Oh for goodness sake Willy, get a grip

Mr. Hutton:

allowing destabilising and economically valueless financial transactions to balloon in value to many times world GDP

Come along now, even you stayed awake long enough in the economics lectures to know that this is impossible.

GDP measures value. So it\’s impossible for the value of something which makes up GDP to be greater than GDP itself.

What you mean is that the turnover of the financial markets is greater than world GDP.

If you cannot get those sorts of things right time to hand in that economist\’s secret decoder ring I fear.

Bankers\’ bonuses unite everyone in outrage – from captains of industry bewildered how top bankers can earn so much more than they do to the newly unemployed who wonder what they have done to deserve poverty and hardship while the moneymen pocket millions.

Noo, don\’t think so really. I\’m certain that a very large chunk of this outrage is the upper middle classes who populate the columnists\’ positions getting outraged that those they saw as duffers when they were at uni with them earning multiples of what the columnists do.

It\’s the pulling away of bankers\’ incomes from the incomes of the chatterati which hurts, the way in which they are now 10 to 100 times the median wage rather than just the five times said median earned by an Observer columnist. Or the seven times it earned by the man who drove the Work Foundation into the ground, eh Willy?

Everybody in high finance knows the risk, but, paradoxically, the bailouts of 2008 were almost too successful. There was no slump; creditors and bank depositors lost no money; the system survived and recovered.

My word, that is excellent then. So we can indeed deal with banking system crises and thus no change is necessary?

6 thoughts on “Oh for goodness sake Willy, get a grip”

  1. It’s even worse than you say Tim. You don’t need to know anything about GDP to know that this is nonsense:

    “allowing … valueless … transactions to balloon in value”

    Anyone who writes that obviously hasn’t thought at all.

  2. I see no contrition from the man on his running of the Work Foundation into the ground. Yet he thinks he has some skill and expertise to lecture us, despite his dismal record.

  3. I think any time Mr Hutton opines on matters economic, someone should ask him why the Work Foundation went bust. Simple question, repeated until he shuts up.

  4. Even some free market-friendly economists, such as Kevin Dowd and Martin Hutchinson, argue that modern finance and speculation has ballooned to absurd levels, Tim. For instance, at one point, the total, notional value of the world’s credit default swap market was $62 trillion. Now these are notional figures, and should net off each other, but the growth of this market does seem way over and above what would be needed to hedge risks intelligently.

    But the solution to all this leveraged marlarkey is not controls and regulations, as Hutton and the rest favour. The solution is to stop pumping so much damn cheap money into the system int he first place. If you lower the price of credit risk to near zero, the results are inevitable.

    DBC: Tim’s arguments are not less valid just because he blogs from abroad

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