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Framing nationalization

February 20th, 2009

With even Alan Greenspan Smother move and Lindsey Graham now in support, and the alternatives canvassed in the Geithner “plan” thoroughly discredited (even Wall Street hated it), large-scale nationalization of US banks now looks inevitable. But, as Obama has observed, this kind of thing seems alien to US culture.

This looks like a classic Lakoff framing problem. How can the obviously necessary, also be made to seem natural? There have been a couple of approaches so far.

The first is to emphasise that the Federal Deposit Insurance Corporation routinely takes over failed banks. So, as Paul Krugman puts it “nationalization is as American as apple pie“.

The second is to focus on the ultimate goal which is to return the banks to solvency and private ownership. Hence the lovely euphemism coined (I think) by Calculated Risk “preprivatisation

While we are on the topic, the sudden emergence of “socialism” as a term of political debate in the US, raises the question of whether “social democrat” might come in to use as an alternative to the rather unsatisfactory “liberal” and “progressive” terms currently in use. Maybe it’s too European for the US, but it’s certainly come into much more common use in Australia over the last decade or so.

And still on the same general topic, I meant to write about Sheri Berman’s piece in Dissent but Henry at Crooked Timber beat me to it. My take on the situation is a bit more optimistic. It’s pretty clear that the collapse of so much of the established order has taken social democrats unawares, even if the shock is not as great as for others. After decades in which the primary focus was to defend and adapt as much as possible of the social-democratic settlement in a world dominated by global finance, everyone is struggling to deal with the immediate emergency, and there has been little time to think about the opportunities for more positive action that have opened up. But the full-scale crisis is only a few months old, and the responses look a lot more constructive than in the wake of the 1929 crash.

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  1. carbonsink
    February 20th, 2009 at 11:29 | #1

    Geithner’s “stress tests” appear to be a pre-cursor to preprivatization, but apparently There Are No Real Stress Tests Going On. Its almost like the results are preordained.

    Now this begs the question: why has the Treasury Secretary set in motion an obviously bogus process? It suggests the result is pre-ordained.

    One possibility is that even a very quick and dirty look at many of the big banks’ books will reveal them to be in very bad shape. In fact, the inadequate staffing could be part of the private conversation: “You know we didn’t send in enough bodies to do this right, and even using your numbers, which we can assume in some cases will be flattering, you look like a goner.”

    I love this bit:

    it is vastly more difficult to examine a bank that is engaged in accounting control fraud. You can’t rely on the bank’s books and records. It doesn’t simply take more, far more, FTEs—it takes examiners with experience, care, courage, and investigative instincts and abilities. Very few folks earning $60K are willing to get in the face of the CEO and CFO making $25 million annually and tell them that they are running a fraudulent bank and they are liars.

    Its amazing how the ‘N’ word has moved from the fringe to the mainstream in a few short weeks.

  2. gianni
    February 20th, 2009 at 12:12 | #2

    Via Calculated Risk, TARP visualised. It really is time for Plan B.

    If one heroically sets aside one’s preconceptions and judges the American and European banks on the bottom line, if you judge them on their own terms, using their foundational metric then the only conclusion one can draw is that they have failed totally. Flush them and start again.

  3. Alanna
    February 20th, 2009 at 12:40 | #3

    What really worries me is that according to an news article last week, many US banks have not yet revalued their toxic assets…and were they to do so they would fail. Is this a failure of accounting standards also?

  4. Spiros
    February 20th, 2009 at 12:56 | #4

    “the responses look a lot more constructive than in the wake of the 1929 crash”

    The putative social democratic responses to 1929 were hamstrung by the fearmongering that they would lead inexorably to Bolshevism, and the not entirely unrelated threat and reality of European fascism. No such constraint exists now.

  5. Socrates
    February 20th, 2009 at 13:21 | #5

    Its about time! It is now almost a year since Bear Stearns collapsed (or rather, a year since its insolvency was admitted by the market). I remember reading shortly afterwards an interview with one of the architects of the “swedish solution” that worked in the 1990s and made perfect sense. Why did we have to waste a year, and a million (US) jobs, before facing reality?

    This whole episode damns the credibility of the economics profession (nothing against JQ and the dissenters, who have been proven correct).

  6. Spiros
    February 20th, 2009 at 13:41 | #6

    “This whole episode damns the credibility of the economics profession”

    That’s a bit harsh. It’s like blaming meteorologists for climate change.

  7. Chrisb
    February 20th, 2009 at 14:13 | #7

    There can’t be many professions, though, where the argument is made that because the practitioners believed something in 1935 we should set aside the last three-quarters-of-a-century’s research and believe it now:
    “A properly educated economist before Keynes published his General Theory in 1936 would have [believed in Say’s Law]”
    As a bonus, he quotes George Gilder.

  8. Spiros
    February 20th, 2009 at 14:28 | #8


    I suspect Steven Kates might be a special case. John might give us some comments on his colleague in the economics profession.

    Interestingly the Howard Government appointed him as a Commissioner on the Productivity Commission in 2006.


  9. Alanna
    February 20th, 2009 at 15:59 | #9

    Economists should be held accountable just like other professions. Bad advice is bad advice, poor modelling is poor modelling (and the history of economics is littered with great models that failed to predict anything) – why should economists escape criticism for a global speculative asset price boom caused by lax lending and even laxer financial regulation? Why should they escape criticism for failure to manage high unemployment or rising inequality or inflation. Thats their job actually. To provide sound sensible policy advice, given current economic circumstances, not perfect models that cause perfect storms. There are lots of economic problems some economists and advisers chose to deliberately ignore in the past two decades (like rising inequality except to the very wealthy) because they were relying on a perfect equilibrium arriving in some yet to be defined future period and I suppose trickle down. Its the same old, same old. Keynes said ‘in the long run we are all dead’ (and Id add – or devastated). Now I know exactly what he means. The disaster arrived before the long run (except that it could and should have been recognised and prevented). Economic negligence.

  10. Spiros
    February 20th, 2009 at 16:11 | #10

    “why should economists escape criticism for a global speculative asset price boom caused by lax lending”

    I dunno, Alanna, maybe because the lending was done by bankers not economists.

    Your premise is that economists control everything and are responsible for everything.

    You might as well blame doctors as a profession for the outbreak of a disease. Some specific ones might be to blame. But this kind of group-blame strikes me as far feteched to say the least.

  11. February 20th, 2009 at 16:36 | #11

    On my blog you can see how useful is stress test and LEMON BROTHERS model of banking

  12. February 20th, 2009 at 18:12 | #12

    “Economists should be held accountable just like other professions”.

    Ah, but, for any profession “professional ethics” is anchored to what a typical professional would do. For instance, an opera singer once specifically queried her surgeon whether a proposed throat operation could damage her singing voice, and he told her it wouldn’t even though he knew there was a chance it would. It did, she sued, and all this came out in court – and she still lost because the judge decided that any surgeon would have lied similarly to get her to undertake the operation which he sincerely supposed to be worth the risk. Her own particular circumstances and values and the fact that she specifically asked to be informed of that particular risk (so no informed consent) be damned, what counted was what was the norm among surgeons.

    So, economists already are held to standards – the standards that are the norm for economists.

  13. Alanna
    February 20th, 2009 at 18:23 | #13

    It was economists that proposed we deregulate and open up the financial sector = from then it was a race to the bottom. As McFarlane noted in the boyer lectures – by quoting Trevor Sykes “never before in Australian history had so much money been chanelled by so many people incompetent to lend it into the hands of so many people incompetent to manage it.”
    And as for borrowers who “had seen prices (no doubt of houses” rising quickly for more than a decade and concluded that the way to increase was to acquire assets whose price would rise.”
    I dont know if you were out trying to buy real estate in Sydney anytime after 1995 Spiro but it was likened to a train – get on at any price or you may miss out. And we wonder why household dent rose so quickly?? The feeling of being left without any acpacvity to ever buy a home drove people to it Spiro.
    At the heart of this debacle lies the four things promoted by every government since the late 1970s
    a) reductions in protection (tariffs and quotas)
    b) financial; deregulation
    c) competition policy
    d) privatisation (that imposed more user charges on lower income groups)
    e) industrial relations reform (culminating in workchoices)

    Has this been the right agenda or not? We all recognise it as the agenda since the 1980s. Is it the right agenda? Ill leave that one to the economists.

  14. nanks
    February 20th, 2009 at 18:29 | #14

    Do you have a link to that case involving the singer PM Lawrence – it strikes me as unexpected in a contemporary setting

  15. Alanna
    February 20th, 2009 at 18:34 | #15

    And Spiro
    With my a) to e) above – what lies at the heart of that? The philosophy that the market; most or all markets, thrive on deregulation.

    I dissent from that view. I recognise the cost of regulation and the burden to businesses, but I also recognise the benefits of regulation towards the prevention of markets towards a natural inclination to failure arising from excess. In all things let us be moderate is a view that springs to mind.

  16. Ernestine Gross
    February 20th, 2009 at 19:39 | #16

    Re Alanna @9.

    Are you trying out the art of framing?

  17. Alanna
    February 20th, 2009 at 20:27 | #17

    15# Ernestine – I am attempting to de frame. We have all heard the frame.

  18. Alanna
    February 20th, 2009 at 20:38 | #18

    Ernestine 15# the word you were seeking is “frisk” = framing risk! (not flaming risk but it has a similar effect). Id go as far as to say over the past two to three decades, in terms of economic propositions, we have all been frisked.

  19. Ernestine Gross
    February 20th, 2009 at 20:54 | #19

    #17, Alanna, it seems to me ‘de-framing’ is just another word for ‘framing’ because the content of #9 is just another fiction.

  20. observa
    February 21st, 2009 at 00:09 | #20

    ‘Economists should be held accountable just like other professions. Bad advice is bad advice..’
    Careful alanna. A lot of people associated with Aboriginal affairs are getting awfully nervous with that sort of talk in the current employment environment.

    ‘It was economists that proposed we deregulate and open up the financial sector..’
    Yes but Austrians didn’t advise opening the Treasury and flinging money to the cheering multitudes at the same time, lest there be that eventual race to the bottom you describe.

    ‘At the heart of this debacle lies the four things promoted by every government since the late 1970s..’
    Don’t forget equal pay, supporting parents benefit, self determination for indigenous folk, multiculturalism, coming down hard on tobacco smokers, allowing sheilas to take out loans and credit cards like blokes, relaxing school uniform codes, not caning kids, free uni education, fluoridated water, low cholestorol margarine, failure to support Leyland P76 manufacturing, computer games…. need I go on? Correlation aint causation but pick ten experts at random for their views on causation and they’d better nail it or be sacked. Hang on a minute, this aint Workchoices anymore alanna.

    As for nationalisation of the fiat money delivery mechanism, that may the last gasp for Keynesians by the looks of that gold price. I’m coming round more and more to the view that we are about to witness the complete collapse of faith in fiat money. That is very, very serious stuff.

  21. Alanna
    February 21st, 2009 at 06:48 | #21

    Then who do you think should be held accountable for poor economic policy? No-one?

  22. February 21st, 2009 at 11:42 | #22

    I don’t have a link off hand. I believe the case goes back to the ’50s, but of course it is still current precedent.

  23. Alanna
    February 21st, 2009 at 12:00 | #23

    Observa 20# The Austrians managed restaurants better than they managed the economy.

  24. Alanna
    February 21st, 2009 at 13:25 | #24

    Ive just noticed that awful Peter Saunders from the CIS has gotten an inflammatory article in on page 8 News Review “living of the Public Teat” where he goes on to attack single mothers. He doesnt mention the loss of jobs to males and females and obviously cant get his head around economic under provision of jobs in a society (which is happening now all around us), or economic stress as a reason for family breakdown, or poor efforts to get reclacitrant males to contribute to the offspring they created,l leaving the burden to the mostly female sole parents or the de-regulation that has not delivered the promised jobs. No, none of that is mentioned at all.

    If you want a FRAME – this man writes nothing but inflammatory garbage (just like Miranda Devine) and is a right wing zealot. Both of them need to spend time handing out meals to the homeless so they can develop a social conscience, instead of whinging about disadvantaged groups and what they cost.

    I had thought they had given the lovely Dr Saunders from SPRC that page article but what did I honestly expect. Its the SMH and they gave it to the extremist and disparaging namesake that writes garbage frames for the CIS.

    Back to the problem of our lousy lousy media…

  25. Ernestine Gross
    February 21st, 2009 at 15:03 | #25

    Alanna @21, I am not in the business of assigning blame. You are. So it is your job to substantiate your accusations in #9.

  26. stuart
    February 21st, 2009 at 15:06 | #26

    Jesus Christ alanna calm down.

    A number of points: Firstly you seem to make the assumption that all economists have been giving the same advice. This is demonstrably wrong.
    I clearly remember 2 years ago reading papers in a 3rd year Macro course questioning the sustainability of the housing booms both here and in the USA. at the time the papers we read were at least a couple of years old, so there has been warning from economists regarding a housing asset bubble.

    You argue that theres 5 things that lead to this debacle yet you provide no evidence as to how they contributed.

    I dont see how you can find economists responsible for the reckless practices of lenders who bought assets without knowing what the really were.

    Finally, remember economics is at its heart a social science. The laws of eocnomics arent set in concrete, nor can one perfectedly predict the future. I think your raising the bar higher than anyone can ever hope to reach.

  27. Kevin Cox
    February 21st, 2009 at 15:22 | #27

    The discussion on nationalisation or no nationalisation is an irrelevancy. It is one of those number of angels on the head of a pin discussion. Economists seem to revel in these discussions.

    Economists as a profession should be held accountable for the state of our financial systems. As one who has tried for many years to get innovation into economic systems I know who stops innovation in its tracks – and it is not the bankers and it is not big oil and it is not the politicians. It is the economists with their outdated ideas on how markets operate.
    There appear to be two broad camps. Both believe in the efficient market hypothesis. However, in the face of overwhelming evidence that efficient market hypothesis only seems to work on rare occastions we have two reactions. The first is that markets are inefficient because there are too many regulations and the second is that we can make them efficient with more regulation.

    Both are wrong and both are right. We need less external market regulation and we need more internal market regulation. For example supply and demand with price as the control mechanism to match supply with demand is an internal regulation mechanism while competition policy is an external regulation mechanism.

    When we see a dysfunctional market then we do not look to external regulations to fix it we look to see how we can change the internal rules and regulations to fix it. We also look to see the unintended effects on market operation of external regulations.

    To give some examples and where the internal mechanisms are falling down.

    It is obvious that the money market is dysfunctional because the way we create money equates money with debt and because we charge interest on newly created money.

    It is obvious that the market in shares in a particular company is dysfunctional because when we increase demand we do not increase supply.

    It is obvious that an emissions permits market cannot work with a fixed supply of permits set by a cap.

    It is obvious that labour markets are dysfunctional because rewards are not related to the work input effort and because an individual’s price of labour is sticky on the way down.

    The solutions are in the nitty gritty of what is better called the market algorithm or the set of rules that describes how a market operates. Work on fixing those and let the optimisation algorithm work out the best allocation of resources.

    To give you an example of what I am talking about ants use a set of rules of behaviour that turns out to be a most efficient adaptable algorithm to collect food. http://en.wikipedia.org/wiki/Ant_colony_optimization We need to find similar sets of rules to govern our market behaviour to allocate resources efficiently. The bee algorithm is different from the ant algorithm. Different ant colonies in different environments have different algorithms. The problem is that we need different sets of rules for different markets and for different purposes. The market rules to give everyone adequate health cover are different to the market rules for providing those who want them with luxury cars. Instead of trying to find “the answer” it is better to concentrate on one problem at a time and fix different markets one at a time.

  28. Alanna
    February 21st, 2009 at 19:11 | #28

    Well I have certainly opened Pandora’s box here by suggesting poor economic policies should be held to account havent I?

  29. Alanna
    February 21st, 2009 at 20:30 | #29


    I have been read the criticisms of policy over the past decade a half. There were lots of dissenting economists. Politicians and Treasury economists were not listening. I could digress to political appointments within government but that is a parallel yet not unelated story. The power politicians now wield over senior public sector appointments (yet once this intrusion was thought unethical) is not unlike the influence large corporations wield over “the market.”

    As noted by Galbraith “assume a personal bias in all economists unless there is proof of a truly saintly detachment” and “if an economists gets too much applause from the affluent, you should always be suspicious” and Alfred Marshall said ” nothing was so to be feared by economists as applause.”

    Worse than that, we have been teaching students a lie for many years. As Galbraith noted in 1978 “nothing more usefully disguises the power that is excercise by Genral Motors, Lockheed, Shell, Unilever or Dassault than the continued instruction of the young that all corporate organisations are subject to the market…the market is not only obsolete; it is the servant of those who, for good personal or pecuniary reasons or because of intellectual torpor, wish to keep things as they are, wish to avoid the modern reality.”

    The market according to the market model was as obsolete nad unrealistic in 1978 as it is today and economists who have been advising economic policy based on “market models” have ignored their own failures and were too lazy to examine and analyse ouctomes and consequences along the way or had a pecuniary interest in pushing a rather empty barrel.

  30. robert
    February 21st, 2009 at 21:41 | #30

    Re P. M. Lawrence’s case of the singer at #12 and #22: the singer in question wouldn’t have been the late Maria Prerauer, would she? The time frame (1950s) seems to fit. Mrs Prerauer was certainly a distinguished singer before she became a distinguished arts reporter for The Australian, but I never heard about any surgery doing her voice lasting damage.

    What I did read somewhere was that undue exposure to pressurised cabins on airplanes in the course of her European travel (during the days when such pressurisation was more crudely devised than it is now) lastingly perforated her eardrums. I met her once or twice (she died only three years ago) and she was always very pleasant, a fact which increased my innate reluctance to ask her exactly how her vocal career had ended.

  31. Ernestine Gross
    February 21st, 2009 at 22:17 | #31

    No, Alanna, you haven’t opened Pandora’s box.

    You say you are quoting Galbraith and Alfred Marshall. Fine. But there were many people who ‘quoted’ van Hayek. Quotes aren’t going to help understand anything. I suppose this is how it should be, given the topic of this thread: ‘Framing’.

  32. Kevin Cox
    February 22nd, 2009 at 02:02 | #32

    Alanna my point about economists being the chief stumbling block to innovation is backed by the response – or lack of response – to the claims I am making. I assume there are some economists reading these posts I have been putting up and yet with the exception of yourself the only people who take an interest seem to be non economists.

    Let me remind readers what I am claiming. First I am claiming that the most markets are unpredictable (which I suspect most economists already know). Second I am claiming that we can change the way markets operate with variations to the internal rules so that the markets become predictable.

    I have been disappointed that people have not come out and said – yes that makes sense – or no that will not work. For example no one has made any comment on my suggestions on how to make an emissions permits market work efficiently at http://johnquiggin.com/index.php/archives/2009/02/20/an-argument-for-emissions-trading

    Let me state again how we can make the money market a stable predictable market without inflation and ask economists to say why it will not work including barriers to implementation. Let me also ask if you think it makes sense for suggestions on how to get it implemented.

    The main positive feedback loop that causes the money market to behave in an unpredictable way comes from the way we create new money or money that is not on deposit. We currently create new money by some banks (including the Reserve Bank) loaning money they do not have on deposit. We can fix the money market by stopping banks lending money they do have and creating money that can only be used to build new productive assets. This restricted money earns no interest while it is on deposit and only becomes interest bearing after the asset is created. Once it is interest bearing then it is on deposit in the banks and they can lend it for other purposes.

    This breaks the link between money and debt so that the increase in debt does not automatically increase the money supply. It also stops the increase in the supply of money causing the need for more money to pay interest before the money has been invested in an asset that can pay the interest.

    Banks still create debt but they cannot create new money. New money can only be created by creating new assets. Creating new money is done by the government through the Reserve Bank or perhaps the new Ahmed Fahour Rudd bank creating special purpose money that has zero interest but must be used to build infrastructure that either earns money or saves money.

    If we allow restricted money to be sold it will sell at a discount to unrestricted money. It is this discount that means we can create as much restricted money as we like without increasing the inflation of unrestricted money. That is, the restricted money is inflated not the unrestricted money which only comes into existence once it is backed by an asset. That is the way we create money is self regulating and will eliminate inflation.

    The most economically efficient way to spend the restricted money is through a market place in ways of creating productive infrastructure. The market place should have many buyers so the wider distribution of restricted money the better. The market place should have many sellers and the products and services being purchased can have purposes – such as reducing green house gas emissions. The market place should be monitored and be predictable so that we know it is efficient. If it isn’t then we change the internal rules.

  33. Alanna
    February 22nd, 2009 at 09:37 | #33

    Ernestine#31 says
    “Quotes aren’t going to help understand anything. I suppose this is how it should be, given the topic of this thread: ‘Framing’.”

    Ernestine – are you trying to frame me? Your point above on quotes not helping? Helping what? I find these quotes interesting, just as I find blind acceptance of market theory interesting when in many markets our participation can be analogised to so many bleating sheep herded into pens, waiting in endless queues to receive our diminishing quality good or service from robotic handlers at inflated prices (sheared). If our economic theory is premised on this quaintly odd notion of some sort of equality between buyer and seller you and I have both been fleeced.

  34. TerjeP
    February 22nd, 2009 at 10:32 | #34

    John Quiggin – the term pre-privatisation does seem quite different to nationalisation because it suggests nationalisation as a form of bankruptcy and nothing more. My opposition to your take on nationalisation of the insolvent banks is that you seem to oppose any subsequent privatisation and because we already have such a process called … bankruptcy. In my view the insolvent banks should have been declared insolvent and normal bankruptcy proceedings followed. What does “nationalisation” have to do with it other than as an alternative route with more risk of politics attached?

  35. TerjeP
    February 22nd, 2009 at 10:37 | #35

    Libertarian Republican US congress man Ron Paul said much the same thing two days ago:-

    RON PAUL: “the thing is you should let these banks go bankrupt”

  36. Ernestine Gross
    February 22nd, 2009 at 12:00 | #36

    Galbraith and Marshall, whom you quote in response to my request to substantiate your accusations of the ‘economic profession’ @9, are economists, too. Now, if you can make sense of your writing on this topic, then so be it. It doesn’t make sense to me.

  37. Ernestine Gross
    February 22nd, 2009 at 12:24 | #37

    “In my view the insolvent banks should have been declared insolvent and normal bankruptcy proceedings followed”

    Terje, my point is merely a technical one. As you know I don’t like political debating. So far you have respected this and I respect you in turn for your fair play toward individuals like myself.

    I don’t believe banks can or should be treated like businesses who produce physical commodities because banks generate (private) debt denominated in national currency units. The way I see it, the ultimate owner of national currency units is the national government.

  38. Alanna
    February 22nd, 2009 at 12:33 | #38

    36# Ernestine, what you appear to object to is my statement

    “At the heart of this debacle lies the four things promoted by every government since the late 1970s
    a) reductions in protection (tariffs and quotas)
    b) financial; deregulation
    c) competition policy
    d) privatisation (that imposed more user charges on lower income groups)
    e) industrial relations reform (culminating in workchoices)”

    When structural changes have been promoted and rapidly implemented for the past twenty years that appear to have resulted in an astonishing rise of income share only to the already rich, then its time to question the underlying theory – that the unchained market is the best allocater of resources. The less regulated market is distributing income much less equally.

    Galbraith questioned the underlying premise of market theory some 30 years ago. There have been numerous other economists that have questioned the dominance of neo liberal economics in practice and in the profession. I dont know what part of my objection you dont understand – but to put it simply, I believe these policies work only for a minority and are not effectively maintaining the underlying economic health of our country.

    The return of common sense to governments and their economic advisers (who are here to govern for the majority) would be more than welcome. If we have to examine the failure of underlying economics models to fit the real situation of how markets operate currently, then economists should get on with it.

    Has not Greenspan acknowledged a flaw? Has Stiglitz not acknowledged the very same flaws in how IMF procedures are implemented? (conditions of IMF loans requiring privatisation without recourse to considering that public services have traditionally helped the poor, too rapid opening up of capital markets , too rapid de-regulation ie a one size fits all approach)resulting in a poverty or economic crisis even worse than before the IMF loan?

    If a policy doesnt work – it doesnt work. It needs to be examined. Its not good enough to say “oh but the market is the best allocater of resources so we will just leave it and eventually it will work.” You need to examine the policy decision to open markets.

    How many more prominent market economists are going to question the theory before the remainder will listen, and stop proceeding with blanket beliefs and blanket prescriptions that are causing undesirable economic outcomes?

    I hope that clarifies things for you Ernestine. If you have any concrete criticisms please reply but if you are just going to say you dont understand or accuse me of framing a debate, then Ill leave you to work it out.

  39. Ernestine Gross
    February 22nd, 2009 at 13:04 | #39

    No, Alanna, I don’t “appear” to be referring to what you talk about @ 38. I have made it clear, repeatedly, that I refer to the content of your statement @9.

  40. February 22nd, 2009 at 13:13 | #40

    “The way I see it, the ultimate owner of national currency units is the national government”.

    Surely that is only instantaneously true, when they are first created? The moment they are issued they are exchanged for goods and services, whereupon the national government becomes the owner of those and the suppliers become the owners of the national currency units, and so on through further exchanges – despite the dilution by further issues. In justice, that first creation ought to be apportioned to current holders too, to prevent that dilution, not reserved to the national government – but that doesn’t happen.

  41. Alanna
    February 22nd, 2009 at 13:57 | #41

    Ernestine at 16# in response to my post at #9 you said
    “Alanna, you appear to be trying out the art of framing.”

    I suggest you need to be clearer as I, frankly, dont understand what your comment is about at all. That was your first comment in regards to my post at 9.

  42. Ernestine Gross
    February 22nd, 2009 at 13:58 | #42

    PML, A national ‘currency unit’ is a unit of account only. The difficulty, as I see it, arises when private debt is denominated in the same unit of account as debt issued by a government. National governments have allowed private organisations to generate debt, using their national unit of account(ie in their name, so to speak). I am saying national governments have a responsibility for the consequences of their franchise arrangements regarding the usage of the national unit of account. Further, I am suggesting that to act responsibly (very broadly defined), national governments require the reserve right to cancel the franchise arrangements and take control of the debt generation business (ie ‘nationalise the banks’).

  43. Ernestine Gross
    February 22nd, 2009 at 14:07 | #43

    No, Alanna (@41), I did not say what you claim I have said (@16).

  44. stuart
    February 22nd, 2009 at 14:14 | #44

    From how im reading it you have a problem with ‘Neoliberal’ economists rather than the profession as a whole.
    This is a fair point, however you really shouldve made this distinction more clear earlier on, as it seemed to me that you were tarring all economists with the same brush.
    Now to your arguments. I dont see how you can say that reductions in protection have led to increased inequality. The last two decades have seen a substantial decrease in international inequality, as developing nations get richer at a rapid rate. This wouldnt have happened if these ‘protections’ were still in place.

  45. gerard
    February 22nd, 2009 at 14:25 | #45

    On Stuart’s points, may I recommend ‘Bad Samaritans’, the recent book by HJ Chang?

  46. TerjeP
    February 22nd, 2009 at 14:33 | #46

    I don’t believe banks can or should be treated like businesses who produce physical commodities because banks generate (private) debt denominated in national currency units. The way I see it, the ultimate owner of national currency units is the national government.

    Ernestine – I believe Jesus expressed a similar view of things when he said people ought to render unto Ceasar what is Ceasars. However I think both you and Jesus have flawed logic on this point. Two things to consider:-

    1. If the government makes notes then it owns them. However if it trades them for my labour or my commodities then I own the notes and it owns the labour expended or the commodities. If it may then claim status as the ultimate owner of the notes irrespective of this trade then can I claim to still own the commodites or productive labour that was traded? I would say that when the government or I trade something we no longer own it. So currency in circulation is not owned by the government.

    2. If the government owns bank credit and debt positions by virtue of the fact that the national unit of account is the denominating unit of measure then do the french revolutionaries who invented the metre now own every metre of lumber in the world merely because it is measured by metres? I would say not. The yard is not the same as the yard stick.

    I think your “ultimate owner” argument has no legs. However please feel free to provide some if you think I have misunderstood your point.

  47. TerjeP
    February 22nd, 2009 at 14:37 | #47

    I am saying national governments have a responsibility for the consequences of their franchise arrangements regarding the usage of the national unit of account.

    Yes but my house is valued in dollars. So can they nationalise my house also. And if not then what is the difference? Why are debts valued in dollars part of the franchise and every other good valued in dollars not part of the franchise.

    p.s. Sorry for not reading ahead before my first response above. However I’m still struggling to understand your logic. Or at least struggling to have any sympathy for it.

  48. February 22nd, 2009 at 14:48 | #48

    EG, there are two things wrong with your line of argument:-

    – you were using the term “national currency units” the other way, not as a sort of franchise/intellectual property thing; and,

    – far from “allowing” others that use, national governments compel it and have no claim at all (if anything, they have had an unrequited transfer of further gain at those others’ expense already, from the dilution; any obligation lies the other way).

    Rather than there being an entitlement to nationalise the banks who were in cahoots with the government at the expense of the public, so giving sole rights of predation to the government, there is if anything an obligation on both to stop doing that sort of thing entirely.

  49. Alanna
    February 22nd, 2009 at 14:52 | #49

    Ernestine said #16

    “Are you trying out the art of framing?”

    My answer

    What do you mean Ernestine?

  50. Alanna
    February 22nd, 2009 at 15:00 | #50

    But Ernestine I will attempt once more, to give you an answer. If you think I am trying to frame ALL economists for the global financial crisis you are not correct. I am suggesting there are good economists and woeful economists but the woeful economists have been dominant over the past twenty five to thirty years. I dont really care a fig for the politics of economic views. In my opinion, politics …and pardon the french…stuffs up good economics more often than not.

    My comment at 9 that economists should be held accountable for poor policy advice – yes in so far as they are employed in positions with some responsibility for the recommendation of government policies, to the extent that any other public service professionals in like positions would be.

    If they wish to accept the pecuniary benefits of such positions, then responsibility is implied in the position. If current economic orthodoxies are adequate we wouldnt have a situation where, as noted by Leigh and Atkinson (2007), the remuneration of a typical CEO in one of Australias top 50 companies in 2002 was 98 times average weekly earnings, having climbed from 27 times average weekly earnings a mere ten years before.

    There is something very disturbing in that pattern.

    If senior executives (who apparently are answerable to no one but a closed shop of like minded souls) think that shareholders or other stakeholders like employees or creditors can and should bear the cost of their excessive risk taking and excessive remunerations, then the only type of company shareholders could reasonably invest in is one of Madoff’s Ponzi schemes (as long as they sell before it collapses) because they are going to need annual growth on annual growth year after year to sustain the senior executives self remunerations.

    If regulators stand back from the mess of global financial sharemarkets and see no need to intervene to curtail this type of rampant short term greed, then I suggest more people are likely to increasingly stay away from the sharemarket.

    I dont know about others in here but I was taught that investor confidence in sharemarkets is tantamount and is a sign of a healthy economy and that was given as a reason why we need regulation. As corruption rises in other countries, their sharemarkets fail due to lack of investor confidence and the greater risks inherent in trading in such a country.

    I am suggesting that the behaviour of some executives in their remuneration decisions and the willingness of government officials and economic policy makers not to intervene (but to willingly permit even greater freedoms) borders on “supporting corruption”.

    I also suggest that some individuals will be brought to account in the clearing up. Lawyers will have a field day with the fallout from the global financial crisis.

    I dont believe what I am trying out here is a “frame” Ernestine.

  51. Ernestine Gross
    February 22nd, 2009 at 15:31 | #51

    Terje, I’ll start from your second response.

    True, your house is valued in terms of the national currency unit (A$). However, the value of your house (ie how many currency units) depends not only on the number of fiat currency units generated by the government but also on the amounts of private debt, denominated in fiat currency units, generated by the private banking system. All other monetary prices are affected too but not necessarily equally (eg asset price inflation vs CPI).

    Bankruptcy laws seem to work quite well for producers of non-essential physical commodities and some non-essential services, particularly when there is no bunching of business failures. These laws may be adequate when there is the ocasional isolated bank failure (‘assets’ – physical things and the loan portfolio are sold to another bank.) But this is not the situation we are in. There was (hopefully past tense) an accute risk of total system collapse – ie all banks fail more or less at the same time and as a consequence many non-bank enterprises fail and individuals with debt are bankrupt, etc, etc. The effect on prices (‘values’) is something one doesn’t want to experience. The only solution to such a monumental mess, known to me, is to go back to barter.

    To the best of my knowledge, there isn’t an approprate and generally accepted terminology – so I use words like ‘franchise’.

  52. TerjeP
    February 22nd, 2009 at 15:40 | #52

    Ernestine – businesses can go bankrupt and still continue to operate. Banks going bankrupt does not mean that they cease to operate. It just means that they essentially become the property of creditors rather than the property of existing share holders. This is what should happen to insolvent banks. In the context of traditional banks it would mean that the depositors take over the management of the bank. It seems fair to me. It also seems very pragmatic.

  53. TerjeP
    February 22nd, 2009 at 15:43 | #53

    However, the value of your house (ie how many currency units) depends not only on the number of fiat currency units generated by the government but also on the amounts of private debt, denominated in fiat currency units, generated by the private banking system.

    The flip side is that the amount of debt is probably somewhat related to the value of our homes. I’m still concerned by your readiness to declare things ripe for nationalisation merely on the basis of the unit of account in which they are valued. If we value our wheat harvest in US dollars does that give the US government a claim over our wheat harvest? If our government borrows in US dollars (or lends in US dollars) does that make our government the defacto property of the US government? It seems to me that you are being needlessly reckless with concepts of property.

  54. Ernestine Gross
    February 22nd, 2009 at 15:51 | #54

    Alana @50, You now mis-quote your own answer @17.

    You made a sweeping generalisation about economists @9, assigned to them jobs which and you want to hold them responsible for the jobs you created retrospectively and without checking empirical realities. When I asked you to substantiate your accusation regarding economists, you replied with quotes from 2 economists in defence. I call this a contradiction.

    Could we please leave it at that.

  55. Alanna
    February 22nd, 2009 at 17:17 | #55

    You can leave your posts at whatever point you want Ernestine.

    I just gave you some empirical realities which you ignored and I will leave my responses to your unexplained questions there as well.

  56. observa
    February 22nd, 2009 at 17:35 | #56

    Alanna et al, re blaming the rise of the free marketeers and deregulation for the problems, that is still a topic of much dispute, which obviously has ramifications for such measures as bank nationilisation, etc

    Basically Phil Gramm argues “that a strong case can be made that the financial crisis stemmed from a confluence of two factors. The first was the unintended consequences of a monetary policy, developed to combat inventory cycle recessions in the last half of the 20th century, that was not well suited to the speculative bubble recession of 2001. The second was the politicization of mortgage lending.”

    Now that certainly has ramifications for who we were going to sack if we still had Workchoices. Personally I think Gramm misses the additional confluence of Western demographics and Asian savings gluts producing that ‘Great Moderation’, a particular alignment of massive planets, the effect of which simply served to pull all brains toward the notion that a new form of anti-gravity machine had been invented. When the new sun never set on rising asset prices these worshippers couldn’t get enough of free markets(Reaganite Thatcherites all), but there’s nothing like an eclipse of their sun to make them all Keynesians now. Austrians had seen and heard it all before, although not in this particular form. Each eclipse is different in location and intensity but the fundamental laws of monetary gravity never change.

    As for more financial regulation and regulators, go tell that to Harry Markopoulos for a belly laugh. He knows only too well that regulators are really professional mourners paid to empathise with fools, often to be found in the company of bailout barons that would fill the world with even more fools. Such is life!

  57. Alanna
    February 22nd, 2009 at 17:53 | #57

    54# Ernestine.
    I did not misquote myself at 17. That was your own interpretation. If you have doubts that economists may be held responsible for poor advice, look to the free trade agreement that permits private organisations to sue governments. A reckless decision on the part of the Howard Government to sign that. How do you think I feel as a taxpayer at the thought some powerful deep pocketed organisation can potentially sue for my taxes. An utterly stupid decision in the extreme.

  58. stuart
    February 22nd, 2009 at 18:10 | #58

    private organisations can already sue governments in most countries in the world. I dont see how this is at all different.

  59. Ernestine Gross
    February 22nd, 2009 at 18:58 | #59

    PML @ 48,

    I don’t accept your first criticism on the grounds that I used the term ‘national currency units’ in a paragraph where I talked about private banks generating debt (means of payment) denominated in national currency units (unit of account)..

    As for your second criticism, I am happy to do away with the word “allow” (and your word (compel) by writing : The current institutional environment in many countries is such that private organisations, called banks, can generate debt, denominated in the national unit of account. In the countries in question, the institutional environment is created by the legislative power of elected national governments, often after consultation with other such governments.

  60. Alanna
    February 22nd, 2009 at 19:11 | #60


    Then I welcome the private class actions of individuals over loss of jobs, loss of security and loss of tenure? – is that in the FTA agreement?.

    Ernestine wanted more empirical evidence of loss of jobs. Im not going to trawl in the ABS – Ive already done it. He can do it himself. While he is there he can look at the rise in family breakdowns, the rise in the number of years it takes to pay off the family home, the rise in household debt.

    I would suggest The ABS even started the series on underemployment because they were concerned about the misleading figure that is unemployment (they are good people – they do the numbers).

    There is more than enough empirical evidence out there that Australia has not been travelling as well in the past thirty years as in the thirty years before that. Trends are not good. Time to examine policy. Is that such a big ask? Genuine and honest economists would do it (and do do it).

    I have a child of seventeen. Do you think I want him to walk into a Labour force where unemployment is the norm, casualisation is the norm, exploitation of the young is the norm (yes my uni students tell me), lower salaries are the norm except for the priivlieged inner circle? How many years work to pay off a house now compared to thirty years ago? How many incomes does it take? Mum and Dad both working?. Sure some will say we are better off – appliances are cheaper, but they are imports.

    Im not an idiot. Ive got a child and Id like to see the country run by people who dont live under the dream of the perfect model, but by pragmatists – be they economists or politicians who are prepared to do the hard yards to examine the reality of where Australia is right now, where it is travelling (for the majority of people), how it compares to post war years, (and what can we do about it?) not under some dream of a bright rosy future that benefits only the wealthiest organisations or individuals.

    Im disgusted with the economic policy over the past two decades. I grew up when some government services were taken for granted. When governments knew their role and no politicians questioned it. The trains and buses could be expected. The holes in roads were assumed to be taken catre of. Ive watched a lot of good systems disintegrate in my life time. Im not that young and I remember. Im disgusted with those who ignore every trend under the sun, right under their noses, including economists and politicians. But worse than that, I am angry about it and angry on behalf of the world my son will work in.

  61. observa
    February 22nd, 2009 at 19:31 | #61

    Actually one shouldn’t berate fools for being fools without telling them how to behave and so to those fools at the top who think they’re actually running things.

    Cast your mind back 12 months ago to all those utterings from on high, as they were raising interest rates to ward off inflationary expectations(don’t laugh). As the penny began to drop that we weren’t exactly decoupled from a globalised world, but anyway China would be our saviour, our banks were safe(despite all that preceding neoliberalism), yada, yada, our fearless Treasurer farts in public that he’d better introduce legislation to guarantee $20k of everyone’s deposits. (what’s that smell if not the sweet scent of rose coloured glasses ask the partygoers?) Not to be outdone, the shy retiring merchant banker in the corner farts even louder it should be $100k and then the life of the party clears the room, and every other financial intermediary for blocks, with a peasouper blanket guarantee. As if that wouldn’t cover every bad smelling sewerage loan and cesspit investment in the land I ask you?

    So what’s to be done now with a shocking hangover, among the empties and the portaloos overflowing? It’s about time we dumped all the experts and called in Kenny for some practical commonsense. Scrap the blanket guarantee for a 60% limit for all depositors on the clear understanding if any bank runs into trouble it will be immediately closed, the shareholders’ equity forfeited and every depositor’s account reduced by 40% and that turned into new prorata equity in the bank, along with any new buyout equity. The Govt guarantees the other 60% of deposits.

    There are obvious spinoffs here. Apart from the odd depositor walking for the mattress, depositors right across the spectrum would look hard at any alternative returns, as well as maintaining interest in an individual bank’s solvency. In the event of a run and a 40% loss amortised, the moment the bank is recapitalised and open again, the depositors have an interest in leaving their remaining savings there and carrying on as usual. Overall there is no incentive to spread savings among banks like Swan and Turnbull were promoting with fixed gurantees. It has to be a reasonable, limited percentage that protects the taxpayer and at the same time puts shareholders equity at risk first. They then have a stake in the solvency of the bank even to the point of forgoing dividends. Then the Govt needs to send a loud and clear message-‘No more bailouts’ It’s Centrelink for eveyone and that’s final. In the meantime for a two year period (the length of that stupid blanket deposit guarantee)ALL existing wages, hours and conditions are as negotiable as calling the plumber or electrician, or voting with your money at any merchants.

    In the medium and longer term the Govt needs to publicise it will be forcing licensed banks to rearrange their loan books to only lend on secured RE and physical assets(mortgages and liens)leaving a non-bank financial sector to unsecured and revolving credit. Ultimately the money supply will be tied to the former with calls to tighten lending criteria (percentage of VGs valuations, etc) as the only means of controlling money supply.

    If you think this is all too drastic then you’d better understand the facts of life. The Great Geriatrification has begun with a bang rather than the anticipated whimper. The US Fed has now undertaken pledges of around $1300 for every human on the planet and gold is now nudging US$1000/oz with US Treasuries at near zero interest. It takes a lot to halve an infinite issue bond price if interest rates rise from say 6% to 12%, but you need to understand bondholders reaction to any whiff that say a current bond return of 1% is headed for a marketplace of 2%, let alone 7%. That is every central banker’s nightmare now, the closer they all push interest rates to zero. Our Reserve should not go there and our Bailout Barons have to understand where they’re treading now.

  62. Alanna
    February 22nd, 2009 at 19:40 | #62

    Stuart# 44
    In reply to your post at 44 on the benefits of the lowering of protection;

    I am not saying reductions in protection have not led to improvements in some countries internationally. Although in Australia I do think reductions in protection have led to rising inequality. There remain also many many countries still totally excluded from global markets even though protections have been removed who are unlikely to even have an internet connection and remain unlikely to participate in global trade.

    Asian countries and India and China have benefitted from the removal of protection (but some Asian countries have also suffered dumping from protected US agricultural industries).

    Global exports remain dominated by a few major exporting countries and the remainder import – the global market has its own unique concentrations and does not spread itself evenly and we have some large trading blocs (EU and US) that do nothing but argue and protection continues within. China has done very well but has not rushed headlong down the deregulation/ no protection path (refuse to). The US still protects its agricultural industries surreptitiously with things like marketing subsidies.

    Its not a blanket cure and the degree of participation in global markets should be measured, not enforced and should be case by case. The IMF has created some basket cases by intervening with open market prescriptions (latest one Ukraine).

    Australia, a small open economy – not a manufacturer’s paradise, and not ever likely to be one (too far away), and susceptible to being governed by concentrated oligopolies (population too small for volume markets) and somewhat dependent on mining extractions would probably find inequality reduced and higher employment with some investment in manufacturing and some protection over it.

    Do I sacrifice my own country’s economic health to see the world in better shape? I dont know – its a very hard call to be brutally honest.

    Its not just the rapid removal of protection, it was the rapid deregulation of financial markets. It was the speed, the haste and the combination, but more than that, it was the asssumption that it was for the best (and it was implemented relatively quickly – like in a decade or so).

    But there has been a failure to look back and examine real outcomes here in Australia (we lost blue collar manufacturing jobs – what else is there we can do – dont suggest tourism – its the last hope of every poor country in the world.

    Are we better off since the post war decades? No. Equality has deteriorated, unemployment is higher, underemployment is higher still.

    The Korean govt ploughed public investment into shipbuilding and it created a city. Yet the idea of public investment under neo liberalism in Australia is another major no no (ridiculous for a country of this small size a population – the government was once a solid employer). Apparently our governments now cant even invest in a two kilometre stretch of road anymore without needing a private partner to hold their hand and charge a toll.

    Blanket free market, no protection open trade remedies leave me quite cold when I cant see them doing any good in our country. Call it selfish but most ordinary citizens would view it the same way.

    If extraction is our only area of global comparative advantage, then just consider the fate of Nauru. Its a short term advantage.

    Case by case for such remedies, and unique characteristics of the economic circumstances of the individual country is important, along with timing, which is only what Stiglitz suggested. Once again it involves economists doing the hard yards, not just imposing a perfect model.

  63. Alanna
    February 22nd, 2009 at 20:27 | #63

    Stuart# 58
    Private US organisations can now sue our government as a result of the FTA. is that a difference? It sure is.

  64. Alanna
    February 22nd, 2009 at 20:52 | #64

    That is a very amusing comment!!

  65. Alanna
    February 22nd, 2009 at 20:54 | #65

    But Observa, you give pay too far too much respect to the Austrians.

  66. Alanna
    February 22nd, 2009 at 20:56 | #66

    As I said Austrians are better at managing restaurants. They do slow cooked lamb dishes very very well.

  67. wizofaus
    February 22nd, 2009 at 21:56 | #67

    Terje, it might well be that banks *can* continue to do business while bankrupt, but do you have an example in history of allowing a major bank to go bankrupt with a positive outcome? I don’t know about you, but if my bank declared bankruptcy tomorrow I’d be very quick about transferring my loans/deposits elsewhere, as would probably most other customers. On the other hand, were it to be temporarily nationalised, I would continue to use its services until there was some obvious reason not to.

  68. wizofaus
    February 22nd, 2009 at 21:59 | #68

    FWIW, I see that Stiglitz supports the bankruptcy idea, but I suspect you would strongly disagree with his proposal for what to do in the aftermath, which is basically to create a new state-run banking system (most likely temporary, but surely someone like Stiglitz would be well aware of the likelihood of it remaining state owned for quite some time).

  69. Alanna
    February 23rd, 2009 at 09:28 | #69

    “They then have a stake in the solvency of the bank even to the point of forgoing dividends.”

    Would you rather have your hard earned savings as cash in hand or a take in solvency (or possible insolvency of a bank ie a take in uncertainty)? If it was me – at the first whiff of this idea I would have wanted my money moved straight out to an Irish bank that was guaranteeing the lot.

  70. Alanna
    February 23rd, 2009 at 09:29 | #70

    They would have to close the exit doors first Observa.

  71. wizofaus
    February 23rd, 2009 at 11:03 | #71

    Oh and Terje to anticipate your requesting of example of nationalisation of a bank having a positive outcome, I’d be interested in your take on what happened in much of Scandinavia (especially Sweden) in the early 90’s.
    Even the WSJ has printed articles in praise of the wide-reaching state inventions that occurred at that point. On other hand, nobody seems to believe much good came of letting Lehman Brothers go bankrupt (at best it might be said that it will act in future as a warning that no bank should assume it always will have government backing).

  72. observa
    February 23rd, 2009 at 12:45 | #72

    We’ll see who cooks those poor sheep best Alanna. I see Obama is promising to halve the US deficit in his term while Hilary trots around the rice begging bowl-
    “By continuing to support American Treasury instruments the Chinese are recognising our interconnection. We are truly going to rise or fall together,” Ms Clinton said at the US embassy here.
    And Confucius say another lefty friend in need is a friend indeed which broadly translated means, we’re all in this together interfering comrades.
    As for our shiny new ‘fiscal conservative’ kid on the block cutting that deficit in half, I’ll let these blokes explain it to him-
    The lead in abstract will do just fine but in particular to all those ‘fiscal conservatives’ in Canberra take note –
    “Recent trends in credit default swap markets show a clearly discernable uptick in
    the perceived likelihood of default on 5-year U.S. senior Treasury debt, a notion that was
    virtually unthinkable in the past. While it is difficult to know exactly how to interpret
    these results, it is clear that – although fiscal policy problems are usually described as
    medium- and long-term issues – the future may be upon us much sooner than previously
    An oblique reference to demographics there perhaps?

    As for Ozzies doing their banking from Ireland I’d worry a wee bit about those union types in the streets already, as well as paying the bills and copping currency exchange fees, not to mention the exchange rate risk. Whatever tinkles your fiscal conservative bell I guess. Who am I to tell free women how to manage their own finances?

    As for that blanket bank guarantee with the kids’ taxes, I’m dead against it and hence my solution for a bunch of oldies covering their assets at present, but there are other unselfish, intelligent baby boomers about with similar concerns-
    All I can say to the kiddies is there’s a missing verse to all those old tossers strutting about at present humming- ‘Imagine all the people living for today…’ and it’s simply- ‘Won’t tomorrow be a bummer!’

  73. Alanna
    February 23rd, 2009 at 14:56 | #73

    Observa – you do have a point about the E/R – mattress looking better pro tem then may as well shop for a nice white shiny stone. The only trouble with women trying to manage their money is that males in banks (well mostly males) have made a monstrous mess. Better idea, hand it over to your wives in the Householdbank, like you all should have done in the first place.

  74. Ernestine Gross
    February 26th, 2009 at 10:06 | #74

    Terje, Sorry for the delay in responding. I overlooked your comments at 52 and 53.

    Re 52: You propose that depositors of insolvent banks take over the management and you suggest this is a pragmatic approach. However, your proposal is not an idea I would associate with the term ‘pragmatic’ because: For any one bank at any time, the category of depositors may includes individuals with or without criminal records in one or several national jurisdictions, the legal representatives of private corporations, publicly listed or not in one or several national jurisdictions some of these corporations being in a state of financial distress or entering the state of insolvency, legal representatives of non-profit organisations and various levels of governments, and, last but not least, the legal representatives of other banks and non-bank financial organizations such as stock exchanges, equity funds, hedge funds. Some individuals (persons) may be depositors with any one bank in several roles. I consider your proposal as practically unworkable even if only one bank would become insolvent during an accounting period. The reality is that the entire financial system is not working. [The word ‘may’ is appropriate because it qualifies the conditions “any one bank at any time”].

    Re 53: I refer to my reply to PML’s criticism at 59. [As for ‘private property’, I wouldn’t mind at all if you could achieve an improvement in property rights for something as essentially private as a house that serves as a home by having legislation that prevents aircraft noise from intruding into this private property in a measurable way.]

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