Now that we have a $1 trillion proof of the profoundly mistaken faith in financial capaitalism, can we please stop listening to financial analysts, economists and other self-interested rideralongs when discussing prosperity, success and what supposedly needs to be done to improve the lives of citizens?

Sounds like an excellent LTE.

Don't fight forces, use them R. Buckminster Fuller.

Lack of wholesale competition blamed

Despite the widespread view that household bills are rising because retail energy companies are making excess profits, some experts say the real problems lie in the wholesale market.

(...)

The roots of the problems in the wholesale market lie in three changes over the past decade: the decline of independent power generation, the disappearance of a liquid trading market and the introduction of the New Electricity Trading Arrangements (Neta) to replace the old electricity "pool" in 2001.

Independent power generation has been in decline in Britain since very low power prices in the first half of the decade forced many companies out of the market, including US groups such as AES, AEP and TXU. Today about 60 per cent of Britain's electricity is generated by the "big six" integrated suppliers.

Electricity trading has been in decline since the failure of Enron, which played an important role in creating liquidity in the UK power market.

(...)

Neta (later reformed and renamed the British Electricity Trading and Transmission Arrangements, or Betta) is a freer market than the pool it replaced. But Dieter Helm of New College Oxford says it gave "enormous benefits" to the big integrated suppliers.

Markets were liberalised. Competition ensued, with significant collateral damage (bankruptcies, bank defaults, price volatility). Competitors did what they could to be profitable, and that included consolidation and internalisation of supply to avoid price risk, within the existing framework.

The regulatory framework was constantly updated to try to be on top of things.

And yet it does not work (for strange values of "not working", by the way - the problem seeming to be high prices: since when were outsiders meant to second guess the prices set by the markets?).

So, either:

(i) regulation is not done properly - but after so many attempts, you'd think that they'd either get it right, or conclude that it's not possible to do so; or

(ii) it's the whole concept of competitive markets for energy which is problematic, given that techncial constraints that apply, the consistent (and rational, and logical, and actually desirable) behavior of the big players to ensure their own stability and the political sensitivity of the topic ;

But no, the conclusion is "more competition"...

In the long run, we're all dead. John Maynard Keynes

US wealth gap dramatically widens

The gap between the richest and poorest in the US has widened dramatically since the late 1980s, while the incomes of the least well-off have fallen since the start of the decade, according to a report out on Wednesday .

The nation's wealthiest 5 per cent of families were paid, on average, more than 12 times as much as the poorest fifth in 2004-2006, compared with nearly nine times as much in 1987-1989. During the period, the richest fifth of families added more to their income in each year than the poorest fifth did over the entire period, the study by the Economic Policy Institute and Center on Budget and Policy Priorities shows.

But the poorest people in the US were not the only ones to feel the pinch of increased inequality. The report, which studied changes in income after accounting for federal tax and inflation, found that those in the middle also saw their wages grow slowly compared with the better-off.

In the long run, we're all dead. John Maynard Keynes

BBC NEWS | Business | IMF slashes world growth forecast

In its latest economic forecast, the IMF says that world economic growth will slow to 3.7% in 2008 and 2009, 1.25% lower than growth in 2007.

The downturn will be led by the US, which the IMF believes will go into a "mild recession" this year.

They are also predicting the US economy stagnating till at least 2009

Any idiot can face a crisis - it's day to day living that wears you out.

Funny, though, if your look at the breakdown of exposure by type of investor, the unregulated hedge funds actually look relatively good. They didn't go quite as hog-wild in buying this junk like the banks.

Dialog International

Reform" does not work. Looting the workers does not create prosperity, it only helps transfer it from one sector of the economy (which creates it) to another (which wastes a good chunk of it, but given how few people share the spoils, it's still worth it for them, obviously).

You make it sound like they didn't know that to start with. It's a feature, not a fault. Wealth capture is good for the few and seeing as they're the ones making policy, what's not to like ?

Course it's no way to democratically govern a country for the common good, but who's trying to do that these days ?

keep to the Fen Causeway

Banks take blame for credit crisis

The world's leading banks on Wednesday publicly accepted much of the blame for the credit crisis in an attempt to stave off calls for more regulation, even as the International Monetary Fund slashed its estimates for global growth and warned that the US would suffer a recession.

The Institute of International Finance, representing more than 375 of the world's largest financial companies, acknowledged "major points of weaknesses in business practices", including bankers' pay and the management of risk.

But it said it would be "completely wrong" for the authorities to impose much greater regulation on the industry.

(...)

The IIF report detailed banks' failings in managing risks, conflicts of interest over bankers' pay, over-reliance on models, and inadequate protection against liquidity shortages. It also pointed to failures in credit ratings agencies and the dangers of mark-to-market accounting at times of illiquidity in creating a vicious circle of forced asset sales, lower prices, further writedowns and more asset sales.

Bwahahahaha.

In the long run, we're all dead. John Maynard Keynes

Volcker Says Fed's Bear Loan Stretches Legal Power

April 8 (Bloomberg) -- Former Federal Reserve Chairman Paul Volcker questioned the central bank's decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at ``the very edge'' of its legal authority.

``The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles and practices,'' Volcker said in a speech to the Economic Club of New York.

(...)

``The extension of lending directly to non-banking financial institutions -- while under the authority of nominally `temporary' emergency powers -- will surely be interpreted as an implied promise of similar action in times of future turmoil,'' he said.

Volcker said the modern financial system has ``failed the test'' of the marketplace. When asked whether he predicts a ``dollar crisis,'' he said, ``you don't have to predict it, you're in it.''

Ouch.

In the long run, we're all dead. John Maynard Keynes

Reform

"How much more proof do we need?"

Wrong question.  Most Eurotribune readers have long been convinced.  The real question is "What will convince a majority of the citizens of the good 'ole USA of the fatuous nature of the reigning paradigm, whether you call it corporate capitalism or "the anglo disease." An opportunity may be forming for a paradigm shift.

As long as the majority of citizens can continue to feel good about themselves and about their children's future it will be very difficult to accept the perniciousness of  popular beliefs about the nature of their society and economy, even when the application of those beliefs is so demonstrably damaging to their own self interest.  This is the dark side of idealism.

Everyone wants to feel good about themselves and they will go to great lengths to do so. The first response to something that disrupts that "feel-good" is an instinct to defend it.  That often takes the form of denial, which is at once the most primitive and powerful psychic defense mechanism. It usually only fails catastrophiclly. Such a catastrophe may be at hand.

The task at hand is to have a significant number of citizens understand the true source of the crisis and not to allow blame to be fobbed off onto those with the temerity to criticize the existing order.  

This is no trivial task considering that close to a majority of USA voters voted for the incumbent president--twice, and considering that, until recently, the most characteristic expression of high officials of said administration, (viz Rumsfield, Gonzoles and Bush), was the smirk. And they had a lot to smirk about: Iraq, Bush tax relief for the rich, turning Medicare Part D into a boondoggle for big pharma and health care providers and systematiclly subverting the constitution which they had sworn to uphold.  In effect the affairs of the government of the USA were conducted as though they were the greatest rich boy fraternity prank of all time.  It may well have been just that.

Do not underestimate W and company.  Else the Bush 43 administration might be seen as the high point of  21st century US and world history.  I fear for your future.


"It is not necessary to have hope in order to persevere."