Monday 28 September 2009

Labour reduced to one policy for Coneference: Envy

Really, the theme of the Labour Conference this week seems to be how very important it is to bash the bankers. I agree, the Bank of England, treasury offical and ex-Banker Shriti Vadera and the FSA (mainly ex-bankers) have a lot to answer for in terms of creating the economic mess in which we find ourselves.

Oddly, it is not to these well paid mandarins with their final salary pensions that the aim of Gordon Brown is falling. No it is on the private (and public bank) sector. Rows about how much to pay people who are doing jobs are beyond the comprehension of the average Labour back-bencher.

It is not that pay and rations do not need restraining and that some tweaks to stop people gambling others money for their own gain is not sensible. it is just that the concentration on it is such a huge sideshow to the real events now needing policy. The banks are last year's story and the market has taken care of the excessive pay in short-order for the underperfomers who now line the unemployment statistics.

Instead of discussions about how to really reduce the dependence on public services in Britian, on how to fix the many social ills created in recent years, of how to reform the tax and benefits systems; we just have bash the bankers.

What next Estate agents and journalists?

It is both populist and poor, the sign of a weak and clueless government. At least in Germany they have had their successful election over the weekend and have been able to wave goodbye to the poor performing socialists. Roll on May 2010.


AntiCitizenOne said...

Socialist Envy policies don't redistribute wealth they transfer money but at the cost of destroying wealth.

Philipa said...

"What next Estate agents and journalists?"

OK :-))

But whilst that may be satisfying it deflects from the primary concern of the conference. I object to the term 'government' as that implies rule. Whilst NuLab have done all they can to make that so I prefer the term 'Administration'. I find that term less suggestive of personality politics (who do you want to rule over you for 4 years) and more suggestive of policies, which are the important things.

If only there was a mechanism for ensuring that the policies they are elected for are carried out when a party gains office. For better or worse this cannot be. So we find ourselves in an uncomfortable marriage with folk we didn't altogether love in the first place.

Blame politics all round methinks, just wait for Manchester.

Marchamont Needham said...

the way the pound's going there'll be no wealth left to redistribute before long.

Anonymous said...

No mention anywhere of banker's bonuses rarely being paid in a lump sum , to take home and spend.
How much of the bonus is in bank shares, which are tied directly to the prosperity of the bank?

As CU says GB and his gnomes ignore the regulation problem and gloss over the efforts they themselves made to encourage the boom.
Bankers are not blameless. In fact they have got away with damaging the entire world's financial system very lightly. but they are not alone. Politicians in all countries, but especially the UK and USA, are equally to blame.

Old BE said...

Aside from "policy", Labour's election strategy seems to be to campaign against mythical Tory policies in the hope that the electorate will believe it, again.

What's so sad is that it takes a major recession for most people to realise how dangerous the Left is.

Budgie said...

Of the failed British banks (RBS, HBoS, A&L, B&B, N Wreck), only RBS was predominantly self inflicted. RBS probably would have survived like Barclays if it had not bought ABN.

All the rest were brought low by the boom, then bust, in the property market that was most of their business. Yes, they chose to finance their mortgage lending using wholesale money that dried up in the credit crunch; but they were simply trying to keep on Brown's property roller coaster.

Brown's property boom and bust is the fundamental culprit. Could Brown be sued by irate HBoS shareholders for keeping interest rates too low for years, printing money that went into property, and encouraging people by example to get into debt?

AntiCitizenOne said...

Budgie, it was lower reserves that increased the amount of debt in the system, not interest rates.

CityUnslicker said...

The main culprit is the BOE and FSA.

This blog maintained for ages the need to assess inflation properly (look in the archives, it is my first ever proper post). They failed to do that and stoked an asset boom.

Now with unlimited QE and government borrowing we may get a new asset boom AND high inflation.

But of course, this is all Fred Goodwin's fault.

Mark Wadsworth said...

Good stuff, agreed, but I think the correct spelling is "conference".

Budgie said...

AntiCitizenOne said: "... lower reserves ... increased the amount of debt in the system, not interest rates."

I don't see 'lower reserves' as anything to do with it. If that was the case then HSBC and Barclays (never mind numerous other banks) would have gone down as well. But in Britain, with the exception of RBS, it was the mortgage banks that fell. That specifically has to be explained.

The too low interest rate (set by the BoE to CPI, under Brown's orders) increased demand for (retail) mortgages, which were then supplied by the (mortgage) banks like HBoS. They rushed to retain market share, by themselves borrowing in the money markets. The amount of money washing around in 100% mortgages drove up property prices.

The purpose of a mortgage bank (building society) is to borrow short and lend long, in a stable market. What went wrong was that Brown first created a property bubble and then it burst - an unstable market.

That left the house holders with (in some cases) an unsustainable mortgage debt. It was that customer debt which, in turn, hit the mortgage banks. Hence, the mortgage banks could no longer borrow on the money markets because no one believed they could repay their debts.

Demetrius said...

I do not object to people doing well, nor to most of the ways they spend it. What I do object to is paying taxes that many others, notably the wealthy avoid or evade. Also, I object to faking the figures, notably those relating to the value of money, especially when they seem to impact badly on the poor, but allow the rich to run riot, again without paying.

ScotsToryB said...

A small point @ Demetrius,

'What I do object to is paying taxes that many others, notably the wealthy avoid or evade.'

I, Demetrius, consider it a duty incumbent to avoid to avoid taxes.

Evasion is a totally different thing.


p.s. I hope to be rich someday.

Anonymous said...

The main culprit is the BOE and FSA.
Well, that's only part of the problem.

There have been 2 inflations, home grown via incredibly stupid socialist spending agendas,
and imported price reductions caused by the rise in imports from S Asia.

UK "financial experts" chose to treat the aggregate of these, when setting interest rates, and that's even before we get into the areas of statistical, ermm, "adjustments". (This to some extent freed the mad politicians to engage in ever more excesses.)

These "adjustments" are specifically designed to not only reduce pensions, and other social security liabilities created by legislation, but to also disguise many other aspects of the true rate of failure of UK international competitiveness, and devaluation of the Fiat £ currency.

The absolutely critical measure of the debt to GDP ratio has never even been considered, - a gross mismanagement at every level, of systemic risk, a mismanagement of criminal proportions in my view.

Such considerations of systemic risk, in future, since politicians seem incapable of tackling the essentials, if G S legislation is not to be returned, must also include liabilities undertaken by UK based banks. A way has to be found to take the tax payer of the hook for casino banking liabilities, and that way must also carry VERY SEVERE PENALTIES FOR BREACH THEREOF.

In truth, the power to deal with banks internationally was long ago lost. The central banks, under the auspices of the BIS, have usurped political control of all major economies, and now manage them to their own agenda. No where is this more evident than in the US and the Federal Reserve.

This current economic catastrophe was planned decades ago, rehearsed with minor players initially, then with smaller countries, and lastly, with "G" countries. Each time, millions were impoverished, for the benefit of the few.

Every commodity price, without exception, is manipulated by finance. Every measure used by economists is manipulated, no models can work.
Every international play has finance behind it. Initially, since financial control of nations was only partial, benefit would flow to nations, and finance, now it is just finance.

This is not the place for in-depth, but...
Here are a few links that should be creating waves, but MSM ignores them.
and 2 illuminating pod casts:-

GATA pod cast here


Jim Sinclair pod cast

Anonymous said...


Anonymous said...

Economic models?

Steven_L said...

I've just been watching on BBC Parliament, and I hope the tories have a good response to all this, because on 8 months time once some better GDP figures are coming through Mandleson and co are going to come out fighting.

It's all going to revolve around highlighting several key big decisions that Cameron disagreed with, bigging Brown up as an international statesman and attacking Cameron and Osborne on economic competence.

But then again I was watching the session on the economy, so maybe it won't be the only key issue.

Doppelganger said...

The Tories are useless. They failed to properly oppose New Labour's moronic economic policies but rolled over. As such they cannot take any kudos by saying "I told you so". And even now after the deluge they have nothing worthwhile to offer or even say. So yes, if the economy picks up, Labour may well get away with it. In which case The Tories (instead of Labour) will be the masters of their and our continuing misfortune.

Anonymous said...

Sorry, just had to......

Anonymous said...

When you see that trading is done, not by consent, but by compulsion — when you see that in order to produce, you need to obtain permission from men who produce nothing — when you see money flowing to those who deal, not in goods, but in favors — when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you — when you see corruption being rewarded and honesty becoming a self-sacrifice — you may know that your society is doomed.

Ayn Rand
Atlas Shrugged, page 413

Letters From A Tory said...

Bit of a shame that the social democrats in Germany got a good kicking during our conference season, because otherwise the demise of the Left would have been heralded by all their opponents in the UK for days on end.

CityUnslicker said...

great comments all. Please note GDP will nto be improving next year - this is a multiple dip recession. As soon as the stimulues runs out the econommy will start contracting again. The only way out of this is to print more money and that is suicidal in the medium or long term.

roym said...

when you see anonymous poster quoting bits of their randian porn, its time to roll your eyes and say next!

Anonymous said...


Time for you to grow a brain

SeanBroseley said...

History presents itself as a set of facts which people try to provide a set of rules for retrospectively. Once your mind is inhabited with a certain world view, you will tend to only consider instances proving you right.

So with this blog and so with the credit crunch.

The imminent cause of the credit crunch is decision-makers in the finance sector flanneling their superiors and shareholders into thinking that they were risk aware and conservative, whereas, in reality, they didn't really have a clue what level of risk they were dealing with.

At the same time they were heavily incentivised to continue to behave 'as if' they understood the risks they were taking and acting accordingly.

So annual bonuses were based upon producing illusory profits that would be lost in the future.

So there is a sound basis for reforming bonuses.

At the same time increasing capital requirements for firms makes sense too.

What is more problematical is changing the perception of the amount of investment risk that is being taken. 1) It requires a re-programming of the way the suits think and act (assuming they do it in that order) 2) It has potential leakage into the wider world, with ordinary people re-evaluating their risk budgets across their pension funds, ISAs and even reassessing downward their willingness to save long-term.

Budgie said...

Sorry, Sean but that is rubbish - you have made wide sweeping assertions about "decision makers" (the dreaded bankers?) without specifying either the country or the mechanisms that went wrong.

The fact is that in the UK, apart from RBS which was a special case, the bank failures were all mortgage banks. They were left high and dry by Brown's property boom and bust. They did not fail because of 'wicked bankers' on massive 'bonuses' as you assert.

SeanBroseley said...

'The fact is that in the UK, apart from RBS which was a special case, the bank failures were all mortgage banks. They were left high and dry by Brown's property boom and bust.'

That isn't a fact.

SeanBroseley said...

'Wicked bankers'

Let's put that one away as well.

Grossly ignorant in an environment that hasn't incentivised them to cure that ignorance. In fact, quite the reverse.

CityUnslicker said...

Sean - Welcome to the blog.

I don't doubt the bankers got it wrong. henceforth the rewards will be re-aligned. My take is that this will happen anyway - just as the hedge fund model is changing.

Whilst there is nothing wrong in your analysis on poor risk management (look at previous posts, this is a fave topic of ours) and reward; the real culprits sit in the BOE and treausry - they set the rules by which the banks played.

Now we are reduced to a Government making populist and noisy policy to please its core vote and avoid difficult questions on how on earth an exit can be at all managed from our horrendous fiscal position.

As for budgie's point - I tend to agree. Sub-prime was the fuse of the crisis and that was entirely caused by low interest rates.

Budgie said...

SeanBroseley said: "'The fact is that in the UK, apart from RBS which was a special case, the bank failures were all mortgage banks. They were left high and dry by Brown's property boom and bust.'

That isn't a fact."

Oh, isn't it? Then name all of the British non-mortgage banks that failed. And explain why the mortgage banks (inc some BS) failed without reference to the circa 25% collapse in property prices.

SeanBroseley said...

It's not an fact Budgie because it is an opinion.

The banks operated on the basis that it if it isn't prohibited then it's the right thing to do. That makes no sense to me.

The politicians don't set the interest rates. Low interest rates aren't an excuse for acting stupidly.