Re: [LandCafe] Fw: Your Comment on was-the-financial-crisis-avoidable
- Ed's is at 117. Jeff Smith also has a post at 113 -- page 7
I've lobbed one in, too, but haven't gotten the email saying it got posted.
I didn't mention Mason's book, "After the Crash," but should have.
On 1/31/2011 11:16 AM, Edward Dodson wrote:
The NY Times is having an economists debate on whether the economic crisis
was avoidable. Of course, we all know it was and further, we know how to
prevent the next one. I left a comment to that effect on the Times and
would appreciate a recommend if you have a little time. Additional comments
would be even better:
I have posted the following, and recommended your comment Scott...
As someone who now teaches political economy after 35 years as a market
analyst and business manager in the financial sector, I have come to a
number of conclusions not appreicated by most economists and other analysts
(but quickly acknowledged by those engaged in the property and credit
markets). One can trace the origins of the financial crisis to the 1970s and
the regulatory environment that enabled money market funds to pull billions
of dollars of deposits from the savings institutions. The patttern of
deregulation thereafter adopted acted as an accelerant on markets already
driven by speculation and fees derived from ever-increasing transaction
Since retiring from my position at Fannie Mae in 2005, I have been giving
talks on the history of the financial collapse (as I interpret the
underlying forces at work). Narrated versions of my analysis are available
online for anyone who is interested in an "insider's" perspective. Contact
me at ejdodson@... and I will direct you to this material.
-- home: 203-539-1484 (google voice, replacing 322-6145) cell: 203-722-1644
- The initial crash was land based, we all know that. The banks did what they are supposed to do, they lent money. The speculators poured debt upon debt into land as it was easy money. Land gained in value for no apparent reason - the value was community created, but the community does not reclaim its wealth, so private individuals take it. Very few of the takers know how the wealth was put into the land. They take it because they are allowed to take it. Land was secure. It cannot be taken off-shore or hidden, so banks lend and secure to the land.
The problem was the system that allowed such harmful speculation to occur, not the banks. Many banks were irresponsible but they are the fall-guys. The culprits are the politicos. The system they have in place is wrong and they know it. They poured trillions into banks to keep them afloat knowing it would not stop it reoccurring. They have put nothing in place to stop it happing again. Obama thinks cutting bonuses will stop it happening again.If GM collapsed the financial world would not collapse. If the largest bank in the work collapses, the world should not crash down either. If a number of banks are reckless and flippant in their lending, the financial system should not collapse. The current flawed system collapsed. Why? They allowed LAND to be treated as CAPITAL. Land and its resources is not a washing machine. The system can be put right and very simply. Reclaim the community wealth that soaked into the land, to prevent land speculation. We on here all know that. It should be in the psyche of the nation that land values get taxed, so it cannot be reversed by vested interest political parties. As no one would reverse votes for women.
Reclaiming the community wealth that soaked into the land to pay for common services will dampen land speculation and stabilize the economy and reduce or eliminate harmful income tax, as occurs in dynamic Hong Kong to a degree. Surplus and borrowed money will be directed more towards economic growth enterprise. The Dot Com bubble was benign and only affected those speculating in the bubble. Land effects us all.
I can't believe I defended banks
- On 2 Feb 2011, at 13:28, John wrote:
> The crash may have been avoided, but there still would have been aHistory being reinvented again I see. He did not. Indeed of course
> major depression. The only way to attempt to get stability in the
> current setup is by touch control, using instant data via
> computers, etc. Gordon Brown as chancellor was probably the best at
> this with the UK e conomy. He raised and lowered interest rates,
> money supply etc to keep an even keel, virtually by the week. In
> reality it is no more than shuffling deck chairs on the Titanic as
> the iceberg loomed. The ship was going to sink.
he could not since he ceded that power solely to the "independent"
Bank of England. But rates changed no more frequently between 97 and
07 as they had in the previous decade.
And what political signals the Monetary Policy Committee did get about
wanting to see lower rates were as Eddie George explained to the
Treasury Select Committee in February 2007 a dangerous course that
they knew was stoking up trouble for a future incarnation of the MPC
to sort out.
GB's tenure at the Treasury, together with the subsequent crash the
loose money he demanded in 2001-ish caused, saw a massive transfer of
wealth from the have nots to the haves in the form of housing debt and
its associated interest and the former will be paying back the latter
for years to come. As the Economist put it last week, New Labour saw
debt as a way for the less well off to better themselves. More like
to put them in hock to the well of and the state I'd suggest.
His activities subsequent to the crash were I think just as
dangerous. When you have such a long period of malinvestment, they
need to be wrung out of the economy, and not prevented from being
liquidated. Having already prevented the shake out from the dot com
bubble being liquidated by his loose money policies in '01, we now
have two credit fuelled booms' worth of malinvestment still stuck in
the system. It will have to come out at some point, just as the US
situation is still needing a shakedown. That I think could be
extremely severe, and will have been directly caused by the panic
rescues of their city friends' businesses. It may happen soon, or it
may be another decade down the line but it is as inevitable as night
follows day. Thank you Gordon Brown.
You cannot rose tint Gordon Brown's term as Chancellor. The word for
it was inept disaster. "Abolished boom and bust" my sweet hair a**e.
Warden's Flat 1e, J Block Morrell Hall, OXFORD, OX3 0FF
m: 07769 695767 skype:jock.coats?call
- Scott, Good comments.But the heading "was-the-financial-crisis-avoidable?"Answer: NO. Well not in the current economic setup. It is peaks and troughs and the occasional world crash.The crash may have been avoided, but there still would have been a major depression. The only way to attempt to get stability in the current setup is by touch control, using instant data via computers, etc. Gordon Brown as chancellor was probably the best at this with the UK economy. He raised and lowered interest rates, money supply etc to keep an even keel, virtually by the week. In reality it is no more than shuffling deck chairs on the Titanic as the iceberg loomed. The ship was going to sink.The only reason it took near 80 years between world-wide crashes was because of the intervention of World War 2, when economics took on a different complexion.Scott your point gave the solution and the preventative measures to stop it ever happening again. Then there is the fairer distribution of the proceeds of a society's production as spin offs.We have to get it into the psyche of people that speculation is generally not good. People generally think is is the way that moves the world. That has to change.
- Jock, to Gordon Brown's credit he upturned how the Treasury Dept works. A new building, new computer systems, new system in general. New ethos. This gives the stings to pull to touch control. The coalition have inherited that and that should make them run matters easier.Brown took the country from a basket case into one of the world's strongest economies. The pound was the world strongest currency for about 10 years. Blair constitutionally got rid of hereditary Lords. The hard of thinking have no idea of what this means. Also the zero unemployment with over a million migrant workers to fuel the booming economy.
Under Brown/Blair since 1997-2008:
That is the basics. We can all nit-pick that he should done this and didn't do that etc. No matter what he did, and lets say he did it all right, the ship was going to sink, as the system is flawed.We need a system that is largely self regulating and Geoism does that nicely.
- The UK economy until 2008 was the world's most robust.
- The pound was has been almighty strong.
- 9/11 caused a recession in most of the western world. It never happened in the UK.
- The UK had the longest sustained economic growth in its history.
- Provincial cities boomed with their skylines changing beyond belief. Few had any buildings built of any note in the previous 30 years.
- The country even absorbed over 1 million eastern Europeans and still not have an unemployment problem.
- I'm sorry - this sort of thing just epitomises why I don't pay much
attention to this list any more. This sort of revisionism boiuls my
blood. Growth returned in Q2 1992 and was continuous ever after that.
As Eddie George said, the reason we didn't go into recession after
9/11 was GB's insistence on loose money which continued to flow into
housing debt, which represents a huge transfer of wealth from poor to
rich over the period since and unliquidated malinvestments of the
previous decade's boom left overhanging the economy.
From the grotesque levels of 1990-1992 inflation was back below 3% by
1994 and continued falling pre New Labour continued by it.
As the Cities Unlimited report makes clear, "provincial cities"
booming with new glass and concrete, built on debt, in an effort to
"regenerate" areas of continuing population decline is throwing good
money after bad, making huge profits for landowners and developers but
more or less on vanity projects.
We do have an unemployment problem. And we always have. We just
don't call it unemployment any more as people don't claim that
particular benefit. But we have had a large and growing worklessness
problem hidden away in "NEETs" and disability living allowance
claimants and so on.
This is not "nit picking" the transfer of wealth from poor to rich is
real, tangible and a direct result of the policies pursued. OECD,
IMF, housing and land use experts pointed it out continually
throughout GB's reign of terror at the Treasury. You cannot simply
say that "the system is wrong". He was supposed to be *running* that
system. If it was broken he could and should have done something
about it. Instead he built an economy, and a government, built on
debt, with the highest levels of private debt as well.
I'll go back to lurking though. As long as people treat that mans as
some kind of an economic hero we will never change.
On 2 Feb 2011, at 14:13, John wrote:
> Jock, to Gordon Brown's credit he upturned how the Treasury Dept
> works. A new building, new computer systems, new system in general.
> New ethos. This gives the stings to pull to touch control. The
> coalition have inherited that and that should make them run matters
> Brown took the country from a basket case into one of the world's
> strongest economies. The pound was the world strongest currency for
> about 10 years. Blair constitutionally got rid of hereditary Lords.
> The hard of thinking have no idea of what this means. Also the zero
> unemployment with over a million migrant workers to fuel the booming
> Under Brown/Blair since 1997-2008:
> • The UK economy until 2008 was the world's most robust.
> • The pound was has been almighty strong.
> • 9/11 caused a recession in most of the western world. It never
> happened in the UK.
> • The UK had the longest sustained economic growth in its history.
> • Provincial cities boomed with their skylines changing beyond
> belief. Few had any buildings built of any note in the previous 30
> • The country even absorbed over 1 million eastern Europeans and
> still not have an unemployment problem.
> That is the basics. We can all nit-pick that he should done this
> and didn't do that etc. No matter what he did, and lets say he did
> it all right, the ship was going to sink, as the system is flawed.
> We need a system that is largely self regulating and Geoism does
> that nicely.
Warden's Flat 1e, J Block Morrell Hall, OXFORD, OX3 0FF
m: 07769 695767 skype:jock.coats?call
- Jock, I for one do not treat Brown as a hero. He was no failure either. I did outline the major point if his achievements. He did not stop the money running from the poor to the rich. But, a Tory saying, all boats float on the same rising tide.Home ownership keeps the same money floating around not doing much at all. and transfers wealth mainly from young to old.Jock, the system is wrong. Over 120 years has proven that. It will fail. No one has not experienced failures of some sort - unless a chancellor is lucky to be in for a short period when we are on the up curve. Geoist policies will prevent the crashes and even out the peaks and troughs. Largely self regulating. Then we are not in the arms of a few men who touch control the economy to attempt to keep it stable.Did they just hit lucky when they were in charge in the longest period of economic growth in UK history? Jock, you can't bluff and economy for the 13 years Brown/Darling were in charge. They were far from perfect, but they were no out and out failures keeping relative stability. OK they may have failed and a world-wide crash hit them masking this but the trends did not indicate so.The UK deficit is about the same as Germany and France and better than the
USA. Look at the photos - click photos in the menu, the chart below is there under John Burns:An external link:
The chart states that the deficit of 2007-2008 was £34.4 billion including £25 billion to bail out Northern Rock. That would have meant the deficit would have been only a lowish £9.9 billion if the CC was not starting bite. It was dropping after the social schemes and infrastructure projects were being finalized. Thatcher and Major neglected the country to the point it was falling apart. Brown/Blair had to spend on infrastructure. They had no option once they stabilized.I dug up some figures..Below: The first two columns are the important ones. 1993 was horrendous under John Major. Brown/Blair inherited a mess. Look at the the 2008 and 2009 figures after the Credit Crunch. Brown had the deficit well down until the Credit Crunch. To 2008 the deficit was to build hospitals and schools and tram systems in some cities, etc. Rail infrastructure was being improved as well. Brown inherited a mess in 1997.YEAR : Surplus/deficit, £m : Net borrowing, £m : Party in power1991 -8,142 -17,976 Con
1992 -29,259 -40,155 Con
1993 -40,576 -50,869 Con
1994 -36,268 -45,945 Con
1995 -28,232 -38,603 Con
1996 -22,749 -29,240 Con
1997 -11,246 -15,555 Lab
1998 6,903 703 Lab
1999 17,474 11,976 Lab
2000 21,489 16,697 Lab
2001 19,646 8,426 Lab
2002 -6,979 -19,046 Lab
2003 -18,943 -34,004 Lab
2004 -19,818 -36,797 Lab
2005 -17,405 -41,355 Lab
2006 -6,878 -30,736 Lab
2007 -7,558 -33,901 Lab
2008 -28,686 -61,450 Lab (includes £25 billion to bail out Northern Rock)
2009 -97,764 -142,640 Lab
Above, under the Tories it was appalling. A true basket case. The figures speak for themselves. 1993 was -40,576, when there was no major infrastructure being built in the country - NOTHING!!! Just shear incompetence - and the rich got richer big time.
Labour got hold of the economy after inheriting a basket case in 1997. The above figures show they were not reckless in spending at all, and what they spent was on essential infrastructure to a large degree.Once again the system is just plain wrong. Geoist policies is the way forward.