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Why are good ideas for taming casino capitalism being ignored?

November 16, 2011

Good ideas for taming casino banks are not only not being adopted; they are not even being discussed by those who matter.

Three particular ideas, at the very least, merit serious attention, but have been ignored:

i Direct quantitative controls on the amount of credit extended by banks for defined purposes, sometimes referred to as ‘window guidance’. Such controls were widely used in the Bretton Woods era (1944 to early 1970s) by Western economies and since used successfully in various Asian economies. These have been advocated by Werner [e.g. Werner 2010] and Lines [Lines 2011].
ii Development in the UK of a healthy local banking sector, which amongst other things would be better placed to judge viable business loan propositions than the current multipurpose large banks.[Werner 2010] Local banking is much more prevalent even in the USA than in the UK.
iii Monetary Reform [e.g. Positive Money/NEF/Richard Werner]

In my post on Banking Reform, I suggest that the reason that the Independent Commission on Banking (ICB) ignored them is that the secretariat, made up of young Treasury hopefuls failed to call members’ attention to these suggestions. Whether this was out of mental laziness, a feeling that anything radical would not help their careers, or more explicit guidance I do not know. Whichever it is, it is simply not good enough. Plainly radical ideas are needed to address casino capitalism. What is the use of something like the ICB if it will not consider any?

Of course it could be the case that the ICB felt that such matters were for the Bank of England and or the Finance Policy Committee (FPC) to consider, but there is no evidence that the FPC is considering them, although at least one of its members Lord Turner is well aware of Werner’s proposals and seemingly in sympathy.

I can only suppose that no one will challenge the banking lobby.

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  1. Unfortunately when bankers are in charge, and if not actually bankers Prime Ministers with a career plan involving them, you are never going to get effective regulation. Other countries would call this ‘corruption’ but alas within the rigid definitions thereof in UK statute we cannot.

    The fear of all politicians is the banks moving out of town. We’d lose financial power and our standing on the world stage. The system is so screwed up that we are stagnating and previous colonies such as India are climbing the economic ranks above us and we’re in genteel decline: we’re on the slide anyway so why NOT get on with it and do something radical?

    Who knows – we may even climb the ranks again due to the ingenuity, initiative and flexibility of our nation that had us ruling the world for several centuries!

  2. Good point Richard, which is why I am now thinking about initiatives like Move Your Money – which I am doing – and sharholder activism.

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