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Where I actually fundamentally disagree with you is that in the peer-to-peer mechanisms, there isn't anyone to vouch - by having skin in the game - the quality of the underlying projects. By having banks doing the lending and keeping the assets on their books, you do have that quality control. And as we know, this is a vital service.

Why can't everyone have skin in the game? God knows that this has been the default outcome of the current fiasco.

Bank capital is scarce, and a lot scarcer in fact than current window-dressing discloses. I have always thought that you are a long-standing proponent of the State's role in infrastructure ownership and development. Yet you are saying here - as I understand it - that it is for banks to provide the role of guarantor rather than end user producers and consumers collectively, backed by States.

I believe that the global markets in energy should be explicitly underpinned by producers and consumers  collectively and backed explicitly by international government agreement. This could be achieved through the creation of 'International Clearing Unions', which would be global agreements (not organisations!) underpinning the creation, development and operation of productive energy assets.

I agree with you that quality control is a a vital service, and that banks could and should be providing it.

I just don't see why banks - rather than market participants generally - should put their capital at risk in order to achieve this. Although I do believe that the income that bankers receive in respect of the use of their 'Human Capital' should be performance related to avoid moral hazard.

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

by ChrisCook (cojockathotmaildotcom) on Sun Jan 3rd, 2010 at 11:18:32 AM EST
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