Wednesday, May 20, 2009

This is why they must go

Capitalism at 'turning point' claims Lord Mandelson

Mandelson is attempting to redefine the economic crisis not as a regulation issue but as a cautionary lesson in not over-regulating. "The risk at the moment is that the critique of markets goes too far, that we rush into re-regulating markets as a point of principle, as a political attempt to demonstrate control ... ". How can the critique of unregulated financial markets NOT go too far? Regulation is now a neccessity for the long term health of the economy. As yet, no word on the government's other attempts to demonstrate control such as the car-scrappage scheme, ID-cards and blocking of MPs expense details. Now what on earth would a politican have to gain from siding with the banks? Fishing for a lucrative bank advisory position after the next General Election by any chance?

Posted by paul @ 09:04 AM (1024 views)
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16 thoughts on “This is why they must go

  • Mandleson is a member of the Bilderberg Group who have just finished their annual meeting. Presumably he attended and is representing the wishes of the elite as usual here

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  • I personally think he has a very valid point, and an unusual one for a politician in such times.

    I’m sure he will be favoured by the banks & shadow banking institutions for fighting this corner, and may well be sought by them after the [third and final?] end of his political career! (…and I don’t doubt this may well have given him incentive in this instance.)

    “””
    A major source of objection to a free economy is precisely that;
    it gives people what they want instead of what a particular group thinks they ought to want.
    Underlying most arguments against the free market is a lack of belief in freedom itself.
    “””
    Milton Friedman

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  • The flipside for the arguement of less regulation surely should be that the market should decide the losers, as well as the winners. IE no government intervention / taxpayers money when an organisation of any sort goes t!ts up.

    Eventually leading to more efficient self regulation, or complete self destruction…

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  • Missedtheboat says:

    Agreed. The opposite of capitalist economy is the closed economy. Capitalism is the least worst option.

    Nobody has died so far, except for a few fatcats that despaired.

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  • Eh?

    If we’re agreed that a lack of government regulation created the problem (because there were too many incentives for the government not to regulate) then how Mandelson sincerely label attempts to reintroduce regulation as politically expedient but unnecessary?

    It just doesn’t add up. Its like saying “There’s absolutely no point bringing back fire legislation because it won’t put out the blaze here”.

    And you Friedman quote 6-6-6, is almost certainly redundant in this case. The free market ended when the government turned to the banks and said ‘help yourself’ to taxpayers’ money.

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  • I also think he has a partly valid point

    “the global financial crisis is not just a failure in markets, it is a failure to “create the necessary conditions for market dynamics to operate soundly” by the governments”

    however I don’t believe the market has failed – it is every thing to do with the interference of Central Government within the market and preventing poorly run businesses (banks) to fail as the market would dictate.

    If banks were allowed to fail, as indeed thousands of small businesses do – then the market would be working. Smaller banks or even new banks, Gid forbid, would fill the void left by the failed banks. There would be a need to protect deposits in some way but that doesn’t mean the banks should not fail.

    Capitalism is not broken – governments are broken.

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  • Mark Wadsworth says:

    What Biggerguy says.

    There are more sophisticated arguments to say that banks were over-regulated (which may or may not be true), but as to the quote that BG highlights, the key to all this is that government WANTED there to be a house price bubble – the credit bubble was merely the inevitable flip-side of this.

    As to the car scrappage scheme, this was doomed from the very start.

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  • matt_the_hat says:

    3. bigguy2 – Capitalism is not broken – governments are broken

    In your capitalist utopia, deposits should not be protected either, surely the market would decide that some people are too stupid to have money and invest in “bad” banks. These deposits would then be reallocated when a bank went bust to someone who would use these resources better!?! Cake and eat it comes to mind

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  • I think this whole mess with the banks & now the politians on the fiddle comes down in part to moral responsibility. Once people feel released from any sort of moral responsibility the only thing holding behaviour in check are rules, these rules can always be bought, sold and fiddled as required. I really feel a lot of these bankers & politians still feel they have done nothing wrong because they are morally ignorant, to them there is no right or wrong just rules & regulations.

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  • The argument that deposits should not be protected under a capitalist system is specious. After all, depositors are not the same as shareholders.

    As depositors are creditors to the bank when it goes bust, they should get first dibs on liquidated assets.

    The only reason the government has to intervene to protect depositors is because depositors don’t get any return under UK bank insolvency rules. So all the deposit guarantee does is make the Treasury a creditor rather than individuals.

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  • stillthinking says:

    Mandelson is extremely duplicitous so even at face value I wouldn’t believe him. His con here is that there is a turning point for “capitalism” where actual events are much closer to a turning point for socialism.
    As bigguy says, the banks were not allowed to fail, which is basically capitalism. The bad restaurants close down and everybody loses their investment (savings), the bad banks go down and the same. There are government guarantees and nothing to stop people splitting their savings between banks.
    Also, the UK is in debt, the people are on average in hock 30K each. What kind of guarantee is it? Basically for foreign creditors.

    The whole idea that we couldn’t have let the banks fail is rubbish. We could have but did not. The problems of the UK are -entirely- from the crazy pseudo-socialism spouted by the Labour party. Arguing , oh well nobody should lose money.!!!! Right good luck with that idea. Nobody ever loses money. And the implications of that would be….worthless money. You cannot guarantee the real value of savings. You can only guarantee the nominal value, all the rest requires real work and real organisation, none of which the Labour party have ever had, smelled or been close to. Does somebody capable of typing believe that Labour have guaranteed savings?!? The pensioners have been stuffed.

    We have a government that has expanded the role of the state up to 50% of the economy, that openly espouses central planning, that has a fascist policy towards the countries savings. To say that capitalism has failed in the UK is UNBELIEVABLE NONSENSE.

    Anybody who believes the absolute tripe Mandelson comes out with needs retard stamped on their head. He is attempting to position the party as some kind of socialist saviour for the next election by fobbing off the chronic failure of New Labour as a failure of capitalism. Higher taxes – not capitalism. No choice on school, hospitals – not capitalism. State expansion – not capitalism.
    For f*cks sake.

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  • Why is Mandelson talking about markets in general rather than about financial markets? Surely these are the issue. You don’t fix them with ‘education’ and ‘export promotion’. Most of what he says is pretty meaningless anyway – “good regulation is better than bad regulation”….cont. page 94.

    Since there’s nothing in the text the question is: what is the sub-text? His paymaster is the Anglo-American banking club (which explains why he keeps coming back), so there’s a clue.

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  • Paul. No we are not agreed on that point (comment 2). We never had a free market – that we did is a misconception which will be used to add more systems of control!

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  • The dangers of over-regulating financial markets.

    Regulation never was a danger. The more regulation the better by insuring 100% transparancy of the money flow and creation which is top secret now. Pleople have the right to know what is going on with their money and not to invoke bank secrecy.

    Plus there is no competition in the housing market and people end up paying more and more for same old properties. Where is the value that the capitalism must create?

    And does anyone think that rest of the world is prepared to tolarate money printing when they worked so hard for those dollars? Or otherwise maybe use the nukes?

    The answer is: hard work

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  • Still thinking is spot on with his analysis, as for whether it is a failure in anything in particular we need to look at what has been a success. In the lack of anything obvious in this department the only conclusion is that everything has failed, the housing market, the banks, large financial institutions and above all governments.

    We are looking at systematic failure on a wide scale across all fronts, any claims otherwise are just attempts at damage limitation as is the case of the Labour party in this country and it’s creepy little klingon the dark lord Mandelson.

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  • mander said, “The more regulation the better”
    – this cannot be true; at some point the additional regulation will cost more than the gain and actually harm the economy with it’s existence (let alone the actual direct effects of said rules).
    Whilst I do not advocate “light touch regulation” I firmly believe that less regulation is better.

    Friedman went on to say:
    “””
    The fundamental threat to freedom is power to coerce, be it in the hands of a monarch, a dictator, an oligarchy, or a momentary majority. The preservation of freedom requires the elimination of such concentration of power to the fullest possible extent and the dispersal and distribution of whatever power cannot be eliminated – a system of checks and balances. By removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power. It enables economic strength to be a check to political power rather than a reinforcement.
    “””

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