Thu 3 Jul 2008
Round-table Discussion: How to Prevent the Next Bubble
Posted by Prieur du Plessis under Money, Markets, Investment
“The financial crisis has shown that markets are bubble-prone and that laissez-faire regulation doesn’t work. The authorities need to get a grip if we are to avoid a mega-bubble. But we may need an even deeper crisis for that to happen.” That is the conclusion of a fascinating round-table discussion just published by Prospect magazine.
The participants (from top left to bottom right) were: Mark Hannam who spent 12 years working in the City for the Bank of England, Citibank and Barclays; Jonathan Ford (chair), deputy editor of Prospect; John Gieve, deputy governor for financial stability of the Bank of England; Martin Wolf, chief economics commentator at the Financial Times; Anatole Kaletsky, an economic commentator and associate editor of the Times; and George Soros, chairman of Soros Fund Management.
Please click here or the thumbnail below to access the full text of the panel discussion.
Source: Prospect, July 2008.
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July 5th, 2008 at 3:55 am
The trouble with Kaletsky’s solution is that the directors and executives of the financials will as a pool of employees demand a salary perhaps five times as large as what they now get in order to pay the exhorbitant fees that will be set by insurance companies who will offer them screw-up insurance. The shareholders will suffer even more and the screw-uppers will still walk away with a bundle. The shareholders already suffer enough when these stumblebums screw up as they not only lose on their investment, but then the wise and self-serving government regulators step in and whack a hefty fine on the shareholders for having allowed said stumblebums to screw up despite the fact that the shareholders have little to no control over them. At first glance, Soros’ modest proposal would appear to have more merit. It is simpler and in the long run would probably cost the shareholders less. Over time, the incompetent boobs would gradually be eliminated from the employment pool. The trouble here is that we may well end up with not enough people to run our companies. There are obviously other problems with Soros’ modest proposal. A more modest proposal might read as follows: Allow the shareholders to set salaries for directors and senior executives. This way we eliminate the greedy pigs from the system. You may recall the natural relationship existing between stupidity and greediness. We could then replace them with reasonable people, having more than half a brain, who would hopefully provide value for money.