Thatcher Was Warned Big Bang Would Go Bad

[TheCountOfNowhere]

http://news.sky.com/story/1399749/thatcher-was-warned-big-bang-would-go-bad

Was It was her fault all along?

[interestrateripoff]

Sir Robert Armstrong, the Cabinet secretary, expressed fears of "unscrupulous" money-making and "a bubble that will be pricked in a year or two".

..

The report expressed concern about "unethical behaviour" and that financial deregulation could lead to "boom and bust".

But he concluded that while there might be "individual financial failures" he did not expect "a systemic problem".

It took longer than Rob thought, over two decades before it imploded and Willets was wrong it was a systemic problem!

[TheCountOfNowhere]

The banks MUST be regulated.

[byron78]

She's certainly culpable.

But so are those who came after and further deregulated/failed to spot the problems building.

[byron78]

The banks MUST be regulated.

There's a post elsewhere on this board that shows how during the period of banking deregulation cartels/monopolies formed (long before 2008).

It's a complete myth deregulation makes the free market function in a healthy manner.

Competition does that.

The most important piece of regulation needed is basically to make sure we don't end up with so much power in so few hands.

We need hundreds of banks. Not half a dozen.

[Damik]

http://news.sky.com/story/1399749/thatcher-was-warned-big-bang-would-go-bad

Was It was her fault all along?

Nope, the 2007 was not about banks at all. It was purely about super low IRs. As both the CPI/RPI and GDP are meassured in the really wrong way ...

It is obvious if there is any asset inflation everybody including banks will start speculating and there is not almost any regulation, which can prevent it.

On the other side if G Brown pushed to increase the IRs in 2004 there would be no 2007. But he wanted to win elections for all costs ...

[spyguy]

The banks MUST be regulated.

Sort of.

*Much* higher capital requirements.

Put the bank's employee's pension fund between the bank's assets and the state bailout.

Oh, and a strict rule on size - any bank's assets not allowed to exceed 10% of the UK GDP.

[Damik]

We need hundreds of banks. Not half a dozen.

You are wrong. You miss the "economy of scale". There is no other major industry with hundreds of small players. All major industries are consolidated to half a dozen of large players. Banks are not any different.

The current competition/ anti cartel legislation is OK.

The 2007 was purely caused by very low IRs as G Brown wanted to win elections for all costs ... including the HPI bubble

Edited December 31, 2014 by Damik

[byron78]

Sort of.

*Much* higher capital requirements.

Put the bank's employee's pension fund between the bank's assets and the state bailout.

Oh, and a strict rule on size - any bank's assets not allowed to exceed 10% of the UK GDP.

Yep.

The issue we have now is that the global banks are bigger than any countries/bodies that might seek to regulate them.

In effect we've sort of got banks regulating and dictating the states via lobbying and direct employment/ownership of a lot of their politicians (I'm a Tory, but I've lost count how many of our MPs recieve a second income from banks or their sub-groups - many earn more from this than they do as MPs).

That's clearly not healthy.

No idea what happens now though. They're clearly going to resist and/or fiddle any effort to break them up/reset the power balance.

[spyguy]

You are wrong. You miss the "economy of scale". There is no other major industry with hundreds of small players. All major industries are consolidated to half a dozen of large players. Banks are not any different.

The current competition/ anti cartel legislation is OK.

The 2007 was purely caused by very low IRs as G Brown wanted to win elections for all costs ... including the HPI bubble

No. Banks are not 'normal' businesses. The leverage makes them dangerous.

Say a dozen-ish medium to large banks.

[byron78]

You are wrong. You miss the "economy of scale". There is no other major industry with hundreds of small players. All major industries are consolidated to half a dozen of large players. Banks are not any different.

The current competition/ anti cartel legislation is OK.

The 2007 was purely caused by very low IRs as G Brown wanted to win elections for all costs ... including the HPI bubble

How many other industries can bring the global economy to its knees?

The only other I can think of is oil/energy and that has hundreds of players if you include all the states involved (90% of that remains state owned).

As for the entire global meltdown being caused by Brown (or rather King) only putting up interest rates by less than 2% between 2004 and 2007 - well that's frankly so ridiculous/odd it's not even worth my time replying to it properly to be frank.

[Guest Jemmy Button]

Thatcher was the beginning of the end. She was the Great Goddess to her ******* offspring, the YUPPIE, the Filofax kid and the Spivs.

[Damik]

No. Banks are not 'normal' businesses. The leverage makes them dangerous.

Say a dozen-ish medium to large banks.

Again the size of the banks is not the main problem. The problem is if the house prices, oil, gold, NASDAQ stocks, currency. etc go rapidly up and down. The problem are the asset bubbles.

If the price of e.g. Thorium goes rapidly up everybody including banks, hedge funds, business and individual investors will start to pump up current savings and also newly created money into the new asset bubble. What is OK till it pops. Then the economy goes into the recession.

In general the BoE should assure that prices of main stuff (houses, food ,energy, transport, stocks, commodities) will grow only 3 or 4% pa. Anything above will create speculative bubbles, which they pop later on ...

Even with 100s of small banks the 2007 crash and recession would be the same ...

[Damik]

How many other industries can bring the global economy to its knees?

The only other I can think of is oil/energy and that has hundreds of players if you include all the states involved (90% of that remains state owned).

As for the entire global meltdown being caused by Brown (or rather King) only putting up interest rates by less than 2% between 2004 and 2007 - well that's frankly so ridiculous/odd it's not even worth my time replying to it properly to be frank.

The crises of the 2007 would be the same even with 100s of small banks. The main problem was not the banking regulation, but the super low IRs which inflated the HPI bubble across the globe. And which popped a bit in 2007 in UK.

Brown is directly responsible for the UK HPI bubble pop of 2007. And yes US and EU made the same mistake, but it does not make Brown innocent.

[Guest Jemmy Button]

To be fair, in hindsight she just seems to represent a switch from one kind of inevitable blow up for another.

Perhaps the bigger picture was the end of the British Empire and on a mountain of debts from the 2 world wars. Britain has been struggling to find a role in the world ever since, one that could pay its way (or rather pay the way for the London based elite).

In the meantime, the borders of the Empire will continue to gradually shrink back to the walls of the M25 like a latter day Byzantium and strife will continue in the country as scarce resources become ever scarcer.

Yes, you are correct - the end of the British Empire was the beginning of the end. I blame CHURCHILL for that! We'd already lost the War by 1941. It was only by Churchill selling off the Empire to the yanks that we got them into the war. I think we stopped paying WW2 debts to the yanks in 2006. But, yeah, if it wasn't Thatcher, then it was Churchill...

[EUBanana]

The Empire was hardly an economic benefit, more like an economic millstone around the neck in the main.

Where colonies were rich (India, Rhodesia) it wasn't the British in Britain who benefited, but the elites who went to the colonies (the nabobs, Cecil Rhodes). Though the British in Britain had to pay for it all via defence spending.

The fact that imperialism was not an economic winner was even recognised at the time, hence Disraeli "Empire for Empires sake".

So the long and the short of it - loss of the empire is an irrelevance to the economy insofar as it affects the average British prole.

[byron78]

By the way, this article is a little fuller, showing the battle raging within the Party itself with Willetts on one side and Redwood on the other.

http://www.ft.com/cms/s/0/f3c0d500-8537-11e4-bb63-00144feabdc0.html#axzz3NTTkmN1p

Basically, Redwood is and always has been an a*se. Nominally intelligent, he obviously is very stupid at the same time. He cannot read people nor how they may react to the real world. He has a naive view of the world that is mechanistic and suited the 'efficient markets' hypothesis and 'rational actors' theories of the time.

Of course that suits more clever people who know that by keeping things unregulated they would be able to exploit systems and human emotions for tendencies to overdo things. Redwood was the archetypal 'useful fool' as some might say - and one who has been extremely well paid to be that useful, influential, Randian, libertarian fool.

Can't stand Redwood.

He makes more from the financial markets/housing bubble than he does as an MP.

The epitomy of vested interest.

[Guest Jemmy Button]

Yes, you are correct - the end of the British Empire was the beginning of the end. I blame CHURCHILL for that! We'd already lost the War by 1941. It was only by Churchill selling off the Empire to the yanks that we got them into the war. I think we stopped paying WW2 debts to the yanks in 2006. But, yeah, if it wasn't Thatcher, then it was Churchill...

Mon Dieu! I forgot to add Tony Bliar to that litany of self serving henchmen who broke Britain. How could I forget that tossball? My apologies...

[Executive Sadman]

Sort of.

*Much* higher capital requirements.

Put the bank's employee's pension fund between the bank's assets and the state bailout.

Oh, and a strict rule on size - any bank's assets not allowed to exceed 10% of the UK GDP.

Ha...there would be no city of London then (no bad thing, IMO...well, if you live anywhere that isnt London, anyway)

I constantly look back to the crisis and note that there were no large building society failures. One or two small ones that were bailed not by the taxpayer, but taken over by other mutuals.

Thanks to Gordon Browns decision to bail out the banks AND tax building societies more to bail out the banks, now even the building societies are toxic. Nationwide has been loading up on shitty quality borrowers.

[R K]

You are wrong. You miss the "economy of scale". There is no other major industry with hundreds of small players. All major industries are consolidated to half a dozen of large players. Banks are not any different.

The current competition/ anti cartel legislation is OK.

The 2007 was purely caused by very low IRs as G Brown wanted to win elections for all costs ... including the HPI bubble

Indeed. This size problem isn't limited to banking.

The entire global corporate world has become far too concentrated and fragile. Banking/insurance/finance just happened to be the failure this time around. It could just as easily (and might be) energy or food next time.

[interestrateripoff]

How many other industries can bring the global economy to its knees?

The only other I can think of is oil/energy and that has hundreds of players if you include all the states involved (90% of that remains state owned).

As for the entire global meltdown being caused by Brown (or rather King) only putting up interest rates by less than 2% between 2004 and 2007 - well that's frankly so ridiculous/odd it's not even worth my time replying to it properly to be frank.

http://www.publications.parliament.uk/pa/cm200607/cmselect/cmtreasy/299/7032003.htm

Lord George: Yes, if house prices are going up. But one has to step back and recognise—I referred to it earlier—that when we were in an environment of global economic weakness at the beginning of the decade it meant that external demand was declining. Related to that, business investment was declining. One had only two alternatives in sustaining demand and keeping the economy moving forward: one was public spending and the other was consumption. It is true that taxation and public spending can influence the demand climate and consumer spending, but confronted with what we saw we knew that we had to stimulate consumer spending. We knew that we had pushed it up to levels that could not possibly be sustained in the medium and longer term, but for the time being if we had not done that the UK economy would have gone into recession, just like the economies of the United States, Germany and other major industrial countries. That pushed up house prices and increased household debt. That problem has been a legacy to my successors; they have to sort it out, but we really did not have much of a choice about what we did unless we accepted that we would yank it back or give up stability altogether.

That is the point I am trying to make in answer to Mr Newmark. There are some people—maybe lots—who say that house prices is the biggest problem, that the mortgage rate is going up, housing is not affordable and so on.

I'm sorry your point is what again?

[spyguy]

By the way, this article is a little fuller, showing the battle raging within the Party itself with Willetts on one side and Redwood on the other.

http://www.ft.com/cms/s/0/f3c0d500-8537-11e4-bb63-00144feabdc0.html#axzz3NTTkmN1p

Basically, Redwood is and always has been an a*se. Nominally intelligent, he obviously is very stupid at the same time. He cannot read people nor how they may react to the real world. He has a naive view of the world that is mechanistic and suited the 'efficient markets' hypothesis and 'rational actors' theories of the time.

Of course that suits more clever people who know that by keeping things unregulated they would be able to exploit systems and human emotions for tendencies to overdo things. Redwood was the archetypal 'useful fool' as some might say - and one who has been extremely well paid to be that useful, influential, Randian, libertarian fool.

Redwood is MBA smart.

They do all the right things but miss the big obvious Elephant.

[Stainless Sam]

She was warned about big bang, poll tax, selling council houses (without allowing replacement stock), and a dozen other disasters.

And yet, still worshipped by too many numpties. Makes you understand why people like Pinochet, Marcos, Peron got away with it so long and are still missed, even though they turned their countries to $hyte.

.

[evetsm]

There's a post elsewhere on this board that shows how during the period of banking deregulation cartels/monopolies formed (long before 2008).

It's a complete myth deregulation makes the free market function in a healthy manner.

Competition does that.

if you have no competition then you don't have a free market.

govt-corporate collusion (fascism) prohibited competition. You try and print money and you go to jail. The govt-banks stitched up a monopoly.

Edited December 31, 2014 by evetsm

[evetsm]

Thatcher was the luckiest(north sea oil) and most overrated(the big bang is a disaster) pm.