Finance & Regulation

Turkey is business-as-usual for the globalised financial system

After the BRICs came the MINTs – Mexico, Indonesia, Nigeria and Turkey.

In a series of January 2014 BBC programmes, Jim O’Neill – then the Goldman Sachs economist who had coined the term BRICs – celebrated the new acronym. On a blog under the title ‘The Mint countries: Next economic giants?’ he raved about the potential of his new discoveries:

I returned from my travels thinking it won't be so difficult for Nigeria and Turkey to positively surprise people, as many put far too much weight on the negative issues that are well-known – crime and corruption in Nigeria, for example, or heavy-handed government in Turkey…

PRIME director wins prestigious Heinrich Boll Stiftung Hannah Arendt Prize

On 19th July, 2018, the director of Policy Research in Macroeconomics (PRIME), Ann Pettifor, received the following from Professor Antonia Grunenberg of the Heinrich Boll Foundation, Bremen, Germany. 

Dear Mrs. Pettifor,

it is my great pleasure to inform you in behalf of the international jury of  the „Hannah Arendt Prize for Political Thinking“ that you have been unanimously selected to be the winner of the prize in 2018.

Die date of the ceremony is December 7, 2018.

The jury pointed out that you, a distinguished scholar, have had the courage to touch a complex topic that keeps influencing European and world affairs as well as the life of people all over the globe: the domination of the political realm by the dynamics of financial speculation…

Protecting us from the worst? The Bank of England on private debt and financial ‘stability’

For policymakers, the importance of private debt was the key take home from the financial crisis. Private debt is also a central theme in the Bank of England’s latest commentary around financial stability, with particular emphasis on the position in China and the US.

But there is a sense of this being only a partial account, with only very limited attention to the more generalised inflation of debt across a very large number of countries.

Ten years after: is the system "Safer, Simpler & Fairer"?

The shadow money banking system in its use of continuously repriced collateral is reliant on opacity, leverage and global interconnectedness. It is therefore highly pro-cyclical. Will the next systemic crisis occur when markets lose confidence in the 'fair valuation' of collateral used in shadow banking? 

10 years after: a series reflecting on the Great Financial Crisis

PRIME (working with the New Weather Institute) organised an event at the TUC to commemorate the day - 9th August, 2007 - that inter-bank lending froze, central banks came to the rescue, and the Global Financial Crisis began in earnest. We will be publishing transcripts and notes from that event, chaired by Ann Pettifor and with contributions by Frances Coppola, Professor Daniela Gabor and Andrew Simms of the New Weather Institute.  We will shortly publish articles written before August, 2007 that warned of the forthcoming crisis. To begin the series, we are posting a longer version of an article written by Ann Pettifor and published in Red Pepper on 8 August, 2017 - The economic crash, ten years on

The gaping contradictions in EU bank bail-out law and policy

The EU’s hugely complex banking resolution framework is generally supposed to have one key goal – to ensure that failing banks are ‘resolved’ without recourse to public bail-outs, thereby breaking the link between banks and sovereigns…  The reality, we have seen today, is quite different – and, it seems, legal. 

The EU can just about argue that technically, the rules have not been broken - but overall, the appearance is of a policy in logical disarray once again.

Masters of the Universe

Today the New York Times reports that the Japanese conglomerate SoftBank will buy an American private equity firm, Fortress Investment Group, that oversees $70 billion in assets.  Fortress specialises in dealing with 'distressed assets' - i.e. assets procured cheaply because of forced sales, bankruptcies or other misfortunes. As the NYT explains, Fortress is "an entity that is regulated - if relatively lightly compared with, say a bank." 

 

"The production of money": Ann Pettifor's LSE lecture

PRIME's director Ann Pettifor gave a lecture on 8th February 2017 on "The Production of Money" at the LSE, at the invitation of the Department of Economics and the Centre for Macroeconomics.  The lecture was recorded by the LSE, and can be listened to as an audio podcast.  Her new book (of the same title) is published by Verso and is available from the Verso website.  Read on for the written text of Ann's lecture, which we also link to as a pdf.

The written version of the lecture is set out below, and is also available as a pdf here.

 

Ann Pettifor's new book

This week sees the launch of Ann Pettifor’s new book, “The Production of Money”, published by Verso, in which she explains how money is created, and how democracies can – indeed must - reclaim control over “money production” and restrain the out-of-control finance sector so that it serves the interests of society, as well as the needs of the ecosystem.

The book’s publication is timely, coming at the very time that minority President Trump announces his intention and measures to once more deregulate the US, and therefore the global, finance sector. 

Businesses, banks and vulture funds - it's time to redress the balance

Businesses are, on the whole, poorly served by both regulation and law. The financial crisis of the last decade has shown cracks in our system that must be addressed if we are not to have a repeat of events in the future.  

The toxic culture in banking institutions contributed to the financial collapse, but if we are to address the root causes of the problems, we must look not just to the culture that fanned the flames of the economic collapse, but also to the regulations and laws that fail businesses time and again. 

Is Brexit Moment a Lehman Moment? Fear Factor in Financial Crises

The Lehman moment is the moment when Lehman Brothers—one of the largest investment banks in the United States (US) at the time—collapsed. The collapse happened on 15 September 2008. Almost nobody disagrees with that the Lehman moment has been the most important moment in the ongoing global financial crisis that started in the summer of 2007, at least, up until the Brexit moment.

A political and economic case for voting to Remain in the EU

The case for Britain to Remain within the EU is to my mind, largely a political case. The political forces pressing for a rupture with the Union are not on the whole progressive, although there are many sincere Leave campaigners on the Left of the spectrum. ‘Brexiters’ are mostly insular, nationalistic and sometimes racist, especially in relation to immigrants and refugees. 

With few exceptions the Brexit leaders are market fundamentalists, anxious to blame foreigners for the state of our economy; to attack European ordoliberalism rather than the – if anything more damaging - Anglo-Saxon Osbornomics. Their approach is particularly ironic, given that today’s European Union is today much more like Britain than it was before. European populist discontent owes much to the impact of Anglo-Saxon economic policies for the liberalisation of finance and the privatisation of public assets.  

Uber, Newsnight and Donald Trump

I fluffed my lines on a recent BBC Newsnight  segment on Uber.  As the discussion was wrapping up, I warned that the uberisation of the economy – the ambition to corral the entire cash flow of whole sectors of the global economy into the pockets of a few - is utopian.

My fellow guest, Julie Meyer of Ariadne Capital, shared her dystopian vision of a world in which companies like Uber will apparently “enable the future infrastructure of the (global) transportation industry”. One in which the owners of a few companies are about to become “the organisations who organise the economics for these ecosystems”.

Bernie Sanders at the Vatican: we face a moral as well as political challenge

Last Friday (15th April), US Democrat candidate for President, Bernie Sanders, made a powerful speech at the Vatican's Pontifical Academy of Social Sciences.  We felt that  his contribution - which has not been widely cited in the UK media - is well worth setting out in full for PRIME readers.

It is an important contemporary reflection on the role of money - and economics - in today's world, and on the need for a moral as well as political response to the challenges of inequality and environmental degradation.

So. Farewell Sir Nicholas. Yes, you were monumentally wrong

In memoriam of the career of Sir Nicholas Macpherson, upon his retirement

After E.J.Thribb, Private Eye’s 17½ year old poet

So. Farewell
Then
Sir Nicholas
Permanent Secretary to
The Treasury

How did you
Manage
Within ten years

To nearly destroy not once but
Twice
The UK economy

Finance rules Britain: what the numbers tell us

The allegation that finance capital (“the City”) rules Britain appears frequently in the media, based on several inter-related arguments: 1) the large amount of revenue generated by the City makes the UK government beholden to finance capital; 2) finance funds the Conservative Party and strongly influenced Labour under Blair and Brown; and 3) the economic power of finance is so great that no government could take the political initiative to reform the City.  

Straightforward legislative changes would reduce power arising from public revenue generation and party funding.  Much more difficult, to the point of intractable, is the power of finance arising from its role in the UK economy as a whole. 

Financialised globalisation enhances, not reduces, global inequality

Oxfam made the headlines today, on the eve of this year's Davos World Economic Forum, with their claim that the world we live in is becoming ever more economically unequal and unjust.

The proselytisers for financialised globalisation counter-claim that extreme poverty worldwide has never fallen so rapidly as in recent years.  While there has been such a fall, which is very welcome, it has taken place over a longer period, and is due to longer-term changes.

It is wrong to blame China for the global economy’s woes

The year 2015 began with the Chancellor, George Osborne ‘welcoming’ the news that inflation had fallen in December 2014 to 0.5% - more than 1% below the official target. The FT declared that “this is almost certainly 'good deflation'". 

In his subsequent letter to the Chancellor the governor of the Bank of England attributed the fall to “unusually low contributions from movements in energy, food and other goods prices.”  In other words he described the symptoms - falling prices - and neglected to analyse or explain the cause of such falls. 

In our view the cause of deflationary pressures lies with the ongoing Global Financial Crisis (GFC), which has not as yet been resolved. 

Shared unemployment insurance: helping refocus the Eurozone on convergence and cohesion

The divergences developed between core and periphery within the euro area represent the main threat to the existence of the single currency and to the cohesion and stability of the EU as a whole.

If divergence and asymmetries are not dealt with through substantial EMU reform, continuing stagnation may turn greater shares of the electorate against the euro as well as the EU. Reconstruction will be blocked, and the only choice will be between orderly or disorderly deconstruction.

In recent years, various forms of common unemployment insurance have been examined as one of the possible ways to improve the functioning of the EMU through automatic stabilisation.