A sample of articles I have read over the last week about the unravelling US financial market:
“…there’s also been a fairly impressive amount of back-patting going on in Canada, with a range of commentators and officials remarking how different the system is here and how much more prudent Canadian regulators and standards are than those in the U.S.
As Canadians, we are no strangers to smugness. It’s not a particularly endearing national characteristic at the best of times, but even less so when it’s utterly unfounded.
Sure we may have dodged a direct bullet this time around, but that’s not to say that our regulation of our own financial services business is not without some profound and frightening flaws.
…
Remarkably, for example, there’s no single agency in Canada that has a full mandate to review and report on the health of brokerage industry balance sheets.
The Office of the Superintendent of Financial Institutions (OSFI) – which is a federal government body – has a singular mandate to keep an eye on the books of Canadian banks. Because the brokerage arms of the banks are consolidated on those books, they get a pretty clear look at what’s going on there. But OSFI officials don’t have the power to enforce any recommendations or warnings they may deliver on the brokerage side.”
from Why Canadians Shouldn’t Be So Smug (September 18)
“It is obvious that the current financial crisis is becoming more severe in spite of the Treasury rescue plan (or maybe because of it as this plan it totally flawed). The severe strains in financial markets (money markets, credit markets, stock markets, CDS and derivative markets) are becoming more severe rather than less severe in spite of the nuclear option (after the Fannie and Freddie $200 billion bazooka bailout failed to restore confidence) of a $700 billion package: interbank spreads are widening (TED spread, swap spreads, Libo-OIS spread) and are at level never seen before; credit spreads (such as junk bond yield spreads relative to Treasuries are widening to new peaks; short-term Treasury yields are going back to near zero levels as there is flight to safety; CDS spread for financial institutions are rising to extreme levels (Morgan Stanley ones at 1200 last week) as the ban on shorting of financial stock has moved the pressures on financial firms to the CDS market; and stock markets around the world have reacted very negatively to this rescue package (US market are down about 3% this morning at their opening).”
Many are still in denial it seems, arguing more and more fiercely for deregulation: the message of much of the business community is still that government is the problem, government is too intrusive, the government should be out of the way of the private market so it can do what the government can’t; all this at the same time that the private market, especially the bank where most of our recent growth has been concentrated, is failing, disastrously, and begging for money from the government.
“I am definitely not a fan of a windfall profit tax on the oil companies, and I understand the need to plow those profits back in new equipment and searching for new drilling sites. However, if the oil companies do not at least pretend they are not completely profit driven and provide some relief for the consumer, some clown in Congress or the Senate or wherever looking to make a name for himself/herself will force through some legislation that will drastically hamstring the oil companies from doing what they do best, and ultimately affect all our standard of living.”
- from Agora Capital’s Five Minute Forecast (September 17)
“
This is further evidence, if any were needed, of the fact that the market is not and never can be the answer. (The need to pursue illegal wars is pretty strong evidence too, of course.) You look around the world and you see massive need on the one hand, and massive wealth on the other, and the two never connect. The market is massively inefficient, capitalism is massively unstable and turbulent, and it’s insane that we are all bound to this terrible wheel of instability.
The real left is making a lot of noise about this. There’ll be a convention of the left during the Labour party conference, all the shades of genuine leftwing opinion, and we’ll be hammering all these questions out from a socialist perspective. But if the papers and the broadcasters fail to record it, it’s very difficult for these ideas to penetrate the public consciousness. The media just turns a deaf ear; it chooses not to hear it. It’s a lot more interested in the careerism of whoever’s after Gordon Brown’s job.”
- Ken Loach, from the Guardian (September 19)
“Although we have long been opposed (and remain so) to views that place monetary policy at the heart of explanations of the course of modern capitalism—a perspective that Grant is identified with—we nevertheless agree with his assessment here that the state and finance are in bed with each other (or have at least closed ranks in the crisis, representing a common ruling-class viewpoint). This also extends to the two major political parties and their candidates. And it includes the media, which ought to be raising a stir. The silence in the context of a general election speaks volumes. We also find ourselves in accord with Grant’s conclusion that in the end there seems to be no completely satisfactory explanation for lack of popular protest over a series of ad hoc grants showering hundreds of billions of dollars of public money on the masters of finance, collectively the richest group of capitalists on the planet. And that raises the question: Is this outrage present nonetheless, growing underground, unheard and unseen? Will it suddenly burst forth, like some old mole, unforeseen and in ways unimagined? That too, we think, is a possibility.”
- the editors of the Modern Review, from last year (2007)
