The Great Debate UK

Bank bonus season again

–Laurence Copeland is a professor of finance at Cardiff University Business School . The opinions expressed are his own–

Bank bonuses are in the news again, and once more we see the spectacle of the Prime Minister indirectly pleading with the bankers not to be too greedy. Note the contradiction in the government’s position: even though we own two of the largest and most culpable banks, we dare not impose explicit limits on their pay lest they decamp to places where the political climate is more hospitable and the regulators more tolerant. But although enforced limits are out of the question, it’s quite OK to pressure them by every other means  – which, of course, raises the question: why should bankers be more willing to stay in Britain when their pay packet is limited by “voluntary” restraint rather than government intervention?

Of course, as I have argued here before, the likelihood of them moving any substantial part of their business overseas is grossly exaggerated and in any case is a far less worrying prospect than is often suggested. We should not be intimidated by dark hints about investment banking operations moving lock, stock and barrel to Frankfurt, Paris, Singapore or Shanghai. First, the world’s major investment banks typically employ hundreds, sometimes thousands of people in every major financial centre, so at worst we are talking about a marginal reallocation of staff from London towards the other four or five cities which are serious competitors. Is that such an awful prospect?

Recall that no less a figure than Adair Turner called for a reduction in Britain’s financial sector, on the grounds that it is far too large relative to our economy. Moreover, every time you hear mention of the contribution of investment banks to the UK economy – the taxes they pay and the number of people they employ – 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.

Why I have to sleep with the enemy

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-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own. -

A week or two ago, I posted a blog bemoaning the size of Britain’s public sector and expressing the fervent hope that the ill wind of the financial crisis would blow much of it away, leaving room for private industry to expand in its place.

Waiting for the other shoe to drop

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-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own and do not constitute investment advice. -

The unemployed and the terminal insomniacs who have nothing better to do than read my blogs will know that I have long been gloomy about most of the Western economies. How can you fail to be pessimistic when the world economy is still dominated by the U.S. – a basket case, becoming weaker every day, with a political class too blind or too scared to admit in public the obvious fact that the country cannot carry on living beyond its means?

Inflation or deflation: a stress test for democracy

-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own-

The policy debate is hotting up. On one side, we have the expansionists, arguing that it’s the Nineteen Thirties all over again, that Keynes is right now as he was then – we need more, not less government spending, we are digging our own graves by cutting back, especially as the fiscal retrenchment is continent-wide, covering thrifty North Europe as well as profligate ClubMed. According to this view, fiscal contraction will exacerbate the situation by magnifying the fall in the level of economic activity, leading to a downward spiral and, incidentally, making it harder than ever to repay our debts.

Not much stress, not much test

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-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own.-

Back in the 1950’s, when most women stayed at home while their menfolk went out to work, a favourite trick of life insurance salesmen was to walk into the prospect’s home at dinner time and ask the wife:

EU stress tests: for banks or governments?

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- Laurence Copeland is a professor of finance at Cardiff Business School. The opinions expressed are his own.-

Worries about Europe’s banking system go back at least to 2007, but whereas the U.S. (and UK) banks appear to have weathered the storm, there are fears that for European banks the worst may lie ahead.  Concerns centre on four areas.

The NHS: Back on the operating table

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-Laurence Copeland is a professor of finance at Cardiff Business School. The opinions expressed are his own.-

“The NHS – the envy of the world”. This is one of the Great British Myths to rank alongside “A-level standards haven’t fallen”.

Confronting the immigration conundrum

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-Laurence Copeland is a professor of finance at Cardiff Business School. The opinions expressed are his own.-

After being the third rail of British politics for a generation or more, immigration is suddenly a topic which can be spoken about in polite society.

To spend, or not to spend?

-Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.-

There is really only one question on the agenda at the G8 and G20 meetings in Toronto and in policy circles throughout Europe and North America: to cut government spending and risk recession; or to keep on spending, risking a return to inflation, or more likely to stagflation – inflation with stagnant economic activity?

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