The Financial Services Authority have today leapt into action and put together some stringent measures to ensure the security of the proverbial barn door now that the frolicsome pony of the UK’s economy has successfully bolted, eaten lots of sugar lumps, and subsequently been mown down by a truck.
Among their hard-nosed, profound changes to our current banking system are the following:-
- A change in the purpose and function of the FSA so it focuses on financial firms’ strategies and identifies when they might get into trouble.
Now I’m curious to know if I’m the only person who looks at that and wonders what the FSA were doing before. Financial Services Authority: that says, to me at least, an authority to oversee financial services, so if they weren’t looking at what financial services were doing, and that surely includes their overall strategies, what were they looking at?
- Banks being required to build up healthy reserves in economic boom times.
Why do we need to tell banks to do that? Seriously, that’s like having to tell a bloke running a fish and chip shop to take the chips out of the fryer when they’re cooked, or telling a bin man to chuck the contents of the bin in the back of the lorry, we assume the person behind the counter in the chip shop knows what they’re doing, and we assume the bin man knows what he’s doing, why do we have to tell the people who run banks, who earn in a year what we’re likely to earn in 20, how to do the basics of their job? More worryingly, why do we have to force them to do the basics of their job?
Going even further, this is just a tacit admission that our current system is inherently tied to boom and bust. Here’s a thought: a financial system that, almost by definition, leads to periods when people lose their houses and jobs through no fault of their own, is not a very good system.
- Risk taking to be discouraged through forcing banks to hold more capital and a bonus system that discourages risk taking.
Again, stuff that banks should be doing anyway. Basically this is saying that prior to this “profound change” in the FSA’s thinking, it was absolutely fine and dandy for a bank to take your savings, quite literally gamble them, and, whether the gamble paid off or not, give a massive sum of money to the person who did the gambling. Oh, and it’s also just peachy for banks to make up money out of thin air with just a tiny fraction of the amount being backed up by actual assets. The very fact that this is being regarded as a profound change indicates that bankers are a bunch of uncaring, overpaid scumbags, and the FSA a bunch of uncaring, oblivious idiots.
- Credit rating agencies to be regulated.
Hang on… you mean they weren’t regulated before? Credit rating agencies basically define the value or worth of packages of debt. That should be calculated according to the interest being paid on the debt and the likelihood of payments being defaulted. It gets complicated but essentially that’s what they’re there to do. I’d say that’s quite a big deal, because the debts we’re talking about are often mortgages, and that’s basically a contractual representation of your house. Basically what they did was rated high risk mortgages as high value because of the high rates of interest being paid on them, and ignored the risk of people defaulting on those payments. That was stupid, but it happened because there wasn’t any regulation, and because the credit ratings agencies basically found a way of making money out of doing it. They found a way of making money out of doing something incredibly risky and stupid, and they did it, a lot. They were able to get away with it because the idea of regulating them was seen as intrusive government.
Now all the above is essentially about the FSA, their changes, and the state of play before those changes. I’m asking why those changes are regarded as profound when they seem to be pretty much common sense, and should have been in place all along, and I’m asking why the services being regulated didn’t recognise and do something about the problems they were well aware they were creating?
The answer is that they found a way to make lots and lots of money by doing stupid, risky things with other people’s money, and the FSA, and all other relevant authorities, were quite happy for them to do it because it looked like that Holy Grail of capitalism: economic growth.
Well it was inevitable I suppose, given that financiers, bankers and economists all over the world have been collectively wetting their pants and crying for the past two months whilst their Alice in Wonderland brand of making themselves rich comes tumbling down around their ordinarily deaf little ears. Yes, we now see countries in the EU claiming they’re not going to be able to meet their CO2 emission targets because of the global economic crisis. Given the extra strain on current political systems and economies our glorious leaders are slowly deciding that, when push comes to shove, we can’t afford to do anything about our slowly worsening environment when all efforts need to go into righting the economy.
It’s the old Environment vs. Economy argument. Economy generally wins, which would be fine if it wasn’t so monumentally, earth-shatteringly, brain-mushingly retarded. Environment vs. Economy – what the fuck? I mean seriously, just have a look at that. Environment – Economy – where’s the debate? On the one hand, you’ve got Economy; there have been various experiments throughout history with economies and how they could work. We’re currently living with the Reagan/Thatcher installed de-regulated free market brand of economy, and it turns out that, as many suspected at the time, it’s a shit idea. It’s failing abjectly, and those of us who benefited least out of it are going to have to bail it out. That’s not my point though, it’s just one brand of economy, and there’ll be more to follow, maybe the next one will be based on speculative quantum future trading of magic beans or something, it’s not important, what is important is that “Economy” is a construct. It’s a concept thought up to manage human interactions, to manage the flow of resources, and I think you’d be hard pushed to identify a system that’s ever worked particularly well for everyone involved. Then you have Environment, so what’s Environment? Well there are those who will dismiss Environmentalism as being all about saving fluffy animals and hugging trees, but let’s have a think about it: what actually is the Environment? Quite simply the Environment is what keeps every man, woman and child on this planet alive. Our planet allows us to grow food, find water, and breathe air. It’s not overly dramatic or sensationalist to say that if our environment was to fundamentally alter we would almost certainly all die. We know that there have been mass extinction events in the past history of our planet, and most have been the result of changes in climate and environment. Now we can argue the toss about how badly we’ve buggered up our Environment and how much worse it’s going to get. Currently scientists are saying that global temperature is going to rise by between 1°C and 6°C over the next 90 years or so. To put that in perspective the temperature difference between now and the last ice age was only about 6°C. The Environment keeps us alive; damaging it is the human race slowly committing suicide.
Now some will no doubt argue that the economy keeps people alive as well, providing medicine and aid to third world countries. In that respect it’s still doing a really shit job because third world infant mortality is a fucking disgrace that we should all be ashamed of. Our global economy has ensured that a tiny proportion of the world uses the majority of its resources and has far more than they need whilst a majority struggle to survive and millions die of starvation and preventable disease.
Environment vs. Economy – it’s an irrelevant argument, entirely moot. Consider sustainability; everyone bangs on about sustainable sources of energy and resources. It’s talked about as if there’s a choice, there isn’t. There is no choice between sustainable and unsustainable; the clue is in the word. Unsustainable – that means you can’t keep using it, not because it’s immoral or a bad idea but because at some point it won’t be there. We live in a linear system, our world has finite resources that we plunder, use and discard. Our economy is based on growth. A fucking five year old could look at that and see it’s not going to work. Are we really so ignorant that we want to put our efforts into maintaining a blatantly failing and fundamentally unsound system rather than correcting our mistakes in order to keep ourselves alive?
Environment vs. Economy: One a human construct that has never truly succeeded in its aims, one the thing that keeps us alive. You can have an environment without the economy, but try having an economy without an environment. This may seem a simplistic argument, and it is, but the complexities of our global economy have been its undoing, and a large contributor to our negative impacts on the environment, so maybe it’s time to look at things simplistically. Maybe it’s time for us all to decide what we really value: an economy based on fantasy that allows us to buy big screen TVs whilst others starve to death; or the environment, the natural world that is our only home.
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