in a bank that didn’t know its exposure?

How could you possibly know, when it came as a shock to the bank themselves.

Interest rates are not a good way to judge risk in a savings product, there are too many other factors involved (which is why a single bank would often have 2 equivalent products with different returns- no risk difference, just policy differences and setting rates partly based on the perceived market)

Here I’ll do some wild supposition… I don’t think you’d find any convincing correlation between savings interest rates and the financial security of the issueing bank, in the 5 years before and after the start of the financial crisis. I’m not going to even attempt to research it 😉 but I do know that RBS and HBOS didn’t have the strongest savings offers running up to their collapses, nor did they have especially high-exposure mortgage packages