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Kleptocracy

Sat, 10/10/2009 - 8:45am — lambert

A long article by Andy Xie on the next bubble (and how the bursting bubbles fleece the small, who don't have the inside knowledge of when to get out). This sentence jumped out:

The lesson from the Lehman collapse seems to be, "Take whatever you can and, when it crashes, you get to keep it."

Yep. "Take what you can." Works for the banksters, works for the health insurance companies, works for the permanent government in Versailles and whichever party is running it.

So I guess the moral is "Keep yours, whatever it is." No wonder the household savings rate has increased so much.

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"Lehman died in vain",

By gob on Sat, 10/10/2009 - 9:03am

says Xie:

Today, governments and central banks are celebrating their victorious stabilizing of the global financial system. To achieve the same, they could have saved Lehman with US$ 50 billion. Instead, they have spent trillions of dollars -- probably more than US$ 10 trillion when we get the final tally -- to reach the same objective. Meanwhile, a broader goal to reform the financial system has seen absolutely no progress.

Lambert, I have you to thank(?) that the first thing that comes to mind on reading that is: quelle surprise!

That's the past-to-present. On the future:

Revamping the financial system has been reduced to political moves over regulating banker salaries. If this could be done, incentives for financial institutions to manufacture bubbles would be removed. But it can't be done. Financial professionals can be based anywhere in the world, and there will always be some countries willing to host them. Because of such competitive concerns, a global consensus on regulating pay for financial professionals is unlikely.

and

It is extremely difficult for an established regulatory regime to stop such a [leverage] spiral. Usually new financial institutions or products come on the scene, and then a new leverage game begins. It would be impossible for an existing regime to be comprehensive enough to anticipate future institutions and products. Governments may need to install principle-based, not just rule-based, regulatory agencies that could take action to control new financial creations.

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