CHan,

RE. your latest offering Time to go Dutch: Could you answer me a simple question? IF THE Europeans can do it, why can't the Americans?

Well, it appears that in the case of America, the banks ARE the government ... lacking a backbone or at least specific understanding of the banking system, the US government (represented by Bernanke, Geithner et al) needs the "approval" of the banks to effect any reforms

Tarullo's speech which I highlighted in the article is impossibly irresponsible for a regulator to be making. Its the kind of self-serving argument that the banks will be making TO the government, not hearing FROM the government in most countries

Even in Europe, it wasn't the ECB, Bundesbank or FSA that proposed the reforms, but rather the "competition" commission of Neelie Kroes. The US doesn't have such bodies with wider remit than their specific sectors...

CA

Well a higher level or philosophical answer is that in Europe, (1) ideology plays a far smaller role than in US, specifically "social concerns" and "regulation" are not dirty words in European business/political worlds, (2) debate/decision making defers to the intellectual elites, whereas in the US, debate/decision defers to infotainment talk shows which is really a puppet show run by "power elites".

I guess what I'm saying is no different from Chan, but I am adding one more layer: ultimately it reflects on the respective peoples: Americans vs. Europeans. Europeans are more pragmatic and flexible. Americans are more ideology-driven and rigid.

Link for non-atimes.net members:
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www.atimes.com/atimes/Global_Economy/KJ31Dj01.html

What is interesting is that US media resembles "camps" - you watch Rupert Murdoch's stuff if you lean right, while much of the rest leans outright left. So the only way to secure a balanced opinion is to average the views across the channels. Not sensible at all.

Secondly,I find the misuse of balance in reporting quite amusing. To wit, US media outlets need to present the "other side" of any news story - and thus have to unfailingly provide equal air time to the cranks and the experts.

There is a very interesting sociological experiment going on in the US media, from what I as an outsider can see, just not sure that its worth examining all by itself.


Going back to the point about Europeans, the thing to note here is that it was NOT the financial authorities of Germany or England who called for the reforms but rather an esoteric group under the Competition Commission. That, rather than any issues on flexibility or pragmatism, seem to have created an alternate outcome in Europe as compared to the US.

CA

"There is a very interesting sociological experiment going on in the US media, from what I as an outsider can see, just not sure that its worth examining all by itself."

Good luck trying to examine the process without getting caught up in the content. Have not watched main stream TV news for 20 years or so, and don't feel like I'm missing anything. Its entertainment, a kind of gong show suitable for those who are addicted to TV. TV watchers tend to be less educated, poorly motivated, and totally boring, and if they are not when they start they will become so fairly quickly.

Most viewers are looking for detraction from their low energy states and are attracted by displays of high energy. Content producers achieved this by presenting 'theoretically' contrasting views. So what you end up with is a media dominated by a tyranny of necessary difference. This has spilled over into politics, you will quite often see a Republican and a Democrat who essentially agree on something fumbling to find some trivial but defining differences.
T hen the various pundits come along and try and build these trivial points into something significant. Its no wonder that people are confused.

No difference has achieved more play than that which is supposed to exist between the government and free enterprise. This is a hand in glove collusion that really got going at the time of the railroad expansions and has continued ever since. Government did what buisness wanted because they financed elections. Its incredible to me that there are still those who think of America as the leader in so called free enterprise. behavior. Talk about buying into the big lie.

"Tyranny of necessary difference"


Yes, your points are well taken about the artificial differentiation along party lines i.e. people posturing rather than discussing. A behaviour that a learned friend of mine attributed to the old 'Perry Mason' shows that have spilled over into the US national psyche.

That said, I do not quite buy into your disenchantment with free enterprise in the US; this is a country that dismantled not just Standard Oil, but also virtually created the necessary competition for its own national champions - General Motors for example. The Schumpeter process of creative destruction is best represented in the disruptive technology of the internet; which will probably end up changing retail behaviour permanently around the world.

A part of me wants to hold on to the notion that the US government bailouts of the financial system, and subsequent irresponsible behaviour, represent an exception. And pigs may well fly, I know.

CA

Chan, I want to thank you and all other conributors for your efforts to edify yours truly on this topic. I am truly bemused by how any country (apart from a banana repubblic) could arrive at a situation where powerful vested interests like merchant banks could call the shots on government policy. I struggle to extricate myself from a state of denial.

Chan Akya wrote:
Going back to the point about Europeans, the thing to note here is that it was NOT the financial authorities of Germany or England who called for the reforms but rather an esoteric group under the Competition Commission. That, rather than any issues on flexibility or pragmatism, seem to have created an alternate outcome in Europe as compared to the US.

CA


You surely mean the EUROPEAN Commission don't you Chan?

Germany and England have nothing to do with the bailout of ING. To the best of my understanding it is Dutch. It was the Dutch government that provided the bailout money. I could have expected better from that crowd going by past precedent.
............................................

(An interesting but probably useless historical briefing): Who is ING? It is (formerly British) Barings Bank recycled under new owners. In the 1990's Barings Bank was sent bust by a rogue trader employee based in Singapore who did a series of unauthorised trades on Japanese stocks and shares. His accumulated losses bankrupted his employer.

A group of Dutch investors bought the remains of Barings Bank from the liquidators.

Not the first time that Barings went bust. They were a big name in London finance in the latter 19th century. They went insolvent in 1890, triggering off a financial panic that caused runs on the banks and government intervention. The subsequent withholding of credit by the British banks brought on a recession in Britain and a full blown depression here in Australia (presumably also in other lands with a high debt exposure to the British banks).

Financial bubbles are not new - even in the Old World.

"A part of me wants to hold on to the notion that the US government bailouts of the financial system, and subsequent irresponsible behavior, represent an exception."


I'll give you that the US has always had a robust small buisness economy. Small and medium sized buisness generates most of the jobs and does lots of things that people all over the world are willing to pay for. But while small and medium sized folks were doing there thing, some of the big's were figuring how to get their hands in the federal cookie jar.

The Washington/big buisness connection gets going at the time of the railroad expansion. Getting railroads built to new territories so they could become States was the main political issue of the time. Washington politics was completely enmeshed in the big banks and bond houses of N York that raised the money for the railroads, and in Chicago and the exchanges there, all connected to a US federal policy of expansion.

It was similar to what has been going on in the Soviet Union in resent years, a kind of legal kleptocracy. Including corrupt judges, politicians, bankers. police, You name it and the Us had it. It took half a century or so to reign it in.

Then Reagan let the boys out of the bag and they commenced to do what they like to do, put on a fancy suit, pretend to know what your talking about and proceeded to make a mess out of everything.

The current generation of financial types took what my grandfathers generation built and my fathers generation maintained and mortgaged it to the hilt and pronounced themselves a success. The reason that things are so stuck in Washington right now is because no on wants to be the one to admit that they were wrong. That the bubble and easy money is at an end. They just don't get it. So they play the media game that started this thread. and bounce familiar tropes off each other free markets vs regulation, government vs buisness. and while we are all watching the show they steal us blind.

MW,

Yes, it is the EU Commission for Competition led by Neelie Kroes; they are the folks who rule on things like whether Microsoft should include a browser in Windows/

On the antecedents of the Dutch financial group, ING, perhaps you may be overstating the importance of the Barings saga - they certainly acquired the group out of bankruptcy, but I don't think there was a substantial benefit to the overall firm size and revenues from that (other than in the area of asset management).

An interesting aside from last year - when the British authorities went after the Icelandic banks, they "transferred" all deposits to ING, in effect stabilizing that bank's funding base, at the expense of the Icelandic banks that were pushed to bankruptcy. So, it is very clear that ING was an integral part of the British establishment (although the Brits may claim that it was the Dutch who pushed them to effect a soft rescue of the bank last year).

Michael,

Yes, it is an interesting angle to consider the pace of financial asset returns relative to real economic contribution. At the end of the day, financial assets are priced to return their long term cash flows after properly discounting the same. When the cash flows become divorced from real underlying economics (e.g. house prices from rental yields), asset bubbles are inevitable.

What is really bad about the current state of the US government is that their only bright idea for getting out of the housing bubble is to create a new bubble in stocks.

CA