Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

[LargoWinch]

Professor Jeffrey Sachs, who has advised the IMF and World Bank, Gillian Tett from the Financial Times and hedge fund manager Hugh Hendry join Jeremy Paxman on Newsnight for a lively exchange on the chances of a second banking crisis.
Broadcast on Wednesday 27 May 2010.
Link here.

Runtime: 8min.

[marvenger]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

Jeffrey Sachs is just astonishing in his denial, that tenure of his must sure make him comfortable while handing out the kool-aid. At the end he was talking about how regulatory authorities already have everything under control and the tools they needs....move along nothing needs fixing here. Jesus , i want to strangle some of these guys, what pompous little dweeb

[LargoWinch]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

Jeffrey Sachs is just astonishing in his denial, that tenure of his must sure make him comfortable while handing out the kool-aid. At the end he was talking about how regulatory authorities already have everything under control and the tools they needs....move along nothing needs fixing here. Jesus , i want to strangle some of these guys, what pompous little dweeb

I agree marvenger and I must say that I used to be a big fan of Sachs.

I guess there are only a handful few we can truly trust anymore.

[Diarmuid]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

I agree marvenger and I must say that I used to be a big fan of Sachs.

I guess there are only a handful few we can truly trust anymore.

agree - he is maintaining the current meme - the recession / depression / crisis is as much the fault of the governments and ergo by virtue of "democratic repersentation" the over indulgent masses (now deep in negative equity) as much as the fault lies with banks, rather than, wholesale corruption and theft at the highest levels of finance, too big to fail doctrine, moral hazard etc. - hand me the sickbag - does anyone pay attention to these shills anymore?

[oddlots]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

Wow... I'm sort of curious about what was said before the camera was turned on. FROSTY.

It reminded me of this conversation between Joe Stiglitz, Hendry and the Spanish Economy Minister:

http://economicedge.blogspot.com/201...iglitz-on.html

Hendry seems to like baiting the establishment liberals.

I'm a bit torn. I like Hendry and applaud the fact that he is repeating Hudson's mantra: "Debts that can't be paid won't." Also loved the fact that he calls folly folly and blames it on the banks where it belongs. (Greek, French, German... who cares.) Also, that he seems to accept that it's the failure of the financial system and then it's bailout that has brought on (accelerated?) the sovereign debt crisis.

The thing that makes me uneasy, apart from the fact that I'm sure he's talking his book, is this: is there any role that a central bank can play in a crisis that does not amount to kicking the can down the road that Hendry would accept?

Surely the most easily accepted point of central banking (for example Lombard Street) is the idea that there are some dynamics that can become death spirals that need not be. That is surely the public utility argument for central banking as commonly understood. (The reality of central banking is somewhat different obviously.) I think that is the real point that Merkel and Stiglitz at least are trying to make (and I think Stiglitz made a real hash of arguing it.)

Now that is, I guess the nub of the issue: need it be?

Let me put it this way. I would like to ask Hendry what would give a central bank the right to nationalise the assets of a private bank, write the equity down to nothing, and give the bondholders a haircut (as he so rightly implies is the right approach, a la Sweden in the early 90s)? I would say it is the public good and that the public good trumps the market. So I think he does his argument a disservice by coming across as saying markets uber alles. In fact the primacy of the political sphere is implicit in his argument. What he really should be saying is that the markets are trying to force governments to act like governments and stop pandering to private interests (e.g. bank shareholders.)

There, fixed it for you Hugh. (You're welcome.);)

By the way, thought this was good for a laugh:

http://www.abc.net.au/news/video/2010/05/20/2905304.htm

[Shakespear]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

I like Hendry's comment that he and the lady from FT lose their jobs if they are wrong. Sachs has his tenure as insurance whether he is right or wrong. Sachs was ready to Blow (body language) but being on codeine held it together quite well

Wow... I'm sort of curious about what was said before the camera was turned on. FROSTY.

I thought the same thing seeing how Sachs and Hendry were sitting. GOOD observation !!!! :0

[*T*]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

It is instructive Hendry said to "purge the rottenness out of the system" which is a direct quote from Andrew Mellon:

Mellon became unpopular with the onset of the Great Depression. He advised Herbert Hoover to "liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."[7] Additionally, he advocated the weeding out "weak" banks as a harsh but necessary prerequisite to the recovery of the banking system. This "weeding out" was accomplished through refusing to lend cash to banks (taking loans and other investments as collateral), and by refusing to put more cash in circulation. He advocated spending cuts to keep the Federal budget balanced, and opposed fiscal stimulus measures. In 1929-31, he spent much of the time overseas, negotiating for repayment of European war debts from World War I. In February 1932, Mellon left the Treasury Department and accepted the post of U.S. Ambassador to the United Kingdom. He served for one year and then retired to private life.

which resulted in this:

Impeachment Proceedings
In January 1932, Rep. Wright Patman and others introduced articles of Impeachment against Mellon, with hearings before the House Judiciary Committee at the end of that month.[8] After the hearings were over, but before the scheduled vote on whether to report the articles to the full House, Mellon accepted an appointment to the post of Ambassador to the Court of St. James, and resigned, thus rendering further action on the issue moot.

They all three know the reality, but Sachs is tied into the IMF power structure / torture mechanism so can't admit that austerity measures will make things worse.

Sachs is essentially a politician, not an economist, as all top-level economists are.

[marvenger]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

Hendry was also promoting debt forgiveness and haircuts for creditors. There's a big difference between that and Mellons policies. One rewards powerful financiers with info advantage gaming the sytem through ponzi schemes and crashes and the other doesn't.

[*T*]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

Hendry was also promoting debt forgiveness and haircuts for creditors. There's a big difference between that and Mellons policies. One rewards powerful financiers with info advantage gaming the sytem through ponzi schemes and crashes and the other doesn't.

Well observed.

[sunskyfan]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

The "Haves" and "Have Nots" is not about wealth anymore it is whether you have a contracted income or you don't. This is the root of the "Sachs has tenor" thread of thought and is essential to understanding this crisis. People who have not missed a pay check see all the measures taken by government as sound policy and called for. People who scramble for a paycheck every week, whether they be business men (non Financial) or the unemployed, know how rotten things have become and see this as an attempt to contract the enormous and unsustainable debt intrinsic to paying Dr. Sach's salary on to the few of us left without any debt via the government and currency manipulation through central banks. These people are financial parasites walking the Earth killing the hosts and unless we disarm them they will kill what healthy folks are still walking around and bring a true collapse.

[yernamehear]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

Wow... I'm sort of curious about what was said before the camera was turned on. FROSTY.

It reminded me of this conversation between Joe Stiglitz, Hendry and the Spanish Economy Minister:

http://economicedge.blogspot.com/201...iglitz-on.html

Hendry seems to like baiting the establishment liberals.

I'm a bit torn. I like Hendry and applaud the fact that he is repeating Hudson's mantra: "Debts that can't be paid won't." Also loved the fact that he calls folly folly and blames it on the banks where it belongs. (Greek, French, German... who cares.) Also, that he seems to accept that it's the failure of the financial system and then it's bailout that has brought on (accelerated?) the sovereign debt crisis.

The thing that makes me uneasy, apart from the fact that I'm sure he's talking his book, is this: is there any role that a central bank can play in a crisis that does not amount to kicking the can down the road that Hendry would accept?

Surely the most easily accepted point of central banking (for example Lombard Street) is the idea that there are some dynamics that can become death spirals that need not be. That is surely the public utility argument for central banking as commonly understood. (The reality of central banking is somewhat different obviously.) I think that is the real point that Merkel and Stiglitz at least are trying to make (and I think Stiglitz made a real hash of arguing it.)

Now that is, I guess the nub of the issue: need it be?

Let me put it this way. I would like to ask Hendry what would give a central bank the right to nationalise the assets of a private bank, write the equity down to nothing, and give the bondholders a haircut (as he so rightly implies is the right approach, a la Sweden in the early 90s)? I would say it is the public good and that the public good trumps the market. So I think he does his argument a disservice by coming across as saying markets uber alles. In fact the primacy of the political sphere is implicit in his argument. What he really should be saying is that the markets are trying to force governments to act like governments and stop pandering to private interests (e.g. bank shareholders.)

There, fixed it for you Hugh. (You're welcome.);)

By the way, thought this was good for a laugh:

http://www.abc.net.au/news/video/2010/05/20/2905304.htm

Not sure I understand you full argument, but I think the bank shareholders and a large fraction of the BOND holders need a haircut. Essentially the shareholders need to go to zero. Several experts have said that the bond holders "have the money" and should/could be required to pay (have their hair cut), based on well known bankruptcy laws.

:cool:

[oddlots]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

Yeah I was clear as mud. I guess what intrigues me about these arguments is that there are several role reversals going on that are quite confusing and I suspect that's quite telling. On the one hand you have Stiglitz and Sachs, famous "liberals" arguing against debt-forgiveness and re-structuring. On the other you have Hendry (echoing Hudson) as well as Roubini arguing that some kind of restructuring is inevitable and therefore we should just get on with it. The liberals are arguing for protecting creditors above all. It's kind of perverse.

The irony to me is that, if Greece (or insert OECD country of your choosing) were a private company there wouldn't be an argument (unless it were in finance of course!): bankruptcy courts would impose haircuts on bonholders as needed and the equity holders would be wiped out. The unfortunates holding the bonds would not have anyone to complain to as they chose to buy them of their own free will and the obvious symbiosis between creditors and debtors is recognised as a matter of course. The morality of it is plain as day and unquestioned.

So why does it get so messed up when you are talking about public debt (or finance for that matter)? Messed up to the point that people like Sachs and Stiglitz are basically put in the position of arguing for the sanctity of debt and Hendry, the market player, is arguing implicitly both 1) that creditors and debtors are basically co-dependants and should share the pain and 2) that governments (either within the EU or through super-national entities) should basically play the role of bankruptcy court and get on with writing the debt off at least partially and then re-capitalising the institutions, surely the most potent display of the primacy of government's role of upholder of the public good, the very power that Stiglitz and Sachs seem to be saying is being usurped by the likes of Hendry. (!)

As I said, it's messed up.

In fact the funniest part of the exchange with Sachs was where Hendry suggests that the banks are at least the proximate cause for the sovereign debt crisis and that they should have been taken over by adults from the onset and Sachs for the first time agrees with something Hendry says!!!! He (Sachs) seems genuinely clueless as to how confused and incoherent his worldview is. Stiglitz was, to my mind, similarly disappointing.

I think this is the real thrust of Hendry's comment about tenure, which I think in the form he made it made him appear petty and small minded. I think his point was, being generous, "I couldn't survive in the market with such an incoherent thesis and neither could you." Or maybe really its more, as someone suggested above, a question of a sympathy between academics and politicians who derive their authority from positions that are not market-tested. I think Hendry demonstrated what a deficiency that really is.

[Jay]

Re: Jeffrey Sachs and Hugh Hendry on banking crisis, BBC - May 27, 2010 (8min.)

Surely the most easily accepted point of central banking (for example Lombard Street) is the idea that there are some dynamics that can become death spirals that need not be.

I think central bankers feel that any sovereign debt restructuring may spark a global self-reinforcing process that they have no control over. Loss of control is what they fear and a ball in the air might bounce any number of ways. Because of this fear, they will put off a restructuring for as long as possible, put on a placid face and hope to hell they can bail the ship. In the meantime they pretend that the world is flat and nothing has changed. Most of the economic scholarly minions have fallen in line as none of them can stomach even hinting that we are screwed. Expectations are, after all, a key economic tool.