"End lending altogether" - Waldman

I've been wondering why we shouldn't bust our criminal banks immediately and replace them with a system that simply transfers money. For a half-serious proposal to end lending altogether, see Naked Capitalism on Steve Waldman.

Evolution Inaction

Some time ago, on this forum, Sackerson discussed the disdain that the ancient Greek philosophers had for those who actually made things, dismissing them as 'artisans', and noted that this attitude appeared to be alive and well in the UK, where engineers are treated much worse than their counterparts in Germany.

As early as 1959, C.P.Snow noted in 'The Two Cultures' that engineers and scientists were not considered 'real' academics at universities. That attitude is alive and well still, and the ranks of academic administrations are full of professors of education, philosophy and psychology.

The recent bailouts in the US add another data point. Wall Street, which produces nothing, was given over $350 billion with no conditions, yet the auto industry was raked over the coals for asking for $25 billion in loans.

I don't think that it is a coincidence that the amazing US Constitution was written by men who were not only were versed in the classics, but knew the science and mathematics of their day.

It is a fact that most of the ruling elite in China have engineering degrees, as do many of the business leaders in Japan. The CEO's of BMW and Volkswagon have always been doctors of engineering.

I am convinced that one of the reasons for our current problems is that our social and political structures have not adapted to the Scientific and Industrial Revolutions. While living in imagination may be more fun than being constrained by reality, we need leaders who can make the hard decisions.

A hand hovers over the chain

Marc Sobel:

Do I understand the net of this posting to be that the US is much more vulnerable to a quick run on the debt, i.e. being mainly financed by short term debt which constantly has to be rolled over ?

Brad Setser:

Yes, that risk is rising...

Read the whole thing here.

Taxation is inflationary, not deflationary

I've often wondered whether that's the case - now the Mogambo Guru says so. If taxes cut our take-home income, we insist on more income to make up for it.

Jealousy

The WSJ has published a list of the 200 best jobs (htp: Paddington). This should stimulate about 5 of the Seven Deadly Sins. Some surprises - e.g. a teaching assistant is 21 places above a teacher - though I do know a teacher who gave up to become an assistant. Find where you are in the pecking order - happy seething!

01. Mathematician
02. Actuary
03. Statistician
04. Biologist
05. Software Engineer
06. Computer Systems Analyst
07. Historian
08. Sociologist
09. Industrial Designer
10. Accountant
11. Economist
12. Philosopher
13. Physicist
14. Parole Officer
15. Meteorologist
16. Medical Laboratory Technician
17. Paralegal Assistant
18. Computer Programmer
19. Motion Picture Editor
20. Astronomer
21. Petroleum Engineer
22. Insurance Underwriter
23. Web Developer
24. Physiologist
25. Bank Officer
26. Architectural Drafter
27. Broadcast Technician
28. Stenographer/Court Reporter
29. Medical Secretary
30. Geologist
31. Publication Editor
32. Vocational Counselor
33. Aerospace Engineer
34. Jeweler
35. Dental Laboratory Technician
36. Electrical Technician
37. Musical Instrument Repairer
38. Audiologist
39. Bookkeeper
40. Anthropologist
41. Nuclear Engineer
42. Medical Records Technician
43. Librarian
44. Market Research Analyst
45. Dental Hygienist
46. Purchasing Agent
47. Set Designer
48. School Principal
49. Industrial Engineer
50. Medical Technologist
51. Archeologist
52. Tax Examiner/Collector
53. Dietitian
54. Typist/Word Processor
55. Chiropractor
56. Hotel Manager
57. Chemist
58. Personnel Recruiter
59. Psychologist
60. Technical Writer
61. Occupational Therapist
62. Electrical Engineer
63. Optometrist
64. Speech Pathologist
65. Financial Planner
66. Museum Curator
67. Zoologist
68. Pharmacist
69. Judge (Federal)
70. Clergy
71. Civil Engineer
72. Office Machine Repairer
73. Social Worker
74. Mechanical Engineer
75. Newscaster
76. Piano Tuner
77. Industrial Machine Repairer
78. Flight Attendant
79. Advertising Account Executive
80. Artist (Fine Art)
81. Telephone Installer/Repairer
82. Attorney
83. Bookbinder
84. Stockbroker
85. Communications Equipment Mechanic
86. Appliance Repairer
87. Fashion Designer
88. Corporate Executive (Senior)
89. Occupational Safety/Health Inspector
90. Photographic Process Worker
91. Podiatrist
92. Optician
93. Author
94. Cosmetologist
95. Computer Service Technician
96. Insurance Agent
97. Compositor/Typesetter
98. Engineering Technician
99. Architect
100. Psychiatrist
101. Dentist
102. Agricultural Scientist
103. Orthodontist
104. Automobile Assembler
105. Barber
106. Teacher's Aide
107. Bank Teller
108. Disc Jockey
109. Construction Foreman
110. Cashier
111. Physical Therapist
112. Public Relations Executive
113. Precision Assembler
114. Receptionist
115. Telephone Operator
116. Airplane Pilot
117. Conservationist
118. Sewage Plant Operator
119. Railroad Conductor
120. Sales Representative (Wholesale)
121. Real Estate Agent
122. Shoe Maker/Repairer
123. Veterinarian
124. Forklift Operator
125. Photographer
126. Vending Machine Repairer
127. Teacher
128. Buyer
129. Electrical Equipment Repairer
130. Shipping/Receiving Clerk
131. Recreation Worker
132. Furniture Upholsterer
133. Advertising Salesperson
134. Construction Machinery Operator
135. Respiratory Therapist
136. Farmer
137. Surveyor
138. Heating/Refrigeration Mechanic
139. Tool-And-Die Maker
140. Reporter (Newspaper)
141. Janitor
142. Physician (General Practice)
143. Nurse (Registered)
144. Plumber
145. Carpet/Tile Installer
146. Physician Assistant
147. Electrician
148. Dressmaker
149. Guard
150. Highway Patrol Officer
151. Drill-Press Operator
152. Travel Agent
153. Automobile Body Repairer
154. Waiter/Waitress
155. Machine Tool Operator
156. Surgeon
157. Aircraft Mechanic
158. Truck Driver
159. Salesperson (Retail)
160. Glazier
161. Choreographer
162. Chauffeur
163. Bartender
164. Undertaker
165. Machinist
166. Bus Driver
167. Photojournalist
168. Correction Officer
169. Maid
170. Actor
171. Drywall Applicator/Finisher
172. Plasterer
173. Nurse's Aide
174. Police Officer
175. Stevedore
176. Carpenter
177. Stationary Engineer
178. Dishwasher
179. Meter Reader
180. Bricklayer
181. Firefighter
182. Child Care Worker
183. Painter
184. Nurse (Licensed Practical)
185. Nuclear Decontamination Technician
186. Butcher
187. Automobile Mechanic
188. Sheet Metal Worker
189. Mail Carrier
190. Construction Worker (Laborer)
191. Ironworker
192. Roustabout
193. Welder
194. Garbage Collector
195. Roofer
196. Emergency Medical Technician
197. Seaman
198. Taxi Driver
199. Dairy Farmer
200. Lumberjack

Under the floorboards

The Contrarian Investor reports that the Chinese will have difficulty stimulating demand within their own country, if the Western buying spree stalls. Poverty, compulsive saving by those who can, and stacks of cash hidden under corrupt officials' floors mean that helicopters filled with banknotes won't tempt the population to get out and blow their wads.

In-Equitable treatment

Victims of Equitable Life are to be paid off by the taxpayer, says the FT.

Equitable Life ran a with-profits fund, a form of collective investment that only goes up (as long as you maintain it to the end of the agreed term). Once awarded, bonuses on with-profits funds cannot be taken away. EL's undoing was that, like some other companies, they dragged in extra pension business a long time ago on the selling point of guaranteeing (in their case) a 12% annuity rate when the plans matured. That is, for every £100 in the fund, the life time income would be £12 per year.

When we moved from a high inflation/high interest environment to low/low, this promise became a ticking time bomb. When annuity rates generally have dropped to 6% or less, you need to double the fund to create the same income. So since there wasn't enough in the kitty, EL had either to renege on the guaranteed annuity rate (GAR), or take away much of the bonuses already awarded. I believe they tried both approaches and the courts wouldn't let them.

This GAR depth-charge was well known, or should have been known, to actuaries. The IFA network I was with in the 90s used to have a shortlist of approved companies (including non-commission payers) for each product, and at some point EL quietly dropped off the list. If outsiders could see the disaster looming, we have to assume the technical advisers on the inside knew even better what would happen. Yet EL carried on awarding bonuses to investors as though nothing was wrong.

Now, it seems compensation is to be paid because industry regulators failed to spot the coming crisis and step in. It's as though houseowners could sue the police for not stopping Bill the Burglar. Perhaps it helps EL investors' case that so many of them happen to be lawyers and journalists?

However, what is sauce for the goose is sauce for the gander. The same arguments can be applied to victims of the mortgage mis-selling of the past few years. For Equitable Life, read banks; for investors, read borrowers. And in both cases, it's the same regulator now.

Compensation, please.