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If this second view is right then regulators have failed. They will have to change the rules to try to eliminate the conflicts that imperil the financial system.

This is, IMO, one of the most dangerous memes and it needs serious debunking.

The implication is that regulators were "asleep at the wheel" and "failed us."

The reality is that regulators were handcuffed by lobbying and pernicious propaganda from free-market ideology economists and politicians, whose stated aim was to eventually end regulation altogether.

So, yes, regulators have been imperfect, but the blame lies with those who sought to undermine regulation in the first place. Some of those people were in fact regulators (e.g. Greenspan) but we should never lose sight of the fact that this is a disaster bred at Cato and the "Adam Smith Institute."

[To tie it to another meme, the anti-regulation people thought only of the efficiency of the market, never the robustness or resilience.]

by Metatone (metatone [a|t] gmail (dot) com) on Sat Jan 26th, 2008 at 07:15:07 AM EST
National regulation is powerless in global markets.

And some global "uber regulator" is no answer, either, because it would never be agreed upon.

Global self regulation by all market participants not just the intermediary lunatics who currently own the market asylum - is the answer IMHO with market standards agreed by governments collectively.

Market 3.0 I called it, almost seven years ago now...

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 26th, 2008 at 07:58:40 AM EST
[ Parent ]
National regulation can tax cross-border capital flows. Supranational regulation may have to be agreed along the lines of Keynes' International Clearing Union (updated for the 21st century) if things get much worse. And self-regulations simply doesn't work.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sat Jan 26th, 2008 at 08:39:40 AM EST
[ Parent ]
self-regulations simply doesn't work

Not the way it's been tried.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 26th, 2008 at 09:06:19 AM EST
[ Parent ]
You might as well say that deregulation/unbundling of energy markets hasn't worked the way it's been tried.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sat Jan 26th, 2008 at 10:50:47 AM EST
[ Parent ]
Never mind, "I might as well":  I do!

There has never been such a complete bollocks as the UK electricity market.

But then it is designed to extract the maximum short term profit for shareholders, because their agents are essentially the ones who designed it.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 26th, 2008 at 11:46:50 AM EST
[ Parent ]
And the Californian market (Enron, anyone?).

The point is that deregulation and unbundling is only advocated by those who stand to profit from destroying a working system. It is wasn't for them nobody would have thought of doing it, therefore it doesn't work irrespective of how it's done, because those who might "do it well" won't do it in the first place.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Sat Jan 26th, 2008 at 11:48:34 AM EST
[ Parent ]
That is the conventional wisdom, but as REACH showed in manufacturing, it might not be the case.

It is still the case that certain markets in the world are so important (and the US is one of these in various financial transactions) that regulations there actually filter out to the rest of the system.

Yes, there will be loopholes and yes some people will avoid compliance by moving operations to the Cayman islands. In the end however, a first step to stabilising the system is regulating the activities of savings banks, most of whom do sit in a geographical position they cannot escape.

Now I know you have no interest in measures to stabilise a system you believe to be doomed, but that's a separate issue.

by Metatone (metatone [a|t] gmail (dot) com) on Sat Jan 26th, 2008 at 09:42:35 AM EST
[ Parent ]
I think you mean decentralised multi-stakeholders regulation rather than self-regulation. In that case, I agree, regulation should take place at the relevant level, which varies with the kind of market. However global markets have to be regulated at a global level.

And to insure fairness and transparency, the rules and methods for decentralised multi-stakeholders regulation must be defined and agreed at a global level.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Jan 26th, 2008 at 03:49:26 PM EST
[ Parent ]
Agreed: I did say that Governments would have to set "Market Standards" (at the appropriate level, as you say). ie set the framework within which the "multi-stakeholder" regulation takes place.

There's no difference between "multi-stakeholder" and "self-regulation" by all. It's the same holistic outcome.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 26th, 2008 at 04:23:24 PM EST
[ Parent ]
There's no difference between "multi-stakeholder" and "self-regulation" by all.

Yes, but most people will probably understand "self-regulation" as voluntary regulation by the industry alone (i.e. to leave the financial markets regulation to the banks themselves).

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Jan 26th, 2008 at 04:56:07 PM EST
[ Parent ]
Regulators failed by allowing the giants of hyperfinance to write the regulations, with the FT's approval.
Daily Kos: The dollar has lost 1/3 of its value
I was a central banker and market supervisor during some of the period of deregulation.  In retrospect it was a mistake to let Citibank and Goldman Sachs define what a good market or a good regulation might be.  But there will be lots of time to learn the lessons of the coming collapse once it is past.
No, there won't be time if the FT propagates the idea that the regulators were to blame. The time to talk about how deregulation was wrong is now.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sat Jan 26th, 2008 at 05:24:03 PM EST
[ Parent ]

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