ie no matter what you think the right policy is there will be a social welfare (or whatever) policy that someonepolicy makers could use to destroy your economy regardless of your banking regulations.

the other issue is that in a way contries are forced to liberalize regulations. ie that it is not just a choice of government, such that if they were to just realize they could change their minds… Instead to do so would be to incur costs to fight a potentially loosing battle against a force driven by improving technology, globalization etc.

The best way around that that i see is for the world to have harmonized rules and thus to a large extent harmonized government… but …. the governments of the world can’t agree their way out of a paper bag and as we see in europe – monetary harmonization implies political harmonization unless one wants… problems…

I can cite a number of things: Th rise of Deregulation:

. Jimmy Carter’s Depository Institutions Deregulation and Monetary Control Act of 1980 phased out a number of restrictions on banks’ financial practices.
0. Ronald Raegan In October 1982, Garn–St. Germain Depository Institutions Act, began the process of banking deregulation and contributed to the savings and loan crisis of the late 1980s/early 1990s.
. President Bill Clinton signed into law the Gramm–Leach–Bliley Act, which reduced the separation between commercial banks (which traditionally had fiscally conservative policies) and investment banks.
. In 2004, the U.S. Securities and Exchange Commission relaxed the net capital rule, fueling the growth in mortgage-backed securities supporting subprime mortgages.
0. Financial institutions in the shadow banking system are not subject to the same regulation as depository banks, allowing them to assume additional debt obligations relative to their financial cushion or capital base.[96]
Citigroup moved significant amounts of assets and liabilities off-balance sheet into structured investment vehicles, masking the weakness of the capital base of the firm or degree of leverage or risk taken. Such Off-balance sheet entities were also used by Enron as part of the scandal that brought down that company in 2001.[99]
. As early as 1997, Federal Reserve Chairman Alan Greenspan fought to keep the derivatives market unregulated.[100] Derivatives such as credit default swaps (CDS) can be used to hedge or speculate against particular credit risks. The volume of CDS outstanding increased 100-fold from 1998 to 2008, with estimates of the debt covered by CDS contracts, as of November 2008, ranging from US$33 to $47 trillion.
.
0. Total over-the-counter (OTC) derivative notional value rose to $683 trillion by June 2008.[102] Warren Buffett famously referred to derivatives as “financial weapons of mass destruction” in early 2003.[103][104]

Finaialization

The fragility of the banking expansion – a process called financialization. From the 1970s onward has emphasized deregulation which resulted in less oversight and disclosure of information in traditional and evolving financial institutions. ‘Ghost institutions’ also known as the shadow banking system evolved and Governments bailed out key financial institutions and implemented economic stimulus programs, assuming significant additional financial commitments.

Fraud and Predatory Lending

In testimony given to the Financial Crisis Inquiry Commission by Richard M. Bowen III his testimony stated that by 2006, 60% of mortgages purchased by Citicorp from some 1,600 mortgage companies were “defective” (were not underwritten to policy, or did not contain all policy-required documents)
In separate testimony to Financial Crisis Inquiry Commission, officers of Clayton Holdings—the largest residential loan due diligence and securitization surveillance company in the United States and Europe—testified that Clayton’s review of over 900,000 mortgages issued from January 2006 to June 2007 revealed that scarcely 54% of the loans met their originators’ underwriting standards. 28% of the sampled loans did not meet the minimal standards of any issuer.

Predatory lending enticed borrowers to enter into “unsafe” or “unsound” secured loans for inappropriate purposes, such as the bait-and-switch method used by Countrywide Financial, who advertised low interest rates for home refinancing. Such loans were written and swapped for more expensive loan products on the day of closing. The consumer would be put into an adjustable rate mortgage (ARM) in which the interest charged would be greater than the amount of interest paid. This created negative amortization, which the credit consumer might not notice until long after the loan transaction had been consummated.
When housing prices decreased, homeowners in ARMs then had little incentive to pay their monthly payments, since their home equity had disappeared.

Increased debt burden or over-leveraging

Competition from the shadow banking system may have pressured more traditional institutions to lower their own underwriting standards and originate riskier loans.[8]
In a June 2008 speech, President and CEO of the New York Federal Reserve Bank Timothy Geithner—who in 2009 became Secretary of the United States Treasury—placed significant blame for the freezing of credit markets on a “run” on the entities in the “parallel” banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls.:
In comparison, the total assets of the top five bank holding companies in the United States at that point were just over $6 trillion, and total assets of the entire banking system were about $10 trillion. The combined effect of these factors was a financial system vulnerable to self-reinforcing asset price and credit cycles.[30]
Paul Krugman, laureate of the Nobel Prize in Economics, described the run on the shadow banking system as the “core of what happened” to cause the crisis. He referred to this lack of controls as “malign neglect” and argued that regulation should have been imposed on all banking-like activity.[96]

Echoing the central thesis of James Burnham’s 1941 seminal book, The Managerial Revolution, Bolge cites particular issues, including:
. that “Manager’s capitalism” has replaced “owner’s capitalism”, meaning management runs the firm for its benefit rather than for the shareholders, a variation on the principal–agent problem;
. the burgeoning executive compensation;
0. the management of earnings, mainly a focus on share price rather than the creation of genuine value; and
0. the failure of gatekeepers, including auditors, boards of directors, Wall Street analysts, and career politicians.

An analysis conducted by Mark Roeder, a former executive at the Swiss-based UBS Bank, suggested that large scale momentum, or The Big Mo “played a pivotal role” in the 2008–09 global financial crisis. Roeder suggested that “recent technological advances, such as computer-driven trading programs, together with the increasingly interconnected nature of markets, has magnified the momentum effect. This has made the financial sector inherently unstable.”

But as significantly in the context of my views:

Robert Reich has attributed the current economic downturn to the stagnation of wages in the United States, particularly those of the hourly workers who comprise 80% of the workforce. His claim is that this stagnation forced the population to borrow in order to meet the cost of living.

All from: http://en.wikipedia.org/wiki/Financial_crisis_of_2007–2008

Where the hell are our decent entrepreneurs giving us a growing economy

They’re in Switzerland. Merry Christmas.

You’re wasting your time with them.

http://wwww.naomiklein.org/files/resources/pdfs/friedman-pinochet-letters.pdf

http://www.zcommunications.org/tinker-bell-pinochet-and-the-fairy-tale-miracle-of-chile-by-greg-palast

Neoliberalism is the attempt to undermine the democratic process through the transfer of publicly owned and managed assets and services to private corporate interests. Wikipedia goes into further detail

Which brings us to wat dabney 4:24 pm: “Yoza, Milton Friedman explains how the left is the problem when it comes to special-interest groups plundering the rest of us.”

This would be the same Milton Friedman who advised the fascist dictator Pinochet (A good friend of Maggie Thatcher, btw)- his letter to Pinochet is worth a look. I found this excerpt most worthy of understanding Friedman’s capacity for ignoring human suffering in an attempt to further his economic credentials: “May I first say how grateful My wife and I are for the warm hospitality that was showered on us by so many Chileans during our brief visit.( It is quite incredible the level servility the threat of torture or ‘disapearance’ can coerce.) We were made to feel very much at home.(?!) The Chileans we met were all aware of the serious problems your country faces;(Incredibly Friedman wasn’t talking about the death-squads, torture chambers or the murderous antics of the Chilean military.) all realized that the immediate future was going to be difficult;(most especially for those subject to torture, ‘disappearance’ and the murderous antics of the Chilean military) but all displayed a determination to surmount those difficulties and a dedication to work for a happier future.”(A happier future being the entrenchment of state sponsored terror)

Pinochet, of course, followed the advice of Friedman and his ‘Chicago Boys’ which saw the experiment with a militarily enforced neoliberal (there’s that word again, Reid.) experiment;: ushering in the Chilean economic miracle

“In 1973, the year General Pinochet brutally seized the government, Chile’s unemployment rate was 4.3%. In 1983, after ten years of free-market modernization, unemployment reached 22%. Real wages declined by 40% under military rule.

Freed of the dead hand of bureaucracy, taxes and union rules, the country took a giant leap forward – into bankruptcy and depression. After nine years of economics Chicago style, Chile’s industry keeled over and died. In 1982 and 1983, GDP dropped 19%. The free- market experiment was kaput, the test tubes shattered. Blood and glass littered the laboratory floor. Yet, with remarkable chutzpah, the mad scientists of Chicago declared success. In the US, President Ronald Reagan’s State Department issued a report concluding, ‘Chile is a casebook study in sound economic management.’ Milton Friedman himself coined the phrase, ‘The Miracle of Chile.’ Friedman’s sidekick, economist Art Laffer, preened that Pinochet’s Chile was, ‘a showcase of what supply-side economics can do.’”

The spectacular failures of past experiments do not matter to the crazies promoting ‘free-market’ dogma, all that matters is the zealous adherence to the faith. Maybe you maniacs need to start burning anti-neoliberal heretics at the stake to elicit favour from the Gods of Quasi-Libertarianism.

Lee I know you’re sincere but to be honest mate I stopped reading when you used the word “neoliberalism.”

As a conservative and I suspect I speak for many, I don’t know what it means. I’m aware lefties have started using it all over the place in an attempt to place a label, but I’m afraid mate Tavistock this time has got it wrong, for a change, in that if you can’t explain what it is in a sentence, you’ve lost the audience. I mean, I can explain who neoconservatives are in a sentence.

Cunts.

But you can’t do that with neoliberals can you. Hamnida has attempted to explain but to be honest I just can’t be arsed trying to understand the details.

Does it mean Hayeckian, if so how?

…point the finger at the speculators and parasites who have brought this disaster around our ears.

Be specific. You should have picked up from my above I have some in mind myself, but who do you think is responsible? I mean for the international economy, that’s what this thread is on, not local, who cares about that?

When our welfare system was set up as “cradle to the grave” it wasn’t meant as a vertically integrated company where you are dependent on the government from the time your swede pokes out until the last spade of dirt is put on your box – you are allowed to show abit of initiative and work for and take care of yourself a wee bit

The more civil servants laid off the better, surely with the skill set obtained after years of working for the government they will immediately find positions in the private sector paying vastly higher salaries than they got whilst aiding and assisting New Zealanders with civil service OR will they find that civil servants are generally paid a shit load more than those flogging themselves out in the real world with no where near the benefits that they receive from their civil service – is that perhaps why so many of them sit and do bugger all for their entire lives and are never called upon to produce?

Working harder is not a bad idea Lee, it might catch on

I did not blame capitalism, per se. I did blame neoliberalism in point of fact. I did not say that welfare was a virtue, but I did highlight how it has become a subsidy for exploitatative institutions which stymie peoples’ ambitions, whereas the Big Friendly Giants want to blame ‘ordinary’ people for sucking the life out of economy. In my view, every civil servant now unemployed under a government ‘tightening’ our belts (while finding wads of cash down the back of the sofa to bail out fraudulent finance companies) is one less bread-winner out there spending and redistributing/stimulating Kiwi and international trade/business.
We ask for more roads. Can people afford to travel on them? Is the cost of living going down, after the ‘tightening’ of the belts?

has it made one iota of difference to you, or your family?

No. But it sure padded some peoples’ pockets; just not yours.

The neoliberal ethos has been hammering on about this public spending strawman for the past five years and every time we get an informed source telling us to ‘cut back’ ‘work harder’ ‘put off retirement’ ‘get another job’ to supplement the main one, overlook employee rights, sell your daughters, drag the old folks out onto the ice, lock up your kids, blame video games – in fact, do anything but actually point the finger at the speculators and parasites who have brought this disaster around our ears.

Instead we act like Moses has just come from the mountains when we read some ideologue once more trot out hackneyed blame-phrases targeted at those ‘on the margins’ or ‘on welfare’ or ‘not working hard enough’ which later will be treated as gospel and waved around as justification for the next round of economic policy designed to suck the blood out of ‘common folk’ and ‘redistribute’ it to the miniscule percentage of very rich ones at the top of he heap.

No it’s not you stupid mental.

Now, what was logically fallacious about that UT?

P.S. You’re not really a stupid mental, I was just making a point.

mathematical modeling and simulation of financial instability thats what his recent work is about (I have no idea what it means) but I do know that models are notoriously inaccurate, just look at the Global warming models.

Steve would get a bit more of my time if he put his cash up, started his own business and put his theories to work rather than fuck around on a computer whilst taking NSW tax monies.

Uglytruth – looks like Steve has 23 better universities to apply to for a job when his “renegade” period is over.

I certainly hope it was better than a “try”, I was wanting to absolutely attack the man

The thing is Ugly lots of “renegades” are just the disaffected who sometimes are lucky enough to get a bit of air time,.

See, the GFC occurred because powerful forces from Clinton’s time through Bush 43 and continuing with Obama have operated consistently to produce what we see. With Greenspan and Bernanke playing their vital parts, combined with a Congress asleep at the switch or more likely, simply bribed to look the other way, both the institutions like the Fed AND the regulators like Congress and the SEC have ALL looked the other way at best or deliberately at worst, taken actions or omitted to take actions which could have avoided this GFC debacle and disgrace.

For actions like repealing the Glass-Steagall Act and for omissions like Bush failing to take action on sub-prime even when a few dozen state Attorneys-General were urging him to (Bush actually used an obscure mechanism to close that down – go figure). And the disgrace crimes continue, with Obama.

Anyone who’s sensible with a 3-digit IQ can see from the actions which occurred over the last two decades, that this is NOT a partisan issue. Both sides are responsible. Anyone who thinks “their” side isn’t, is kidding themselves and needs a lesson in basic economics.

And the key to knowing what’s going to happen next in the GFC from which we haven’t emerged, despite what the MSM would like to and does pretend, is knowing what caused it in the first place. And when you know that, you will know that while BCG is correct in its prognosis, it is just plain wrong in its diagnosis and it’s consequent suggested treatment. Possibly this is because it no doubt gets a hell of a lot of consulting fees from the oil and banking/finance industries both of whom heavily rely on arbitrage, who the hell knows and who cares, but the point is the report is wrong because it operates from a false premise. The premise being that the fiat-currency fractional-reserve banking system the entire globe* operates isn’t broken.

Except Iran and North Korea (and it used to be Iraq and Libya).

It is. Broken that is. I’m not going to bother explaining why, it’s too complex to cover in a blog post. Anyone with a 3-digit IQ can find out for themselves by driving google. Happy to help with a few keywords if required. But the point is, unless and until the flaws in that model is publicly debated and replaced, anything else is merely munting at the edges, which is what BCG is doing, by munting on about public and private debt ratios.

And because this model has been operating for simply generations, people have forgotten it didn’t used to be like this, and have conflated fiat-currency fractional-reserve banking, with capitalism. They have forgotten, or never bothered to acquaint themselves with the fact the US only introduced income tax around the time the Fed came into being, for example, which was 1913. No income tax existed until the early 20th century in the US. And last I heard, capitalism did fine in the 17th, 18th, 19th centuries, didn’t it.

To the lefties, if we had that model now, OF COURSE WE WOULDN’T HAVE THE CRUELTY WHICH EXISTED BACK IN THOSE DAYS WHICH WAS A RESULT OF THE MORE OF THOSE TIMES. DER. OF COURSE WE WOULDN’T. TO SUGGEST OTHERWISE IS MENTAL. So please don’t try to argue that point, there’s a good lefty.

Steve Keen
Steve Keen is a professor in economics and finance at the University of Western Sydney. He classes himself as a post-Keynesian, criticizing neoclassical economics as inconsistent, unscientific and empirically unsupported.

He also gives credit to Marx for contributing to the “financial instability hypothesis” of Hyman Minsky.[1] His recent work mostly concentrates on mathematical modeling and simulation of financial instability.

Another economic genuis just twiddling his thumbs until he is offered a job running the world or socailist twerp that never has to fear that anything he preaches will actually be put into practice because its been tried and failed everywhere.

Milton Friedman explains how the left is the problem when it comes to special-interest groups plundering the rest of us: