What is being done to fix Britain?
Paul Mason’s Blog – BBC Newsnight
Here is the second film in which I travelled from the tip of Wales back to south east England to find out whether Britain is flourishing – or at least can flourish – in the new world economy.
Watch video: http://www.bbc.co.uk/blogs/newsnight/paulmason/2010/03/what_is_being_done_to_fix_brit.html
Biomimicry versus traditional economic concepts like maximising profits. Eccentric nutters or a logical new way forward?
and from the Economist, some ongoing (conventional?) fixes in the US, home building and Intel.
Time to rebalance
America’s economy is set to shift away from consumption and debt and towards exports and saving. It will be its biggest transformation in decades, says Greg Ip (interviewed here)
And this is the context in which the efforts (investments) above are being made.
What Do We Have to Show After a Year of “Extend and Pretend”?
By Gonzalo Lira, a novelist and filmmaker currently living in Chile
In 1982, many of the banks hit by the Latin American debt crisis were effectively insolvent. Paul Volcker, as the then-Chairman of the Federal Reserve—charged with overseeing the banking system—effectively cast a blind eye on this banking insolvency.
Volcker’s reasoning seems to have been that the US banks were not broke—they were just getting temporarily squeezed. Volcker seems to have concluded that time would heal the balance sheet wounds caused by the Latin American defaults. Therefore, to hold the banks to the letter of the accounting rules would likely drive one or more of them broke, to no useful purpose—and it could potentially cause a bank panic and general financial crisis. But to pretend (for a while) that all was right with the US banks would avoid a potential panic—so long as the crisis sorted itself out and the banks repaired themselves by writing off and renegotiating their toxic Latin American debt.
Volcker gambled, and won: The US banks indeed took the Latin American debt hit, but grew their way out of their hole. None of the large American banks were pushed to bankruptcy in 1982, and by 1983, the worst had passed. By 1984, the biggest chunks of Latin American debt had either been renegotiated or written off—so far as the American banking system was concerned, the crisis was over, with not a single name bank going broke. And most importantly, stability and calm reigning all the while.
Score for Volcker and what we could say was the Volcker Call.
But this time the successful execution of this solution is in doubt …
Why hasn’t Team Obama’s version of the Volcker Call worked? Simple—because Paul Volcker made it clear to the banks in ’82 that he would declare them insolvent, if they didn’t repair their balance sheets. Volcker scared the bankers, scared them enough to make then do what was necessary—which was to clean up their balance sheets.
What did Team Obama do 27 years later? Did they twist bankers’ arms, and force them to write off the garbage on their balance sheets?
No they did not. Instead, they bowed and scraped at the banksters, as if they were truly Masters of the Universe, instead of what they really are—scum of the earth dressed up in really nice suits.
But then, how have the banks made such staggering profits during the last year?
By trading. Instead of being banks, since March of ’09, the Big Six US banks have effectively become hedge funds. They have been trading themselves into profitability. Worst of all, these banks qua hedge funds have been making money by trading with each other. Price-to-earnings ratios bear this out—their general upward trend, across sectors and industries, even as the economy has been severely weakened, is indicative of a speculative bubble. A massive bubble—the kind that makes the Hindenburg look puny.
and, of course, in the event of another “dip” a second bailout would be political suicide so it won’t happen. What then? The UK and Europe are in equally precarious positions of solvency.