Saturday, May 10, 2014

Adair Turner — The Perils of Financial Freedom



Adair Turner gives China some advise about financial instability without mentioning Minksy.

The credit cycle is too important to be left to free markets.
Project Syndicate
The Perils of Financial Freedom
Adair Turner, former Chairman of the United Kingdom’s Financial Services Authority, is a member of the UK’s Financial Policy Committee and the House of Lords

See also James Kwak, Finance and Democracy at The Baseline Scenario
In other words, it’s not just that complexity can cause banks to blow up. It’s also that complexity makes it impossible for regulators to monitor banks, which is a critical ingredient in the financial crises that we all supposedly want to avoid.

8 comments:

Bob Roddis said...

We apparently must suffer the death of the English language. A bank with a special dispensation to create funny money loans out of thin air is not "the free market".

Tom Hickey said...

Well, we know that that there never was and never will be a free market. It is an oxymoron, especially given modern society, a global economy in which institutions "compete" aided by governments, the structure of monetary production economies, and the conventions of modern money.

Adair Turner is telling the Chinese not to be taken in by the "free market" philosophy of neoliberalism and in doing so, create a ripple effect throughout the global economy due to a Minsky moment in China.

Unknown said...

"A bank with a special dispensation to create funny money loans out of thin air is not "the free market"."

Extending credit is what banks do, Bob, even in a system with little or no government involvement. They don't need special dispensation to do that.

Matt Franko said...

Bob,

What's your take on the Clive Bundy situation out in Nevada?

Do you support their policy of armed checkpoints?

rsp,

Matt Franko said...

Background:

http://www.latimes.com/nation/nationnow/la-na-cliven-bundy-congressman-20140507-story.html

Matt Franko said...

Bob,

Within their rhetoric, they are apparently looking at slavery for "negroes" as paerhaps a better system:

http://www.washingtonpost.com/blogs/post-politics/wp/2014/04/24/cliven-bundy-on-blacks-are-they-better-off-as-slaves/

James said...

"create funny money"

Every form of money in human history is funny money, none of it had any value until some human said it did. Gold is no more "natural" as a form of money than paper, it's all a human invention.

Matt Franko said...

James,

Not exactly imo... maybe for you and me, but not the wacko libertarians...

Here is A Hamilton in Federalist 12:

"The prosperity of commerce is now perceived and acknowledged by all enlightened statesmen to be the most useful as well as the most productive source of national wealth, and has accordingly become a primary object of their political cares. By multipying the means of gratification, by promoting the introduction and circulation of the precious metals, those darling objects of human avarice and enterprise, it serves to vivify and invigorate the channels of industry, and to make them flow with greater activity and copiousness. "

You can see here that for Hamilton, humans were subject to the metals. The metals themselves had independent value not subject to human authority...

In fact, our institution of govt thru which we impose our authority and achieve public purpose, was itself in a desperate need to acquire mass measures of these metals just as any individual was in need at that time:

"The ability of a country to pay taxes must always be proportioned, in a great degree, to the quantity of money in circulation, and to the celerity with which it circulates. Commerce, contributing to both these objects, must of necessity render the payment of taxes easier, and facilitate the requisite supplies to the treasury." Federalist 12

Contrast this to our Greek and Roman ancestors view of these metals vs our own human authority thousands of years ago:

"By virtue of voluntary convention nomisma has become the medium of exchange. We call it nomisma, because its efficacy is due not to nature but to nomos (law), and because it is always in our power to control it." — Aristotle, "Ethics." c 350 BC

Or 350 years later here is Augustus Caesar:

"From that year when Gnaeus and Publius Lentulus were consuls (18 Bc), when the taxes fell short, I gave out contributions of grain and money from my granary and patrimony, sometimes to 100,000 men, sometimes to many more. " Augustus, c. 14 AD

Here with our ancient ancestors we see humans controlling the metals, while with Hamilton, we see the metals controlling the humans...

So at some point, libertarianism spread like cancer throughout humanity and we became subject to the metals until the 20th Century when we got out from under them in the two bipartisan Executive actions in 1933 (FDR) and 1971 (Nixon)...

So NOW it is like you say here: " none of it had any value until some human said it did."

But it wasnt in fact like that for quite a long time... we had like an almost 2,000 year lapse, NOW it is starting to turn back but there are those like Bob who simply just dont like authority (unless it is their own) and even there are PLENTY of moron others still around who actually want to go back under the metals if you can believe it!

You are talking like Aristotle/Augustus but NOT talking like Hamilton with your statement: "none of it had any value until some human said it did."

rsp,