The Dim-Post

September 30, 2010

Contrary indicator?

Filed under: economics — danylmc @ 8:26 am

Bernard Hickey had an op-ed in the Herald yesterday declaring the death of the free market:

We need to accept that a completely free and unfettered system of global multi-national capitalism driven by an elite of CEOs and investment bankers will inevitably blow itself up in a frenzy of borrowing, bonuses, short term thinking and self interest.

Does this mean I should change my super scheme back to a high risk investment profile?

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16 Comments »

  1. Yes. The rise of state capitalism will morph back to the future when the state figures out they picked up the bill and lost their knickers to the banking system.

    Comment by leon — September 30, 2010 @ 8:40 am

  2. Are you joking?
    Your kiwisaver have been the high growth from the start.

    Comment by Steve — September 30, 2010 @ 8:41 am

  3. “My dream is to have a true “epistemocracy”; that is, a society robust against expert errors, forecasting errors and hubris, one that can be resistant to the incompetence of politicians, regulators, economists, central bankers, bank­ers, policy wonks and epidemiologists.”

    from the article by Nassim Taleb Bernard references…

    http://www.newstatesman.com/ideas/2010/07/debt-system-mother-black

    I have a dream….

    Comment by nommopilot — September 30, 2010 @ 9:25 am

  4. The “new normal” that people are talking about looks pretty much like the old normal, ie, there’s a boom and a bust, people change their ways for a few years and then away we go again.

    Bernard seems to be in the “After the ball is over” stage.

    JC

    Comment by JC — September 30, 2010 @ 10:32 am

  5. Hickey is a prize dick.What bloody Free market?! Where? Tell the rest of us please …we have been waiting in vain as this over regulated mixed economy falls apart as the inevertible ‘state failure” kicks in…

    Comment by James — September 30, 2010 @ 1:12 pm

  6. “we have been waiting in vain”

    the free market will ride in on the back of a winged unicorn any day now (because these are all real things). just keep holding your breath. . .

    Comment by nommopilot — September 30, 2010 @ 1:36 pm

  7. Sue Bradfords’s gleeful gloating re Hickey’s turn to the dark side is truly hideous – now there’s a surprise…

    http://pundit.co.nz/content/bernard-hickey-converts-just-as-europe-erupts-0

    Comment by Sam — September 30, 2010 @ 2:11 pm

  8. I think we will wake up tomorrow to the news that someone got hold of BH’s log-in. I mean to say:
    “Essentially, I’m saying we need to build some redundancy into the systems for global trading and capital flows. We need to realise that sometimes the system doesn’t work. We need to have something in reserve.”
    Alan Greenspan suffering a brain tumor (or whatever it was that caused him to forget the link between easy credit, low interest rates, inflation, current account deficits, fiscal deficits and asset bubbles, as well as failing to spot the moral hazard it all the US deposit and mortgage guarantees) is easily fixed by purging the Reserves of Keynesians, similar to the way you would purge a school of pedo teachers.

    He describes in detail how the interests of investors/savers and the interests of bankers/fund managers became mis-aligned. He should discuss the ways of realignment. For most “real” companies conducting “real” business, the alignment did not get too far out of whack. (Although perhaps windfarm generators receiving taxpayer money will end the way banking, with its taxpayer guarantees, did.)

    Comment by Clunking Fist — September 30, 2010 @ 9:10 pm

  9. “My dream is to have a true “epistemocracy”; that is, a society robust against expert errors, forecasting errors and hubris, one that can be resistant to the incompetence of politicians, regulators, economists, central bankers, bank­ers, policy wonks and epidemiologists.”

    Wow. That sounds like precisely the opposite of what Comrade Hickey is getting wet about.

    Comment by Miguel Sanchez — September 30, 2010 @ 9:38 pm

  10. is easily fixed by purging the Reserves of Keynesians, similar to the way you would purge a school of pedo teachers.
    A randian nirvana only an accountant could dream of. Back in the real world we all suffer the consequences of decisions made by numbties with 2 bit commerce degrees pretending to be masters of the universe.

    Comment by The Fox — October 1, 2010 @ 7:51 am

  11. Indeed and those with 2 bit politics degrees.

    Comment by blackspy — October 1, 2010 @ 8:01 am

  12. ” is easily fixed ”

    nice, CF. but it wasn’t easily fixed was it? it pretty much f**ked up the global economy.

    “will end the way banking, with its taxpayer guarantees, did”

    has banking ended?

    I suggest you read that article I linked to above. it’s really very sensible, so it will be a novel treat…

    Comment by nommopilot — October 1, 2010 @ 8:25 am

  13. fair’nuff, I’ll give it a read and get back to you.

    Comment by Clunking Fist — October 1, 2010 @ 12:37 pm

  14. “is easily fixed” nice, CF. but it wasn’t easily fixed was it? it pretty much f**ked up the global economy.”
    Really? the author of your article thinks it’s easy, just need to take the right decision. He even uses the phrase “No socialisation of losses and privatisation of gains”.

    “will end the way banking, with its taxpayer guarantees, did” has banking ended?’
    You author recommends that banking, certainly as Americans lived it, needs to end. Again, I and your author recommend “No socialisation of losses and privatisation of gains”.

    Comment by Clunking Fist — October 1, 2010 @ 1:57 pm

  15. “the best teachers of wisdom are the eldest, because they may have picked up invisible tricks”
    Hmm, me thinks he needed to add the economists standard proviso of “all other things being equal”. For Alan Greenspan and the boards of directors of the banks did not appear to possess the wisdom of the youngster, Peter Schiff.

    “[Mother Nature] she likes redundancies. Look at the human body. We have two eyes, two lungs, two kidneys, even two brains. [However, an orthodox] economist would find it inefficient to carry two lungs and two kidneys – consider the costs involved in transporting these heavy items across the savannah.”
    Luckily, outside of central banking and banking, the business world is ruled by entrepreneurs and businessfolk, rather than economists!

    I don’t get his point about elephants: he shoots one elephant, one elephant dies. One bank is allowed to fail, all banks failed. However, if the one elephant you shot was nursing a small calf…?
    There is a difference between shooting a perfectly healthy elephant, or intervening and nursing a seriously ill elephant that was on its way out. Still, I’m no big city economist.

    “The challenge, rather, is to ensure that human mistakes and miscalculations remain confined, and to avoid them spreading through the system – just the way Mother Nature does it.” Well, I’m pretty sure Mother Nature would have looked on impassively as General Motors died and was consumed as carrion. And that’s what should have happened. So I can’t help but conclude, still, that the banks, as Americans know them, should have been left to their evolutionary dead end.

    Then I read on and that’s what I think he is saying. But after saying “[we need a society] that can be resistant to the incompetence of politicians, regulators, economists” he states “Nothing should ever become too big to fail.” So who decides what is too big? Politicians? Regulators? Economists? Callers to a talkback show? High Court Judge? Look at the squealing when someone suggests there are too many horses in Kaimanawa. Look at how our calls of “government is too big” are derided by lefties. And it is governments that are bailing these feckers out, using our children and grandchildren to pay for it.

    The comments to the article are fantastic.

    Comment by Clunking Fist — October 1, 2010 @ 2:01 pm

  16. “[Mother Nature] she likes redundancies. Look at the human body. We have two eyes, two lungs, two kidneys, even two brains. [However, an orthodox] economist would find it inefficient to carry two lungs and two kidneys – consider the costs involved in transporting these heavy items across the savannah.”
    Luckily, outside of central banking and banking, the business world is ruled by entrepreneurs and businessfolk, rather than economists!

    This is bullshit. The entire world of Insurance exists to provide exactly this sort of ‘redundancy’ and spread risk. Your/Hickey’s economist straw-man is a farce.

    he shoots one elephant, one elephant dies. One bank is allowed to fail, all banks failed.

    False equivalence. Your analogy including the calf is more apt, but still lacking.
    A better comparison would be with the foundations of a building; if one load-bearing pillar is left to fail, others must take on additional weight. If you’re not careful, the whole structure collapses.

    Comment by Phil — October 1, 2010 @ 3:12 pm


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