Friday, August 28, 2009

Turner and Boris

To my surprise Lord Turner and Boris the Blond have succeeded in interesting me. The former has floated the possibility of a transaction - 'Tobin' - tax to control the excesses of the City and the latter has said this is crazy because it will damage our competitiveness and, anyway, even the bonus buggers pay taxes. Turner said some City activities were 'socially useless'. This, at least, is true. I often tried to get City types to explain the point of their menagerie of derivatives and they always failed, primarily because, as we now know, the point of them was to be ever more elaborate versions of Find the Lady that would enrich the card sharps on the other side of their easy-pack trestle tables and leave us impoverished when they suddenly vanished with their carpet bags full of used tenners.
But lots of things are socially useless and we can't legislate against people solely because they make money. We can however legislate - in this case, tax - things that are socially damaging. We do it all the time. It should now be clear to everybody that whatever the bonus buggers were up to that wiped out trillions of pounds of our wealth was socially damaging. This should not be forgotten even though Barclays and Goldman Sachs are now floating happily on a government-rigged market saying it was all a storm in a tea cup. The question then becomes: how much of our present prosperity, as defined by Boris, are we/should we be prepared to forego in order to eradicate activities that are bound to be socially damaging in the medium or long term?
Turner went a long way in using the phrase 'socially useless' but not quite far enough properly to sharpen the issue. The enormity of the City's long con is in danger of being forgotten as stock markets and house prices begin to rise. They ripped us off, they drained the blood out of our economy. Think on, Boris.

21 comments:

  1. The enormity of the crime is indeed being forgotten, in part because the lessons from the great Depression were learnt and vast quantities of public money were used to stop the system from crashing. The return of the bonuses is just amazing.

    They did learn the lesson in the 30s and regulated the banks properly. Krugman has written very well about this (NYT column and blog), about how when he started out banking was considered boring and conservative, but this all changed with the 1980's cult of selfishness and deregulation ('greed is good','there is no such things as society', etc.).

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  2. Well, since at least 90% of all the revenues that flow through the City originate abroad, I'm not sure that they ripped US off rather than the rest of the world.

    In addition, the fact that HM Government was taking 40% of all those lovely bonuses plus an additional chunk in corporation taxes, the biggest trougher wasn't the bankers or traders but G.Brown and A.Darling.

    By all means separate utility banking from wholesale and require that only partnerships or individuals can indulge in proprietary (or, if you prefer, casino) trading - advisory houses offer no risks to anyone - but the biggest chunk of our tax revenues comes from the City and we should be cautious about just kicking them out. I'm with Boris.

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  3. The Mayor of London said it was perverse to propose a tax that would hit London and help rivals such as New York and Frankfurt.

    In the fall of 2000, when the United States Senate was debating legislation for deregulation of derivatives trading, the strongest argument for the legislation was that regulating derivatives would hurt New York, to the benefit of other financial centers, specifically London.

    Funny world, ain't it?

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  4. We can however legislate - in this case, tax - things that are socially damaging.

    Global socialism and general moonbattery?

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  5. As long as there are people around who think you can get something for nothing or that there is a "money tree" out there somewhere and all that they need to do is shake it - I include many not so innocent small investors - you'll get the "bonus buggers". The b.b's are only the pilot fish that feed off the "whale" of public greed

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  6. Yes I'm with Boris too, finding 'the enormity of this crime' guff very unconvincing - the longstanding complicity of the debt-driven consumer makes them just as culpable - lock them all up and throw away the key!

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  7. I have often dreamed of becoming a banker - i would like a bonus - who wouldn't?

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  8. Boris is an apologist for the excesses of the City mainly because most of his school chums work there. But, when one looks long and hard at what the City really does, it's not wealth creation, but simply moving wealth around as much as possible while creaming off profits through all sorts of impenetrable derivatives.
    And all these derivatives were created in order to service greed, plain and simple.

    Whether we like it or not, the banking system has become socialised to the extent that it is now underwritten by the taxpayer. Banks need to be allowed to fail if they are badly managed, and the only way this will happen is if they are prevented from becoming too big in the first place.

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  9. Why has everyone bought in to the Franco-German (broadly) idea that we should cut City salaries/ tax transactions rather than enforce greater capital reserves - other than that it is more politically exciting?

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  14. y did learn the lesson in the 30s and regulated the banks properly. Krugman has written very well about this (NYT column and

    ReplyDelete