Another Conference, many Consensuses!

Another conference, many competent economists participate, much learning distributed, no consensus except that it is "not working". Not only is that not scientific, but, if an honest, perceptive response is needed as to whether the economy is working or not, ask the next economically-untrained person encountered. As for -


Financial regulation: Not yet an efficient outcome

Angus Armstrong, E Philip Davis 22 April 2016

Since the Global Crisis, a number of regulatory policies have been discussed, proposed and sometimes implemented to address shortcomings in the regulatory framework. This column presents the views of the speakers at a recent conference on whether we have reached an efficient outcome. For most of the speakers, the answer was a resounding “no”.

Editors’ note: This column summarises the views presented at the National Institute of Economic and Social Research (NIESR) conference on “Financial Regulation” held at the Bank of England, London, on 18 March 2016. The column includes several videos recorded at the event.


Since the Global Crisis, a number of regulatory policies, which seem unending and are so represented in the legislation that resulted, have been discussed, proposed and sometimes implemented to address shortcomings in the regulatory framework. The question addressed at the NIESR conference (presentation slides for which are available here) is whether we have reached an efficient outcome. For most of the speakers, the answer was a resounding “no”.


O&G Comment:

By definition, a consensus is an agreement; and, although the economists gathered at the NIESR covnention to a man may have acknowledged that credit growth is excessive, or banking reserves need to be raised, or that regulations to restrict risk creating moral hazard is called for, each proponent had the gratifying experience of expressing personal views, yet the conference appears to have disbanded with no concise statement as to what one, two or three items should be attended to in any priority.

That is the problem not only in Economics, but in Banking, finance, and regulating the two. As a consequence, we'll continue to generate lengthy studies, and reach no agreement on an effective path to tame volatitlity and the excessive fluctuations that are counter-productive to the life-goals of the great majority of struggling souls. We'll continue to suffer loss while our confusion presents opportunity for those interested in no less than promoting confusion which enables stealing off with the community treasures. It's impossible to prevent that when no single over-arching conviction expresses the social benefits of containing those risk-disposed (but not at their own expense), socially-insensate foragers for wealth.

As a result, we'll go on feeding - or allowing them to feed - their voracious appetites.

Objective or not – and the truth is: more subjectivity is all those hunters mean to acknowledge - bankers believe they are on top of the situation and have the situation under control; the economists have been rooting around through options for centuries branching off in several directions at once, according to the data they’ve accumulated – which can be formidable in girth – and the sentiment they detect in their personal contacts.

The "learned" display their wide visions and abilty to deal with several concepts at once, and in doing so allow the essence of their job to dissipate, lacking any carefully defined direction - and the social misfits are free to do as they please in the uncommitted atmosphere that results.

The copyrighted voxeu article quoted above, complete with videos of noted and true economic experts in banking and finance from a March 18,2016 conference in London, gives a cross-sectional view which is quite uniform in opinions as to the need for guidance, yet, each participant has a differing concept of what should command the attention of the analysts and regulators - or why. This, if anything, can be confusing to the politicians with the responsibility of putting correctional rules into place - that is, if they were honestly searching for guidance.

We need some effectively standard methodology to constrict the range of discussion and proposals into as few a number of diversions as possible which would promote maximum effect – as, say limiting comments to credit growth, housing markets and reserves, or detecting turning points in the boom/bust cycles - concentrating on them for effective controls, and allowing chief regulators to then expand on that small but effective base for maximum benefit.

Nothing so concise results from our conferences. Personal satisfaction in expressing opinions may rank high, but those extra embellishments which are unique and expected among any variety of personalities, tend to add to the complexities and confound the essentials. As vital as understanding of micro-and macro-, or credit and markets, or bail-in or bail-out are, meaningful messages need to be shorter and less detailed. Economics never has confined itself to effective communication.

How then can you influence popular opinion or direct the legislators and regulators on what is important?

As it stands, the articles are too long; the messages, too steeped in variety, to the point where they emerge near-garbled when viewed as a collection even though each in its own context is perfectly phrased and comprehensible. How then can we expect the public and legislators whose personal languages derive from a variety of backgrounds to concentrate on essentials when the learned do not?

Legislators will never be presuaded to generate concentrated, comprehensible rules or effective laws while dealing with the divergent choices offered to them by "experts". They're already pre-disposed to show their own wide-ranging "comprehension" (not always accurate in any of the trades involved – economic, banking or financial) of the situation in combination with personal political beliefs in what is effective in promoting agendas and what is not. So much so, that it is oftern interpreted as a subterfuge to avoid doing anything, which in turn does nothing to enhance the image of legislators. Testimony by experts usually results in supplying selective intellectual ammunition to bolster the positions of the legisltive troops on the front line to serve their individual purposes. . . The "He said. . ." "No! She said. . ." type of exchanges that lead no where.

Economics, to be effective, must get down to business hammering out agreed to conclusions and drop the academic, frustrating, pseudo-scientific conceits (popular meaning). They appear to not believe their status would be enhanced if some good resulted from their efforts. (Could that be another example of the "job security syndrome"? Don't tell them everything all at once or we're lost?) If the academics don't see the advantage, perhaps we need to break-off a variety of corps of economists dedicated to working solely on issues in the public's interest. We believe we have that in those economists working in private sector banks and government, but they carry the wrong attitude with them into the new workplace and are surprisingly ineffective for all the learning they bring to the scene.

From The Trenches...

It's not working will do just fine. We need a consensus on it and an adjournment. Next meeting is called for in 30 seconds after the adjournment. Now that we know it isn't working, no pay, lodging, food or clothing will be given until "it is working".

We never see that outcome because those folks are the problem, not the solution.

Since it isn't working... if we close the banks, end the Federal Reserve and get RID of Wall Street... my guess is that everything and everyone who was working gets to stand back up and progress. There is nothing worse than a group of scholars arguing an "ideal" to which they benefit from and few others do.

Based on observation from said trenches-- it truly appears that we enter a weekend on fire and emerge Monday with a Hell of a lot of crispiness.

Is the American Dream gone? Nope. But there are a LOT of loiters in administrative roles blocking it and the Sun. A commonsense approach to restoring the Dream is to move the impediments.

The Obvious Is Starting To Be Addressed

GSE is the acronym for: Government Sponsored Enterprise. Enterprise is a venture. A venture is generally something someone expects to make gains in but enters it grasping there is just as much or more potential for loss.

The government sponsored credit mills attempting to organize due process accordingly for large segments of the US population... Sallie did student loans, Freddie and Fannie did mortgages for wage-earners and Ginnie did them for veterans of military services and Federal Housing designed to oversee that low-income wasn't shafted with bad homes. The pools (portfolios) of credit generated by these ventures was originally quite static. The criteria aligned with millions of ordinary people and in spite of highs and lows in the general economy, there was consistency because the paper was generated to specific criteria.

No venture lasts forever.

Financial corruption is actually very organized, almost static. In the book: The Loan Pushers by authors Darity and Horn... the whole 20th Century was largely financially manipulated by a "routine" exploitation guaranteed to blow up and then be bailed by government. Take every decade since 1900 and you will see a bust period where America bailed banks (shareholders) without responsible remedy. Essentially, banks have never been solvent and don't operate to be solvent. They operate corruptly to bolster shareholder investments gained by bail outs. The GSE's became an integral component of banking corruption. Banks literally controlled every GSE by generating the portfolio unit content-- the credit. In 1994, Fannie Mae investigated it's own criteria and discovered that most of America no longer qualified. Largely, that was the case after 1981... the year corporations began downsizing, then broke themselves in 1983. During this period... Corporate America hired directly from colleges into middle management. The advent of administration without a clue of what to do or how to do it. This would also become a migration from hourly pay for actual work to salary.

FACTS collected in a series of Price Pritchett booklets attempting to illuminate a course toward failure for the United States by commercial entity steerage foretold of globalization and how it would destroy this nation using portfolio migration. Consider this... 1981, 1988, 1995, 2002, 2009, 2016... each of these years was the reaction year to corruption occurring the prior year. Pritchett chronicled the decline of wage earner jobs for salaries... increased administrative management that is literally adverse to tangible performance. FACT... in 2008, millions of college degrees walked away from homes with mortgages they supposedly could afford, kept their jobs only to buy bigger repossessed homes formerly owned by wage earners uptown. Since then, we have had a closed job market and hyper appreciation to restored value in housing (uptown) without economy. Stock markets are at record highs with no economy. Debt exposure is so massive that a .25% hike in the US bank rate in January caused a 2,000 point fall for the Dow-- an Index of Industrial entities that contains banks, technology and global importers.

Two GSE's... Freddie and Fannie want to split off over-value balances for home owners in their portfolios mainly struggling stagnant since 2008-09. Why? Because nothing invented by scholars this century has worked and there is massive exposure to correction before insolvency now. Defaults on student loans are record high now... people did not get career positions after graduation, they got under employment. Their parents bet the farm on that college degree and they lost their jobs and have since depleted all their earned-for assets.

It's 2016. It's an incremental year. Nothing is working. Everyone must or we go bust. China appears to be ahead of us in that... Japan is toast, Europe is dead, Australia is stagnant, Russia is stagnant, Canada and Mexico are stagnant, South America and Africa are struggling, India is... whatever India usually is. To put a bunch of dumb brained scholars in a conference and expect results is-- lunacy. WHERE is Carl Levin's One Stop Job Shop cure? It makes too much sense to post jobs and resumes in a managed system regulated the way the financial sector should be to end abuses. Post a job. Get candidates. Hire one. If he/she doesn't work out, reprimand INSIDE the entity not go overseas and seek ignorant replacements you can suppress and control. Destroy oligarchies, legacies and stop inheritances of entities with omnipotent potential. FREE THE PEOPLE, watch them make economy that corrects all of the manipulation, control and obvious death course toward catastrophic failure.

It has to happen this year. Or else.

cutting our losses

O&G's opening comment is an excellent example of human tendency to not recognize defeat and continue with the same policy after it has become apparent that current policy isn't working. The tendency affects man on an individual basis and groups (the herd).
Most men when being honest with themselves, can cite times in their lives when they have stubbornly clung to idea even when it becomes apparent that a change of course was warranted long ago.
Interestingly, some of the greatest inventors in history were men and women who were able to change course regardless of how much time, resources, and reputation that they had invested in the failed project.
Today, it appears that the masses are recognizing that the radical policies implemented by the large central banks aren't working. Only a few years ago, people were awed by various central bank speak that seemed to confidently reassure that the situation was well contained and "lift-off" would occur by next year..then another year..then another year....etc.
Lift off never occurred and the only benefit has been a rising stock market that fewer and fewer people in developed and developing countries refuse to participate, or unable to participate in. What do they do? They double down on the same failed policy even though anything multiplied by zero equals zero. They have too much reputation invested.
I also work in the trenches. I've seen the confused and fearful look that men have after they receive a permanent pink slip due to lack of work yet the company's stock has doubled. Eventually that initial fearful and confused feeling turns into an angry and vindictive feeling, sometimes directed at the rightful culprit but more often than not at the wrong person or group of persons. Slowly, so slowly, they eventually figure out they were swindled and who is responsible.
A person who lost his wallet to a pick pocket doesn't have to know the art of pick pocketing to understand that the world is better off without pickpockets.