Crippled Jesu Christe on a crutch:
One of the reasons why rogue trader Jérôme Kerviel faked a stunning £3.7bn of transactions at SocGen may have been because he regarded himself as being paid as a beta when he should have been paid as an alpha like everybody else.
Why is Hutton employed to write on matters financial? He doesn\’t seem to know the difference between transactions and losses.
That\’s the amount that was lost by Soc Gen in trying to clean up Kerviel\’s trades. His actual transactions have been (by working backwards from the losses, looking at the changes in market prices) estimated at €30 billion or so.
Someone who doesn\’t know the difference between these two things should really put down their prejudices and step away from the keyboard.
The rest of it is all about how finance should be regulated like a utility: welcome back the "queue" to get your mortgages folks.
Thirteen years ago, I tried to blow the whistle on financial market liberalisation in my book The State We\’re In. It was obvious then what is even more obvious now: financial market freedom embeds short-termism, guarantees lower investment, works against business building and innovation, generates booms and busts, inflates house prices, creates system-wide risk and excessively rewards those who work in them. I thought the Germans and Japanese were better than the British and Americans in the way they organised and regulated finance and that while Britain and America might look good in the short term, their economies would eventually come back to earth with a bump.
Allow that all of that is true (it isn\’t, but we\’ll allow Willy his moment of glory). 13 years for a prophecy to come true is actually really rather a long time as far as an economy is concerned. What would be most intriguing to look at is, after the slump in Anglo-Saxon economies that\’s predicted, what are the end results of the comparison between the two systems?
13 years ago the German and Japanese economies were at x and y GDP respectively, the US and UK at a and b similarly. So, have x+13, y+13, shown a higher growth rate than a+13 and b+13?
No, I don\’t have those figures to hand, but that would be the way to work out which was a better system of financial managment: the Anglo system might have greater volatility, but what if it provides better results in the longer term?