Sunday, Dec 27, 2009
It’s already bad. But it is going to get worse.
Greg Pytel: Is the pyramid collapse about to resume?
… in the meantime best of luck for 2010. We really need one. (Not really for fainthearted or high-spirited during this festive season. Those should spare the reading till the first week of January to mix it with clinical hangover and general post-Christmas depression. It will make an easier reading:-)
Posted by ant @ 10:20 AM (2163 views) Add Comment
34 Comments
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1. devo said...
Excellent post.
If I was the author, I would expect minimal discussion to follow, and accept this as a tacit acknowledgement of the truth.
2. rumble said...
I think ant is the author, or Greg's publicist.
3. taffee said...
If the reason for the collapse was leverage too low interest rates for too long and huge debt then 10 x more is hardly the answer....the only answer was to not let it happen in the first place,which is what the boe and treasury are supposed to do.
Perhaps the best solution is to separate politics from running the economy so major decisions are not politicised
4. devo said...
2. rumble said... I think ant is the author, or Greg's publicist
i don't have a problem with that
titanic captain often links to his own output and we think none the less of him for it
5. devo said...
3. taffee said... If the reason for the collapse was leverage too low interest rates for too long and huge debt then 10 x more is hardly the answer
And yet that was the approach adopted.
Why was this do you think?
My guess is that the government was advised that there was no solution and so a playing for time strategy was instigated until something turns up.
6. taffee said...
think you are spot on........one of the major failings imo was inflation perception.....they created a basket of measures including dvds flat screen tvs music cds etc etc when really I feel the basket should just include essentials like utlity bills,mortgages,petrol,food....has this been the case then inflation would have been around 7-10% per annum so interest rates could be raised to combat it...therefore no housing boom....all other items are luxuries
perhaps there lies the problem
7. ant said...
@taffee: you are right to great extent. Low interest rates give incentive for massive irresponsible lending (as the interest rates are low people are inclined to borrow, and as the interest rates are low banks have to lend more to earn a decent profit). But... this is not an excuse for constructing a financial pyramid (i.e. lending with loan to deposit ratio above 100%) in the same way as jewellery unguarded shop is not an excuse for robbers or if you leave your wallet on the table in the pub it is not an excuse for a thief.
Politics cannot be separated from running the economy. (For example collecting taxes and social policies, whether we like it or not, are part of democratic governments.) In my view this is unfortunate, but if we accept a democratic state as part of our social organisation we have to live with it. What should be done is that when financial crimes are committed (like in the case of this crisis constructing a pyramid) the perpetrators must be prosecuted and their wealth confiscated. This would recoup some loss and act as a deterrent to other, some unscrupulous, financiers. Currently we live in the world of Madoffs who act with conspicuous impunity and continue to commit real financial crimes (with government approval). PS. This is not an assessment of a loony-leftie: I am laissez-faire hard wing capitalist (who knows a thing or two about the financial fraud). Pytel’s blog is pretty much dry in revealing fraudulent mechanism of this crisis (and I have no problem of being called his “publicist”).
8. devo said...
7. ant said... the perpetrators must be prosecuted and their wealth confiscated.
Identifying the perpetrators is the first challenge
Who would you start with?
9. p. doff said...
8. devo said...''Who would you start with?''
Who do YOU suggest?
10. ant said...
devo said: “Who would start with?”
Albanians managed to prosecute (jail them and confiscate their wealth) some of their pyramid purveyors of 1996 – 1997. I do not think we should aspire to have a justice system less effective than Albania. (BTW, respect to Albania for doing the right thing!) To start with, we should start prosecuting all members of the boards of financial institutions that where lending with loan to deposit ratio above 100%. (The board membership brings ultimate responsibility.)
And then start working the way both upwards (towards regulators and the government officials) and downwards (lower ranking executives).
You should note that anyone in financial institutions, even if he were not directly responsible for pyramid crimes (like back-office staff, secretaries), if they earn money (e.g. through bonuses) on the back of the proceeds from a pyramid their wealth must be examined. (It is the same principle as if you buy a stolen car then it might well be confiscated and your lack of knowledge is not an excuse for retaining it.) But, of course, common sense must prevail.
After that we will realise that banking jobs are not any better than ordinary jobs. Bankers simply created their own reality fuelled by stolen – through pyramid schemes – money. It is time to end it. Or it will just get worse.
PS. I encourage everyone to save and revisit this comment next Christmas. So “no one predicted it”, ”with benefit of hindsight” (rather idiotic) arguments are not repeated. They are so popular in this crisis.
11. devo said...
9. p. doff said... Who do YOU suggest?
Fred Goodwin
12. rumble said...
Just an observation of the last few days, not critical ;) Certainly not in the same league as the youtube leads!
13. tpbeta said...
Grey Pytel's insights and timely interventions are a shining beacon of well reasoned analysis in these harsh and confusing times. Thank God for you, Greg Pytel, if you are reading this.
14. p. doff said...
11. devo said...''Fred Goodwin''
I suppose you'd have to include the RBS shareholders too for lapping up the quick bogus profits. Then theres Andy Hornby and his mates - better included HBOS shareholders too. Then there's those pesky bank cashiers and mortgage advisers who get paid peanuts but do get bonuses when they stitch the sheeple up with cross sales. What about all the BTL scum who who milked the system and stole our tax money. Then there's ........ My God, everybody was in on perpetuating the pyramid. Who needs the Illuminati.
15. ant said...
@ 11 devo: Fred Goodwin, Adam Applegarth, James Crosby would be popular names to start with. No shortage. However we need more systemic approach like in any wide scale fraud investigation. Going just for popular names, scapegoats, is likely to result in botched investigations, flawed prosecutions leading to acquittals. And this will actually protect the system and even make more fraudulent and more resilient to any scrutiny.
At the end I think we need more like a coordinated, mass, trial of all those who organised and run the financial system as a pyramid scheme.
So encourage you to read my post @ 10 above.
16. taffee said...
for a start goodwin and hornby should be in jail or at least banned from holding a directorship and banks should have been allowed to fail........after almost going bust in 2008,saved by the government,goldman sachs paid record bonuses to staff as a sort of fingers up to the world as far as I can see.
In this almost depression,we have seen record bank bonuses,record bbc salarys(brucy paid £900k and wogan £812k per annum)highest footballer transer fees and wages and rising hous prices...err...something not quite right I would say
17. p. doff said...
Yeah, I forgot about overpaid TV presenters, celebs and footballers. What about pop stars too - they are overpaid and don't deserve it - and actors, they get paid millions just for showing their faces. Life is just so unfair. Down with everybody I say.
18. ant said...
If we look at prosecutions we have to search for a meaningful example. I think looking at mass trials of war criminals after WW2 is a good starting point. Almost all Germans (or massive majority) were guilty in that war. In Wehrmacht army, working in ammunition factories, etc. Yet after the war, quite rightly, it was the elite that got a chop.
Similarly here, common sense is needed. Some ordinary people (like banks’ secretaries) benefited from financial scams organised by bankers. Yet a lot of these ordinary people are paying for that as the crisis hit. So saying (like even Vince Cable says) that we ALL are somehow behind this crisis is true but misleading.
So taking an example from war trials we should go for the guys on the top. Ultimately being on the top brings fame and wealth but also responsibility. And if people on the top commit crimes their payback must be even greater.
19. ant said...
…but in reality it should be quite a technical investigation and prosecutions. We talk about constructing pyramid schemes which is common criminality. Nothing special about it. If Albanians could manage, we can manage too.
20. devo said...
@ant
I'm guessing you have some well-placed contacts.
If so, I hope they read, understand and agree with the content of post 18.
21. shipbuilder said...
When an entire economic system is based on the (false) premise that a human's primary motivating factor is greed, It's perhaps not surprising what happens and what type of personality gets into power. It's also won't come as a surprise when the countries most in thrall to such a system do little to stop it or prosecute the most 'successful'.
22. ant said...
@21 shipbuilder: you are correct to a great degree. However you are not going to change the major premise of people trying to better themselves (even at the cost of others). Your argument actually helps the "greedy" bankers and politicians as you reduce the problem to philosophical and ideological (left v right, redistribution of wealth v laissez-faire, etc). The current crisis is far simpler than this: it is a result of a basic fraud called "a pyramid scheme". It has always been a crime even within this "greedy" society framework. So in the same way as we prosecute rapists, burglars, car thieves or murderers, we must prosecute pyramid purveyors who caused the current crisis.
Once this is done then we may engage in arguments like yours how to make society better. At present we cannot afford such luxury. First things first.
23. general congreve said...
Come on guys, live and let live. Personally I couldn't be happier that the international banking fraudsters and incompetent politicians have created this appalling mess. Good on 'em, cos they've given me a once in a lifetime opportunity to make out like a bandit off the back of this mess.
Forward to the collapse of the USD, GBP and the Euro! Viva Gold!!!
24. crunchy said...
Never have so many oversized flat screen TVs and 4x4s been made in the imminent wake of carbon based climate change.
Greed is the motivation behind all new developments. It was also the reason why these new developments were delayed for so long untill some economic alternative was invented to cut losses by the sharing of a looming corporate pollution tax burden. Everything we see and do is a sham brought on by the greedy and most powerful. Will it be just the people that suffer this or our whole planets well being that has been hijacked by the true terrorists of our world.
25. crunchy said...
http://www.youtube.com/watch?v=22fEvR0IGrI&feature=channel
Lets get down to the true business. Who do you believe in this unraveling of lies deceit, pure greed and the oncoming global power grab.
What a bloody mess!
26. shipbuilder said...
ant, a crime is when those at the top of a hierarchy have their 'property' taken by those below. When it happens the other way, it is 'success'. This is not left or right theory, but how our society works. Our society needs to recognise the crime first. Do you see that happening?
27. devo said...
26. shipbuilder
I'm disappointed by your defeatist attitude.
No doubt you will tell me it is borne of years of experience:no excuse.
An amazing opportunity for change is presenting itself here; at a comparatively fast pace.
28. fallingbuzzard said...
Its a shame a leader isn't presenting him or herself
29. happy mondays said...
@ 28, be patient, it will naturally happen..
30. crunchy said...
26. shipbuilder
The most accurate thing you have said in a long time IMHO.
It is the thing that the self serving rich law makers base everything on. The establishment always wins in crime, untill it is tempered by the
laws of, and for the people. The laws of balanced justice.
31. crunchy said...
Bye bye, The US Constitution.
32. alan said...
The only time the consumer wins is in a Grisham novel.
33. Adarmo said...
I was at a diner party a few weeks ago and had a chat with an idiot. The idiot told me to buy gold. I asked him what he thought about diamonds, oil, coal, uranium and rare Earths. He hadn't a clue. But he'd heard about gold. Since then gold is down about 8% or so. Gold has no practical application. The only 'value' in gold is that people think other people think it has value, so the thing rides up on this. If you want an inflation hedge at least buy something that has a practical application in industry. The other commodities I mentioned do, further more, since they are consumed and used up in that process (oil is burned, diamonds are ground on drills, uranium is fissed!?) the supply falls. The amount of gold in circulation increases historically by 2% per year. Slower that fiat money right now, but much much faster than oil et al.
When a fool in the street tells you to buy something it's usually a sell indicator. It's tough out there, especially if you're trying to find a home for large amounts of wealth but gold may rise in U$D terms but that's because their new health service just bankrupt the former most powerful nation on Earth. In other terms it most likely will not rise. Oil, Grain, Sugar, Coal, Wood etc are necessities. Gold is not. If you're predicting the end of fiat money why not buy something that has value in the very worst case scenario. Food and fuel.
34. fallingbuzzard said...
Or housing