Will there be blood in the streets by May? Well there could be if companies lay off large numbers of people, while governments keep giving huge amounts to banks which lavish it on their staff.
The bank bail-outs in the Western World are one of the largest instant transfers of wealth in history. And the wealth is going mostly from working tax-payers to the richest people on the planet of the sort who go to any lengths to avoid paying any tax at all.
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So far we have seen little sign that the bankers will change their ways. Their habit of taking generous performance-based rewards for themselves, even if their performance is ruining their employers, is set to continue.
The banks argue they need to pay huge rewards to keep the talented people even if the talented people are doing loss-making deals.
While the banks continue on their road to ruin, the tax-payer is expected to keep stumping up for all these ruined banks, and expected to continue to stump up again and again until the Western economies are ruined. It's a vicious circle which no one has yet found a way of breaking.
Most people think there is something grotesquely wrong going on.
To those who will be mounting the barricades, and to those who will, like Baron Nathan Rothschild, be seeing blood in the streets as the signal to buy shares:
Good Luck.
If this makes you feel any better, all signs are pointing towards the US government not being able to get one cent out of Congress for bank bailouts after the $700B of TARP is all gone.
So I guess the real question is... can the remaining ~$250B in capital injections let the banks survive until May? ;) If not, I don't see what the problem is, they'll just be nationalized with shareholders and executives wiped out, which should improve taxpayer sentiment. Of course, that's for the US and I don't know what the dynamics are in the UK.
Until, of course, they all realize they're now bailing out the creditors because the Gov is way too scared of the systematic risks of Credit Default Swaps. Yay?
Yes., Arun, I think we've nationalised one bank in the UK, the State owns 84 per cent of another and 43 per cent of two others which have been merged. Full nationalisation still looms but the governemnt is getting a bit arsey with them now and thos morning asked the ex-CEO of one of them to give up his £650,000 pension! If a few of these guys get a good kicking like that, then maybe people won't be so cross about the bankers.
I still wonder if the governments couldn't have set up alternative banking arrangements to get credit out to businesses and individuals and let the banks go bust. Presumabley if all the banks are bust then all the debts owed to eachother would be wiped out which would be another way of starting all over again.
In parliament they talk about "the taxpayer" - as if it is a gullible entity. We have no say in all these "decisions" being taken on "our behalf".
Migration is our only way out of this cock-up.
Where to though? Suggestions please.
I know I know rogkru, it's as if we're poor stupid saps not supposed to take any part in the resolution of this scndalous state of affairs. But it was ever thus
Where to go? Well if you happen to be a dodgy banker, then I'm told the Turks and Caicos Islands have an enlightened attitude to banking regulation.
If you're a poor sap taxpayer and want a non-indebted country to live in, then it has to be China. But I wouldn't recommend it.
Maybe it's time to let these so called "talented people" join the ranks of the unemployed and put some rookies in their place. How much worse can they do?
Well Njineer, I suppose the banks would say: 'To make money we need to trade with other banks. If all our guys are on £20K and all their guys are on £1 million then they'll have smarter guys than we have and they'll take all our money.'
Something like that.
It's probably unreasonable to expect all banks to have a unified salary scale but it might be possible to ban High Street banks which take deposits from ordinary people from the sort of trading which demands very highly compensated traders.
I don't really know. But someone's got to sort out a way of handling this or it's all going to happen again and again. Until the Western World hangs itself on its own rope.
A central problem is that bank management and politicians are mathematically naive. Naseem Taleb is right: most of 'star' trader's performance can be ascribed to random factors falsely ascribed to skill.
If you simulate someone playing a gambling game such as Blackjack with a computer playing perfect strategy you will see quite large runs of success and failure due entirely to random effects. You need to run the simulation for a very long time for the underlying expectation to show through the noise. The city is the exact same - the annual bonuses are largely measuring volatility (luck) not expectation (skill). The city is arguably even worse than blackjack in this respect because the downside in the game comes as very sharp losses which occur infrequently.
A nice twist for the traders is that when they get a particularly bad run of luck they change jobs (or get fired) and start again from zero. So only the times when they are winning actually get measured in bonuses.
Thanks Tom that's a great account.
Tom - I've just finished Taleb's Black Swan book. A bit of an eye opener and slightly unsettling, but he debags the world of banking, and academia, very well. Recommended reading for those interested in the roots of the financial crisis.
Thanks Al, I've started The Black Swan. Will be in touch.