Tuesday, December 9, 2008

Basically a duplicate post, but he’s hit the nail like other Times economics writers don’t

A crash as historic as the end of communism

Peter posted the original article link earlier today, but I think most missed it. Robert Peston (for it is he etc.) blames the Bank of England, banks, the media and us, in that order more or less.

Posted by paul @ 05:12 PM (1401 views)
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26 thoughts on “Basically a duplicate post, but he’s hit the nail like other Times economics writers don’t

  • Top quality article. Well worth posting again to rise above the spam.

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  • I agree with the first comment at the end of the article:

    “You tell us all this now Robert, but where were you pre Northern Rock. Despite the chaos in the system, the picture painted by the BBC was one of the economy working well. Even post Northern Rock, for months you failed to grasp the seriousness of what was happening.”

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  • Peston is on record criticising Northern Rock’s business model as far back as 2003. He is also a long time critic of big city bonuses and unregulated global markets. Okay, he didn’t predict the credit crunch but he did point out that things were much less transparent nowdays – and, as we now know, thats what enabled the mess we are in.

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  • To be fair to Peston I also remember him criticizing the city’s attitude towards risk. He does take a sideswipe at his own ilk too – saying that the media was very muted about the dangers of excessive debt for a variety of reasons.

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  • gone-to-colombia says:

    Excellent posting, I’m not sure if I saw it before but never mind.
    I agree with much of what is written with one exception ‘Who’s to blame? The short answer is all of us.’
    No, we can pin point the blame far more accurately than that, how can prudent savers who repay their credit cards monthly and own a home as a home and not an investment vehicle, how can these people, and there are many of them, be to blame?
    When all this present crisis settles down there should be an enquiry, I would favour a Soviet style set of trials and a short trip for the guilty. We can see quite clearly who shoulders the blame for all of this, the damage they have done is far greater than any serial killer could have inflicted upon a largely innocent public.

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  • @gone-to-colombia

    I think your point about blame somewhat misses Peston’s point … of course prudent individuals aren’t to blame ‘as such’ for the overall mess .. but rather than playing that blame game, Peston (rather like Jeff Randall in his rather more flamboyant way) is saying something more thoughtful: decrying how a whole society bought into this mess, how so many millions of us came to be living debt-driven, credit cards or HPI fuelled and stupidly extravagant lifestyles, the cars, the holidays, the property obsession, the designer handbags, the logo’d clothes, the flat screen tvs, the ski holidays for the kids and all the rest of it.

    I for one don’t feel at all smug about ‘getting’ all this a little ahead of the great unwashed, as I didn’t really begin to spot what was going on until 2005, when I sold up and rented. Even after that point I still did some stupid stuff with money. I don’t have credit card debt, I don’t have a mortgage let alone an excessive one, but I must own up to my own responsibility in buying into and helping sustain this mass delusion for so long.

    Blame and shaddenfreude are very human activities, but however briefly satisfying, they are not all that useful in the current situation. I sincerely hope that Peston’s vision of a reformed kind of capitalism might indeed come about but I fear that kind of benign outcome is highly unlikely (as indeed is a witch hunt of those ‘responsible’ in whatever way that might be defined – I suspect defining who they might be is not as simple as you suggest).

    What’s much more likely is a resurgence of naked capitalism resurgent, as those vultures who by accident or design well out of the mess grab hold of power and seek to consolidate their position. What will be left for them to pick over is anyone’s guess.

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  • I’m with colombia. I am playing the blame game because I had nothing to do with “buying into and helping to sustain the mass delusion”. Eg. my TV died a few months ago, at the grand old age of 15. I admit wanting it to die for a while, but I did not act on that wish. I sustained my patience and prudence, but not delusion. I will not be lumped in with “a whole society bought into this mess”.

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  • Exellent post montesquieu.

    Has anyone noticed the change here? How nice to have an intelligent exchange of views without being sidetracked by half baked conspiracy theories.

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  • Don’t speak too soon!
    Yes, it’s refreshing.

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  • @rumble, @colombia – you say you are not to blame, but there’s more to it than being prudent. We also collectively voted in NuLabour 3 times running, despite knowing what the historic consequences would be. Before you say, “But I didn’t vote for them”, you have to ask yourself what did you do to stop them? To my shame, I didn’t do anything aside from vote for an opposition party. This time I’m going to be campaigning, making contributions, and offering as much help as I can to get Labour kicked out!

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  • Personally, all I can see in the article is him pointing out the bleeding obvious after the event.

    As for this attitude of we are all guilty – speak for yourself mate, instead of projecting your own lack of perception onto the entire human populace.

    He does it again here:

    “During the boom years we created twin connected bubbles in assets and credit. Both of those bubbles have burst.”

    Who’s the ‘we’ he’s talking about?

    I let my opinion on what I recognised to be a bubble be known to my mates in a pub back in 2001 when it became obvious to me that a) house prices were rocketing and b) people were spending more as a result on the back of it. What particularly angered me (and again I can remember pointing it out at the time) was that financial journalists would constantly trot out the line about confidence on the high street being high with house prices rising, as if it was economic gospel that rising house prices meant people were richer and could spend more money – what absolute fecking idiots – why did nobody take them to task? I don’t feel smug about being right – I haven’t profited from this in any way – I just feel extremely frustrated that something so very damaging that I could see happening (without much in the way of qualifications in the area) could be allowed to continue for so long.

    Peston would be right if he said there were many parties complicit in the creation and perpetuation of the bubble, but to blame everyone (which presumably absolves everybody as well – if we’re all guilty then nobody is) is a disgrace and a cop-out on his behalf – who are you really trying to excuse mate? Saying everyone is to blame is not insightful and it is not mature – it is a deliberate deception imho.

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  • @phdinbubbles

    1) Peston to be fair was one of the ones who called it (as did jeff randall); it’s an accident – mainly due to stephanie flanders getting pregnant at the same time as Northern Croc went down – that raised his voice higher than it was before. For those of us who saw something of what was going on, it was hard to get a hearing even in the pub (remember?). Think how much harder it is to get a contrary view across to news editor or producer who is the gateway to an influential public hearing. (I speak as someone who worked as a daily newspaper hack for 10 years).

    2) Can you enlighten me as to what ‘blame’ is actually useful for, and why it matters so much to you to make sure that it is properly allocated? If one wants to engineer a change in attitude – as Peston seems to want to – then casting blame around only divides and alienates.

    We are all responsible for the way we, as a country, have lived and conducted our business. We are all complicit in one way or another. To divide the world into good and bad, and say – that group of people over there, it was your fault, we did nuthin – is a gross oversimplification. If a small number of people with a view want to create lasting change, they need to somewhow engineer a new mass consensus. Alienation and shame are not efficient ways to effect change.

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  • Peston – total f uk wi t!

    He really cannot bring himslef to critisis the Labour government who are even at this point encouraging debt and strongarming banks to lend – he is beyond contempt.

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  • Tenyearstogetmymoneyback says:

    The BBC did have programs about house the house price bubble years ago.

    I sold my Halifax shares back in 2004, the day after a program in which
    a reporter was advised to ring Birmingham Midshires about a ten times salary
    Self Cert mortgage “and whatever you do don’t tell them your real salary because then
    they won’t be able to give it you.”

    Look at http://news.bbc.co.uk/1/hi/business/3478635.stm for a good overview of their investigation

    Thinking about timescales, the problem was that all the people who did give warnings were
    so early in doing so, a couple of years later they just looked stupid when prices had climed yet another 30% +

    The one thing I never did hear was an explanation of was where all this money was coming from. Until last year
    I honestly believed that there must be loads of rich OAPS and a few British Pension funds funding all these mortagages.

    :- Duncan

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  • “Alienation and shame are not efficient ways to effect change.”

    Well, that depends if the person or persons are still in office or wielding power. If they are, point and shout away, I say.

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  • phdinbubbles – me too.

    not smug. just car-crash-in-slow-motion syndrome

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  • phdinbubbles ,

    ” it is a deliberate deception imho.”

    Agreed.
    The comparison with the collapse with communism is yet to come – wait for Autumn 2010
    Communism collapsed at the end of the last sixth night (1985-1991)

    Sixth night destruction runs Nov 2009 – Nov 2010

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  • You don’t change society by haranguing politicians. You change it by creating new discourses, new realities that people didn’t see before, and by making those realities inclusive and accessible.

    You don’t change people’s minds, or attitides, or behaviour, by gloating and pointing. (However satisfying that may be in scratching some fairly basic human urges).

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  • I don’t know to what extent Robert Peston can point a finger of blame but I agree (we) is positively vague. And I personally object to being included in we.

    Reading the article makes it clear that this won’t bounce back in a hurry.

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  • “You don’t change society by haranguing politicians”

    Yes you do. That’s how a democracy works – change people’s perceptions of the people paid to look after their interests – espcially when they’re not doing just that.

    Also, if no-one is to blame, no-one has to take responsibility. If no-one has to take responsibility, no-one has to reform. If no-one reforms, then we’ll make exactly the same mistake again.

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  • Casting blame creates the opposite of people taking responsibility – instead you create a false argument between one fixed viewpoint and another. This is as true in politics as in bringing up children.

    Blame-mongers / responsibility dodgers. Two sides of the same coin.

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  • And I must disagree as to whether blame culture has any useul place in politics. At least, it doesn’t if you want change.

    If you want change, change the discourse (Obama is a good example). Don’t join in thinking who shouts loudest or makes the best pro/anto argument wins. That’s naive and a recipe for perpetuation of the status quo.

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  • I sat through this boom as perplexed and fustrated as anyone else here…. but had I have bought a house (at a good price, got a raise, inherited a deposit, whatever) I’m sure I’d be a heck of a lot less informed about this crazy world. This madness made me ask questions, I found this site among many others, I’ve been reading books, from economics to Kant… I never used to read books. Personally I look back and I’m wondering weather I did indeed miss out.

    Essentially I’d agree with montesquieu.

    I’m in a position to gloat or blame the irresponsible (though just saying ‘I’ll not stoop to that level’ could appear to assume a certain superiority, maybe?), the irrespnsible could blame the lax lenders and the irresponsible media, the lenders could blame the regulation and the politicians could site any number of complicated reasons and use the lack of regulation to justify more regulation and red tape. The truth is and always has been that we are all in it together. The problem has to be rooted out but that won’t happen while we’re devided.

    Good and evil are subjective. Positive and negative are objective and absoloute. (In addition you could say that positive, negative and good, evil are implicitly one).

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  • Could I just add that absolutely none of this would have happened with decent central monetary policy. Mispricing of risk and return is based simply on interest rates and the availability of money and credit. You can blame (or not blame) as many actors as you like in this play, but the people putting on the show are the central bankers and policy makers.

    The ability of these banks to create money fuels the entire system. Money creation should be appropriately managed!

    Blame estate agents? They are out to make commission. Blame broekrs? They’re out to make commission. You can’t blame people for doing their job well (although you might complain about dodgy practices and a lack of oversight and/or regulation). The people to blame are the people who are supposed to be supporting the whole system, and they make the rules, this is the problem!

    No conspiracies here from me. Just the awareness that there are still the same amount of people and stuff in the world – but suddenly there is a whole lot less money. That’s the failing of the core monetary system that these people operate.

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  • @montesquieu

    Apologies for not getting back sooner. I would like to spend some time answering some of the interesting points above – but am rather limited with a heavy workload the the mo.

    Peston did call it after NR went to the BoE. If he’d called it several years earlier he would have been some use.

    The word ‘blame’ isn’t useful, but accountability certainly is, otherwise nobody is ever responsible for anything. The relativism that you are espousing, I would argue, is one of the prime causes of the bubble (and very much a sympton of the narcissism that has wreaked havoc with this Country over the last decade).

    I, for one, didn’t divide the world into good and bad or evil or anything like that. I pointed out there were a number of parties complicit in the creation of the bubble and also that there are entirely innocent people (and obviously a whole spectrum of complicitness inbetween). The irony of what you are saying is that it is actually yourself and Peston who are ‘splitting’ (in the psychologicacl sense) the world into good and bad by making a sweeping statement that we are all guilty. This is simply not the case – some are more guilty than others and there is ample evidence to back this up. It is Peston’s argument which is a gross over-simplification and imho an attempt to avoid being held accountable himself for not spotting the elephant in the room – only reporting on the droppings he found.

    “Blame-mongers / responsibility dodgers. Two sides of the same coin.” Partially true. There are those who blame others who are guilty themselves (Brown blaming the world economy would be an obvious examples), but then again there are those that genuinely blame those who are genuinely guilty. If someone commits a murder, are we all equally as guilty? Again you are yourself splitting people into a black and white category – i.e. that everyone that blames others is avoiding responsibility – this is an oversimplification of the world, which is exactly what you are actually complaining about. I perceive that you are actually complaining about yourself.

    As for Obama – I will judge him after he’s done his job, not before.

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  • I would like to clarify my position, at this ridiculously late point in time. I was defending myself against pest-tone’s absurd belief that he has the right to volunteer me for accepting blame. He raised the blame issue, and pointed at me – not on. Orcus – silly argument – all assumption – feel free to volunteer for blame with pest-tone. I’m not gloating, but nor am i going to be held accountable.

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