In which I agree with Richard Murphy

I am increasingly aware that people are now asking whether we can do without the investment banks – which are the toxic element of the banking industry. And increasingly I think the answer is an unambiguous yes.

Sure we can. Plenty of places don\’t have investment banks: no one had them three hundred or so years ago.

But you might also want to note that the absence of a vibrant Pyongyang capital allocation mechanism, the State monopoly on such in Havana, seems, to put it politely at best, somewhat deficient in the production of economic growth.

We can certainly do without the investment banks: the thing is, do we want to?

I admit I haven’t formulated the whole logic of the bank free alternative, yet. But it is something we need to do.

And I\’ll guarantee you that when you do you will have reinvented the investment bank.

11 thoughts on “In which I agree with Richard Murphy”

  1. “I admit I haven’t formulated the whole logic of the bank free alternative, yet. ”

    Because you forgot to say SHAZAM! Murph.

    (Apologies to Captain Marvel)

  2. He is laughably inarticulate, but I *think* he is driving at a good question, which could be something along the lines of “can we design the banking system such that failures of one or more components (particularly prop traders) do not necessarily lead to systemic failures that amplify moral hazard and require taxpayer bailout.”

    And on that note, I dont understand why supposedly smart people still refer to banking in the singular, when there are (at least) 3 broad categories of banks*:

    1) Nylon-suited high street banks
    2) Spivy ‘advisory’ IBs; and
    3) Prop trading

    How I view each is very different. How they should be regulated and bailed out is very different. But we still talk like they are homogenous.

    * yes I know there are blurred lines, but you do also know they are more different than similar.

  3. The hubris of the man knows no bounds. Implicit in what he says is that as soon as he, Richard Murphy, unleashes the galactic power of his intellect, he will formulate a mechanism for fundamentally deranging the current banking system with something that works better. I doubt the man could solve a differential equation, yet he thinks he’s clever enough to do that. Yet more evidence of his crippling Dunning-Kruger cognitive deficit.

  4. You lot are far too hard on Murph.

    He achieves his ends, namely, a good income from the easy work of conning unions and lefty donors with bogus papers and opinions.

    I visualize Murph in his palatial home, swirling a vintage port, laughing demoniacally at his donors and offering to loose the hounds on the peasantry. I picked port so I could say Murph’s port is no doubt better than Tim can afford, even though Tim is in Portugal.

    How many of you do as well as Murph with as little effort?

  5. So Much For Subtlety

    A bank-free alternative wouldn’t involve an end to interest rates would it? It looks to me as if he is continuing his flirtation with banning interest.

  6. SMFS: he wants to do what? That’s a new one on me. Not even the most batty Islamokazi denies the time-value of money. What does Murphy-compliant finance look like?

    RMIAC.

  7. So Much For Subtlety

    David Gillies – “he wants to do what? That’s a new one on me. Not even the most batty Islamokazi denies the time-value of money. What does Murphy-compliant finance look like?”

    I don’t think he has said that yet, but I think he is working himself up to that point. He denied the time-value of money on this thread:

    https://www.timworstall.com/2011/01/11/in-which-ritchie-denies-the-time-value-of-money/#comments

    Which linked to an article where he said:

    Richard Murphy
    January 11th, 2011 at 17:48 | #10
    Reply | Quote

    @Greg

    In most cultures throughout history usury (that’s lending at interest, not just excessive interest) has been considered abusive

    And like it or not there is good reason for that, because as we see time and again, it is abused

  8. Or he will find he has (re-)invented totalitarian communism.

    I suspect that’s more likely.

    @Gary,

    “which could be something along the lines of “can we design the banking system such that failures of one or more components (particularly prop traders) do not necessarily lead to systemic failures that amplify moral hazard and require taxpayer bailout.””

    That one is easy: tell everyone upfront that you are not under any circumstances going to give anyone any taxpayer bailouts. Then sit back and watch the market sort out who it thinks is a good risk.

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