Inside Job on the crisis

Academics are distracted by conventional wisdom as well as pleasing their university masters. It takes a real maverick to not go with the flow and you can be sure that a position supporting what the powerful finance sector's wants to do will be celebrated. The film should be judged by what it adds to the general knowledge of what happened and of course cui bono!

Stephanie wrote:

"In the film, the head of the Harvard Economics Department, the well-liked and respected British economist, John Campbell, appears literally flabberghasted by the suggestion that economists writing supportive papers about, say, financial deregulation, should reveal who has paid for their research "

I'd like to see more than his flabber ghasted! If the big City and Wall Street businesses did not pay for the reports, who did and what did they gain from them? We MUST be told. The is the rotten heart of economics - it needs ripping out! I consider that it is reasonable to hold Harvard and the other training institutions jointly and severally responsible for the collapse of western economics and the disgrace and joke they have made of a formerly respectable subject (well almost respectable!).

Surely it`s now obvious to Agatha Christie fans that whoever financed Clinton`s election campaign is prime suspect in tracing who profited from the 2008 financial crisis scam.

No one dare ask why the Glass-Steagal Acts got repealed because that might allow the us mugs in to sue America plc for re-running 1929...which itself was a very similar rip off of the global economy.

We can`t afford to be taken to the cleaners again!

"As I've written in the past, the crisis shone a harsh light on the failings of mainstream macroeconomists and financial theorists, but it was an intellectual failure as much as an ethical one"


Yes, Yes, Yes
Please do a blog on the ideas of MMT Stephanie.
You don't have to take a view but please acknowledge their work.
I'll be your best pal

This is a major global fraud...now just imagine how the USA would have responded if it was China that had done the dirty deeds...or us in the UK?

Half of the Chinese elite or our metroplitan middle class would be in chains (having been rendered to GITMO or a dark corner of Egypt for some vigorous questioning) while a thousand US lawyers would be starting class actions against the alleged perpetrators and their governments and regulators.

Sadly,our politicians arevirtual bailiffs and asset strippers working for the USA....so don`t hold your breath!

I won't watch it, probably another Monday Quarter Back making a fortune telling us what we already know.

What I wish to experience is someone with a conceptual vision to get us out of this mess and stop it ever happening again. This not a game of numbers, ordinary innocent hard working families are being made the victims of this mess, and that is immoral and indefensible.

What we have at present are totally discredited, (by their own admissions of previous forecasts), Journalists, Academics, Bankers and Economists arguing, for example, about this weeks 'shots in the dark' about future possible, probable, well maybe, uhm your turn Fred, inflation rates.

No wonder we are in this unprecedented mess, nano thinkers.

We know we are bust for many years to come, move on, stop looking for the sinners of the past and find the next generation of shakers and movers for tomorrow.

The present generation of politicians, advisors, economists and the well paid city spivs that put us into this mess are never ever able to contribute to future solutions, they are already proven useless and only interested in their own welfare not the nations.

I would like Economists at the BofE to explain why they think that giving money away practically for free to a massively over indebted financial system is a way of fixing the system.

Where in all the University research have the computer models been created and verified that shows that this sort of abuse will rescue, rather than further deteriorate, the financial system.

All the models I have seen and understand, and have been proven over centuries, show that massive indebtedness must be defaulted on in some form, so the system can reset and start again based on sure foundations.

The problem we have is that this "resetting" will wipe out the most from those who have the most. And those who have the most have created a set of quangos like the BofE to defend their way of life.

Stephanie, as someone who I hope is independent from these influences, it would be good to see you put your neck on the line and really start telling how it is. Maybe you will then be able to look back on your career and be proud of your part in the uprising of the common man against those running our current financial system.

And I am not some Marxist or conspiracy freak, just a normal guy who has looked beyond the insipid news bulletins to understand what is really going on.

I'd love to see the excruciating interviews, but I'm not sure I'd see the rest - the experience of Leonardo DiCaprio in '11th hour' has put me off campaigning films for good.

34. At 3:52pm on 16 Feb 2011, stillpuzzled wrote:

Stephanie.
mushroom is a little bored now...we keep hearing about the MPC and the base rate, and yet...
#################

At 18:34 on 17 Feb 2011 Stephanie Flanders wrote:
...in the last half an hour, it starts to lose focus, until more or less everything bad that's happened in America and Britain in the past 20-30 years is tied up together in a massive capitalist conspiracy of government and banks against the ordinary man. You either buy his thesis, or you don't. But in the screening I went to, that is where audience interest started to flag.
~~~~~~~~~~~~~~~~~
Touche ma'am. :)

"It was fun and refreshing to see the academic economists come in for criticism for their role in the crisis: they've been missing from most other documentaries on the crisis."

Have the financial journalists had their fair share of criticism yet for not being sceptical enough of the mainstream?

"the crisis shone a harsh light on the failings of mainstream macroeconomists and financial theorists,"
You're a great economic journalist and I would really love to see you do a documentary about the alternative ideas that might just have got it right. Even the ideas that are still considered crazy, like returning to a tally stick system where banks are removed from their position (by buying government debt) as gatekeepers of the money supply to the economy. Maybe it is crazy, but I'd really like to hear you making the arguments for it and against it.

Quoting from one of the articles you linked to: "too many practitioners on Wall Street decided that 20 years' worth of data was enough to tell you that house prices could never fall, and stock prices would never go down by more than 5%. "
I remember it being explained to me after the japanese financial crash in the 90s that it had happened because people had started to believe that property prices could never go down.

It's not as if economic journalists and academics were conscientiously studying and drawing sensible conclusions from the data and were suddenly hit by an unprecedented event. It had happened ten years earlier in japan.

To call it an intellectual failure is too high praise. To include the word 'intellectual' in any sentence relating to economists is highly dubious. It was a failure of basic common sense. A failure of people who were more interested in models that supported their bank balances and their niche expertise than in what the data was really saying.

Given the assumptions that were implicit in the ratings authorities' AAA certificate for US mortgages, ie the assumption that house prices could never fall, a child could have drawn a parallel to the japanese crash and concluded that the same crash was going to happen here. Only given the much larger sums involved, that it would happen on a much larger scale. So my question is: why didn't you spot it? That's not a rhetorical question. I'd really like to know : ). You can add it to the end of your documentary.

jonearle,

I like your comment.

There was an UK Economist, his name and institution escapes me, who consistently predicted this mess since about 2005 and of course he was rubbished by many of his fellow Economists.

In 2005/7 the EU and IMF wrote to the UK government three times with a caution about the UK governments financial and economic policies, they of course were equally rubbished by Brown and Balls.

I expected Osborne to really 'spill the beans' and give the burdened taxpayers the inside track about this mess, but even he must recognise his political suicide would be to criticise his paymasters in the City.

As just an ordinary fellow defending what I have worked for all my life, certainly I am non politically affiliated as I detest political parties, I believe this mess is simply the honest people VERSUS the useless government and the crooked financial institutions. For millions of people like myself hanging on to what you have for the next 5 years will be a victory.

For those who feel sufficiently angry there is always the Tahrir Square option. The only opportunity I know to exercise this is 26th March in central London.

Excellent summary Ms Flanders. Non vedo l'ora....

I agree about some Economists getting off pretty lightly...but with all respect so have Journalists who are much more connected, on a regular basis, to the Elites in Gov't, Quangos, or Banking, than Academics usually are.

watriler #12.

"For those who feel sufficiently angry there is always the Tahrir Square option. The only opportunity I know to exercise this is 26th March in central London."

while I do hope for a large turn-out, it is an insult to compare to 'Tahrir Square' -- how many people in Egypt (and other places) leaf through their diary and say, oh, I know, I'll have to keep this weekend two months from now for a chance to show my depth of frustration. risible.

This documenary film is a very convincing explanation to me of what went wrong and how we can fix things-

https://www.youtube.com/watch?v=4Z9WVZddH9w&feature=related

This is the Official Online (Youtube) Release of "Zeitgeist: Moving Forward" by Peter Joseph.

On Jan. 15th, 2011, "Zeitgeist: Moving Forward" was released theatrically to sold out crowds in 60 countries; 31 languages; 295 cities and 341 Venues. It has been noted as the largest non-profit independent film release in history.

This is a non-commercial work and is available online for free viewing and no restrictions apply to uploading/download/posting/linking - as long as no money is exchanged.

A Free DVD Torrent of the full 2 hr and 42 min film in 30 languages is also made available through the main website [below], with instructions on how one can download and burn the movie to DVD themselves. His other films are also freely available in this format.

Website:
https://www.zeitgeistmovingforward.com
https://www.zeitgeistmovie.com

Stephanie

It is great that the cinematic art form has addressed this subject. It may even become a genre like the Vietnam war movies, spaghetti Westerns, etc. Wall Street and Wall Street: Money Never Sleeps (aka WS II) are already other titles vying as signature titles on the theme. Satire, pastiche and polemic all have their well-established places in this popular art form.

Time and popularity will tell whether the film has touched a popular nerve and becomes part of a general recognition of a cultural and social change being required in society, or whether it ends up being a footnote on Wikipedia, or a filmography somewhere.

We await the next film in the genre: the one that attacks the regulators or the politicians. The attack on academics; of the economist or the MBA type in banking, particularly when they hail from Harvard has probably been over done though; MBAs have mostly been attacked by journalists such as the Times hack that studied at Harvard, rather than through the art form of cinema.

The over mathematisation of the Dismal Science at the expense of common sense is a point worth making. Apparently culpability by the off-shoots in micro-economic analysis on financial markets; often propagated by people trained as physicists and mathematicians was probably a soft target, or even a sitting duck. Well worth a shot though!

I for one, at least look forward to seeing it.

It is quite clear that economic theorists failed the world. It is also well known to some that their theories are built on a bed of sand and actions based on those theories will produce unlooked for results. The economists in charge learned their subject at a time when convertible currencies disappeared and were replaced by fiat currencies. Many failed to recognise the significance of this change. Many still do not seem to understand the realities of our current system. Text books were not updated and the old ideas based on gold standard theories continued and sadly, are still extant.

If theories in hard science subjects fail to predict, they are thrown away or have to be modified before they are used. Economics fails to do this. All universities should hold their heads in shame for teaching a subject according to old out of date ideas. It is just as if the phlogiston theory were still in vogue. Now the world's economies are being burned by this failure.

The political class must share their portion of blame in this. They too have failed to understand even the most basic of issues that the change to a fiat currency wrought. They still preach the idea that our economy is like that of a household and it can go broke, bankrupt.

It is time for change, but it will need to be throughout the financial industry of the world and the politicians who make decisions on our economy. Seems to be a rather large task - ..............

"In the film, the head of the Harvard Economics Department, the well-liked and respected British economist, John Campbell"

Whwn you single someone out for praise it worries me after the way you praised the Irish Finance Minister Brian Lenihan as "A Good Man". What would a bad Irish Finance Minister have done? the mind boggles...

watriler- there are options to protest continously. Look at

https://www.ukuncut.org.uk/

https://38degrees.org.uk/

https://www.tuc.org.uk/

I work in the middle of London. Every day I hear and see protestors. Just watched the London BBC News and saw police removing protestors from Islington councils budget meeting.

But the events in the Middle East are truly amazing and heartening!

I don't think people here are going to go as quietly as the Government are hoping though.

Inequity has built up too much and to have idealogically inspired cuts rammed down out throats is just about intolerable.

The unvirtous circle is too obvious for people to bare so they cry kleptocracy:-

1) funding of Tories by banksters who caused the crisis
2) policy proposal that help the banks and big business (corporation tax decrease, no reform of banking or impostion of restraint on remuneration of bankers or high earners, selling off public sector including NHS to business)
3) No clamping down on corporate tax evasion. In fact increase in sponsorship of tax evasion including allowing foreign earnings to be considered tax free
4) On the other hand the public and public sector wrokers do pay for the cuts with higher unemployment, decreasing living standards due to speculation by the banks, slashing of valuable public services
5) Cameron marching around and claiming the Big Society will fix things and that effectively we shouldnt be complaining if publisc services shut as its Our resposnbility to take voer provison ourselves in adtion to our family and work repsonbilites. All the repsonsiblity falls onto the shoulders of ordianriy people. none on business. None on capital owners and none on the state to assist workers collectively.

“Does the film tell us anything we didn't already know?”

What is there to know? When it is quite clear that whatever the bankers did was within the law and was protected by the law. In the country where I am now working, there is criminality in selling ‘Magic Stones’ which purported to cure a variety of diseases plus some mental ones. The police had no problem in successfully prosecuting the felon-conmen for cheating, despite the fact that the placebo effect is well-documented effect among the researchers in the pharmaceutical industry.

However when it comes to the financial institutions, there are many Madoffs who got away. Based on my personal experience, an investor; notwithstanding their substantial positive net worth, should be able to examine the bona fides of every derivative product and get an authoritative opinion, without any repercussions.

At that time, I questioned my bank’s customer relationship officer on the viability and the ‘fair-chanciness’ of some product which the bank was promoting. But since the products were already approved for sale by the local monetary authority, I was told in explicit terms that I opened myself for libel if I made it an issue. I backed off.
Not surprisingly in 2008-2009, the product ‘collapsed’ and many hurt investors demonstrated for redress.

The American movie industry has been telling you all you need to know about the world financial superpower for over a century.
They pretend to project a myth of the lone hero fighting the "evils" of crime and corruption and loan sharking...but in reality America is a nation run by major corporations and organised crime and the Wall Street loan sharks ....with their CIA and NATO and EU etc network and capitalist China hoovering up all the jobs and resources in the way we used to.

As for us in Britain....isn`t it time we realised that ordinary non working people aren`t going to feel inspired to dig for Britain while the beneficiaries aren`t their children but the children of immigrants...and a lot of seedy American loan sharks?

Could we fight a war with the same conviction we used to have that we are building a land fit for heroes?

My Dad voted Labour after WW2 and by the 60`s he was behind Enoch Powell and saying that the socialists were more treacherous to working people than capitalists.

Naturally,I knew better in the 60`s...but he was right!

7. At 8:38pm on 17 Feb 2011, jonearle wrote:
I would like Economists at the BofE to explain why they think that giving money away practically for free to a massively over indebted financial system is a way of fixing the system.
--------------------------------------------------------------------
It isn't. It wasn't. At least, not the 'system' you are thinking of.

The huge amounts of money lent/invested in RBS and LLoyds was to keep your/our bit of the banking 'system' - wage payment, pension payment, direct debits for utilities and Council Tax - going. Oh, and the rest of the public sector going; things like schools, hospitals, services to the elderly, waste collection, emergency services and so on.

It is possible, highly likely, that a complete breakdown of the UK banking system would have brought everything to a shuddering halt.

4. At 7:36pm on 17 Feb 2011, EconomicsStudent

It is very much against the interests of nearly everyone with any power in our current system to offer any platform to those ideas. It would be great to see it but I won’t be holding my breath.

To me, Harvard seems to be a gravitational centre for much of what is wrong in current economic and business thinking. Its influence is huge. The suggested reaction of John Campbell seems staggering – all published academic papers in all fields should state their funding sources clearly. Why should it be any other way?

The purpose of the BBC is to inform, educate and entertain.

It certainly entertains, and informs.

However, it fails to educate.

The financial crisis is a complex and difficult subject.
When analysed, there are clearly villans.
Because the "waters" have been deliberately "muddied", it is hard to see where blame lies.

Does this mean that any criminal who wishes to commit the "perfect crime" just has to obfuscate their actions, and never be found out.

Within the BBC, good journalists must use their resources to educate the public.
Your review essentially says "don't go to the film, it is boring"

You have been in post for the entirety of the crisis. Can you honestly say that you have educated the public into the causes?

If you have done a good job, why does this comments page show so many differing views on the causes

"a massive conspiracy of government and banks against the ordinary man".
"Conspiracy"?....no.
"Opportunity"?....yes.
Many might accuse the financial industry of a sustained period of THEFT.
I don't know.
Governments were mesmorised by the industrys ability to make money grow on trees......it didn't of course, it was all borrowed.
Now it all has to be repaid, except for the large part that has gone into their pockets.

Steph,

'The problem, for me, was that it was almost too flattering to economists - and economics as a subject - to suggest that they made so many mistakes in the lead up to the crisis because they were in the pay of the bankers.'

The problem for me is this in't the first time this has happened - and you and your ilk should have known better.

It was a bubble...it burst.....Again!

Mow many times do we watch you make the same mistakes over and over again before we think you are doing it on purpose?

Tulips? Stock markets? Dot-comms? Property? Commodities?

Mishkin's response to being stitched up by Ferguson:

https://blogs.ft.com/economistsforum/2010/10/the-economists-reply-to-the-inside-job/

Slightly off topic but it appeared to go un-commented on the fact that Germany are making more and more noise about the recovery fund;

" Germany has warned that the euro zone's future bail-out fund must not become a "regional development fund", despite Europe's widely diverging economies."

There does appear to be a backlash in Germany from the populous as they feel that they are propping up the rest of Europe while being asked to dig deep for their own economy. This can only end in two ways, a completed melt down or the setting up of a two tier system. Both of which are unthinkable for the bureaucrats who are still trying to expand the EU out of trouble. Time will only tell and that time could be fast approaching for after the Irish election there may well be a call from them to reduce their debt burden while also lending them more.... How long before we come to that straw?

Economics is an 'Art' rather than a 'Science' and we should all try and remember that. No economists has ever stood be his theories when he has got it completely wrong, there is always a get out out!

Polemics? Part of the entertainment industry. I may watch the movie one day but I'm not interested in the following:

1. Blame - pointless waste of time and energy that would be better spent on organising the best course of action. That's action at all levels of society i.e. local, national, global.

2. Excess baggage - I've got enough of my own thanks. I neither want nor need anyone else's.

3. Lack of breadth, depth and objectivity of analysis - isn't this the major reason why we have reached our current position? (Rhetorical question).

I watched Robert Peston's recent doc about banks. I await a similar treatment of our national and global regulatory structures, financial and political, and the implications for: currency speculation, commodity speculation, capital flows.

Ms Flanders wrote:
‘What the film seems to miss is that many of them got it wrong for free’
Beautifully put Ms Flanders.

As one wit once posted on this site:

Economists:
Is there any other profession where you can be wrong most of the time but still be considered an expert?

A positive note...
HSBC and Barclays are world class companies.
Although they did get mixed up to a certain extent in the mayhem, they were not on the road to disaster made by RBS and some others.
HSBC and Barclays are top-line banks, and two of Britains finest companies.
Credit where credit is due....

It would be justifiable to investigate how academic institutions such as the Financial Markets Group of the LSE provided the academic foundation for regulatory policy and/or the alrm bells and the network which operates between these institutions, the regulators and the financial institutions and markets.

A chap called Hyun Song Shin could be a useful point of reference. He put a lot of work in to liquidity risk and contagion risk in the financial system in 2005. He might have something important to say on this subject.

3. At 7:13pm on 17 Feb 2011, worcesterjim wrote:
"No one dare ask why the Glass-Steagal Acts got repealed . . . "
Actually, quite a lot of people have asked this sensible question before you.
Central to Clinton's decision was the advice he received from Rubin, who was then Treasury Secretary. The triumvirate of Messrs. Rubin, Summers and Greenspan were wedded intellectually to allowing the derivatives market to flourish with minimal regulation. Clinton, subsequently admitted on a US TV interview that he was probably mistaken to take Rubin's advice.
After Rubin left Treasury he joined Citibank in a senior position. Interestingly Citibank had been breaking the law for over a year in the US relating to certain aspects of Glass-Steagal, until its repeal!
An excellent documentary which I should recommend to anyone interested in this issue is on the US public network PBS, Frontline. The programme (which can be accessed online in archives for 2009) is called The Warning.
Of course, just like Bernanke appeared on last year's front cover of Time magazine as 'Man of the Year for 2009, so too did Greenspan, Rubin and Summers appear on Time magazine in 1999 with the title 'The Committee to Save the World - The Inside Story of how Three Marketeers have prevented a global economic meltdown - so far.'
I think the ending to this title is most telling; '. . . so far.' Of course, 8 years later their views, echoed by Bernanke and his low interest rate policies with easy money have been shown as completely idiotic and the height of arrogance and hubris. Hence my sense of deja vu with Helicopter Ben.

31. At 10:06am on 18 Feb 2011, Dempster wrote:

Economists:
Is there any other profession where you can be wrong most of the time but still be considered an expert?

This was me, I hold ecomonists with the same regard as astrologists and tarot readers.

A better phrase I heard once was:

Economists; frequently wrong but never in doubt.

Stephanie,
If you ever get bored or fed-up writing about the economic woes of our nation and the world, I recommend you take up film reviewing.
This was a very balanced, informative and helpful review.
Thank you.

I don't know about Martin Wolf appearing with Matt Damon but I was surprised to hear Stephanie on Radio 4's arts show Front Row talking about the film. Another string to your bow Ms Flanders for when this blog gets shut down by the powerful ones!

You're right, not may new factoids, but it serves a very useful purpose. It shows to we lesser mortals that much of the democracy we seem to enjoy is a sham. When the elite act in concert and purely in self-interest across national border voting for one party or the other is meaningless and whatever government ensues either won't or can't improve the lot of the bulk of people.

The Chinese don't recognise our democracy as legitimate. At least in their scheme the regime acts in the national interest (to some degree). In the Western scheme, we all get to vote on the system of casting a vote (AV etc) but we don't get a SAY in how our nation's wealth has been expropriated.

Stepehanie, you and Robert need to become the People's Representatives because we don't seem to have any at the moment.

32. At 10:13am on 18 Feb 2011, stevewo wrote:

"Although they did get mixed up to a certain extent in the mayhem, they were not on the road to disaster made by RBS and some others."

I'm not so sure.

Had RBS been allowed to go under, like dominoes, Barclays and HSBC would have gone the next day.

Plus, had RBS pulled out of the ABN Amro deal - Barclys would have bought it - and possibly faced the same fate.

When markets freeze, they are ALL in trouble!

Sorry - I misread the title - I thought it said "Jobs inside the crisis" - but as there are none then this was a silly mistake.

....unless of course you saw the clown recruitment agent on breakfast this morning - a most bizzare argument that people can't use the 'excuse' that they can't get a job because the person in front of them is a recently redundant experienced worker.

....he even used the phrase "get on their bikes" as well as "wake up and smell the coffee" (which may have been a clever reference to the commodity prices at the moment....but then maybe not)

The Capitalists are living in fantasy - and their fantasy is becoming more and more ridiculous.

Why don't they make a film titled "The Economic crisis that never was" - a wonderful film where a 'jobless recovery' is achieved and a housing market (on which the UK economy is tragically based) which 'recovers' despite the fact there are no new entrants into the market thanks to the absence of credit offered by banks!

I think there are a number of people on BBC blogs who could contribute to this as they already have their fantasy storylines rehearsed.

Anyone who's bothered to read JK Galbraiths book "the great crash" will see that some things never change.....all the way through that depression there was a string of claims of 'recovery' - but it wasn't until they actually saw a real recovery did they realise how much rubbish they were talking for the previous decade or so!

#31 Dempster,

You'll also notice economists at the BOE are turning to biologists for help with their sums...

https://bbc.kongjiang.org/www.bbc.co.uk/news/business-12479998

At least they are beginning to acknowledge they have't a clue...

As long as the crooks and gamblers in Wall Street and in the City are allowed to finance politicians, nothing will ever change.

35. At 10:25am on 18 Feb 2011, newblogger wrote:
31. At 10:06am on 18 Feb 2011, Dempster wrote:

Economists:
Is there any other profession where you can be wrong most of the time but still be considered an expert?

This was me, I hold ecomonists with the same regard as astrologists and tarot readers.

A better phrase I heard once was:

Economists; frequently wrong but never in doubt.

---------------------------------------------------------------------

The second phrase is very good, but I still think your first one was better. In any event if you have any more post them.

Let's be frank about the business of economics ~ it is indeed the oldest profession. When its practioners are not coyly comforted in the embrace of their financial services clients, they opt to ply their trade from cosy rooms in academia, here with gentle and lily white fingers thrust into the public purse.

#10 >>Quoting from one of the articles you linked to: "too many practitioners on Wall Street decided that 20 years' worth of data was enough to tell you that house prices could never fall, and stock prices would never go down by more than 5%. "
I remember it being explained to me after the japanese financial crash in the 90s that it had happened because people had started to believe that property prices could never go down.

This is but one example of how parochial viewpoints are taken to be representative of the situation applicable across the whole world !! Another example is that some in this very blog still insist that since Japan had 0% interest rate for years and is still going strong, seem to have forgotten that (a) Japanese are obsessive savers whereas many in the West are obsessive spenders. They have also forgotten that while Japan is still a major net exporter, Britain is a major net importer !!

It's a film.
It's entertainment.
It's job is to make money, in the pursuit of which it MAY tell the truth.
We know what went wrong and we know how to fix it. Trouble is, those in power don't have the b...s.

My preference when banging on is that lessons must be learned from this economic and financial mess to protect the ordinary citizen in future and move on.

The accountability for this mess seems to be centering around the personal behaviour of some city slickers working within large financial institutions on both sides of the Atlantic. Is this the real case?

For example, everytime a UK government department or similar produce an economic or financial statistic we have 2 high-flying Economists and/or Politicians generating at least 5 opinions. Opinions which often change from the same alleged authorative sources within minutes, dependent on the question, audience or political spin required.

This diversity of opinion is disfunctional and evidence that statistics are suspect by the product of poor selection and/or interpretation which results in flawed policies and a flawed system of management by flawed people. This UK obsession of debating this days economic forecasts until overtaken by the next guess is invideous nonsense.

It remains nessessary but very convenient to allocate the causation of this global mess to certain individuals and institutions, financial, economic and political, but is not the case that the major contributing factor is the systems and the driving psyche employed in global economic management?

The fragile UK government are only tinkering around the edge of this toxic cess-pit, that presently favours the chancers, incompetents and corrupt. What is needed is radical reform of the systems backed by controls that are designed to protect the ordinary UK citizen, not the city slickers ability to scam the World for their personal and corporate gains, allegedly in the UK exchequers and nations interest.

The UK never learns from mistakes and our political ability to absorb the embarressment and react to prevent another mess is just pathetic.

• 26. At 09:28am on 18 Feb 2011, newblogger wrote:
“It was a bubble...it burst.....Again!

Mow many times do we watch you make the same mistakes over and over again before we think you are doing it on purpose?

Tulips? Stock markets? Dot-comms? Property? Commodities?”


We’ve seen bubbles in the past and to my knowledge they have all burst.

A couple of questions if I may.

1) Does every bubble eventually burst?
2) Has there been a commodities bubble before?

I know in 2008 there was a price spike but if there hasn’t been a commodities bubble before we can assume that

a) the bubble will burst and we will reap the fallout

or

b) a commodities bubble is for some reason different and won’t burst (or
bursts in an unexpected way) and we all starve due to ever increasing
prices.

Thinking on, it will burst won’t it? At some point due to over-supply and under-demand the prices will collapse.


What are other people’s thoughts?

#35 >>This was me, I hold ecomonists with the same regard as astrologists and tarot readers.

As an (amateur) astrologist, I resent being classified with economists !! :-)

I'm really looking forward to seeing the film.

I think the vested interests of so many economists in producing publications of questionable quality masquerading as intellectually rigorous work that support free market ideology, which are paid for by Wall Street sharks needs to be shouted from the rooftops.

Any scientist who stepped over this line would be toast - economics needs to be cleaned up and those that are in effect taking bribes to tell deliberate lies and distortions to influence government need to be named and shamed.

In the UK with the Tories getting 50% of their funding from the City and such a high proportion of their MPs with strong personal vested interests in the City too, whilst large sums for every man, woman & child has been paid out to bail out the banks, exposing the level of collusion and abuse of ordinary peoples' money is important.

The DVD alleges that the whole crash and its aftermath was the fault of inadequate regulation of Wall Street and US mortgage brokers.
If that's true - and I don't dispute it - then how is it that the Labour Government is repeatedly blamed?

It's worth noting that Martin Wolf is also a severe critic of the Osborne-Cameron-Clegg strategy of severe cuts in government spending. Wolf predicts that there's a very high risk of pushing the UK economy into a downward spiral that will make the current government deficit worse as tax revenues fall.

That could be the subject of another 'crash' movie in a few years time: about the UK collapse of 2011-13.

47. At 11:25am on 18 Feb 2011, Remantled wrote:
What are other people’s thoughts?
------------------------------------------------------
I suspect, that as bubbles go, the food one, isn’t one.

@39. At 10:35am on 18 Feb 2011, writingsonthewall wrote:
"Sorry - I misread the title - I thought it said "Jobs inside the crisis" - but as there are none then this was a silly mistake."

-------------------------------------------------

It's been a great little earner for the kleptocrats.

-------------------------------------------------

"....he even used the phrase "get on their bikes" as well as "wake up and smell the coffee" (which may have been a clever reference to the commodity prices at the moment....but then maybe not)"

--------------------------------------------------

Thankfully I missed these pearls of wisdom. Where do they find these people.......

--------------------------------------------------

"The Capitalists are living in fantasy - and their fantasy is becoming more and more ridiculous."

--------------------------------------------------

Fantasy. The worrying thing is they seem to believe it.....

--------------------------------------------------

"I think there are a number of people on BBC blogs who could contribute to this as they already have their fantasy storylines rehearsed."

--------------------------------------------------

One of my 'evergreen' favourites:

https://news.bbc.co.uk/1/hi/business/7828549.stm

Something more thought provoking to ponder:

https://www.bloomberg.com/news/2011-02-17/world-feeding-itself-spurs-search-for-answers-eric-pooley-and-phil-revzin.html


PS Following on from currencies/commodities/capital flows in my previous post I forgot to add 'asset bubbles' (you know....houses/a place to live.....that sort of thing)

42. At 10:57am on 18 Feb 2011, Dempster wrote:

Please don't tar us all with the same brush, there are good and bad as in all professions, there are even economists who will declare that they "Don't Know"....

#38 >>Had RBS been allowed to go under, like dominoes, Barclays and HSBC would have gone the next day.

Have you any facts that show this would have happened ?? From what I can remember of those times, Barclays still enjoyed the support of Middle-eastern and some African backers and HSBC has its very profitable operation in the Far East to keep it afloat regardless. The same cannot be said for both the "premier" Scottish banks !!

Furthermore, there was also a third very stable bank known as Lloyde TSB and it was a very conservative (with a small "c") attitude towards the deposits of its account holders. It is now a lame duck because of a shotgun marriage with HBOS, brokered by the Great Gordo and his merry men !!

Plus, had RBS pulled out of the ABN Amro deal - Barclys would have bought it - and possibly faced the same fate.

I believe there is a major difference between the two suitors. Whereas RBS borrowed up to the eye-balls in order to finance the takeover of ABN AMRO ("leveraged buyout", to use an ugly Americanism), Barclays actually have sufficient financing to hand to avoid being held to ransom by their creditors !!

Blanket assumptions tend to be wrong, as had happened with most "expert" economists !!

As mere village idiots we have to rely on the opinions of experts from time to time so it's important for us know about the relationships experts have. They can lead unhelpful and sometimes dangerous 'group think'.

I think the concept of having a peer reviewed journal for economics is a good one. And perhaps under the headings it should clearly state 'this research / work was funded by...and if necessary provide details who pay for the funding group as often they can be part of an industry / PR machinery.

Unfortunately as things get complex no one completely understands them. For example the link between cancer and smoking, and man made CO2 emissions and climate change. And experts nearing the end of their careers will desire status and a bit of cash. I've noticed these debates start to have similar appearance and strong rhetoric.

In medical sciences they use the Cochran Collaboration (probably spelt that wrong). Perhaps similar approaches could be use in other areas of research??

Most of us live by heuristics and have to simplify complex information to understand and use it. We model reality. That's all experts do at the end of the day, there's are only more sophisticated. So it's easier to see how they can get it wrong....

Rambling now...

50. At 11:41am on 18 Feb 2011, leftie wrote:
=========================================================================
Many economists have a degree in hindsight, and this film just proves that point about those in question.

It is all very well bringing out another film about the financial crisis but where were all the financial journalists when all this started e.g people without jobs in the USA being given mortgages. If more of a hue and cry had been set up by the media in those early stages maybe the avalanche could have been avoided. They should have learned from Watergate that just because the "authorities" say that something is right and above board does NOT mean that it is so. As for economic and political journalists.....don't get me started !!

Vive le Revolution!!!

I have had a gutful of these bankers and politicians and the spin and games and, frankly, the bs.

I have nothing against money or entrepreneurialism or people being rewarded for hard work, handsomely so in some cases. Most of them only spend it on four pairs of shoes that make a certain type of whooshing sound, things that I have no interest in (a reference to Gordon Gekko in Wall Street 2).

But the game they have been paying leaves a nasty taste in my mouth and we are all about to reap, in my opinion, a rather nasty whirlwind.

The middle classes will soak up only so much before they break.

I hope what emerges from the ashes is better than before.

I truly do and I will try to play my part in creating something better.

Charlie

It was and remains about corruption, financial and political. Economist are simply tools used by the banks and financial services to support decisions they have already made. Failure in the political arena to provide oversight..at the behest of the banks and financial services lobbyists, and greed.
The question is really about those early canaries who were shut down by the political process. The ones who said what would happen eights years before it did. Paying for papers to support positions is as old as academics....may have been the founding initiatives for academics.
No one wants to know the truth about this because of what it says about the corruption of the political process and the buying of the elected. We continue to pretend that the democratic process represents the people and that money does not influence votes. Pretending the problem does not exist will not lead to a solution...as the current solutions all benefit the banks and financial services. As the current models are based on the feudal system where the people are taxed to support the wealthy, there is no light at the end of this tunnel.

#54

The timeline is important.

The question is would Qatar have given capital to Barclays AFTER RBS was allowed to fail?

Barclays needed to raise £7 Billion - and that was without ABN!

The entire system was propped up -not just 1 or 2 banks...

"The problem, for me, was that it was almost too flattering to economists - and economics as a subject - to suggest that they made so many mistakes in the lead up to the crisis because they were in the pay of the bankers."

Never ascribe to malice what can adequately be explained by incompetance . . .

I'll look out for this via local authority library DVD borrowing, that if its not been closed by the CONDEM's to save money! Ah money, I suspect if you were able to follow the real MONEY, I'm pretty sure they'll still be many that did not do it for FREE afterall.............

I've been in the industry since 1995. I rely on it to pay my bills, I study and like the the cut and thrust of financial markets - its fun. I disagree with a few points made in this review.

I can tell you right now, the 'crusading' can never go far enough - even if in doing so a lot is missed, plain wrong or simply made up. It doesn't matter as long as the central themes hold true.

There is a conspiracy, but its more of a sub-conscious one than a lot of business executives meeting up in secret and planning a strategy. This is what makes it so incredibly dangerous - how do you stop a movement that has no center, no heart, just the implicit collaboration of all those who wield any power and influence ?

This 'conspiracy' movement now knows it can take almost *almost* everything and get away with it - it didn't know that in 2008, but it does now and it is absolutely going to. All those who know what is really going on and disagree with it are filling their pockets as fast as they can so when the really big crisis hits, they will be fine. And they will get away with it then too. Unless something really, truly momentous happens. Maybe, just maybe, the majority of people will be pushed that little bit too far that little bit too much and some form of serious political change will occur.

54. At 11:48am on 18 Feb 2011, ishkandar wrote:
#38 >>Had RBS been allowed to go under, like dominoes, Barclays and HSBC would have gone the next day.

Have you any facts that show this would have happened ?
Barclays actually have sufficient financing to hand to avoid being held to ransom by their creditors !!
---------------------------------------------------------------------
It is my understanding that no bank has sufficient money to hand to avoid being made insolvent by their creditors. Such is the nature of Fractional Reserve Banking.

This comment was removed because the moderators found it broke the house rules. Explain.

There are signs growing of soemthing that may radically change our lives. As the cuts start to bite on ordinary families and unemployment grows, the continuing desire of the bankers to enrich themselves and the increasingly publicised way very rich people and companies avoid paying UK taxes, there are growing signs of a revolt against them. Never mind that many of these companies & individuals may relocate themselves outside the UK, people are beginning to demand that they pay their fair share. Fairness is increasingly an issue in the UK. The massive disaprity in incomes at one end, the hardworking people on low incomes seeing people better off idling away their time on benefits - all this may well come to a head over the next couple of years. People cannot understadn why, if government spending is being cut back to 2006 levels, many services which were available then are being cut. They see bankers as the prime cause of it & when lower tax revenue is publicised as a major contributor to the gap between revenue & spending, people are asking why don't the rich pay their share? We may not be in Tunisia or Egypt territory yet - but we could soon be.

7. At 8:38pm on 17 Feb 2011, jonearle wrote:
The problem we have is that this "resetting" will wipe out the most from those who have the most. And those who have the most have created a set of quangos like the BofE to defend their way of life.

........................

Exactly, it is the politics of fear that the elite push on people to try and preserve their skewed system. If the banks collapse it will be a catastrophe, or Mubaraks claim chaos would ensue if he left, or Bush and Blair claimed that Saddam had WMD's.

The majority of people at the bottom have nothing to lose if the banks fail and can only gain. Most people are living pay check to pay check with very little savings and their pensions are already spent on the current crop of pensionsers.

It's amazing how many people believe that their pension is being tucked away earning interest for when they retire, when infact it is just shoring up the current pensioners.

The media ran stories in the last couple of years that people are living longer with fewer young people to support them so we have to increase the retirement age.
This is nothing but spin.

What they are really telling you is the ponzi scheme will collapse if the Government don't start meddling with it to decrease the upper tiers. Ofcourse since these stories first broke we have had the crisis, so now the lowest tier is shrinking which will guarantee the collapse of any ponzi scheme.

A resetting of the system would level the playing field and we should start again with better regulation to prevent the system becoming top heavy again.

Re Newblogger and ishkandar....
HSBC and Barclays did indeed "dodge the bullet", and LLoyds was indeed "lumbered" with a pile of manure.
Why on earth senior management at LLoyds couldn't see that is a mystery to all, including its shareholders.
But even our successful banks must take heed of the nauseating sight of ordinary taxpayers propping up City multi-millionaires, many of whom obtained their millions with colossal bonuses paid on non-existant profits.....at the very least, a moral fraud.
The governments call for "restraint" in core-finance pay is probably the best way forward.....I'm not in favour of a revolution, (although there are times when the blood boils)...just fairness.

P.S. The serious reforms that many are looking for in finance can only be done by the USA.
The US government is the only authority that can bring banking off of its pedestal and into the real world.
The "ransom threat" by banks to "relocate if the reforms are too tough" can only be tackled by a US-European move to boycott such banks if they do so.
Any bank (or its associates) that relocates to avoid the clampdown would not be allowed to trade in those zones. Banks would then totally reform.
Unless the USA leads the fray, it will not happen.

I wonder. Are BBC journalists not allowed to use the words Fraud or Crime when talking about the current "crisis"? Film 2011 certainly didn't have any issues using these words when reviewing the film.

Perhaps the BBC needs a translation service:

Instead of "Mis-represention of asset quality" we have "inadvertently mis-priced assets"

Instead of "Fraudulently induced loans of deteriotating quality" we have "impaired assets"

Instead of "Fundamental insolvency problems", we have "Temporary liquidity concerns"

Instead of "Criminal conduct" we have "administrative oversight"

And I certainly don't like the BBC doling out criticism that films such as this are "not balanced", as if asserting some sort of superior journalistic high ground.

fleche_dor 16 wrote:-

"The over mathematisation of the Dismal Science at the expense of common sense is a point worth making. Apparently culpability by the off-shoots in micro-economic analysis on financial markets; often propagated by people trained as physicists and mathematicians was probably a soft target, or even a sitting duck."

Mathematics is a discipline founded on precision and perfect logic. To describe the methods used by economists as mathematised is an insult to mathematics. If some of the people involved were trained as mathematicians, they must either have been very poorly trained, or they have forgotten, or now ignore what they were taught.

For example, their computations of probabilities are fundamentally flawed in ways which should be obvious to anyone with an elementary knowledge of mathematical probability theory, and the gay abandon with which they extend time series data in order to make future predictions is something, that most mathematics teachers in schools would depreciate.

It is sometimes said, that mathematicians treat Mathematics as a pure young girl, physicists as a hand maiden, and engineers as a prostitute. You need to think of something even worse to describe how economists treat Mathematics.

#65 and #67. stennylfc

You have just posted copies of contributions 0 to 7 why?

Do you agree with the sentiments expressed or not?

Just so its clear the Revolution is to be non violent.

As I see it, and I know its a little far out for most posters here,
but the whole set of problems of resource management, food security,
population growth (which a lot of the time is due to insecurities
as regards future survival and lack of global welfare) is caused
and exasperated by these so called 'ruling elite'.

As I say, I have nothing against money, entrepreneurialism, abundance,
innovation, creating a better, good life - prosperity, technology, etc.

But it should be clear to most that if you let the ruling classes
continue with their interest of greed, not self interest,
their interest of greed to the detriment of everybody else,
to the detriment of the planet, then we are all in the proverbial
handcart to hell.

A lot of posts deal with macro or micro economical concerns:
money supply, interest rates, inflation, deficits, quangos, summits, etc
and with the behaviour, motivations and needs and wants of the
the so called ruling elite and players involved.

I feel a transition, based on current systems and values directed
towards a more harmonious, equitable future (I appreciate this sounds
naive to mature posters but I do have belief in this vision),
but without the blatant, and it is blatant - that is why some posters
use words like conspiracy or manipulation, is the most pragmatic way forward.

I have no problem with them having more money than me
or even holding onto the reigns of power - I just wish they
good do a decent job of it.

I don't see any widespread global change - remember, you
would not have these freedoms to post if you lived in China -
without radical 'revolution'.

But this should, must be peaceful and focused on a better
future for all.

Charlie

32. At 10:13am on 18 Feb 2011, stevewo wrote:

A positive note...
HSBC and Barclays are world class companies.
Although they did get mixed up to a certain extent in the mayhem, they were not on the road to disaster made by RBS and some others.
HSBC and Barclays are top-line banks, and two of Britains finest companies.
Credit where credit is due....

where do you possibly get that idea from ????I think perhaps you should look a little deeper at their recent history. But as a taster Household Finance Corporation (HFC),for hsbc study and for barclays how about off shore tax havens.

I dont want to pick out just these 2 but you seem to be of the opinion they are white knights when infact they are no better than any of the other spongers who have and are continuing to destroy our economy.

I thought that "Inside Job" literally skewered the lobbyists, the economist and the financial industry and its several apologists (aka spin-doctors).
The 2008 global financial crisis cost millions of people their savings, their jobs and their homes; but most people don't understand what happened.
Charles Ferguson contends that the meltdown was “not an accident” but an “inside job,” in which Wall Street Government Economic elite put the interests of the elite ahead of the average working person, and even the best interests of the country.
The movie runs in chronological order. Inside Job outlines how insipient deregulation and Wall Street greed infiltrated the White House. This has been going on, and continues, since the Presidency of Ronald Reagan, an American hero.
Toxicity ate its way up the financial organs: subprime housing, mortgage-backed securities and unregulated, bundled credit derivatives - really worth DDD rating but given AAA rating.
Then came George W. Bush who lifted banks’ leveraging limits, and from this move there slithered a problem too big too fail.
In pithy, probing interviews, Charles Ferguson skewers the squirming lobbyists, government economists, so-called financial experts who made, what just about had to be, purposeful & self-serving mistakes.
The conclusion is utterly sobering.
No one, not one person, who was responsible for financial meltdown has been prosecuted; President Barack Obama, having campaigned to clean house, returned many of the same Wall Street "insiders" to powerful financial positions. Why? Was it Obama's belief that the people who caused the problem were the best ones to solve it?
Reagan: The American government deregulates savings and loan companies, leading to the S&L crisis and the $124 bailout.
Clinton: The 1999 repeal of the 1933 Glass-Steagall Act removes the separation between investment banks and residential/community banks, a seperation that allows investment banks to make enormous profits by financial (often platform) trading. Worst of all: The 2000 Commodity Futures Modernization Act bans the regulation of financial derivatives, exempting them from anti-GAMBLING laws. These are the notorious bundled derivatives - bundled garbage - in then longrun worth nothing.
Bush: Mortgage lending quadruples on sub-prime; housing prices escalate. The Securities Exchange Commission lifts the leverage limits on banks. The American housing and mortgage market blow-up causing a chain reaction of financial failures. Government response: a $700B bailout.
Anyone that cannot see what the American loose regulation, bundled derivatives and credit default swaps (including negatives) have done to the global financial community, is simply too blind to see (financially-speaking).
I can't understand why the global community has allowed the investment banks too big to fail to get away with their nefarious, often illegal tactics. I can't understand why more banks too big to fail have not been held to account.

#68. HSBC and Barclays did indeed "dodge the bullet", and LLoyds was indeed "lumbered" with a pile of manure.
Why on earth senior management at LLoyds couldn't see that is a mystery to all, including its shareholders.

After a quick google I found this piece of info that your comment brought back to mind:

https://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6868827.ece
At 5pm, the Treasury called in the banks. First up was Sir Fred Goodwin, chief executive of RBS. Lord Myners told the banker — an old nemesis from previous boardroom clashes — that RBS would have to accept billions of pounds of funding, in a move which would leave the Government with a majority stake in the bank. RBS’s chief furiously retorted that RBS’s problem was liquidity, not capital.

So right at the brink of the bail out, there was Fred the Shred, not even understanding that he had a lack of capital. These guys did not understand their own business. Just pitiful. And even more galling is that he has "retired" on so much money that even he will have trouble spending it.

71. At 2:57pm on 18 Feb 2011, stanblogger wrote:

'You need to think of something even worse to describe how economists treat Mathematics.'

I agree.

Which mathematician or physicist declared property prices can only go up?

They certainly wouldn't find employment as a mathematician or physicist!

Stephanie,

You state that "it was an intellectual failure as much as an ethical one".

Can we hold you to this statement, such that if things go horribly awry in the next 5-10 years and it later transpires that the concerns expressed in this film were indeed legitimate (and not “imbalanced” to use your term), then we can only conclude that you mislead us?

William K Black makes the case for widescale fraud and corruption:

https://fdlaction.firedoglake.com/2010/04/20/transcript-video-bill-black-testimony-on-lehman-bankruptcy/

Kathleen Barrington is equally concerned:

https://kathleenbarrington.blogspot.com/2011/02/bowing-to-bankers.html

How do you respond to their allegations?

So the 'dismal science' just got a lot more dismal, there's a surprise.
Regards, etc.

Madam Stephanie could you PPPPPLLLLeeeeeeeaaaaaasssseeeee write a blog in

which all the reasons for financial crises and the crises in Britain are

written in Bullet Points or small paragraphs.I Just want your opinions,

what reasons do you think are the cause for this crises.
Please Enlighten every1...

I request every1 to ask Madam Stephanie.

32. At 10:13am on 18 Feb 2011, stevewo wrote:

"A positive note...
HSBC and Barclays are world class companies.
Although they did get mixed up to a certain extent in the mayhem, they were not on the road to disaster made by RBS and some others.
HSBC and Barclays are top-line banks, and two of Britains finest companies.
Credit where credit is due...."

This line is about as credible these days as "the mess of the finances the last Labour Government left us with"

Do you need a dictionary definition of systemic? - here's one.

https://dictionary.reference.com/browse/systemic

47. At 11:25am on 18 Feb 2011, Remantled wrote:

"What are other people’s thoughts?"

Turnips! - they taste foul but you're going to be grateful when you're struggling to feed the family.
I think you can safely survive a commodity boom, so long as you don't have any 'unexpected events'.

....like this one for example....

https://www.telegraph.co.uk/foodanddrink/8328621/Purple-broccoli-shortage.html

52. At 11:47am on 18 Feb 2011, Duxtungstu wrote:

"One of my 'evergreen' favourites:

https://news.bbc.co.uk/1/hi/business/7828549.stm"


Oi! hands off - she's mine! That's my line (I have to admit I've been a little neglectful lately) - how old are those green shoots now? - surely they are brown shoots....or compost?

"Something more thought provoking to ponder:

https://www.bloomberg.com/news/2011-02-17/world-feeding-itself-spurs-search-for-answers-eric-pooley-and-phil-revzin.html"

....all the roads lead back to the crisis of capitalism....

54. At 11:48am on 18 Feb 2011, ishkandar wrote:

"Have you any facts that show this would have happened ?? From what I can remember of those times, Barclays still enjoyed the support of Middle-eastern and some African backers and HSBC has its very profitable operation in the Far East to keep it afloat regardless. The same cannot be said for both the "premier" Scottish banks !!"

yes, it's called interdependency. Tell me - how long would Barclays have lasted (with or without Middle eastern investors) with LIBOR rising fast and credit markets closing out?
Without saving RBS and lloyds then do you seriously expect us to believe that the Barclays and HSBC savers would have faith in their bank?

That's not a credible premise - it's hope rather than knowledge. I have money in HSBC and if Northern Rock hadn't been saved then I would have been queuing at my local HSBC the following day - without any shadow of a doubt.
All the other 'rational' consumers would do exactly the same.

"Furthermore, there was also a third very stable bank known as Lloyde TSB and it was a very conservative (with a small "c") attitude towards the deposits of its account holders. It is now a lame duck because of a shotgun marriage with HBOS, brokered by the Great Gordo and his merry men !!"

More nonsense, I'd like to know how Gordon can force a takeover, but he couldn't force the banks to lend nor demand wage restraint. It seems private enterprise is a 'pick and choose your moments' depending on what the argument is.

We haven't seen you for a while - but at least you're consistent!

There seems to be a determination to complicate and obfuscate around what really is a very simple issue.
American politics is corrupt and organised crime finds it profitable to "invest" in presidential candidates and then surrond the newly installed president with their advisers/enforcers who then use folk like the infamous Chicago politicians to bully the president into doing what they want....in our case relax regulation so that a very profitable global madoffesque fraud can be perpetrated and somehow lost from view in the global financial markets.
It isn`t even very clever...because it`s happened before....and unless we clean out the global financial Augean stables it`s likely to happen again.

Thus far we have nothing that would even tax the brain of Inspector Clueseau ...but then the plot thickens...because "our" politicians seem worryingly unable to recognise what`s happened..... and have taken to playing their old party political game of "if it wasn`t for them we wouldn`t be in this mess" ...and taking vast amounts of our money and throwing it at the very people who should be sitting next to Madoff in jail!

Why aren`t we suing the USA?Why aren`t there people in jail?

Why are our politicians seemingly in league with organised crime?

Is there a higher or external authority to which we can appeal for justice?

It wasn't really the bankers who are to blame for the financial crisis it was the dot.com bust in 2000 and the fed's over-reation to the event horizon of 9/11.

Greenspan was the architect of the property bubble which rejuventated the US economy post 9/11 but then within a few short years, 24 consecutive rate rises by the fed in the run up to the crash saw all those low interest home buyers put out of their homes. When you start from say a 1% rate, a quarter percent rise is effectively a 25% increase)so interest rate movements can have a kind of exponential effect depending on the lowest lending point and the amount lent at that point. Neither the FED or the BOE were aware of either the amount of debt created via its low rates post 9/11 or the viability or risks of that debt = nor were they aware how debt had become re-packaged and re-disrtibuted around the globe. All of this ignorance meant that they thought they could just carry on raising interest rates in their fight with inflation with impunity. History clearly indicated otherwise.

Strangely the interest rate rises in the US here and then, were trying to stem the same inflationary phenomonen as we are currently witnessing but this time neither the FED or BOE are raising rates (they know they caused the crisis they just don't want it pointed out). Internal interest rate rises could not keep prices down then as they cannot now as the rises are currently being generated by excess printed money washing around commodity markets and the ever inceasing global competition for resources as more and more countries buy into consumer society.

The financial crisis was apparently a price worth paying for the central banks taking an ineffectual swipe at an inflation they couldn't control in the first place.

Sure the banks have been greedy since in paying zilch to savers and not passing on interest rate cuts to borrowers but not to worry the greedy bankers will still go out of business in the next crash and there won't be funds to save them. When it kicks off in the near future - short markets and buy gold with profits so you get max yield from the fall in the markets and the dollar and max profits from gold which is now the new gold standard. Let's face it you can't rely on anyone else to help you out so you may as well help yourself.

To all those who are saying that comment 32 is laughable....
you know that I dont think that the financial establishment is made up of "angels".
But HSBC and Barclays are huge companies, employing hundreds of thousands of people....most of whom are on normal salaries.
And I'll say again....the retail operations are excellent.
Comment 85 worcesterjim..."American politics is corrupt"....watch Max Keiser.
But unless US and UK politicians can come up with a credible "counterthreat" against the behaviour of "big finance", we are probably all wasting our breath (or our fingers).
Wall St is dictating the course of our lives....but it always has.

#71 stanblogger

The application of mathematics was in itself not a problem. It was as you point out the misuse of that, which caused the difficulties.

It was also the suspension of common sense in relation to those, particularly in the ability of company growth and analysis models to continue to generate profits, which was also at fault.

You seem to have confused the current debate about the accuracy of macro economic model predictions, with the mathematical micro sales, growth and highly leveraged debt products, which led the financial services into the abyss in 2008. The film and hence the subject of this blog is about the latter.

A very strong argument that these financial sector company or product level models ignored basic macro-economic philosophy about the risks of credit creation by the financial services and particularly banking sector, as set out by Von Mises and P A Hyek; through the Austrian School economists. In short these micro-modellers failed to listen to economists and fairly well-known economic thought.

72. At 3:05pm on 18 Feb 2011, John_from_Hendon wrote:
#65 and #67. stennylfc

You have just posted copies of contributions 0 to 7 why?

Do you agree with the sentiments expressed or not?

---

in 67 yes I did agree.

As for 65 that post was during my lunch so I cannot remember verbatim what I said, but I know I did disagree with post 6. From your comment I would guess I somehow pasted everything from post 1 to 6 in my reply, in error.

oops, sorry mods. You can delete that one.

"John Campbell, appears literally flabberghasted by the suggestion that economists writing supportive papers about, say, financial deregulation, should reveal who has paid for their research"

Whenever I have a new statistics student, I tell them that the most important question to ask when reading a statistical analysis is "Who's paying the statistician's salary?", as this will most likely determine where they place the burden of proof. To some extent, this precaution is probably necessary in any scientific field, as the ethics of the "oldest profession" are much more widespread in society than one would like to think.

@24 onebadmouse: "....the BBC .... fails to educate. ..."

I first became interested in economics more than 30 years ago because of a BBC series by J K Galbraith in the seventies. I then bought the book, now sadly out of print, but still available second hand:

https://en.wikipedia.org/wiki/The_Age_of_Uncertainty

@35 newblogger

I have read and reread much of Galbraith, and in contrast to your general rule: "frequently wrong but never in doubt" I have found him to be mostly right but always reflective. Keynes too was one who recognised the complexities of the world and was careful to leave his theories open to modification the the light of new evidence. Of course, the mathematical background necessary for him to write his 'Treatise on Probability' would have inoculated him against a serious attack of certainty.

Why is there so much disagreement amongst economists? At least part of the answer is that economics is to an extent a tool of politics, and that in part one's preferred economic strategy is likely to be influenced by what kind of society one would prefer to live in.

90. At 10:09pm on 18 Feb 2011, Sasha Clarkson wrote:
Why is there so much disagreement amongst economists? At least part of the answer is that economics is to an extent a tool of politics, and that in part one's preferred economic strategy is likely to be influenced by what kind of society one would prefer to live in.

----------------------------------------------------------------------
I agree:

A good recipe for an omelette is:
2 eggs
50ml of milk
Add salt and pepper to season

A good recipe for economics is:
200 grams of mathematics
50ml of politics
Add sugar to taste.

‘Economics’ is politically warped mathematics.

#90. Sasha Clarkson wrote:

"I have read and reread much of Galbraith, and in contrast to your general rule: "frequently wrong but never in doubt""

I rather like the musical conductor's faint praise 'loud confident and wrong'!!!

As to the reason as to why there is so much disagreement between economists. Firstly, like many numerical pseudo sciences, economics works with data that has large and difficult to evaluate systemic error in mensuration and it pretends to be far more accurate than it is. Secondly, there are far too many variables for accurate reproducible model construction except in the vaguest most imprecise way. Thirdly. many if not most economists are in fact only partially innumerate. That will do for starters. The key is I think to understand that the certainty that is expected and claimed is in fact fake.

#90 Sasha Clarkson,

Thank you for a well balanced response. It is not the science of mathematics that is in dispute but the motivations of those who use/abuse the science and those who commission it.

In essence economics is a philosophy as is politics. It seeks explanations and truths but unlike the 'classical' sciences it has to accept that it cannot produce laws - even the Law of Supply and Demand is flawed. Therefore economic analysis should be considered as thoughts rather than rules. However, as in my own area of management, both students and paractitioers are always seeking a Magic Bullet.

It seems somewhat ironic that whilst the social sciences acknowledge that complexity is a necessary element of human existance and that the interplay between those complex elements cannot be guaranteed, the mathematicians are trying to use define systems that limit the elements of complexity - hence the unforseen sonsequences.

Moneyu is created as debt.
But debt is only of consequence if it can be enforced.
Therefore money only has value if debt can be enforced.

Now given that 97% of all money is electronic based debt and credits, the question that perhaps we should ask, is, can existing debt be enforced?

And when I say enforced I mean individually, nationally and globally.
If ultimately it cannot be enforced, then electronic credit money may lose its value. And that’s the worrying part.

Because in a debt based monetary system, money only has value if debt can be enforced. I wonder if that’s the dilemma that faces central bankers.

How do you maintain the value of money in a debt based monetary system, where there is the potential that a significant proportion of debt may ultimately be unenforceable.

94 Dempster,

All that you have done is to identify the concepts of risk and therefore insurance/hedging.

@93 Dave "...mathematicians are trying to use define systems that limit the elements of complexity.."

that was before the Mandelbrot Set and Chaos Theory. :-D

In chaotic systems, infinitesimally small differences in initial conditions lead to enormous differences in outcomes.

https://en.wikipedia.org/wiki/The_mandelbrot_set

(A point starting in the black area stays there for ever. A point outside Bulgarians off to infinity - but what is the boundary? See this beautiful animation and tribute to the late Arthur C Clarke)

https://www.youtube.com/watch?v=QZA5ZOs_E8s

https://en.wikipedia.org/wiki/Chaos_theory

Mandelbrot himself co-authored a highly readable economics/maths book in which he challenged much orthodox theory (including the so-called "Efficient Market Hypothesis"), saying that markets were inherently more unstable than people believed. (Hudson, Richard L.; Mandelbrot, Benoit B. (2004). The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin, and Reward. )

And finally, a bit of fun from Terry Pratchett:

https://wiki.lspace.org/wiki/Quantum_weather_butterflies

#96 Sasha Clarkson,

I like to think about it this way: Today I'm having bacon and eggs for my breakfast. I may have mushrooms and tomatoes (but I haven't decided yet). If I have too much beer or wine today then these are the very last things that I would probably want to eat tomorrow.

You can use any form of logic that you wish but you can't accurately prdict what I will have for breakfast tomorrow. In Marketing terms the great conumdrum is will I be maximising my satisfactions or minimising my dissatifactions?

For humans there are only 2 certainties - when we are born we have life and (at some point) that life will end. If we were purely logical rational beings then why don't we all just cut out the middleman? Thank God we are not rational creatures - hey it's still a beautiful world.

funny how the ecconomists didn't see this crisis coming though. I ( a lowly pleb) was having a chat with some acocuntants in the finance department in 06 and remember saying that there was gonna be a masive crisis, because debt levels were soaring and productivity was not. I was asked (in the condecending way that graduates have) where I studied ecconomics, as if 3 years in university was a substitue for 20 years of watching the bankers rip off the common worker in good times and bad.

The idea that no one knew this was coming is complete bunkum, the only issue that I can see is why the media wasn't callng the warnings in the early naughties, not who was paying the pocket ecconomists..........

It is nice that everyone feels able to comment on the film.

Out here in the real world in Birmingham, the UK's second biggest city after all, you have to travel nearly 80 miles to watch the film!

https://www.timeout.com/film/listings/search-listings/?film=inside+job&loc=Birmingham%2C+Birmingham&date=week&search=1

I would have to go to Liverpool or Cambridge to watch it.

Based on this I don't think the film will have any effect outside of the Westminster bubble.

98 WorkersRights...you are our Everyman/Nemesis...here to point out that there is only one unchanging law that governs all our politics and economics and society in general.....that the powerful write history and define the present and have far more influence over our collective future than the wisest poor man.....because they CAN!

Wall Street shysters run our global capitalist world and reach into our wallets and mess with our heads and send our kids into battle and control our virtual one party state ...et cetera for no better or cleverer or more scientific reason than BECAUSE THEY HAVE THE POWER TO DO IT.

Forget well-heeled cosmetics like Cameron and Clegg and Merv....think of Diamond Geezer`s smile of assurance as he smirked his way through a "tough" series of "searching" questions from "our" fearless incorruptable "honourable members"..... is there any need to ask yourself who is in charge?