What would the economic implications of salary capping be?

Actually it is worse than that: because of all the noise about banks being the big bad ogres, the disgraceful brouhaha about bonuses, the rush by politicians on all sides to make cheap political capital by attacking the City, etc, not only are new entrants less likely to come to London but existing City-based financial institutions are reorganising themselves to avoid the UK. London us now the most unfriendly of the major financial centres and if the views aired here are anything to go by, it will continue being so for a while. The UK is very successfully killing one of the few industries it is good at- and enjoying doing so as well. But the enjoyment will be short-lived, the consequences (such as having a longer, deeper recession than would otherwise be the case and a slower recovery ) much longer-lived.
If it was being done to any other industry people would see the damage much mire clearly and try to stop it, but because it is about something not many understand and most people could not do, it goes on and on and on.

Maybe it's because they believe they will leave the country.

They call for restraint, but evident it ain't.

And they don't seem to have much say about the size of the bonus pool.

rabbitstew, I think you are right. They have implemented a halfway house type system. They have bailed them out with public money but they don't seem to be able to force them to lend to each other or to small businesses. They don't seem to have managerial control.

In fact, owning the majority of shares in the business just encourages the government to encourage the banks to carry on with business as usual, rather than to change to a less-immediately-profitable-but-more-sensible-in-the-long-term model, doesn't it? The government is desperate to offload the shares asap.

But banks haven't been nationalised, really, have they? The government doesn't have enough say in how they run to describe them as nationalised.

The gvmt understands the importance of financial intermediation v well, hence nationalising some banks.

'Would you stop non-nationalised banks doing business in your fictious country?'

Certainly not. But I would stop bailing them out with public money. They are private businesses.

I may not understand the role of financial intermediation, but there are others who do

www.social-europe.eu/2011/10/why-we-need-nationalised-banks/

and the governemnet already nationalised Northern Rock and partially nationalised some other banks. Are you saying that they don't understand the role of financial intermediation too?

www.telegraph.co.uk/finance/financialcrisis/3187946/Financial-crisis-Banks-nationalised-by-Government.html

Banks and their employees are not two entirely different things - they can't run without employees. Yes, there are, however, many different people and entities lumped in under the general "banker" designation, some of whom were doing what bankers have always done and others attempting to be creative with hedge funds. Unfortunately, when one group of people get phenomenally and successfully greedy, everyone else wants a slice of the action and starts behaving similarly, until boundaries become blurred and before you know it, hardly anybody is really interested any more in the original businesses and what they were set up for, they are all just looking at figures going up and down and how they can manipulate them (preferably without actually having to do anything useful with respect to the running of the businesses concerned). Why not lend recklessly if it doesn't matter to you what happens to the business at the end of the day, because you've worked out a way of being the one who ends up with the profit, anyway? We've developed a huge industry of people who don't care about the real businesses in which they invest - they rely on others to do the real work, they just want to cash in on the profit. And we are all constantly being encouraged to behave the same way - we should all become shareholders who buy and sell shares for a profit, without expressing any real interest in the businesses in which we invest, just in the amount of money they generate for shareholders. And if we don't become shareholders in our own name, we should become shareholders through our pensions, etc, so that we are all responsible for this don't-care attitude. We are all living a big lie, encouraged by the financial industry, that we can make money by handing money over for other people to play with.

Banks and their employees are two different things. And within this categories are quite different people and entities. Which you mean?
Which banks would you nationalise? Why? How would that work? What would your nationalised banks do? Would you stop non-nationalised banks doing business in your fictious country?
It seems to me that either you do not understand the role of financial intermediation or you have not thought your proposals through. I am afraid going into either is beyond my telephone typing, apologies.

Saving the financial system is the same thing as saving the bankers, so no point pretending otherwise.

Of course the West cannot always remain in the ascendancy. That doesn't mean the West has to enjoy the process of becoming the new Third World, or becoming the stomping ground of billionaires and their selfish ways.

Those around today are not the fittest : the fittest were killed off in the last two World Wars, leaving behind a lot of short sighted, flat footed, heart-disease prone simpletons, and crooks.

The bailouts were not "for us" they were an attempt to slow down the inevitable fall from grace of the powers currently in the ascendancy, which actually messed up big time and ought no longer to be in the ascendancy.

Life certainly is interesting, I'll give you that.

It requires regilation in the national interest. Not the communism that many progressives desire, not the slavery of the population, the destruction of liberty and the return of the gulags.

We need a better regulated capitalism.

'We are an ambitious and competitive species, both men and women and it's huge fun.'

That is true, but that should not be at the expense of millions starving or going without healthcare. We know it can be done, we created a National Health Service, where once there was none. Children no longer clean chimneys. We are no less competitive than we once were, but we have also made things fair.

They just pumped more billions into the system in what they call quantitaive easing. They say it is because the banks are not lending to each other. If these private banks were nationalised then we could make them lend to each other and we wouldn't need to pump billions into them because they are not lending to each other.

We come and go, the various species on earth (I am assuming I am not writing amongst creationists on this thread) The planet is old and man is a tiny blip on it and we will then be gone. It is as likely to be changed by asteroids as by man.

Anyway back to markets they go in cycles. We don't have a great depressoin at the moment like the 30s as we are managing things better. However different parts of the earth in recent times have had their hey day and others not as well all know. There is no reason the West should always be in the economic ascendancy.

However what is true is that those of us who are here today are those who were the fittest. Those survive and that's as true of markets as it is of childbirth and all manner of other things. We are an ambitious and competitive species, both men and women and it's huge fun.

'Whichever papers you've been reading so far clearly have swallowed and regurgitated the unpopular rubbish coming from many bankers and politicians'

i.e. that the banks were too big to fail. They let Lehman Brothers fail, which brought teh house of cards down. We should have called their bluff and taken them all into receivership and then restructured them all, written off lots of debts and reorganised them on a sound financial footing.

The planet will not fail and the banks are not too big to fail, that is the progressives' tale.

'Do you really believe the bailouts were for the bankers? Really? No, the bail-out were to stop the financial system from collapsing'

At the expense of the economy collapsing and millions worldwide losing jobs, benefits and suffering declining living standards?

They should have nationalised the banks, liquidated some of them and written off lots of debts. The banks should have taken a haircut and some people responsible should have been prosecuted.

'Whichever papers you've been reading so far clearly have swallowed and regurgitated the populist and popular rubbish coming from many politicians'

I beg your pardon, I read the Daily Mail.

'Btw, who are the puppetmasters?'

Nobody knows, for we are like the children who watch the Punch and Judy show, although it is no comedy, they call it austerity.

Do you really believe the bailouts were for the bankers? Really? No, the bail-out were to stop the financial system from collapsing - to dampen the effects of the crisis on the real economy (I.e. All of us).
If you want to understand more about this, the latest Rogoff book would be ideal. Whichever papers you've been reading so far clearly have swallowed and regurgitated the populist and popular rubbish coming from many politicians...

Btw, who are the puppetmasters?

But, hey, it's OK, because they always intended to create their 'new world order'

In an interdependent world, where capital is global, and national industries are privatized and in private hands, any contagion becomes instantly global.

If a puppet master chooses to flick a switch or pull a lever, financial contagion will spread instantaneously across the globe, and not a single person on this earth can escape the subsequent austerity.

'The only thing the Dail Mail tries its best at is being small minded, hypocritical and petty.'

Please stop reading progressive pamphlets.

'The decision on what your children are good at will be made by government officials and there will be no right of appeal.'

Another great English thinker wrote about exactly that. His name was Aldous Huxley and in "Brave New World", sometimes referred to as 'Brave Progressive New World Order", he foresaw a world of gammas and deltas and an elite of alphas. The gammas and deltas would receive an education suitable for their purpose. Pricing them out of an education keeps them down.

'under the new world order, different countries will become specialists at different things'

This is already happening under globalisation. It ensures that no country can be independent and maintain national sovereignty. It makes the world interdependent and subject to the control of a gloabl progressive elite.