so let’s add another level of weirdness, that the ones that got it right barely have any more voice now than the ones that got it wrong.

It’s not really weird at all. You’re looking at it from the wrong angle – you’re assuming what happened was completely unacceptable. You’re not looking at the bigger picture.

The crises of 2007 was the logical conclusion of 30 years of neoliberal economics and deregulation on both sides of the Atlantic. A period of time which saw a massive unimaginable increase in the wealth of the 1%.

Sure, the Global Financial Crisis and all the economic instability it caused could hardly be described as desirable, but it didn’t undo what had been achieved over the previous 30 years, ie, the massive accumulation of wealth in the hands of the few.

Furthermore those responsible for the crisis got off scot-free and the burden was placed firmly onto the shoulders of the people with no discernible wealth or power.

And in the case of the UK a banker friendly government was able to effectively use the situation in their favour and carry out widespread ideological motivated cuts in social provisions, and remarkably, to a great extent blame and demonize the poor people for the crises which the country was/is experiencing.

It would be wrong to dismiss neoliberal economics and believe that it requires a revaluation purely on the basis of the Global Financial Crisis, if you are a neoliberal of course.

So it’s business as usual ……… no need to change anything, no need to listen to anyone else. Don’t expect change.

ernie_lynch – Member
Gordon Brown and Ed Balls.

Well I’m not sure how Ed Balls the Secretary of State for Children, Schools and Families, was responsible for the collapse of Lehman Brothers, but it’s an interesting proposition.

Ed Balls was economic adviser to Shadow Chancellor Gordon Brown in 1994. When Labour won the 1997 general election, Brown became Chancellor and Balls continued to work as an economic adviser to him. He went on to serve as Chairman of HM Treasury’s Council of Economic Advisers.

Balls became Economic Secretary to the Treasury in the government reshuffle of May 2006.

By then, the damage was done! Only after that was he Secretary of State for Children, Schools and Families (27 Jun 2007).

Balls became Economic Secretary to the Treasury in the government reshuffle of May 2006.

And 2 years later Lehman Brothers went bust !

If that doesn’t point the finger of guilt then I don’t know what does.

For three years, the young assistant professor took his vacations at a country inn. He had an affair with the innkeeper’s daughter. Looking forward to an exciting few days, he dragged his suitcase up the stairs of the inn, then stopped short. There sat his lover with an infant on her lap! “Why didn’t you write when you learned you were pregnant?” he cried. “I would have rushed up here, we could have gotten married, and the child would have my name!” “Well,” she said, “when my folks found out about my condition, we sat up all night talkin’ and talkin’ and we finally decided it would be better to have a bastard in the family than an economist.”

Whats frankly unbelievable is that once again the axis of greed and stupidity that is the government and the banks are now conspiring to fuel another debt laden housing boom, in a short termist insanity that will inevitably lead to the same conclusion as the last one! They’ve learnt nothing. But then why would they when they all just walked away unaffected by the carnage they caused, and left the rest of us to pick up the tab?

Brown-Balls so smugly announced that they had put an end to boom and bust. Obviously there are myriad causes to the recession we had (which was not double-dip btw), but they could have done more to protect us and we could have fared a bit better.

At risk of undermining myself, I just don’t like either of them!

At risk of undermining myself, I just don’t like either of them!

So you confess !

Among other things, economics suffers from two things

Like politics, economics is weakened by the fact that people feel the need to define themselves according to certain “schools of thought” eg, at it’s simplest Keynesian v Monetarism. It is unnecessary and unhelpful and leads to sterile debates. Current issues within monetary economics are a great example of this. Some feel the need to insist that certain relationships are constants for example despite evidence to the contrary. The interesting stuff comes from trying to understand why and how the thereotical frameworks may have broken down and why the constants are variables not constants. Economists should not fear this.

The ever-increasing domination of maths within economics gives people a false sense of precision. Economics is at best a social science without the precision that many believe in. IMO it is best studied in conjunction with politics and philosophy. This makes it a more “real” and useful subject.

At is best, economics give people analytical frameworks that allows themto make sense of the world around them. In fact, we are all economists every day, since economics is concerned with how we allocate scarce resources and none of us can escape this need ever day of our lives.

As an example, economics gives us a very simple set of tools that explain the “why” behind Binners points above.

So you confess !

I do, but I stand by the points made.

End of correspondence!

THM that is an exceptionally good post.

Why thank you! 😉

As always the non-consensus views were drowned out (like climate change?)

It would only be like climate change “controversy” if not only were the deniers denying that busy would happen in the future, but also that it had happened in the past and was now happening.

How refreshing to find an interesting and informative thread that the dickheads have stayed away from!

ZOMBIE APOCALYPSE! YOUR BIKE IZ SARACEN

Aaah, that’s much better.

To answer the OP’s question. Yes.

Banks started lending more and more money against the assets they had.
Other bankers were basically running the financial equivalent of the horsemeat scandal (Credit Default Swaps).

End result is that if a few people start defaulting on mortgages, banks are going to go bust. Banks are pretty important to the economy, and so the government had to prop them up. At some point the management of the banks will have realised that they had a free insurance policy in place…

You can argue that there’s a place for regulation – see the split of Lloyds TSB, the BoE insisting that banks hold more capital to avoid the risk of banks going to the wall in future etc. Ultimately, the management of the banks went down a risky path, and the bet didn’t come off for them.

tron
Ultimately, the management of the banks went down a risky path

Very true, but don’t stop there, it’s the next bit that’s so important (especially if we want to play the blame game)…..WHY?

IMO it is best studied in conjunction with politics and philosophy. This makes it a more “real” and useful subject.

Perhaps – although IMO this still doesn’t excuse the preponderance of PPEists inhabiting Government, who insist that market platitudes are a sound basis for policy. The small print in current healthcare reform is chock-full of received wisdom about “competition” that makes very little sense on the ground (not least in acute care) – and it’s grimly amusing to see Monitor [the Mckinsey alumni job scheme health regulator] belatedly discovering just what an utter clusterfug the ConDems have unleashed (excepting those who regard such fragmentation as the actual plan, of course…).

Does money actually exist?

Chainreaction vouchers, innit. Actually, as a single bloke with no real responsiblities, I tend equate money with ‘time’.

Edit: E.F. Schumacher’s joke is still doing the rounds:

I was sitting on a train the other day in England and found myself in a compartment with three gentlemen who were having a heated debate. I couldn’t help hearing what they were saying and I gathered that one of them was a surgeon, one was an architect, and the third was an economist. They were discussing whose was the oldest profession. After a totally inconclusive debate finally the surgeon said, “Look here, come off it? I mean, there’s no doubt: if you know Genesis, the Lord took a rib out of Adam to make Eve, and that was a surgical operation.”

But, unabashed, the architect said, “Well, long before He did this He had created the whole universe out of chaos: that was an architectural job.”

And the economist said merely, “And who created chaos?”

WHY?

Banking is the apex of capitalism and [ at the top]it attracts folk who are greedy and want to be richly rewarded. they have few morals as to how this is achieved and they think of the next big pay day. i suspect the bonus culture encourage short term ism as well and “risk takers” “wealth creators” are admired and fetted as geniuses and richly rewarded financially and personally- Fred goodwin knighted for example

IMO it is best studied in conjunction with politics and philosophy.

you want more politicians who have done PPE 😉

I might also point out that, in the case of HBOS, the Risk Control function was chronically under-resourced and that the warnings they tried to flag up were ignored by those at the top. I’m still amazed that we’ve seen none of those responsible charged with some sort of corporate fraud (other than Peter Cummings) and that the only censure was the loss of a knoghthood or two. Andy Hornby, the man in charge at HBOS has since picked up another role at bookmakers Coral. Personally, I’d have moral reservations about employing such a shyster but maybe he’s already proved he’s good at gambling and taking other folks money.

Anyway, my point is that it’s unfair to blame “bankers” as if everyone who worked in a bank was in some way complicit – and we should remember that many, many thousands lost their jobs.

I think when folk say bankers they mean the ones at the top making the decisions,the players of the market, the investors in the city, Hedge fund players etc rather than the person behind the counter in their local branch
I think everyone can see that difference

Good point JY! But seriously, economics addresses how we allocate scarce resources. Philosophy adds the question, “what is the right thing to do” and politics sets the context, “why are we doing it.” Both make economics more useful and less abstract IMO.

I think the problem with the politicians is that they have broadly have the same frameworks. The enigma for me is ed balls because he writes very well and brings a quite different perspective. But then screws up in practice and when talking especially in the westminster village.

I’m sure I will get a shoeing for voicing my opinion, but it is the idea of a “growth” economy as a whole at a base level that caused it.

Money/wealth is like Energy. it CANNOT be created, nor destroyed. Any and all who are making a “profit” are making it a the expense of someone else in the system (on four dimensions, a this now includes the time axis). End of.

Unfortunately society sees this wealth accumulation as a thing to aspire to, the top gets heavier and heavier, the base gets narrower and narrower. it has a limit! it cant go on forever! in an idealistic term, we would all be super rich, when we were all super rich, we would all be just as rich as each other, and therefore not rich.

I recognise the system is hugely complicated, but on a base level the system has to conform to a certain set of physical laws, and it is currently trying (and succeeding) to dodge them, but as it climbs higher, when it inevitably falls, it just has further and further to fall.

I obviously wouldn’t want it to happen to me, or anyone else, but when the banks fell, due to bad decisions they should have been allowed to fall. this would force people to voice how much risk they were prepared to put up with the banks taking with their money. As it was/is, people go for maximum return because they know that if it doesn’t work out the government will give them their money back anyway (which will then be taken from future taxes)

I have no problem with a capitalist system as such, but it has to recognise it works both ways! This obsession with “growth” is so stupid.

Yes you SHOULD be able to buy a house, you borrow money off the bank (cash that is in the bank from other people), and PAY IT BACK. If the bank doesnt have the cash to lend, it shouldnt lend it!

Why is socialist SUCH a “dirty” word? That rubbish they were bonking on about how Ed rubber bands dad was a Marxist? as if Marxism was on a par with Naziism. Hating one random group of people, and not believing in “profit” are not really comparable.

Money/wealth is like Energy. it CANNOT be created, nor destroyed

Money and wealth aren’t the same thing, but you are wrong on both counts Imo.

defining:

Money: tokens used in substitute of actual things when exchanging things for different things (or services)
Wealth: accumulation of the above

Please explain

Wealth can be created. It is the basis of civilisation. If I had to make everything that I use I would be very inefficient. Grow my food, build my house, treat myself when I am ill etc etc. The fact that we specialize means that you can create a surplus which you then trade for things you want. Also known as profit. Something like a bike can be created because I make a profit which I then spend on a bike & lo! bicycle manufacturers appear to fill that desire.

I believe, personally, you are mixing up profit with efficiency. You may not have to build your own house, but you do have to pay for it. That money pays the people who built it. Building a top end plastic bike frame would not be efficient for you to do yourself, but you could do it. A specialist has that market as they have the tooling and staff and skill etc etc in place. The costs for those overheads are spread over multiple consumers, but the costs remain.

But then screws up in practice and when talking especially in the westminster village.

I dont think having a stutter helps him tbh and I rather suspect he has to be careful what words he uses given this
Supposition but seems plausible.
I dont think either him or GO are good orators tbh

Perhaps the other problem is they have to frame arguments in a way the person on the omnibus can comprehend – you often give economic answers that mean few of us have a clue what you are talking about* – perhaps this is what they need to avoid doing to the electorate and they sound dumb to you?

* Not a dig just saying if you use the language of economics few can follow your argument.

I wasn’t meaning his stutter – that is unfortunate and he does very well to mask it. I mean that he has to play party political bullshit all the time, However, perhaps the biggest complement that he can be given is (1) he coined the best description of the UKs economic performance (“flatlining”) and when the rest of the BS is stripped away, what Osborne implemented was pretty much exactly what Balls was calling for. In the end the Tories did not cut too far or too fast (to the dismay of many RWers) and the end policy was pretty close to what Balls was recommending. Not that either is likely to admit it!

But for me, Balls biggest sin as an Economist (and forget the rubbish about his job title as he was the main Labour economic brain) was to forget the essence of what his Keynesian training taught him and what he himself has written about. Under Labour, Gov finances were at one point coming under control and a true Keynsian would have adopted counter-cyclical policies to ensure we built up surpluses that would have allowed us to manage the downturn better, Instead in a mark of hubris, his trainging was ignored and we went on a fiscal gorge fest at exactly the wrong time making the subsequent downturn worse and reducing our ability to respond to it. For that (forgetting what he was taught and what he wrote himself) I find it hard to forgive him!

Can you stop making reasonable points as it hurts to much to agree with you 😉

Indeed we should have banked some for the bad times but they did not need to as they had ended boom and bust

Both make economics more useful and less abstract IMO.

What we need is an academic discipline that involves critical thinking about the past (so as to avoid repeating mistakes).

We could call it ‘History’. 😉

True – currently looking for which Unis offer History, Philosophy and Politics for number 2 son!!

May be more useful than PPE!!

May be more useful than PPE!!

I dunno, IME, Personal Protective Equipment has its uses.

Good luck with THM junior’s application. My head spins when I reflect upon the fact that it was nearly 20 years ago that I filled out my UCAS form… 😯

It was a lot easier back then. Perhaps NWind can give us tips!!! Still a year away from submitting for number 2.

I thought you would have had him darn’t pit by now thm? 😀

Nah, he didn’t even help with the grass today. Writing homework essays on Kant instead. The surreal life of the modern teenager!!!! He did get short bike ride in though so I will let him off!

@Junkyard – going back to yesterday; yes shareholders money is the basis for loans. Don’t think about the trades on the stock exchange but the original issue of shares, “real money” moves from shareholder to bank.

There was a comment earlier about banks and capitalism (banks being the peak of capitalism I think), the two are inextricably linked, to have have a healthy vibrant capitalist economy you need a healthy banking system. What we are seeing now is that with the banking system damaged (due to out doubted excess) the general economy is suffering. Capitalism as we see it certainly isn’t “perfect” but it’s certainly proved to be the most effective and dominant system.

Don’t think about the trades on the stock exchange but the original issue of shares,

stretching it a bit, Barclays,for example, was formed in 1690.
I disagree with your assesment of capitlaism. Its good for the winners. of which anyone in the west is one, but it is iniquitous and deeply flawed.

I could live with being a bit poorer and a lot fairer personally though its a minority voice in the main.
this is not what i would call effective personally – the top 0.001% have more wealth than the bottom 99.9%
thats 91,000 v 6 billion ish!!