Comments on: Guest post by the Search Foundation: The global financial crisis

By: Ambigulous

Ambigulous — Wed, 19 Nov 2008 10:31:35 +0000

wizofaus: I think John Brumby’s move is to purchase services fron local suppliers, a subsidy (perhaps) not a gift.

Maggie: some posters here claimed that abject poverty had been REDUCED by trade, not that it had been abolished. Do you agree that living standards have risen, on average, in China and India? I won’t call you a communist just because you think the present set-up needs big improvements. You’re not advocating the old Soviet, Cuban, Khmer Rouge, etc “systems” are you?

By: Kat

Kat — Wed, 19 Nov 2008 08:37:11 +0000

It is clear from the responses here that some forms of protectionism are supported in a free market. So what makes one form of protectionism bad and another good?

I would prefer to see protectionism directed towards companies that pay tax in Australia. Keep the money here. Govt funding should be withdrawn for any companies who do not pay tax in Australia, or outsource labour offshore.

BTW Carbonsinks link is very interesting.

I would say that the free market operating without regulation, restraint or social conscience should be considered ‘past it’s useby date’ too Mark.

By: Razor

Razor — Wed, 19 Nov 2008 07:59:37 +0000

Maggie, Funnily enough, most people would agree with your aspirations for a better world. Unfortunately history and human nature aren’t on your side. Democracy and capitalism aren’t perfect systems, but they are the best we have come up with so far. Show me better systems and I’m in like Flynn. We’ve been through financial crisis’ in the past and we will go through them again. And, just as with this one and past ones that have all signalled “the end of global capitalism as we know it”, so will the future ones be deemed “the end” as well.

What needs to happen is learn from the mistakes without throwing the baby out with the bath water, stabilise the financial system (again), write off the bad debt, prime the pumps, restore confidence and in a few years time this will be another down on the rollercoaster that are the markets.

By: Maggie

Maggie — Wed, 19 Nov 2008 07:10:07 +0000

I think I have to take issue with the amount of micro analysis being used to critique the Search Foundations post.
If we are not now reliant on mining and resource exports, can you point to anything else that is supporting our economy at present?
I have to agree that the ideology that has underpinned the issues that led to the financial crisis is wrong. Poor people were exploited in these so called subprime deals, I dont particularly care what happens to the greedy fools who traded on thier poverty, I hope they are held to account or perhaps experience some of the life they have now made much worse for many poor US workers.
I think the world is moving further away from the democratic ideals that have underpinned our society for a century, we need more control of money, corporations and powerful and wealthy individuals by the vast majority of people who are not in that group. To say that some in the developing world have benefited is to ignore the millions more who will live and die in abject poverty and the profiteering that is going on by arms dealers and finacial traders supporting regimes and insurgencies who have driven half the developing world into war and terror.

The fundamental issue is who gets to decide? Big Business and the powerful or us. I vote for us, call me a communist, or a loony lefty but seriously if you have accepted that the system we have now is the best we can aspire to, I emphatically disagree.

By: Razor

Razor — Wed, 19 Nov 2008 06:34:13 +0000

If life can be breathed back into the Doha round of trade negotiations leading to more reductions in trade barriers (in particular more access for developing world exports into developed economies and lowering of protectionist policies (Yes! Europe I am looking at you!) then something good will have come of the Credit Crisis. Even more so if it demonstrates just how wrong the Search Foundation Statement is.

By: David Rubie

David Rubie — Wed, 19 Nov 2008 06:05:08 +0000

Katz wrote:

Probably, the bubble was so sudden and the appetite for this paper was so voracious there was no incentive to create a clearing house scheme.

The big historical futures markets didn’t emerge clearing houses until after a crisis either Katz – it’s just the name of the game. Granted, it’s a stupid game with plenty of historical examples of exactly why clearing houses emerged in the commodities futures markets (see wiki on CBOT – nice example of why credit default risk necessitates a central place of exchange whether government sponsored or not.

By: Katz

Katz — Wed, 19 Nov 2008 05:48:09 +0000

There’s no reason why paper representing securitised mortgage risk couldn’t be traded on current futures and options markets. In fact present-day CDOs could be raded under some kind of clearing house arrangement. There is nothing bizarre or objectionable about such arrangements.

It makes one wonder why these markets didn’t evove during the recent bubble.

Probably, the bubble was so sudden and the appetite for this paper was so voracious there was no incentive to create a clearing house scheme.

Once bitten, twice shy.

By: David Rubie

David Rubie — Wed, 19 Nov 2008 05:01:31 +0000

Mark wrote:

is a measure to restrict the range of financial instruments that can be created and traded, and a body to monitor attempts to work around such prohibitions.

Yairs. In the old days, we called them “exchanges” and “contracts”. Be nice to return to that eventually.

I think they’re proposing something akin to a Futures type market for complex derivatives (which implies both standardised contracts and players having to maintain a margin account at the clearing houses for which the house calculates the appropriate level, not the customer). It’s going to be a very tough road to negotiate that, but the entire financial community is comfortable in the way futures exchanges work.

By: Mark

Mark — Wed, 19 Nov 2008 04:44:06 +0000

I haven’t fully thought it through, Katz, but there is no doubt whatsoever that among the plans currently under consideration – for instance that which Gordon Brown is proposing – is a measure to restrict the range of financial instruments that can be created and traded, and a body to monitor attempts to work around such prohibitions. This isn’t something I’m cooking up in a blog comment, but a serious proposal from the UK Prime Minister – and it’s supported by economists like Krugman and Stiglitz, if memory serves, among others.

By: Katz

Katz — Wed, 19 Nov 2008 04:19:09 +0000

There is no doubt that it is being contemplated that decisions about the strong>licitness of particular financial instruments are being contemplated in the discussions going on at the moment.

Every law creates a multiplicity of loopholes.

The troublesome instruments that are iconic of the present crisis were originally traded domestically inside the US.

Would your contemplated institution oversee domestic financial transactions? Few countries would be happy with that form of oversight, especially the US. That recalcitrance would be a deal-breaker.