It's all Thatcher's fault... (Post saved as draft this morning, so reposted now)

The Guardian's 'Comment is Free' section is always predictable and this article  is no exception. The article by Zoe Williams tries to absolve the general public from taking out mortgages that they couldn't afford and generally borrowing like there was no tomorrow. Apparently people have no choice but to take banks up on their offers. I think that much of the banks' lending was reckless and that much of the blame for this should be laid at the feet of Blair, Brown and Balls for stoking the economy so recklessly in order to engineer a boom so as to pay for the ridiculous expansion of the public sector and garner votes for their New Labour project.

However at Comment is Free, the only people really to blame include, as always, Margaret Thatcher, here's  one comment that does bear repeating here:

greatdivide

16 May 2012 8:44PM

Response to grumpyoldman, 16 May 2012 8:41PM

Thatcher and Reagan did this on purpose - inflated housing stock, made everyone take out loans to replace wages so banks could increase profits in the face of booming productivity so profits at businesses could go through the roof without the employers having to raise wages.
All this shit right now is thanks to them.

It is incredible how some people seem to be able to forget that Labour were in power during the biggest expansion of credit, but that's the joy of being a Labour supporter and/or a Socialist...

Hedge Funds - Myths & Facts

'Did the hedge fund industry contribute to the global financial crisis? Did it make the crisis worse? In her weekly appearance on Bloomberg TV, Reason columnist Veronique de Rugy explains the truth about hedge funds by separating economic fact from economic myth.

Myth 1: Hedge funds are highly leveraged.
Fact 1: The market exposure of most hedge funds is less than twice the percentage of assets under management.

Myth 2: The hedge fund industry's tendency to take excessive risks, combined with a lack of regulation, was an important cause of the financial crisis.
Fact 2: Not only did hedge funds not precipitate the financial crisis, they did nothing to exacerbate it. If anything, hedge funds have helped the economy to
recover more quickly.

Myth 3: Most hedge fund managers are billionaires.
Fact 3: Who cares? But if you must know, the average hedge fund manager's yearly earnings are $336,000.

For additional information, see de Rugy's article "The Truth About Hedge Funds and the Financial Crisis." http://reason.com/archives/2011/03/18/the-truth-about-hedge-funds-an'

Some information that the BBC are somewhat coy about presenting being concerned with blaming the economic crisis on banks and hedge funds and not their allies in the Labour Party.

However I do wonder what the leverage ratio in the first part of the video is based on. Also I wonder whether whilst hedge funds are not highly leverage themselves but their assets (derivative) are.


Thanks to Theo Spark for the spot.

Bashing the bankers

The BBC report in full 'bash the bankers' mode that:

'European regulators have backed tougher than expected draft rules on bankers' pay despite pressure from the UK and France to water down the restrictions.

If the draft rules are implemented, it would cap the amount of a bonus able to be taken in cash to a maximum of 30%.'

Never mind the reduction in UK competitiveness, for the BBC this is about ensuring that the public blame the bankers in the City and not the wankers in the last Labour government. The scheme itself has flaws so obvious that they scarcely need discussing here, but here's one: why would a M&A banker who has worked 14+ hour days for weeks or even months to structure a deal and earn his company a large fee with no onward risk for his company, want to see his well deserved bonus tied up in shares that could have their value much reduced if a trader does something stupid in the future?where the value can be wiped out by one stupid trader?