The financial crisis was caused by:

Bad traditional bank lending, based primarily on property lending and to some extent lending to business;
Bad policy by central banks - keeping interest rates deliberately low in order to continue to fuel an asset bubble in property to mask poor economic performance (Brown's end to boom and bust);
Poor US policy in response to the crisis - causing a much deeper crisis than necessary.

In short, investment banking (which does not use people's pensions) was not the problem. They are just easy scape goats for politicians to mask their own ineptitude. In the UK we only have one big investment bank - Barclays - and that did not even need state aid.

It was not "traditional lending".

"Traditional lending" disappeared years ago.

And given that one of the biggest banks that was rescued, RBS, had been involved in gambling on a whole range of things, including but not limited to buying up other financial organisations (without checking their finances properly – how much more of a gamble do you want?), it's hardly something that is just limited to investment banks per se.

The crisis is also part of Thatcher's legacy – help create a housing crisis and then prices will go through the roof; deregulate so that financial bodies can offer riskier and risker mortgages (because people do actually need a roof over their heads). Then get a bubble – etc etc.

It's a cyclical thing. It's happened before and will happen again. Essentially it comes from too much money chasing too few assets. There is a constant stream of investment money going into the system, not least through pension funds. That has to find a home - essentially in property, bonds and shares, which generally get forced up in price and periodically drop back, often sharply, to move towards longer-term overall economic reality (ie close to overall GDP performance). It also partly comes from politicians buying into flawed economic theories, rather than being adaptive. Politicians (whether it fits your blinkered narrative or not, largely Labour ones in this country) helped by deliberate policy to fuel a domestic property boom, which exaggerated the normal cycle.

Talking of "flawed economic theories", monetarism has been a disaster, Dally.

And spouting one of its central tenets – hence the reason for its obsession with low inflation* – does not help.

Keynesian ideas, used by central banks, had improved stability – but have been deregulated away because they don't tally with the neo-liberals and the monetarists.


* See Ha-Joon Chang on inflation in [i23 Things They Don't Tell You About Capitalism[/i.

Genuine question. Which actual Labour policy was that?

Didn't the winter of discontent spell the end of the UK's experiment with Keynesian economic management? Hardly a success story. Like I said, dogma is crass and stupid. Politicians need to be flexible and change their thinking continually with the changing environment and not stick rigidly to "Keynesianism", "Monetarism", "Market Fundamentalism" or whatever economic theory is / was in vogue for decades at a time.

The one that abolished Tory boom and bust by encouraging cheap credit? Were the Fed and BoE really acting independently of theor governments at all times?

If by Fed, you mean US Federal Reserve, its a stretch to blame Labour for anything they did

It's quite possible to blame politicians for some of the mess we're in, but its a cheap jibe to suggest Labour are "largely" responsible

This is an answer to being asked what specific policy caused the housing crisis and boom, as suggested here:



Clueless.

For you and me, perhaps. Elite elements of society? No.

Have you never heard the political maxim, [i"In this town you're innocent until investigated"[/i?

No. It was an ideological choice made by Thatcher. Things like that may have been the excuse but she would have done it anyway.

They are still doing it. The "reforms" to the NHS are purely ideologically driven. Even the "have a loan until you die then pay it off" scheme for elderly care is ideological. We already pay Tax and National Insurance so in theory we already pay for the care required. The trouble is the tax and n.i. take is not big enough to fund this and many other things [iso we are told[/i (tuition fees being another example). So what you end up with is the individual paying for everything themselves (eventually to private companies brought in to take on the tasks - you just watch) and there is no state support. This is pure Tory ideology whereby income tax is reduced to paying for a runt of services you really can't privatise and the individual funds everything else.

However has your overall tax bill gone down due to the facts students now have to pay £9K a year in fees? No and neither has your local postman's but the "postman paying tax for the students education" was how this was sold. So we end up with being taxed pretty much as we were or taxed even more (VAT 20%, income tax thresholds left to be eroded by inflation) and we end up paying for what was once state provided ourselves anyway!

Pure Tory ideology.

So, as you say, tax has not gone down but the tax take is insufficient to pay for all these things. Indeed, with the ageing demographic profile in 20 - 30 years time the tax take will be nowhere near enough to remotely provide care. Are you advocating increasing taxes across the board? Personally, I favour basic rate income tax of c. 30% plus NI at, say, 10%. We need a grown up debate. Seems to me three main options (perhaps in combination):

1. Go the Swedish, etc route and increase taxes on everyone (especially the so called squeezed middle) to fund good state care.
2. People have to pay themselves - which will inevitably be paid for by employers - who will then prefer the State to take the burden (as is starting to happen in the USA).
3. Encourage married women not to work. We have a ridiculous situation whereby women pay people (usually less able than themselves) to look after their own children and are also no longer avaiable to look after ageing parents. This to me is the most sensible approach to take in any civilised society.

[url=http://www.independent.co.uk/news/business/news/jp-morgan-botched-bets-lose-37bn-7942046.htmlGambling? What gambling?[/url

A couple of points...

The bit that I have highlighted is by no means inevitable and is almost certainly not likely to happen at all in the majority of SME's and quite a lot of large coporations too.

Its slightly related but I took up the cudgel on behalf of the NHS during a discussion on Obama's healthcare bill with some American people I know on Facebook who were all dead against the concept of the state "interfering" (as they see it) in their health and well being, they were adamant that if they needed care then they would pay for it although they weren't quite sure how, but even more adamant that they were not going to pay for healthcare for those less well off then themselves, the over-riding principal being one of small government, so little would be a national governments interference in a citizens life that they would be happy to see another citizen die of a cureable disease if that other citizen could not afford to pay for the cure. - to me that is bizarre and not the sign of a civilised society.

The opinion among them was that the NHS was stood only slightly to the right hand side of communism, one even suggested that the NHS was a breeding ground for terrorists (but I think he was a nutter), and so I asked them a very simple question - I informed them what your average UK citizen on an average working wage would pay in terms of percentage income tax and in terms of national insurance, and pointed out that although not completely true anymore the NIS contribution was "supposed" to be your pension and healthcare provision with the healthcare being of an unlimited, open-ended nature and including everyone in your family if you were the only wage earner - then I asked them what they paid every month for their own private family healthcare plans.

Strange enough, no one commented after that.

You omitted the word misogynist

The problem in the USA is the system doesn't work. It costs twice as much in GDP terms as here for far from universal coverage. Despite the image of glitzy hospitals for those who can afford it, outcome rates are lower than in many European countries. The US government needs to get to grip with costs as the industry is ripping off the country to such an extent that it is becoming unsustainable. Companies do often provide healthcare insurane for employees, which will start to make them uncompetitive in world markets (as, like us, they want to rebalance back to exporting more). So, the call for more state aid will most likely come from the business lobby there - just at a time when our government will be taking the opposite course!

I can't say I buy into the theory that in 20 or 30 years time we won't be able to afford care. With having to work longer before retiring and with obesity on the rise this combination will do a fine job of culling the elderly! I read somewhere for every year beyond 55 you work it takes time off longevity (can't remember how long).

However lets say you are right and we and younger generations all survive well into old age then yes I'd go for increasing income tax by quite a bit. It would have to be with a big crack down on avoidance. Even "accepted" scams of things like the self employed paying themselves a small wage to avoid tax (and to claim benefits such as support for their children at Uni) would have to be dealt with.



I am not familiar with the way the Swedes get taxed these days but income tax is progressive so theoretically no one is squeezed as it is a progressive tax. There is no need to squeeze anyone if income tax is the major source of tax revenue. The middle is currently feeling squeezed precisely because the government tries to save money by a scatter gun approach to raising money that is giving us all sorts of anomalies.



The way health care is funded in the USA is bonkers but once over 65 they have medicare which is state funded. It's under age 65 where you have to have private health care which is normally paid for by your employer.



You really do need to catch up with the times. The man works, woman is the housewife thing has long gone. In any case in most cases children are grown up by the time the grand parents need care so child care isn't normally a factor in care for the elderly.

What is more why do you think the women are actually qualified to care for the elderly? My parents were 89 and 85 when they died and my mother was 89 and bright as button so needed little actual care. The problem was my Dad who had dementia and he required constant care but by specialists. Had he been in the care of my wife she would be in the funny farm by now herself. It is a terrible affliction and the idea you can just have a family member, man or woman, give up work to care for the elderly who actually need care is simplistic.

Yep. I saw the effect trying to care for/look after my 90 odd year old gran had on my mum for the last few years. Fortunately my gran didn't have dementia or mental issues but had quite severe physical problems. Partly from a car accident in the 70's in which she got a broken leg that wasn't treated properly and meant she couldn't bend her left leg, and partly from severe arthritis in her hands (she used to be a seamstress) which meant she could hardly pick things up. This made simple things like getting out of a chair, reading a newspaper or changing the tv channel very difficult, and getting upstairs (even on a stairlift) almost impossible.
My mum is in her early 60's and was obviously still working (a TA at a local secondary school). So, at a time in her life when she should have been enjoying herself, going on holidays etc she was spending most of her free time driving over to Leeds from York to care for my gran. This took a big toll on her, I don't think it's any co-incidence my mum got ill more often than is normal during this time. The stress of not only having to care for an elderly relative, but sort out every little problem (pay bills, deal with letters, deal with carers etc) is far bigger than most people realise. Also it didn't help that my gran wasn't a particularly nice person, I know it's not popular to say it but not all little old women are lovely, kind people. Sadly, she was a bitter, twisted old bag who had a go at everyone and anyone who didn't please her 100%.
My gran qualified for some council funded carers to come in twice a day and help her with things like getting up and making meals, but the council had contracted it out to private care companies. These poor sods were paid minimum wage, not paid for the time travelling between houses, and most certainly did NOT have expense accounts. So despite being entitled to 2 sets of 30mins per day, she only received about 10mins of those sets, because as soon as they had done the vital stuff as quickly as possible they were off to their next house. I don't blame them, I'd do the same. It's the frankly, sh|t system that's the problem. This all added to the stress on my mum. To the point where my mum was nervous to go on holiday because of how my gran would cope while she was away.
It might sound horrible, but the best thing to happen to my mum is when my gran finally died last year. The difference in my mum's health and just general happiness is huge.

Barclays had "culture of gaming". Nothing whatsoever like a 'gambling' or 'casino' culture, of course. www.bbc.co.uk/news/business-18854193

Barclays had "culture of gaming". Nothing whatsoever like a 'gambling' or 'casino' culture, of course. www.bbc.co.uk/news/business-18854193

For those of you with access to The Times or The Times Online, good article (except for the final bit) by William Waldegrave today talking about the need for the State to maintain certain responsibilities, including keeping the excesses of the private sector in check. Seems to be trying to remind Conservatives of what they were / should be about. Pity the Labour Party can't say the same.

That's what Ed Miliband was criticised for doing at the weekend.

I missed that, although I did see umpteen years of a Labour government handing out cash and contracts willy-nilly without protecting the public's interests. Just like I am witnessing again with the incompetent Home Secretary and all those ministers who hand out infra-structure contracts to overseas businesses. Where's the sense in handing the profit element of public money to foreign owned businesses? Surely, it's better to pay a little more to UK contractors who retain the profits here? Our politicians are mad. NHS contracts to US healthcare providers next, I'll bet. Our politicians should take a leaf out of the US's book and extract cash from overseas companies not give it to them!

The government wheeled out Baroness Warsi to claim it was a return to communism.



As I have repeatedly said, there were very many ways in which the government under Tony Blair continued the same basic economic philosophy begun by Margaret Thatcher. It may not suit you to see the continuation of a philosophy, but it was there.

We are now seeing very general complaints about rail contracts, infrastructure spending and the subsidy of rail companies' profits by the taxpayer, let us not forget precisely when this situation was put in place to start with.

The same can be applied to the utility companies that are now ripping off ordinary people.



Haven't you heard about the market and globalisation and competition etc?

It's the natural order of things and the only proper way for us to be free.

And you mention the US, but as just one example, the behaviour of Wal-Mart over the years has been eroding US jobs with it's price cutting, year on year.

Minty, did you read the Waldegrave article? I thought it was good until he spolit it by adding at the end that's what Cameron and his Big Society was all about! If you ignore that bit, it was difficult to find much to disagree with.

No. I don't have access to the [iTimes[/i website, and I haven't had the chance to go and find a copy anywhere else in the building yet.

I would agree that there has been a definite change in the Conservative Party – but that change is not new: in essence, it happened before the 1979 election, and William Waldegrave was part of the governments that put those changes in place, so it would be more than a tad disingenuous if he were to be claiming now that the changes were rather more recent.

We have merely been following the same basic path since.