Capitalism

23

Moral monetary theory

How moral is money? OK, I’ll pause while you laugh bitterly. But in this era of computerised meta-money, it is an important question. First it should be said that I am using the word “moral” in the sense of an extension of “mores”, social habits, not as a reflection of larger questions of right and

34

More CEOs grab bonuses

In The Great Crash of 2008, Ross Garnaut and I identified four major causes of the GFC: housing bubbles, global imbalances, clever money and greed. Pretty much none of these causes has been seriously addressed. But today I’m going to focus on the last. Greed is a part of all bubbles of course, but in

30

Time is money

The time value of money is the corner stone of capitalism; it dates back to capitalism’s origins in the Renaissance (as historian Carlo Cippola “Clocks and Culture” describes). It is in deep trouble. The twenty first century capital markets are becoming so strange, this simple notion is being turned into a bizarre mixture of hyper-instantaneity

51

Innovate or die

I have been reliably informed by Houses & Holes that we are “all going to die”, and rather sooner than we all imagined. Something to do with the economic meltdown in Europe and America, I believe. While I have no reason to doubt such potent insight — after all, death is the best one way

79

Marx is back

Recently, Nouriel Roubini’s exhumed of Karl Marx to help explain the current travails of the global economy. His argument included this spectacular paragraph: So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his

74

Freedom versus free markets

Probably the most wicked intellectual subterfuge of the last three decades — and goodness knows there have been many — has been the pretence that democracy and markets are two sides of the same coin. Both have been extolled under the banner of “liberty”. “Free markets” are somehow the hallmark of democracy and they should

33

The governance of money

The idiotic ideological battle in Washington over the debt ceiling was yet more evidence of the failure of governance in Western economies, which is the real crisis. Then, after the stock market carnage of last week, the attention was focussed, reasonably enough, on government’s MANAGEMENT skills — how good they are at being efficient bureaucrats

19

Time to take stock

Exactly how did we get into this mess with the capital markets? A situation where the global stock of derivatives is over $US600 trillion, which is about twice the capital stock of the world. A situation where high frequency trading is over two thirds of the transactions on the NYSE and about the same in

42

Ban the bots

Anyone who thinks that the stock market is about finding fundamental value so that worthy companies can find they capital they need should read a recent article in the London Review Books.  It is another example of what I call “meta-money”, which is spreading like a virus (the $600 trillion of derivatives being the worst example).

12

Wisdom of the ages

By popular demand, find attached the full interview with Peter Jonson (AKA Henry Thornton), former chief economist at the RBA on where we’ve all gone horribly wrong. I also recommend the book mentioned in the video, Great Crises of Capitalism.

8

The cost of capital

The chronically low interest rates in the developed world – Britain has the lowest interest rates in the Bank of England’s 300 year history – are a symptom of a deep sickness in global capitalism. It is a sickness that may be long term. The problem afflicts most economies, including China, but for different reasons.

5

Guest post: Derivatives regulation – part I

By Satyajit Das. On 30 July 1998, Alan Greenspan, then Chairman of the Federal Reserve argued that: “Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary.” In October 2008, the now former Chairman grudgingly acknowledged that he was “partially” wrong to oppose regulation of credit default swaps (“CDS”). “Credit default swaps, I think, have

6

Ban the bonus!

It’s bonus time for bankers around the world and the GFC is a distant memory. In the US, the Wall St bonus pool is at a record high. In the UK, Barclays Bob Diamond of Barclays is in hot water. And here, if the Sunday Telegraph (h/t threedogsandakid) is to be believed, then MacBank is