The dead horse rebeaten to life – How governments keeps banks alive

October 6, 2008 by
Filed under: Economy 

So, once again it happens, local governments jumps the bandwagons to save big time banks who have done a crap job at making sound and good business. Once again we have people completely misbehaving, and in general doing bad business, getting their wallets lined with more money from the governments to save them.

Personally, I don’t have a belief in either [political] direction really, but I think that if we are going to make a sustainable planetarian (as opposed to the wordinternational, which always tend to exclude countries) economic system, we need to stop promoting the current scenario with promoted competition and then giving our friends (the loosers) prizes for doing bad choices. This is contra-productive in my humble opinion, and stagnates the market and the players in a bad circle.

We have two diametrically opposite choices planetarian economical systems — in reality, no we don’t have these choices, but to make what I believe is a sustainable planetarian system. I refuse to talk about global economy as we’ve already seen where that leads.

The problem
The world willingly entered (yes yes, I’m beating a dead horse as well) a global economic system during the 1990’s, the leaderships and right wing politicos of countries jumped the possibilities, while citizens and left wing politicos where slightly defiant and backwards, something normally attributed to right wing people. Either way, we entered the system, but only partially. Banks (swedbank, hypo real estate, fannie mae, et al) and global mega corporations (ibm, dell, coca cola company, disney, ford, nestle, et al) are using the possibilities to its fullest, they are no longer national entities, they are everywhere and anywhere and noone except themself has a decent window into the ins and outs of their economical structures. And no, no, no — Nasdaq, SEC, NYSEC, and none of the so called third parties have a decent looking glass into these kind of megacorps. In actuality — the ones who where in some part supposed to be our warrants against misbehaviour, where the ones misbehaving the worst in this round.

National governments and local governments are still living in the local economic system, they know part of what is happening, not even close to everything. They are still regarding banks and other megacorps as local entities, which does good for the locals, and which needs local support in bad times. For examples, look at Lehman brothers, Hypo Real Estate or SE-banken back in the days.

Are they really worthy of our [local] support? As it currently stands, the economical machinery doesn’t work. It’s out of sync with reality, fantasy sums of money are passing around every day in the forms of loans and 1’s and 0’s.

I will pull a weird example from a game I’ve played for quite some time, eve-online (It has it’s own problems, admittedly), to show how numbers can be misguiding. Recently, there’s been a gigantic war between two different factions — GBC and NC. Normally all “kills” are gathered on specific webpages for each alliance, GBC has several alliances, and NC has several alliances as well. Now looking at any one of those alliances killboards for a big battle, you always have the “local“, ie the alliance who owns the killboard, looking as if they came out as the winner of the battle. Now, go over to an alliance on the other side, it looks the same way, the “locals” where winning. In this case, you only get a partial overview of the fight — you get the losses of that specific alliance but none of the others, but since everyone from all alliances on one side are sharing the kills, all the kills are showing up on any one of the respective alliances killboard.

This [eve fights] alone is hard to get accurate numbers on unless you do some serious data aggregation and acquisition, now let’s try to get accurate numbers for a real life company operating in 50+ countries, especially if anyone at any level in that company has something to hide? And if the one who has something to hide, is the one who is supposed to be supervising the market?

Choices
The situation as it looks is untenable, we are currently fighting a fire with fire, and most likely moving problems from one place to another.

There are of course, several different choices imho, but to be perfectly logical, there are a few different changes that must be made.

Choice number one, go liberal. Do not engage in saving the different banks in financial crisis, let them be devoured by bad choices and the strong ones survive. The problem is, how do you make this work on a planetary level? Ie, if the banks in your region are not saved, they get a disadvantage in comparison to banks from regions which have regional support in bad times, hence putting darwinian rules out of the calculation. In other words, a planetary agreement must be reached for this to happen.

Choice number two, go all out socialistic, save the banks, but in return all the banks should either be run in such a way that their own proceeds will pay for either their own demise (Ie., make them pay for some kind of government run insurance, which must reach a zero result over a defined timeline), and also make the figureheads and CEO’s of financial institutions and banks personally responsible for what happens inside their organisation. Make it personally hurt whoever is responsible. This also requires quite a lot of unison between countries as to not provide too much leeway for any one of the banks around.

In summary, something needs to be done about this. Every 15-20 years or so we have another financial crisis due to more and more greed, and mostly it’s about the same type of people doing the same type of mistake over and over again.

Comments

2 Comments on The dead horse rebeaten to life – How governments keeps banks alive

  1. Kalle on Wed, 8th Oct 2008 15:19
  2. This is not my domain, yet I saw “Zeitgeist: Addendum” it is a quite interesting movie. It comes bearing crap such as conspiracy theories, but it is definitely on topic and rather interesting.

    http://video.google.com/videoplay?docid=7065205277695921912

  3. Oskar Andreasson on Fri, 10th Oct 2008 07:10
  4. I must thank you for the tip, I’m downloading the movie and addendum as we speak, going to watch it this weekend 🙂

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