Control the cause of the Financial crisis or not?

 

The dice is thrown. The so called Anglo Saxon world has decided against control of banking business that sets a limit (a cap) on the bonus system. This is a nice moment for a schism in the ideology of capitalism which allows the world of finance, financial capitalism, all freedom.

One side uses state support to create unlimited space for the money driven bankers. The other side uses the support to the banks to get a say in the financial world. With that say they may control the banks and their personnel in behaviour and income development.

The two (still) big financial blocks could compete for success. Europe may fulfil what she decided in Lisbon (becoming one strong competitive block). The success of this choice will probably be that the Anglo Saxon traders will become more careful too. They will prove they do not perform worse than the competition in risk adverse Europe.

 

European bankers will get more cautious in their support of the capitalist dreamland. Many of the bad loans were sold for the high interest expectations in Europe. They believed the ratings attached. Careful bankers would not have done so. The fast trade created too quick decisive moments. And like in every market things went well as long demand was affluent. As soon the doubt soared about the underlying value the market collapsed. That goes for all markets: houses, shares, coffee, potatoes, etc.

 

The idea of a bigger buffer to limit risks by the banks, as they were thought to have before they almost tumbled, is a nice thought of governments. Banks did willingly go around these barriers by providing misleading balance sheets and records. That was necessary to let their golden boys and girls do their things. If a company or a civilian does a thing like that they are trialled and go to jail. Banks are like governments, they are always innocent.

 

Why are financial institutions and their managers treated differently from Milosevic? Because they are part of the same elite as the political leaders. American war criminals are not taken to court. The SEC controllers failing of Madoff are not punished, like policemen that do not catch a criminal. Here the known perpetrators are still free. Why?

 

An other important element is the free market ideology. A free market is a market with many demanders and suppliers which is completely transparent. Very few markets are like this. It is an artificial construct of theorists used to legitimize general support for covered actions. Profit is made by preventing transparency. We have seen what it leads to. Distrust will steer market for a long time. Trust is asking to be cheated according the business mores.

 

A contrary approach to financial markets and financial institutions will probably lead to more careful behaviour on both markets, the risk taking Anglo Saxon and the risk averting European. The chance of loss of face in front of the whole World did create adjusted behaviour before. A dichotomic approach will also create a continuous flow of critical evaluations and analyses which will comment overenthusiastic actions from the side.

We should also remember that Canada already used this “European” model successfully during the last years while the rest of the world followed the stampeding Wallstreet.

 

By following two roads the World also shows a sensible portfolio approach. In stead of putting everything on one card risks are spread over different business models.

 

 

Amsterdam, September 7, 2009