Saturday, January 03, 2009

In Screams Begin Responsibilities

The consensus among the City types I met over Christmas was that the banks did stupid things but they had no choice. They had to deal in toxic securities to keep up with the competition. But is this a Nuremberg 'I was just following orders argument'? If the banking system was at fault and there was no way the industry as a whole could stand back and see the big picture, then shouldn't that mean the individual - meaning one person or one bank - has more rather than less responsibiity? 
Meanwhile, Shakespeare lookalike and once great editor of The Economist Bill Emmott explains why he got it wrong when he said 'Crisis, what crisis?' back in August. He used the wrong model - Japan - and he didn't allow for psychology (bit of an oversight that, Bill). Fair enough but, unfortunately, he doesn't draw the only possible conclusion - that it is the very idea of prediction that is at fault. The safest assumption to make about the future is that we know nothing about it whatsoever and that any forecast about the behaviour of any complex system is virtually certain to be false. This may not be quite right but it will at least save us from catastrophes caused by our delusions of future competence. Emmott, like the bankers, was just following the orders of the system in which he operates. The big picture, again, goes unnoticed.
This is a fine interview  of Lynndie England by Emma Brockes. Brockes allows her material to unfold and presents a picture of unremitting bleakness. England was found guilty of abuses in Abu Ghraib. Everybody now knows the real guilty parties were the likes of Cheney and Rumsfeld. England was just following the orders of a depraved and sadistic culture within the prison that was directly inspired by the administration's casual, criminal and diplomatically insane acceptance of torture. 
England seems to be a bewildered, hopeless type, apparently far removed from City sophisticates and former editors of The Economist. But they are all trapped by a failure to apply reasonable scepticism to the systems in which they are obliged to operate. They seem to remain  in denial about the deep folly of those systems. Competition drove the banks, the idea of prediction drove Emmott and a need to belong drove England. But they all ended up in the same place.


  1. Happy New Year Bryan.
    A very good post, very good indeed.

  2. You could argue the Nazi guards were less culpable than the bankers; if they refused orders they would face a lenghty prison sentence or even death. Happy New Year.

  3. All well and good Bryan, Yep bankers have a lot to answer for, but the politicos have much more to answer for, to see that you have to follow the money.

    Banks are wholesalers of money, and the bankers are the agents that find the best places to "invest" that money (market efficiency rather than our old friend central planning, which I assume you are against?) a job they cannot do at the moment as they are broke, which is there fault, this was to do with the RISK instruments they invented so they could take more risk (as you and Sir Taleb rightly point out) which put a lot of cash in the economy (good for getting re-elected thought the grateful politicos) A very virtuous circle don't you think?

    Blaming bankers for "greed" is a bit like someone jumping off a tall building and saying the death was caused by can harness this power for good or ill, its a part of human nature and you cannot regulate or legislate it out of existence. All you can do is take away the toys (money supply) or turn the toys into Gold (hard currency less likely to be misused)

    What is to blame is the boffins, mandarins and politicos WE employ at incredible expense to the public purse forever more, to look out for our interests, this they failed to do, because behind all this, is one great big error of macro economic policy that they were supposed to be in charge off, mainly credit growth, and this was powered by a lot of new wealth from south east Asia pouring into the money markets.

    For all their stupidity its not bankers jobs to save the world. there job is to pump the cash around the system, and if there is a big pool of cash to pump round, then its much pumping they shall do.

  4. Hmm, so which movie quote is it? "You never know what's comin' for ya" (Benjamin Button) or "I drink your milkshake!" (There Will Be Blood...And Milkshakes)?

  5. Movie quote? If you mean the headline, Susan - 'In DREAMS begin responsibilities' was Yeats and later used as a title of s short storu by Delmore Schawrz

  6. Well said pb, it's the rich what get the pleasure, it's the poor what gets the blame. Fill in the rest yourself, mine would be .. the rich are here forever, Gordon they have tamed, the lawyers rape your country, on you they heap the blame, the banks they have your money, your cash flow they have maimed.
    Must dash, John Lewis are giving away 50 inch tellies tonight.

  7. Silly rabbit, of course I know the "dreams" quote -- W.B. Yeats is one of my heroes. I'm just thinking of two movies recently seen that would cover the issue of futurity and greed.

  8. "safest assumption to make about the future is that we know nothing about it whatsoever and that any forecast about the behaviour of any complex system is virtually certain to be false."

    Agreed. However, it seems to me that those who have been most vociferous in their criticisms of the predictive models of financial markets tends to be the very same people who are most credulous regarding those models which are currently predicting climate disaster.

    I've seen many of your articles in which you state that you believe global warming is happening.

    How do you reconcile these two seemingly contradictory viewpoints?

  9. Happy New Year to you all....
    From Lewis Carroll, "The Hunting of the Snark", Fit the Seventh...The Bankers' Fate.
    "....Down he sank in a chair—ran his hands through his hair—
     And chanted in mimsiest tones
    Words whose utter inanity proved his insanity,
     While he rattled a couple of bones....."

  10. Don't know where the question marks came from in the above was a copy and paste job, please ignore the question marks.