What's the most frightening force facing the global economy? Godzillas. Not the fictional monster from the sea that enjoys destroying Tokyo. No, according to Andrew Sheng, chief adviser to China's Banking Regulatory Commission, the threat comes from very real multinational "Godzilla banks" that despite the global financial crisis remain so massive that they can impose their will and crush free market principles in their path. "The idea of the free market is a myth," Sheng declared. If the five largest Godzillas control a hefty fraction of trading, "is that a free market?" This is just one of the countless stimulating ideas in this compelling video from INET's 2011 Bretton Woods conference. Economic thinkers from around the world gathered to question the conventional theories that guide the global economy. And in the end, they galvanized a movement to push the economic orthodoxy to reform its ways and adopt a more inclusive approach to economic thought and theory.
Comments
@Andrew Sheng "The idea of the free market is a myth"
Of course it is. If regulators can order the banks to have more capital requirements when lending to one client than when lending to others, they are directly interfering and distorting the markets.
Our problem is that we have regulators who wanted to substitute for bankers, and play the risk-managers of the world, instead of being just regulators. A regulator should worry about the possibility of credit ratings or the bankers’ risk-models being wrong, and not bet the whole regulatory structure on these being correct. A bank regulator should know that the most dangerous area of banking is not what is perceived as risky, but what is perceived as not-risky, because that is what can grow into the dangerous excessive exposures that can be affected by unpleasant surprises.
The most incredible thing is that we allow the same producers of the failed Basel II to produce Basel III with only minor script changes.
Now if you allow me, here is a video explaining current regulatory madness it in an apolitical red and blue! http://bit.ly/mQIHoi
You are looking in the wrong place.
The ideas that will transform our world financial system will not come from the halls of academia, from think tanks, or from bodies that formulate public policy. These places were the incubators of the mechanisms that perpetrated the biggest wealth grab in human history. Anything coming out of these places perpetuates theft. These truths are being revealed all over the world by the internet.
The ideas you seek will come from those who have never set foot in a university economics class. I mean no disrespect to those who have degrees in economics - I have one. I only mean to point out if you want outside the box thinking, you have to look outside box.
Questioning the conventional theories that guide the global economy will not change anything. The theories are still theft. People are tired of being extorted by gangsta governments. They are tired of the wars created by those who benefit from the sale of the implements of war, that are financed by the gangsta government extortionists.
The discipline of economics has a huge problem. People think economists just got things wrong. When they learn the truth, that monetary policy and fiscal policy are just fancy words for fraud and theft, you will have way more than a credibility problem.
You must be willing to be honest about the truth behind economics, that it is a system of theft. You must be willing to look outside the box for solutions. Unless you do, society will abandon the "science" of economics. It will evaporate as a discipline.
Just like alchemy.
Karen Smith
Marietta, Georgia
770-973-4470
What the heck Larry Summers was doing there? It's worrisome to leave the floor to people that contributed to the current meltdown if we want a new economic thinking.
INET does offer a great historic chance to make a real breakthrough in the field of economics broadly understood. For that to happen though, a critical mass of original (theory cum different levels of comparative praxis) multi – and cross-disciplinary thinking must be combined with integrative thinking coming from, if possible, all potential contributors dispersed in this global village of ours. Inclusiveness matters a lot not just for fairness (Nobelist Akerlof term) reasons; this new and historically important convergence (Nobelist Spence term) in the global economy (catch up by emerging markets in terms of economic development solutions) has to be adequately reflected in the INET work so INET thinks and works globally indeed! Emerging markets have been the ultimate lab in economics & finance for some three decades now. However, adequately representing emerging markets in the INET work is physically impossible and/or prohibitively expensive without resorting to modern digital collaboration and knowledge management networks.
Val Samonis
Toronto
The reason banks are able to create such problems is because they are government protected monopolies. It's the very use of banks as a pets by governments that is the problem. Banks exist in a crony capitalist environment, not a free market due to this "regulation". Size itself is not a worry, it's the fact that govt thinks that it should "run" economies in the first place.
Of course, free markets can only be disrupted by government so if you, like the ponce on the video, like to say things like "the free market is a myth", you should realize that government is the problem and cause, not the solution. Wake up statists, Fabian socialists and Progressives, it's your policies that have created the mess we are in across the board in the West. The field of Public Choice shows this clearly - when are economists actually going to start supporting actual free markets?
Hi all, personally I think that all regulator create distrotion, so the problem is how to minimize the framework of regulation. In this way I think that Godzillas probably were feed by actuall regulation.
So, we could think that bank system has a pubblic utility, in this view we could try to think about a government base bank system and a parallel private one with less regulation, but that could faild. It is a provocation sure, but we could consider a new desing of banking system in that way.
Good night.
Paolo Italy
I'm surprised to see so many responses claiming regulation is the problem, when it is in fact the deregulation over the past 30 years, in particular the repeal of the Glass-Steagall act, that allowed these megabanks to swallow competitors. We see the same problem in communications. Ma Bell got deregulated, and the market led to an even larger monopolization of the communication grid. I mean, really, you have to be ignorant to believe that regulation led to these megabanks. If it's so obvious, explain how it happened (I believe no such explanation exists, as none have been put forth; only people crying "regulation!" like the boy who cried "wolf!").
Post new comment