2 thoughts on “To the man with a hammer…every problem is a nail”

  1. Posted 04/07/2012 at 08:17 | Permalink

    Agree Mr. Booth. Unfortunately I don’t see any change of direction in the short future and more regulation is certainly coming. Yet, regulation is the effect, the cause being the mentality, ideology attitude and culture of most of the political establishment, including regulators and central bankers supported by half of the country and which they want to inculcate in the other half. Sadly, very few individuals in the “establishment” seem to have different opinions.

    There is an old Japanese proverb related to hammers and nails that came to my mind when I read the title of your post: “The nail that sticks out gets hammered down”. Barclays has always been the nail and everyone in Westminster, the FSA and the BoE. Regulation (and culture and morality which are the politicians’ tools and shields to push through further regulation) attempts to ensure that every bank is the same, that no-one is going too far ahead or lagging behind, to secure uniformity for the phony sake of “common good” and “consumers’ protection”. Far from creating a level playing field where everyone plays by the same rules it dictates a uniform pre-approved pattern of behavior for everyone, and, if someone steps out, the FSA will be watching.

    Demoralizing indeed. Our constitutional and primary law framework is a joke nowadays. It is there, full of dust and spiderwebs, but no longer relevant. Financial regulation is undermining that constitutional framework, the separation of powers, the presumptions of innocence, and in essence, it is the tool for politicians to control the financial market. We live in a crony capitalist country, but not because bankers have politicians in their pocket with their fat cheques. Actually is the opposite: banks are becoming another arm of governments in their utopian strive. Regulation is the tool and the FSA is the judge and jury.

  2. Posted 04/07/2012 at 11:22 | Permalink

    I broadly agree with Dr Booth – the danger of this whole crisis is that more regulation will be introduced. However, I don’t concur with this part:
    “The bank cartel argument is also something of a red herring. Yes, it is true that the smaller the number of banks, the easier it is to manipulate the rate, but there are 16 banks on the sterling LIBOR panel, so the cartel argument is stretching things somewhat.”
    Surely, the critical factor is not the number of banks (16 seems small to me, but still) but the size of the banks. Barclays is able to wield huge influence as a result of its scale. Now, far from being one of these people who thinks ‘we’ ie the state needs to break up banks – how is the state to know what size banks should be? Moreover, the banks tried to break up by going bankrupt and the state stopped them. As we know, it was state intervention that caused the banks to become so large, to a great extent, in the first place. This takes us back to state intervention in the monetary/financial system and the problems it has caused – until this can be eliminated, behemoths of the Barclays scale will continue to dominate, rather than a multiplicitity of players who would be less susceptible to this kind of market manipulation. The roots of the LIBOR scandal, like the root of the financial crisis, lie in state intervention into the economy

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