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Nationalisation; Bailout or Something Else....

by ChrisCook Sun Sep 28th, 2008 at 06:34:06 AM EST

I read the FT's defence yesterday of free markets

In praise of free markets

and was moved to write the following LTE, which will undoubtedly go the way of most of the rest...

Dear Sir

Further to your leader yesterday, as a former market regulator - I recently gave evidence to  the Treasury Select Committee in relation to oil market regulation -  I naturally advocate a market solution.

But to borrow language from Dr Yunus of Grameen Bank, I advocate a market which operates "Not for Loss", rather than "For Profit".

The UK bit the bullet and chose the "Public" solution of nationalisation : the US twists and turns to find a "Private" or  "For Profit" solution, albeit a genetically modified one.

I propose a "Not for Loss" synthesis in the form of a "Capital Partnership" within the framework of a UK LLP or US LLC.

A Bradford & Bingley Partnership would operate as follows:

Step One: B & B assets are put into the hands of a "Custodian".

Step Two: existing B & B Equity is exchanged for proportional "Units" in B & B gross revenues eg billionths.

Step Three:  the B & B "rump" now stripped of finance capital remains as "human capital"  which receives an agreed proportional allocation of Units as a "Managing Partner",

Step Four: the Treasury introduces Public investment as necessary and in exchange receives Units from the Investor allocation, thereby diluting existing Investors.

Such a "Capital Partnership" is a simple, but radical "hybrid" solution, but transcends the "Principal/Agency" conflict between the interests of owners and management which both the UK and US leave intact in different ways.

The interests of B & B management and B & B investors - whether public or private - are now aligned in a simple, radical, and, believe it or not, Islamically sound, way.

It's not Rocket Science.

Yours faithfully

Chris Cook

Update [2008-9-29 9:5:21 by ChrisCook]:

The "Glasgow Herald" published today a slight variant of my FT LTE

Introducing a new market solution for banking crisis

Probably too radical for the FT!

published this week at Counterpunch: "An Islamic Perspective, Meltdown in American Markets" by Liaquat Ali Khan. He mentions a Harvard University Forum on Islamic Finance held this past April. Oddly enough, it appears this annual conference is hosted by HLS.

Would you recommend or not interested readers purchasing  books of the proceedings? Just how academic with respect to Anglo-Saxon business ethics is such conference literature?

Diversity is the key to economic and political evolution.

by Cat on Sun Sep 28th, 2008 at 04:29:05 PM EST
I would not recommend it.

Maybe it's sour grapes because they rejected my abstract! Maybe they won't next time, because there may be very little left of the conventional system left to discuss....

Both the greater part of that seminar and virtually the entire conventional Islamic Finance "industry" apply an Islamic veneer to an UnIslamic reality: or a "'halal' window on a 'haram' palace" as I have heard it said.

A small number of very highly paid scholars apply a great deal of sophistry to justify the unjustifiable. It is a situation which reminds me irresistibly of the purchasing of 'indulgences' which was one of the factors which led to the Reformation.

A Bear of Little Islamic Brain, like me, finds it impossible to see - from my relatively restricted reading to date in the three years since I discovered that what I advocate actually is Islamic finance - how "Money as Debt" and any kind of "leverage" or "gearing" can ever be compatible with Islam.

But as I have often said, I think that in fact "Ethical is Optimal", and if so, the philosophical question which follows:

"Is Ethics a subset of Islam; or Islam a subset of Ethics; or is it all One?"

And so back to a second glass of wine....

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

by ChrisCook (cojockathotmaildotcom) on Sun Sep 28th, 2008 at 04:59:15 PM EST
[ Parent ]
Wine or not, this is an important point.

There are useful truths at the core of all religions. Different ways of looking at living. But the Islamic stance on usury is a special case - however sullied it is now, in practice.

The question is: what is a bank?

You can't be me, I'm taken

by Sven Triloqvist on Sun Sep 28th, 2008 at 05:49:19 PM EST
[ Parent ]
In Islamic finance any different than Christian finance? From the General theory
I was brought up to believe that the attitude of the Medieval Church to the rate of interest was inherently absurd, and that the subtle discussions aimed at distinguishing the return on money-loans from the return to active investment were merely Jesuitical attempts to find a practical escape from a foolish theory. But I now read these discussions as an honest intellectual effort to keep separate what the classical theory has inextricably confused together, namely, the rate of interest and the marginal efficiency of capital. For it now seems clear that the disquisitions of the schoolmen were directed towards the elucidation of a formula which should allow the schedule of the marginal efficiency of capital to be high, whilst using rule and custom and the moral law to keep down the rate of interest.
by gk (gk (gk quattro due due sette @gmail.com)) on Mon Sep 29th, 2008 at 01:24:02 AM EST
[ Parent ]
I have this reputation of being this fringe fanatic, the guy holding the Armageddon is Soon sign.  A tin foil hatter.

The reality is that markets have not been "free" for quite some time.  "Free" means subsidized by manipulated governmental policy on a global basis.  "Free" means subsidized by the financial houses of the entire western world.  "Free" means shipping lanes protected by the western world.

"Free" markets means the gold rush that is the rest of the world is NEVER Ever published or spoken about in domestic US "media".

Fuck "free" markets for the concept of exploited people for profit comes from Satan himself.

by Lasthorseman on Sun Sep 28th, 2008 at 05:05:43 PM EST
You've lost your sense of humor again, Horseman.

Diversity is the key to economic and political evolution.
by Cat on Sun Sep 28th, 2008 at 06:03:29 PM EST
[ Parent ]
It is several things.  The calculated de-construction of a barely functioning manufacturing company based in the US.  It is the future Yale business school case study of an "American" company who "screwed up" and offered a far too generous "early retirement" package.  Well the real workers, those who knew how to do things beneficial to the company took "the package" knowing full well that disruptive technology would soon obsolete their jobs.

Me coming from advanced research I know that the shit you buy is crap and would last ten times longer, burn brighter save for the fact that assholian bean counters mandate that in this country sans the slave labor of China one must make seven thousand of these pieces of shit they sell you at Walmart per hour.

I am after your freeerisa.com golden parachute package and your reservation to your personal underground safehouse "secure location" don't you know.

by Lasthorseman on Sun Sep 28th, 2008 at 07:44:19 PM EST
[ Parent ]

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