söndag 19 april 2009

Gömställen finns inte inför den stora kollapsen

SvDs Rolf Gustavsson skriver följade synnerligen intressanta kolumn i dagens tidning som i realiteten i sin tur är ett referat av Martin Wolfs FT artikel från i Onsdags. Jag klippte ut de viktigaste delarna från Gustavssons inlägg och det blev nästan hela artikeln. Tog även med Wolfs hela FT artikel, för de av er som inte är FT prenumeranter.

Mycket, mycket viktig läsning och visar att det finns de som nu iaktar vad som skett och håller på att ske utifrån ett mycket nyktert och kritiskt perspektiv. I synnerhet det som tidigare nobelpristagaren Joseph Steiglitz säger ang det faktum att nu pengar från skattebetalare för över till i realiteten redan insolventa bankintressen och vilka konsekvenser detta får när väl allmänheten konkret får detta klart för sig är något som inte nog kan understrykas.

När en insider som Simon Jonsons dels inte bara talar klartext och levererar sin klockrena analys utan även detta tillåts att komma fram i media på detta sätt tycker jag det är det som i realiteten inger hopp. Även om budskapet i sig är så nattsvart. Som vanligt gäller "a problem well stated is a problem half solved" och skulle alla kunna enas om problemets grundläggande natur så blir steget till att hitta lösningarna betydligt lättare. Klart är nog att etablisemangets företrädare ex Paulsson, Geitner och som i realiteten är de som varit med och skapat problemet inte ingår som en komponent i detta arbete att hitta bästa vägen ur detta dilemma.

Gömställen finns inte inför den stora kollapsen
När Financial Times mycket respekterade kommentator Martin Wolf i onsdags lyfte fram samma artikel fick jag bekräftat att Stig borta i Antipodien spårat upp en viktig analys som hjälp att förstå läget.

I artikeln beskriver provokativt Simon Johnson upprinnelsen i USA. Som tidigare chefsekonom vid Internationella Valutafonden (IMF) drar han slutsatsen att grundstrukturen har deprimerande likheter med vad han tidigare sett i finanskriser i andra länder, som Ryssland, Ukraina och Indonesien. Därför skulle IMF, denna världssamfundets klinik för akut finansiell intensivvård, kunna rekommendera samma medicin i USA som på andra håll.

IMF:s standardrecept brukar vara en hästkur som ingen regering vill höra: sanera bankväsendet (ofta genom förstatligande) och bekämpa oligarkerna. Eftersom USA levt på krita lika ansvarslöst som olika bananrepubliker så skulle samma hästkur kunna tillämpas där. Men USA är annorlunda eftersom landet har världens mest avancerade ekonomi och samtidigt den mest sofistikerade oligarkin (i form av personallianser mellan Wall Street och Washington). Dessutom åtnjuter USA det formidabla privilegiet att landet i stor utsträckning kan finansiera sina skulder genom sin egen valuta, i sista hand över sedelpressen.

Det vi för tillfället bevittnar under president Obama är möjligen, i bästa fall, en inledning till den första delen i IMF:s hästkur, det vill säga saneringen av bankväsendet. Det pågår en så kallad stress test av de största bankerna och finansministern Tim Geithner har föreslagit ett räddningspaket. Men om man får tro på auktoriteter som nobelpristagaren Joseph Stiglitz så innebär den föreslagna metoden ett mycket komplicerat partnerskap med staten som främst leder till transfereringar från skattebetalarna till bankirerna. Stiglitz förutser att när det klarnar så eroderar förtroendet ytterligare för finansmarknaderna (och dess oligarker).

I slutet av sin artikel spekulerar Simon Johnson kortfattat i ett scenario där de globala efterverkningarna av finanskrisen kan bli mycket dramatiska. I Europa skulle de sprida sig från Öst- och Centraleuropa genom de integrerade bankmarknaderna till Västeuropa. Är det inte just detta som håller på att ske i dessa yttersta dagar?

Den gängse visdomen säger att dagens kris inte kan bli så allvarlig som den stora depressionen på 1930-talet. Det är fel, skriver Simon Johnson. I dag är banksektorn mycket större och idag är världen finansiellt mycket tätare sammanflätad.
http://www.svd.se/opinion/kolumnister/rolfgustavsson/artikel_2758899.svd

Is America the new Russia?
Is the US Russia? The question seems provocative, if not outrageous. Yet the person asking it is Simon Johnson, former chief economist at the International Monetary Fund and a professor at the Sloan School of Management at the Massachusetts Institute of Technology. In an article in the May issue of the Atlantic Monthly, Prof Johnson compares the hold of the “financial oligarchy” over US policy with that of business elites in emerging countries. Do such comparisons make sense? The answer is Yes, but only up to a point.

“In its depth and suddenness,” argues Prof Johnson, “the US economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets.” The similarity is evident: large inflows of foreign capital; torrid credit growth; excessive leverage; bubbles in asset prices, particularly property; and, finally, asset-price collapses and financial catastrophe.

“But,” adds Prof Johnson, “there’s a deeper and more disturbing similarity: elite business interests – financiers, in the case of the US – played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse.” Moreover, “the great wealth that the financial sector created and concentrated gave bankers enormous political weight.”

Now, argues Prof Johnson, the weight of the financial sector is preventing resolution of the crisis. Banks “do not want to recognise the full extent of their losses, because that would likely expose them as insolvent ... This behaviour is corrosive: unhealthy banks either do not lend (hoarding money to shore up reserves) or they make desperate gambles on high-risk loans and investments that could pay off big, but probably won’t pay off at all. In either case, the economy suffers further, and, as it does, bank assets themselves continue to deteriorate – creating a highly destructive cycle.”

Does such an analysis make sense? This is a question I thought about during my recent three-month stay in New York and visits to Washington, DC, now capital of global finance. It is why Prof Johnson’s analysis is so important.

Unquestionably, we have witnessed a massive rise in the significance of the financial sector. In 2002, the sector generated an astonishing 41 per cent of US domestic corporate profits (see chart). In 2008, US private indebtedness reached 295 per cent of gross domestic product, a record, up from 112 per cent in 1976, while financial sector debt reached 121 per cent of GDP in 2008. Average pay in the sector rose from close to the average for all industries between 1948 and 1982 to 181 per cent of it in 2007.

In recent research, Thomas Philippon of New York University’s Stern School of Business and Ariell Reshef of the University of Virginia conclude that the financial sector was a high-skill, high-wage industry between 1909 and 1933. It then went into relative decline until 1980, whereupon it again started to be a high-skill, high-wage sector.* They conclude that the prime cause was deregulation, which “unleashes creativity and innovation and increases demand for skilled workers”.

Deregulation also generates growth of credit, the raw stuff the financial sector creates and on which it feeds. Transmutation of credit into income is why the profitability of the financial system can be illusory. Equally, the expansion of the financial sector will reverse, at least within the US: credit growth and leverage masked low or even non-existent profitability of much activity, which will disappear, and part of the debt must also be liquidated. The golden age of Wall Street is over: the return of regulation is cause and consequence of this shift.

Yet Prof Johnson makes a stronger point than this. He argues that the refusal of powerful institutions to admit losses – aided and abetted by a government in thrall to the “money-changers” – may make it impossible to escape from the crisis. Moreover, since the US enjoys the privilege of being able to borrow in its own currency it is far easier for it than for mere emerging economies to paper over cracks, turning crisis into long-term economic malaise. So we have witnessed a series of improvisations or “deals” whose underlying aim is to rescue as much of the financial system as possible in as generous a way as policymakers think they can get away with.

I agree with the critique of the policies adopted so far. In the debate on the Financial Times’s economists’ forum on Treasury secretary Tim Geithner’s “public/private investment partnership”, the critics are right: if it works, it is because it is a non-transparent way of transferring taxpayer wealth to banks. But it is unlikely to fill the capital hole that the markets are, at present, ignoring, as Michael Pomerleano argues. Nor am I persuaded that the “stress tests” of bank capital under way will lead to action that fills the capital hole.

Yet do these weaknesses make the US into Russia? No. In many emerging economies corruption is egregious and overt. In the US, influence comes as much from a system of beliefs as from lobbying (although the latter was not absent). What was good for Wall Street was deemed good for the world. The result was a bipartisan programme of ill-designed deregulation for the US and, given its influence, the world.

Moreover, the belief that Wall Street needs to be preserved largely as it is now is mainly a consequence of fear. The view that large and complex financial institutions are too big to fail may be wrong. But it is easy to understand why intelligent policymakers shrink from testing it. At the same time, politicians fear a public backlash against large infusions of public capital. So, like Japan, the US is caught between the elite’s fear of bankruptcy and the public’s loathing of bail-outs. This is a more complex phenomenon than the “quiet coup” Prof Johnson describes.

Yet decisive restructuring is indeed necessary. This is not because returning the economy to the debt-fuelled growth of recent years is either feasible or desirable. But two things must be achieved: first, the core financial institutions must become credibly solvent; and, second, no profit-seeking private institution can remain too big to fail. That is not capitalism, but socialism. That is one of the points on which the right and the left agree. They are right. Bankruptcy – and so losses for unsecured creditors – must be a part of any durable solution. Without that change, the resolution of this crisis can only be the harbinger of the next.

*Wages and Human Capital in the US Financial Industry 1909-2006, January 2009, http://www.nber.org/
http://www.ft.com/cms/s/0/09f8c996-2930-11de-bc5e-00144feabdc0.html

Nobel Prize winner Joseph Stiglitz says Wall St ties threaten bank-rescue plan
Nobel Prize-winning economist Joseph Stiglitz has warned the US bank-rescue plan is likely to fail as its architects are either in the "pocket of the banks or incompetent”.
America has had a revolving door. People go from Wall Street to Treasury and back to Wall Street. Even if there is no quid pro quo, that is not the issue. The issue is the mindset.”
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5169582/Nobel-Prize-winner-Joseph-Stiglitz-says-Wall-St-ties-threaten-bank-rescue-plan.html

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