Exactly.

And more, you get a finance-equivalent of Dutch disease. In the Netherlands from the 1960s onward, booming oil and natural gas made the currency abnormally strong and made manufacturing uneconomical. All the rest of the economy directs its attention to serving the needs of the booming sector. Similarly, much of the economy of the UK bends toward the service of the City.

Interesting read. I see the English are as fond of analogies as the North Americans.

One said that this financial crisis left a scar and TBTF banks and the systemic risk have to be fixed to ensure it doesn’t happen again. A more correct analogy is there is a gaping wound and in order to heal, the systemic risk that can again effect world economies has to be contained.

Banks need to be contained and constrained everywhere and the only way to do it is to break them down to manageable entities and enforceable regulation with addendum as the loopholes arise.

Dejavu:

“Stock dealings which had made bankers rich and respected
in the era of affluence now glared as scarlet sins in the age of depression. Disillusionment with speculators and securities merchants carried over from investment bankers to commercial bankers; the two were often the same, and an embittered public did not care to make fine distinctions”. Glass and Steagall made just such a distinction. They underpinned it with legislation, signed by President Roosevelt in June 1933.

Andrew Haldane does: http://www.bis.org/review/r100406d.pdf. “Put in money terms, that is an output loss equivalent to between $60 trillion and $200 trillion for the world economy and between £1.8 trillion and £7.4 trillion for the UK … assuming that a
crisis occurs every 20 years, the systemic levy needed to recoup these crisis costs would be in excess of $1.5 trillion per year. The total market capitalisation of the largest global banks is currently only around $1.2 trillion. Fully internalising the output costs of financial crises would risk putting banks on the same trajectory as the dinosaurs, with the levy playing the role of the meteorite.”

Shareholders do not have the clout they need to deal with the sky rocketing pay packages, whether they be bankers or incompetent is irrelevant.

appears to completely disagree with ‘tiger4′s assertion that the banks contribute more to the economy than what we’ve put into them.

He says “bear in mind that in the last two years they have cost us far, far more than they will ever provide in tax revenue, and that will still be true even if we are able to avoid another systemic banking crisis for the rest of the century”

Seriously how many Brits are there even in the finance industry in London? Per my personal experience they are a minority. You really think they are here because they love living in London per se? horrible weather, horrible transports, ridiculously expensive… you get my drift.

If the finance industry migrates elsewhere, even the smart locals will leave (just like I left Switzerland to come here).

The only way this could be done is if it’s a globally coordinated effort, and good luck with that…

Your argument about finance sector = crack is also interesting. Do you really believe, even factoring all the bailout costs, that over a 10 year period finance sector contribution to the UK economy has been negative???

I find this an incredibly strange attitude. We’re in the middle of a period of globalisation: the international division of labour. And just as last time around, at the end of the 19th cent, the UK’s comparative advantage is in finance, just as Germany’s both last and this time seems to be in capital goods production.

Why would anyone at all bemoan the movement of smart people into such an area of comparative advantage? It would be like moaning that the German machine tools industry is getting that country’s bright graduates, that Silicon Valley is getting the bright Yanks or mining clever Australians.

Getting the smart locals into the sector where there is such a comparative advantage is generally known as a “good thing”.