Tag Archive for 'banks'

The Tobin Tax and the GFC

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Mark
2 months ago
in Economics, Elections, International, Markets, Politics and USA
. 3 Comments

In a recent post, I observed that the momentum for systemic reform and coordinated international regulation of the financial sector, pursued through the G20 in the aftermath of the Global Financial Crisis, appeared to have stalled. In that context, it was interesting to read an interview in yesterday’s Financial Review with Dominique Strauss-Kahn, Managing Director of the IMF, where he observed that there was a need for some sort of revenue raising for a fund to draw on for future stabilisation measures.

He didn’t explicitly refer to a Tobin Tax, but I suspect that’s what he had in mind, and it’s something that has popped up higher on the agenda over 2008 and 2009. So it’s worthwhile to point to a comprehensive article by John Langmore in Inside Story on just that measure.

From my point of view, one key advantage of a tax on cross border financial transactions would be its contribution to transparency and thus the ability of states (and others) more easily to grasp what’s occurring in the ’shadow banking’ sector. Whether or not future bank bailouts are politically feasible is another question entirely. I suspect that might be political suicide in the USA, no matter how dire another financial shock.

And, incidentally, when the Democrats inevitably lose Senate seats in November, it will become more or less impossible for anything of any size to pass the US Congress.

A People’s Bank for Australia?

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Mark
8 months ago
in Economics, Markets, Policy and Politics
. 47 Comments

A number of economists, including the blogosphere’s own John Quiggin and Nicholas Gruen, today released a letter in Canberra calling for a new enquiry into the financial system. [See the hyperlinks for the text of the letter and commentary from Quiggin and Gruen at their respective blogs.] As Bernard Keane observes in Crikey [article reproduced with permission over the fold], there are much more pressing issues associated with finance than can be encompassed by a ‘debt truck’ (or, to be bipartisanly sceptical, a ’saving jobs truck’). Among the suggestions for items that should be considered by such an enquiry is the establishment of a “People’s Bank” utilising the infrastructure of Australia Post. The economists’ worry is that there is decreasing competition in the banking and finance sphere, driven in part by the consolidation of market power attendant on the GFC and facilitated by some of the policy responses of the Rudd government.

No doubt, as with most of the measures taken to increase competition in the interests of consumers and citizens, the usual suspects will find some reason to decry “government interference” or whatever. Such are the contradictions of neo-liberalism. The ideological patter is all too often a screen for a sort of dirigisme that supports the interests of big business above all others. We’ll see – surely no one could object to these important matters being canvassed in an informed and wide-ranging enquiry?

Continue reading ‘A People’s Bank for Australia?’

The Australian economy’s biggest problem? Barack Obama

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Mark
1 year ago
in Economics, Markets and USA
. 49 Comments

Politically, much of the resilience of Kevin Rudd’s government in the face of the economic downturn is explicable by voter perceptions that the causes of the crisis are external to this country – the Global Financial Crisis.

While that’s largely true, it doesn’t mean that only unseen structural forces are to blame. We could debate the responsibility of people like Alan Greenspan til the cows come home (and others have). But we don’t need to – we can look at a much more contemporaneous cause of the ongoing mess.

As Paul Krugman argues, the “dithering” of the Obama administration is a huge worry. There appears to be a bedrock ideological resistance to taking banks into public ownership (albeit temporarily). Hence all the talk of “zombie banks” and the continuing lack of liquidity in credit markets. Nothing has been done – effectively – to track down the toxic debt, and credit markets remain close to frozen.

Kevin Rudd is right to blame ideology for a large part of the world’s current economic woes. But the closest thing America has to a social democratic administration is compounding, not ameliorating the problems.

Nationalise the banks!

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Mark
1 year, 1 month ago
in Economics, Markets and Policy
. 33 Comments

In a piece in today’s Crikey sparked off by Kevin Rudd’s remarks about the difficulty Australian banks are having accessing foreign capital, Bernard Keane makes some good points about the response to the global financial crisis:

Rudd’s rather anodyne response to this threat is that “we will continue to work in partnership with the private sector to do what we can to support Australia’s credit markets.” This means more work for the Government-banking oligopoly combination. Bankers and officials have been busy discussing options while the rest of us were having a break.

This approach — and this is not to suggest there’s a viable alternative — is not merely entrenching the position of the major banks, which have been allowed to consume competitors, but also entrenching the Federal Government at the heart of our financial system.

It’s not nationalisation; it’s more like the worst of both worlds. Politicians and bureaucrats are now key decisionmakers in our financial system, but they have limited control via the major banks, which continue to operate — as they’re required to — in the best interests of their shareholders. Responsibility and accountability are diffused between ministers, Treasury, agencies and the banks themselves. And there are multiple ways in which it could go wrong. Taxpayers could be left, via government guarantees, with failed businesses and debt. Business might struggle to obtain necessary capital. The only guaranteed winners are the big banks…

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The state of capitalism today II

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Mark
1 year, 4 months ago
in Apocalypse, Disasters, Economics, Europe, Foreign Elections, International, Markets, Media, Nationalism, Politics, Sociology and USA
. 28 Comments

SocProf over at The Global Sociology Blog and I must be reading the same things, and thinking along similar lines, because I had planned to link to precisely the same articles she highlights in an update to my recent post on the state of the global financial crisis.

In The Guardian, Will Hutton explains why measures to halt the cascading crisis have been ineffectual to date. He might have made more explicit the implication that one of the basic structural problems is that action taken at the level of the nation state can be counter-productive given the disseminations and movements of capital, and that there are real domestic political barriers to coordinated action, as well as all the obvious problems of concertation through institutions such as the EU and the G20.

But he does make this point – harmonising with the note I’ve been sounding repeatedly – very clearly indeed:

There was no effective opposition. The left and organised labour collapsed as intellectual, social and political forces; there was no conviction that any alternative to this shareholder value-driven, financial, ’securitised’ capitalism existed, or any political muscle to support it even if there were. Mainstream culture moved away from public purpose and fairness; the new priorities were individual self-fulfilment, personal experience and loyalty to self.

Hutton is perhaps more sanguine than I am, though, about the capacity of state action to turn all this around. Continue reading ‘The state of capitalism today II’

The state of capitalism today

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Mark
1 year, 5 months ago
in Activism, Consumerism, Culture, Economics, Ethics, International, Markets, Media, Politics, Poverty, Sociology and USA
. 89 Comments

Iceland may be a barometer for what’s changing in the world economy. It was only very recently that the Milton Friedman fan club was hailing Iceland as a “Nordic Tiger”, lauding its flat taxes and praising its “economic freedom”. “Economic miracle” was a common phrase. What’s it looking like after the credit crisis?

Iceland right now is apparently in a state of shock and gives a snapshot of what a depression with the Great in it will look like everywhere – “cafes were half-empty, real estate agents sat idle, and retailers reported few sales” says the AP.

This after the government basically took over its banking sector, with Russian money, which as noted in the linked post, has real geopolitical implications.

Meanwhile, the British government is laying out 500 billion pounds to take equity in its banking sector, but basically proposing business as usual. Co-ordinated interest rate cuts are having very little impact on the stock market, and more worryingly, on the liquidity crisis. Paul Krugman writes:

We’re way past the point at which conventional monetary policy has much traction.

In America, in the eye of the economic storm, the Fed has basically become the financial system, but to little avail:

The time for a recession was 2005. At that time simple macroeconomic policy; simply raising interest rates, would have ended the bubbles in credit and housing at the cost of a standard if somewhat nasty recession. Trillions of dollars of intervention would not have been needed. Just standard macro policy. Even in 2006 it might still have worked. The Fed blew it, and they broke the system, and now with the system broken they may have to either buy it all out (and Paulson may be considering that after all) or just become the system. And even if they do that may not work, because, well, who wants to borrow and invest right now?

Bernanke and Greenspan are certainly in the “worst Fed chairman of all time” stakes in a big, big way.

Continue reading ‘The state of capitalism today’

Here’s something a bit interesting

Published
by
Kim
1 year, 5 months ago
in Economics, Markets and USA
. 4 Comments

Some Democratic congressfolks have had the intriguing and unorthodox idea that the role of Congress is to legislate. Ian Welsh has the details on the preparation of alternative bills to the Paulson take it or leave it (with bells and whistles to entice you to vote for it added in the Senate!) TARP measure.

I’m not sure, though, how “market sentiment” of “it’s 700 billion or the apocalypse” will deal with this development.

More at OpenLeft.

Ps: Paul Keating on Lateline last night made some very instructive points about why pumping liquidity into markets isn’t working and why Malcolm Turnbull is playing a populist game on interest rates.

Continue reading ‘Here’s something a bit interesting’

Reaction to Paulson’s $700 billion market bailout plan; Turnbull wants an Oz version

Published
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Mark
1 year, 5 months ago
in Economics and Markets
. 11 Comments

There’s an informative links post at Obsidian Wings from hilzoy. And a bit of food for thought:

I do not want to hear people tell me that regulation cripples the economy, unless they are willing to admit that a lack of regulation can also cripple the economy. Not ever. I don’t understand why anyone is so much as tempted to think that “regulation” is good or bad, as a whole: to me, that’s like being for or against “things” or “people”. Some regulations are good, some are bad; obviously, we want people in government who can tell the difference, and implement regulatory systems that work well. However, altogether too many of my fellow citizens were willing to listen to ideologues, and now we all get to pay for their mistakes.

Very oddly, Malcolm Turnbull has proposed that the federal government in Australia should also bail out Australian banks. Now, unless he’s suggesting that the banks should have their exposure to Lehman Bros. etc. paid for gratis by the Australian government, to the benefit of their share price or something, it’s hard to see how this makes any sense, particularly when Turnbull has been blathering all round the shop about Kevin Rudd and Wayne Swan “talking down” the Australian economy (and thus magicking inflation into existence – it wasn’t at all Peter Costello’s fiscal profligacy, no matter what the IMF may think). One can only infer from this call that there’s an implication that there’s some disaster waiting to happen domestically.

Unless Turnbull is suggesting that the Australian government should compensate the banks for their exposure to Lehman Brothers or whatever, it’s really quite hard to work out what he’s saying here. Obviously, it’s a bit of politicking, tied up in a neat package as it is with his “bipartisanship” theme, and it may also be designed to imply that while the Bush administration has a Plan, Rudd doesn’t. But it’s difficult to read it as anything other than irresponsible, despite the instant anointing of Messiah Mal with the all important “economic credibility” by the media.