The financial sector: discredited but unchallengable

The Economic Society of Australia regularly polls a panel of members seeking responses to statement on policy issues. The most recent was unusual both for a low response rate (admittedly, it was run in January) and for the unanimity of the answers. This may be attributed to the strong formulation of the statement “There is no way to significantly increase the degree to which Australian retail banks act in the interests of consumers.”

None of the respondents accepted this, but the answers broke into two categories: those recommending reforms broadly in line with the recommendations of the Hayne Royal Commission and those (including Allan Fels, James Morley and me) who wanted radical reforms that remain outside the realm of political feasibility.

My response:

None of the options that have been proposed so far are likely to do much good. What is needed is a reversal of the massive expansion of the financial sector that began in the 1970s. In the banking context, this would entail a “narrow banking” model in which retail banking was separated from trading and investment banking and regulated as a public utility, along with the recreation of a publicly owned “no frills” bank, along the lines of Kiwibank in New Zealand. These proposals may be beyond the realm of political feasibility, which is why I have expressed only modest confidence in my view.

This isn’t just a problem in the Australian retail finance sector. The whole structure of financialised capitalism is a recipe for greed and dishonesty. Everyone knows this, but there’s no obvious way to tackle it, given the entrenched power of the financial sector.

The situation is reminiscent of the last decade of the Soviet Union. Those in charge are utterly discredited but apparently irremovable.

32 thoughts on “The financial sector: discredited but unchallengable

  1. the recreation of a publicly owned “no frills” bank, along the lines of Kiwibank in New Zealand.

    Kiwibank is very niche. It has a market share of 7% for home loans and 8% for business loans. That’s not nothing, but people haven’t rushed to abandon the private (all Australian-owned) banks in favour of the government bank. This may be because whether they are privately owned or government owned, banks are banks.

    https://www.kiwibank.co.nz/about-us/press-releases/financial-results-kiwi-group-holdings-including-kiwibank-year-ended-30-june-2017/

  2. @Smith9
    I am wondering at the statement that ‘banks are banks’ and its meaning. Similarly with the statement that ‘people havant’t rushed to abandon the private banks’. How would you measure the ‘rushing’? The article in your link does not seem to support any of these two statements.

  3. ‘Banks are banks’ means they conduct themselves the same way whether they are privately owned or government owned.

    ‘Not rushed to abandon private banks’ means that Kiwibank’s market share is small, probably because it offers more or less the same services and products at more or less the same prices.

  4. “The situation is reminiscent of the last decade of the Soviet Union. Those in charge are utterly discredited but apparently irremovable.” – J.Q.

    This is a very prescient statement. Even the suggestion of a time scale, a decade, seems about right. Sclerotic systems are rigid and unable to adapt. This sums up our current system’s behaviour in the face of information from objective science, especially from climate science and ecological science. The science is telling us we need to change our system rapidly or else face climate and ecological collapses leading to potential civilizational collapse. However, our late stage, finacialized, oligarchic-corporate capitalist system is persisting with business as usual. There is a pretence that marginal changes, fiddling at the edges, can save us when only radical and fundamental changes can do so.

    Our current governing and financial elites are in collusion and in control of the system. They respond neither to science nor to democratic demands. While they remain in charge, our system remains maladaptive which of course contains within it a prediction about our fate. Species and civilizations which are unable to adapt go extinct. With maladaptive civilizations, there is a juncture well before extinction. This entails a collapse of the existing order; especially of the existing political and economic order. This collapse can be rapid, as evidenced by the experience of the Soviet Union. The main aspects are clear. The system appears rigid and maladaptive and these characteristics are most prominent and even intensifying just before a rapid collapse of the entire status quo. This is why J.Q.’s statement is so prescient, IMO.

    Of course, there is no guarantee that a new system will arise which can deal with the political, social and environmental challenges which it will face. The new system may also be dysfunctional or the social disintegration and/or environmental may too great in degree or extent for even a functional system to deal with. But our best chance lies in developing an ecosocialist program based on genuine science and genuine democracy. Of course, the devil is the detail. This program and the progressive political parties and the people have to be ready to meet the imminent crisis.

  5. “The situation is reminiscent of the last decade of the Soviet Union. Those in charge are utterly discredited but apparently irremovable.”

    Yes and no. A more accurate statement is that the situation is reminiscent of the the first half of the last decade of the Soviet Union. The Gorbachev equivalent has yet to emerge. We are currently at the Andropov stage, with some of the old regime gone (at AMP and NAB) but most of it still in place. It might be remembered that Andropov was hoped to be a reformer after the bleak Brezhnev regime, but this was a false hope, and he soon died anyway, replaced by the Brezhenvite Konstantin Chernenko.

    Taking the analogy further, the old school Stalinists in the banking industry haven’t gone away and they’re not going to give up without an almighty fight either.

  6. “The whole structure of financialised capitalism is a recipe for greed and dishonesty. Everyone knows this, but there’s no obvious way to tackle it, given the entrenched power of the financial sector”.

    But it is not just the “entrenched power of the financial system” but the apparent prosperity such a system delivers despite its uglinesses and imperfections. The stock market is a casino where the dishonest do prosper and where massively wasteful transfers/transactions costs occur but it seems to deliver good living standards. Ugly but with an unexpected ability to deliver reaspnable economic outcomes – financial markets are messy but have obvious success stories to back them up certainly in preference to more planned investment allocations.

    I feel the same as you do about other aspects of capitalism – particularly marketing. It seems terrible to me that our entertainment/cultural media, sporting events and newspapers depend so heavily on agencies who tell lies to customers as part of their core business model. Coke = “the real thing” etc. Ugly but overall not too bad in terms of unexpected social efficiencies.

    I am much less reserved in my support for a no frills banking sector that offers deposit facilities and sells mortgages. Seems like a good move that could easily coexist with the cowboys. Of course the cowboys too need to be constrained in the greedy ambitions by regulations stringent enough so they do not to bring the whole system down.

  7. Financial institutions do not conduct themselves in the same way however they are owned.

    AMP as a mutual was very differently conducted to its behaviour since listing. Commonwealth Bank has behaved very differently after privatisation compared to before. The remaining mutual banks/credit unions do not behave very like the major listed banks.

    No State GIO has behaved the same since privatisation.

    We have had an empirical test of the ‘strong’ argument from Samuelson invariance. And we have had a strong and unequivocal answer: all evidence shows that ownership structures matter to commercial behaviour, certainly in the financial institutions sector.

    ‘‘Banks are banks’ means they conduct themselves the same way whether they are privately owned or government owned.’ This was a pious hope before privatisation and demutualisation and has proved plainly false. It is no more than the battle standard for hopelessness in the face of misconduct.

  8. Commonwealth Bank has behaved very differently after privatisation compared to before.

    That is true, but the other banks also behaved differently (worse) over the same period. The zeitgeist was different and they all adapted to it. Same goes for the privatised GIOs.

    Back in the old days, there was also no difference between the Commonwealth and other banks, except that the CBA was for Catholics and the others were for Protestants. They were all paternalist, sexist and hyper-conservative. Not the amoral spivs of recent times, to be sure, but problematic in different ways.

  9. My family were (lapsed) Protestants and banked with the Commonwealth. I never noticed as a customer that the Commonwealth Bank was in any way a Catholic Institution. Perhaps this happened on the employment side of the counter. I believe (from a bit of my own anecdotal evidence) that the old Dept. of Social Security was somewhat dominated by Catholics in middle and upper management circa 1984 and earlier. This may have been true of the Federal PS as a whole and thus also of the Commonwealth Bank in that era.

    The old Commonwealth Bank did operate a bit differently at one point. When mortgage interest rates hit 17% in 1988-99, my wife’s and my home loan was pegged to a lower rate. I think this was standard for Commonwealth customers at that time. I can’t remember what the pegged rate was. It was maybe 14%, not sure. Back then an average home was about 3 times average annual wages, so this wasn’t so bad. We paid $66,000 for our first house with $22,000 deposit and we each had a wage of about $22,000 per annum. We were DINKS (double income no kids). Full-time jobs were easy enough to get, at least in the PS at local, state or federal level. We had it easy. Things are a lot tougher now for young people. (I wasn’t that young at that time. Late 20s.)

    So, interest rates went high for a while but houses were cheap and being a double full-time income couple was not hard to achieve. The current situation is considerably worse for young people. Full-time jobs are harder to get, wages are stagnant and houses are very, very expensive. All this is preventing household formation by young couples. The current low interest rate regime is mainly a boon to capitalists, not workers. Moderate price inflation, say 5% to even 10%, is a boon to workers if it is matched by wage inflation and low asset prices. But capitalists hate that situation. They would rather run high unemployment, precarious work and wage stagnation along with asset inflation. This sort of situation boosts their wealth accumulating positions enormously. This current situation has been deliberately engineered. It’s not an accident. It’s not a truly emergent phenomenon which they can’t control. It’s a deliberately engineered situation.

  10. As I’ve raised before, I think even credit unions that call themselves banks begin to behave like big banks, e.g., leaving existing member/customers on relatively high mortgage rates in order to offer lower rates to attract new customers. That wasn’t the case before, and I assume it’s driven by the growth imperative rather than a general requirement to cover costs or meet prudential obligations.

  11. @Smith9
    “may be because whether they are privately owned or government owned, banks are banks.”

    @anonymous
    “I am wondering at the statement that ‘banks are banks’ ” (and measure rushing. +1).

    “except that the CBA was for Catholics and the others were for Protestants. They were all paternalist, sexist and hyper-conservative. Not the amoral spivs of recent times, to be sure, but problematic in different ways.”

    Don’t you see smith9 your logic mentions banks are banks, then grows straw to bring religion, men, sex, and hyper conservatism into the banks. And amoral spivs. Only recently so which bank is bankbank.

    If I ran a bank and I’d bet JQ, Ikon or others, the governance and fiscal would be “a bank” and it also can be ” not greedy, and we can change “ownership structures” for a positive social outcome as chrishod mentioned.

    So banks are able to be narrowly defined, different, and as Ikonoclast says, except when ” our late stage, finacialized, oligarchic-corporate capitalist system is persisting with business as usual”.

    Smith9, Banks are banks only IF business is as JQ says, “The whole structure of financialised capitalism ,”  stays as usual.

    And I am pretty sure invoking the soviet union is not helpful for discussion.

    Chrishod.  Care to expand a bit on “the ‘strong’ argument from Samuelson invariance”. Deep and straight in to Fisher. I’ve used depreciation at about level 1, not for bank valuation. Seems tobbe a case of “in the know” showing… I dont know. And very few direct accesible links turn up – even with goo gl. 4 in one search. Very unusual. I had to find the paper’s actual name referenced elsewhere to get a link to it here; 

    Tax Deductibility of Economic Depreciation to Insure Invariant Valuations
    Paul A. Samuelson
    Journal of Political EconomyVol. 72: , 
    Issue. 6, : Pages. 604-606
    https://www.journals.uchicago.edu/doi/abs/10.1086/258967?journalCode=jpe

  12. KT2

    Banks were banks before financialised capitalism became a thing, which was around 1985. They were different, but they were still banks.

    An anecdote might help. Before Westpac was Westpac, it was called the Bank of New South Wales. Its slogan was “You can bank on the Wales”. With good reason, Gough Whitlam used to say, “You really can bank on the Wales”.

    It is a myth that banks in the ye olden days were friendly and customer focussed, could-have-been-worker-co-ops-at-Nimbin, not ruthless capitalist enterprises. Unlike today, bank managers wouldn’t force a loan onto you that you didn’t need. They’d refuse you a loan that you did need and could repay, and they’d do it just because they could, and humiliate you into the bargain.

  13. I commenced my 47-year banking career in 1964 and experienced all the economic and financial vicissitudes that occurred between then and 2013.

    Readers may not be aware that in the late 1980s the banks, under guidance of consulting firms, started to dismantle their operational structures for cost cutting purposes. To a significant degree the lending functions were centralised and significantly de-skilled, leading to the wide spread loss of the integrity, knowledge and experience required in dealing with borrowers generally and more specifically in establishing their credit worthiness. From the customer’s viewpoint it meant they were completely remote from their bank and the first commandment of lending; “thy shalt know thy customers” was forever erased from the texts. Food for thought; it’s very hard to treat someone unfairly when you know them well. From that time the emphasis was on marketing, not the professional application of banking skills. We now have generations of bankers, many in senior executive positions, who really don’t know what they are doing – we daily see the profound views of these public figures quoted in the AFR. My view is that banks have gone well past the tipping point in respect of these matters.

    We know that of the over ten thousand submissions received 61% were concerned with banking matters, mainly lending, and yet we find that of the 73 Hayne recommendations only 17 relate to lending and of those 3 relate to farm lending, with Hayne washing his hands of small and medium enterprises. There are obviously a few reasons for this. The banks and the Morrison government, who didn’t want a Royal Commission, were at pains to ensure that there were no interruptions to the big profit drivers – that is why the market reacted so positively to the final report. Hayne and his entourage might well understand the wording in a mortgage document but of course would not be qualified to approve a $400 credit card application – and therein lies the problem. On the evidence APRA and ASIC are equally clueless.

    Why appoint someone to head a commission into finance when they have no knowledge of the arcane art and science of banking. Hayne et al. of course would refuse to acknowledge that bank lending involves the application of any knowledge at all and his view is unfortunately supported by the belief that 3 months as a shift manager in a hamburger joint is a great launching pad for a career in bank lending.

    One of the more astounding, and revealing, recommendations in the final report is the first dot point of 1.14 which referred to distressed agricultural loans:

    “ensure that those loans are managed by experienced agricultural bankers”

    I’m sure that under the influence of Barnaby Joyce or Bob Katter agricultural lending couldn’t suffer the same fate as SME exposures. Still the inclusion begs the obvious question: (which commentators have missed) shouldn’t all agricultural loans be managed by experienced agricultural bankers? (Define experienced agricultural banker and show your work) Does it imply that agricultural loans are not managed by experienced agricultural bankers? And further; shouldn’t all lending be managed by lenders who are experienced in the field in which they operate? Hayne knew of course that extending the experienced banker’s statement would open a can of worms that would have far reaching consequences and he must have gritted his teeth as he penned 1.14.

    Bottom line is that most people would expect a higher level of expertise and personal accountability from their plumber than they do from a banker.

    Until the regulators come to realise that banking is a profession and bankers must re-learn and assiduously apply the art and science of banking, we are all biding our time until the next inquiry or financial crisis – to be bailed out with government intervention of course. If they started today banks would be in a better place in a decade but I’m not holding out much hope that ASIC, APRA or a future Labor Government will do much more then keep expressing the platitudes that fill the daily press.

    Some have mentioned re-regulation and my advice on that would be to rent a time machine and go back to 1970 and try it out; I think you will change your mind after a couple of weeks.

  14. “Why appoint someone to head a commission into finance when they have no knowledge of the arcane art and science of banking.”

    Precisely because he was not an insider, Hayne was the right person for the job. (That and his other qualities.) We recently had an inquiry into banking by a banker’s banker, David Murray. It achieved SFA.

  15. John Quiggin

    Well, yes, competition led to housing interest rates halving. People responded by borrowing twice as much because they thought they get a house twice as good but all that did was double house prices. If housing supply had been more responsive there might have been a better outcome. Or maybe people could have borrowed the same and just paid less interest and got the same house as they ended up with anyway. But it wasn’t to be.

    There are better targets for your hostility to deregulated finance. You could start with credit card debt, which is targeted at poor people’s psychological vulnerabilities. It is unconscionable.

  16. JQ – “… given the entrenched power of the financial sector.”

    http://www.stuff.co.nz/business/blogs/2588345/A-Kiwibank-for-Australia
    A Kiwibank for Australia?
    Sep 01 2009

    “Six of Australia’s most influential economists last week called on their government to follow New Zealand’s example and establish a government-owned bank.

    They saw Kiwibank as a model desperately needed in Australia because of frustration with the domination of Australian banking by their big four commercial banks – much the same beasts that dominate New Zealand banking.

    The Australian economists make the same criticism of the banks that New Zealanders do: they act more as a cartel than as competitors, have not passed on decreases in interest rates to customers and are more focused on profits than service.

    In the recession they have squeezed out other local banks in Australia and increased their share of the mortgage market from 80 per cent to 92 percent.

    Prime Minister Kevin Rudd has dismissed the idea and says Australia should be proud the big four Aussie banks are among the 11 largest international banks. This is no help to Australian consumers. Where the banks are owned is immaterial – whether the profit goes to a wealthy Australian or a wealthy American makes no difference. It’s the community’s ability to control and regulate banks for the benefit of customers which is important.”

    The banks. Rudd and Ripoll. The LNP and Hayne. Cue 2029. So it goes.

  17. Why would a public Roobank be inconceivable in Australia? The granddaddy of public banks, the Banque Postale in France, has 10.8m active customers, around a quarter of the adult French population. It is a general retail bank, offering loans, no-frills investment funds, and so on in addition to the basics, current and savings accounts, money transfers, online banking and credit cards. No frills and customers queue in scruffy post offices behind stamp collectors and immigrants making money transfers to Chad, but everything works. The Cour des Comptes, in its last report on the postal service, found things to criticise in the banking operation (c’est leur métier), but did not question its public service mission. (******ccomptes.fr/fr/publications/la-poste-une-transformation-accelerer)

    The Cour des Comptes is famously tough and independent. It is one of the few French ancien régime institutions to have escaped the bonfire in 1789, and traces its origins back to the ruthless Philippe le Bel. The motto could be “hanging Finance Ministers since 1315”. Mind you, the king (Philippe’s successor Louis X) could not prove financial crimes against Enguerrand de Marigny, an unpopular scapegoat, and had to resort to a trumped-up charge of sorcery. Now that’s a charge that could usefully be revived against the inventors of incomprehensible derivatives.

  18. Smith9
    A simple answer as to why Hayne was not the right choice would be look at bank share prices and read the many articles expressing confusion about what to do next.

    Certainly, David Murray was an awful choice to chair the 2014 Financial System Inquiry, why would someone in his position attack what he helped to create?

    It is precisely because Hayne is judge that he should not have been appointed. When banks have problems with their clients they adopt a highly legalistic approach, so the legal fraternity are very much part of the problem. Lawyers are far too enmeshed in the finance industry to take an objective view of what goes on. In any case banking is a multi-disciplinary profession despite what we are led to believe from Hayne.

    I think the issue with Opal Towers provides a source of analogies for this question. Imagine Hayne being appointed to head an inquiry about the cause and remedy of the faults. He would take evidence from the owners, the engineers, contractors, project managers etc, who would all be presenting their respective cases in the best light possible. But whose evidence would sway him the most? Of course, it would be independent experts, structural engineers and so on who would provide a completely unbiased view of what happened and why.

    Keeping in mind that Hayne has no qualifications in respect of bank lending – where were the dozens of independent experts to review and comment on the 6000 odd submissions on lending? We now know that APRA and ASIC are not up to the challenge, so the answer is there were none, and it was never intended that the inquiry would address such issues.

    It was said at the outset that Hayne was a black letter law man and would resort to that approach when in doubt. They should have added that he would resort to that approach when in ignorance of the wider circumstances – which is why he was appointed in the first place.

  19. Re the low response rate: they’ve changed the presentation of the poll results so that only panel members who respond are listed. This is a pity since who has and who hasn’t replied is generally at least as interesting as the responses themselves.

    I was certainly fascinated to learn that former bank chief economists Saul Eslake and Nigel Stapledon didn’t have any thoughts to share on this issue. I’ll be keeping this in mind when I read their opinions on other matters.

  20. @Smith9

    “Or maybe people could have borrowed the same and just paid less interest and got the same house as they ended up with anyway.”

    Yes, well, the demand for housing doesn’t look like that, as evidenced by econometric research and the endless parade of reality TV shows centred on the vicarious consumption of housing.

    “Well, yes, competition led to housing interest rates halving. People responded by borrowing twice as much because they thought they get a house twice as good but all that did was double house prices.”

    I think the idea that real quality-adjusted housing prices would have remained the same if interest rates had not fallen is highly questionable. The kind of gross divorcing of prices from costs witnessed in the last boom in Sydney would surely have been avoided. Maybe the sizeable increases in construction costs that have occurred were caused by interest rate-driven demand, but rising real construction costs are a very long-run phenomenon. The increased relative desirability of more centrally located housing is surely about more than people having a lot of cash to throw at housing because of low interest rates, and the reality of relative production costs is that prices have to rise quite substantially above those at the fringe before infill development becomes cost-competitive. The bidding up of the prices of existing houses to very high levels, which pushes the marginal cost of additional housing supply to the cost of high-rise development, would surely have occurred over smaller parts of Sydney and Melbourne, however. Households would likely have responded to rising costs by forgoing ever-increasing housing consumption; new housing could have become more of a luxury with a larger discount for existing dwellings.

  21. @Luke Elford

    After reading your post in response to mine many times I can’t work out whether you agree with me or disagree with me.

  22. In relation to several comments above I would say this. Our current economic system is expressly designed and intended to indebt 99% of the population and make the other 1% very rich. The end goal is to have 99% who own nothing and owe every portion of their pay (if they have any at all) to creditors other than a slim amount on which to survive. The cost of living relative to stagnant wages has now reached the point where net youth and young adult pay, after tax and debt obligations, is less than the reproductive cost of labor.

    Australia, as a political economy managed by and for the 1%, is playing this system in the following manner. One, average wages for young people (taking into account unemployment and underemployment) are less than the reproductive cost of labor. Two, high house prices play into this situation, limiting household formation by young people. Three, household formation is not necessary anyway as Australian born young adults are not reproducing (in the main). The demographic shortfall is made up by bringing in immigrant families with young children. These immigrant families are also required to bring in capital (to buy homes etc.) In turn, when their young or teenage children become young adults, they too will find (in the main) that household formation for them is not possible.

    What is going on is a kind of demographic arbitrage, from Australia’s point of view. It is cheaper to bring in families with capital and ready-made children or teenagers whom Australia paid nothing to support and educate. The rich 1% need not pay adequate taxes to help support and educate Australia born children. They can import ready-made educated adults and consuming children from India and China (two important examples now). From the point of view of the immigrants, it is geographic arbitrage and entirely economically rational.

    This game is the opposite, in some respects, to global labor arbitrage, where jobs are moved to nations where labor costs and the costs of doing business are low. Demographic arbitrage does include an aspect of global labor arbitrage but it is not impoverished labor but rather under-paid skilled labor which moves from poor nation to nations with higher paying jobs.

    The end results of global labor arbitrage, demographic arbitrage and geographic arbitrage, under conditions of neoliberal capitalism, will be the equalisation and normalisation of extreme poverty all over the globe. There will be gated communities of the super rich in metropoles but other than that the extension and equalisation of extreme poverty for all the masses internationally will be the outcome.

    Of course, this is only the outcome under late stage global capitalism, with no borders for capital or labor. Borders would exist only at the private security fences of the gated rich communities of the metropoles. This is a rather fictionalised dystopia of the extreme end result of current trends. It’s unlikely, though perhaps not impossible, that current trends will proceed to that point. In its middle stages, when energy gradients are still available to maintain thermodynamic dissipative systems, the cosmos, as the largest complex system example obeying universal laws, is still clumpy not homogenised. We only expect a fully homogenised cosmos with heat death from entropy. Admittedly, the fictionalised dystopia depicted above is still slightly clumpy.

    The world political economy can be expected to still behave in at least a moderately clumpy way (significant national, regional and economic differences) until an extreme crisis in terms of a lack of energy and other resources for useful work and useful reproduction (biological, social, industrial, technological). That is, if such a crisis occurs as it is not certain.

    Australia needs to be aware of what game it is playing. Playing the game of demographic arbitrage, leading to a high population on what is a a very hot continent and the most arid inhabitable continent of the world, and doing this at the start of a global warming crisis, is a most dangerous course of action. It brings quick and easy economic fixes in the now and permits the economic elite to set up a system channeling wealth from the 99% to the 1% while leaving an anodyne level of consumption to those not yet affected by the policy. The middle and upper class baby boomers (me included) are in the “I’m all right jack” position. They can be relied on to (a) support the status quo and (b) die out before they become a real problem. The new generations will be more inured to poverty and hopelessness except for those who suicide. The suicides can be spared because, hey we are way overpopulated anyway, so who cares? That’s my black irony by the way but this is the way the 1% must be thinking.

  23. @Smith9

    Well “highly questionable” generally suggests at least some disagreement. I’m indicating my dissent from a shared premise (“all that did was double house prices”) rather than taking sides. My contribution was intended to be deliberative rather than combative.

  24. Smith9 says: FEBRUARY 18, 2019 AT 6:37 PM

    “Banks were banks before financialised capitalism became a thing, ” so what?

    “With good reason, Gough Whitlam used to say, “You really can bank on the Wales””. So what.

    I’m looking forward positively, not pointing out the obvious from the past.

    And you are mixing credit cards, banks, mortgages, capital lending etc. Op says “narrow banking” – your bankbank sees no bounds.

    And you obviously don’t have enough caplital to state this;
    “They’d refuse you a loan that you did need and could repay, and they’d do it just because they could, and humiliate you into the bargain.”

    See you in the future with a level narrow bank and good culture for all.

    Hostility > mirror.

  25. can some one tell me if it is true that the “banks”/”housing market” require personal housing ownership turnover every seven years to keep prices from collapsing?

    is that real?

    or bulldust?

  26. “can some one tell me if it is true that the “banks”/”housing market” require personal housing ownership turnover every seven years to keep prices from collapsing?”

    Prices are much more likely to collapse when banks lend indiscriminately. Remember the GFC? At its core was poor lending.

  27. KT2 asked about my reference to the ‘strong’ version of Samuelson invariance. He correctly tracked down the correct Samuelson paper.

    Samuelson set out conditions under which assets will be valued at the same amount by taxpayers whose effective tax rates differ. In effect, if there is ‘economic depreciation’ then people with different effective tax rates have correspondingly different discount rates…that will generate the same valuation of any given productive asset.

    This is often treated as a proof that effective tax rate differences can never produce different productive asset valuations. Because of this, productive assets are worth the same to tax-exempt charities and to tax-liable businesses.

    ‘Strong’ Samuelson invariance arguments go very much further. They posit not only that productive asset valuations will be the same for taxpayers whose effective tax rates differ, but that all economic decisions about the use, holding and sale of productive assets will be the same though taxpayers have different effective tax rates. This ‘strong’ Samuelson invariance is, I said, effectively disproved by the recent history of demutualisation and of privatisation of financial institutions.

    You may take a different view; but that’s what I was referring to.

  28. Thank you. chrishod says:
    FEBRUARY 19, 2019 AT 8:51 PM

    “This ‘strong’ Samuelson invariance is, I said, effectively disproved by the recent history of demutualisation and of privatisation of financial institutions.:

    Proof. Like it.

    I was amazed the paper seemed hard to find. And at the Chicago school. Doesn’t it go against many a chicago school grain. I couldn’t even find an rebuttal just a couple of later addons and alterations. Wikipedia needs a page on it. Invariance yes but not directly Samuelson. I’m inspired now to maybe! become a wiki page poster hoping some exoerts may adjunct my feeble attempts. That is what wikip is for.
    Thanks again. It is in my saddlebag now, even though it is like a mountain to me. I’ll traverse slowly.

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