Which is more important now: political reform or the economy?

There is a lot of confusion about what caused the crash. Did complex instruments play a part? That is all we hear but I think there is a fundamental paradox at play which is never discussed: I put it you when you create a environment where everyone thinks that the economic cycle is dead, IRs are stable and low, inflation is low, everything going nicely, then people will take larger and larger bets. Risk management works to a degree but then over a long period of time there is a build up of risk, so when the crash comes it is harder.

So the paradox is when you manage an economy well and create stability, risk premia narrow and people take bigger and bigger risks which build up. Eventually you get a big crash; no surprises there. Even without complex financial instruments we would have eventually had a build up of leverage. Just look at the role straight forward property borrowing n this and previous crashes.

It annoys and amuses me that financiacial journalists fail to point this out.

That would be the bank bailout caused by speculating wankers, yes? And now we should take our tongues out of the speculating wankers' arses just long enough to ask them what they want us to do next, yes?

oh please swc, don't patronise...'too complicated for you all to understand'.

no one is accusing bankers of being evil, doesn't mean that the system isn't pernicious, and i do believe, and have met many people in the financial sector that know they are doing something that fucks ordinary people...which isn't good for their mental or physical health tbh.

Madame C, yeah exactly, the banks held a gun to the population and bankers have to be incentivised not to destroy the economy, as you've just pointed out...

The arrogance of the right, of power. "The great masses who whine..." Dear oh dear.

sophable we will have to wait to see how Clegg, from his rich banking family, possibly speaking from Coolfonz's dacha or chateau, will take a scythe to the banks, when he shakes on a deal with the Etonian millionaire, Cameron.

Oooohhhh no blame the banks on here EAP - people spouting shite who obviously don;t know enough about the economy to realise that if that and the financial sector went up the swanny we would all be well and truely fecked.

Do you realise that one of the major high street banks were moments away from not having any money to fill their cash machines at one point - that is the small man on the street problem which not bailing out the banks would have caused - think of everyone who banked with them not being able to get at any of their money all the whiney little feckers would have been on their hands and knees beggingh the government to do something about it.

ANd they have not effectively bailed out the banks they have given them an asset backed loan and as for wannting to stop bonuses in those banks the government are clever enough to realise to get their money back they need big hitters staying and earning them their money back - or I suppose we could fill their positions with the great masses who whine about bank bonuses and see how bloody well they get on investing your pensions and investments.

swc, as I understand it, the mendacious Goldman Sachs operation was in Greek government bonds. I don't think, as things stand, it's possible to create such a clear separation (although it sounds as though a clear separation would be a good thing).

But let's also be clear: there is no such and never will be such a thing as the 'free' market.

The humongous bailout by The State makes that point rather well I feel.

I like common sense, and Noam Chomsky...and no utopias. I want new politics, not constant reflections to the past...

Yes much debt was already raised by successive govts, in the belief growth would continue for good, free market fantasies...

And Scandinavia was only a quick short cut to a more balanced economy, not a blueprint for the future...

I am middle-class, not rich. The millions and millions of people who voted Tory throughout the English regions were not rich. They were ordinary people who said no thanks to the chains of socialism.

"the complex, high risk instruments that undoubtedly did pley a role in the creation of the financial crisis"

hmmm...they 'played a role' did they?

This is capitalism or rather neo liberalism going down the toilet, twenty years after communism did.

Neither system works

again not true. capitalism is the only system that has ever worked...in its various forms. (feudalism and tribalism you can regard as proto-capitalism.) All that will result from this is a new capitalist form will arise - there has never truly been a free market anyway.

lets not forget that in comunist countries, the Communist party member's kids weren't the ones to starve...there was never a really communist system in operation.

the funny thing is the free marketeers are the Soviet apparatchiks. clinging to a system which they profit from as it slowly collapses. they had bread queues, we have unaffordable housing, they had shit cars, we have X factor...

Claig and Madame C could be talking to us from their dachas...

Frakkin said:

"Sure it's a capitalist view but newsflash: we live in a capitalist world."

Quite - Even the Scandinavian's are having to adapt to the pressures of the global economy. They appear to build the society they want within it's constraints - not by telling capitalism to FO!

coolfonz has already suggested Scandinavian social democracy as a viable alternative.

Coolfonz, Brown is not socialist enough for you. Who do you like, the Socialist Workers' Party? The Cuban system?

Stop telling people that their only choice is betweem hyper-capitalism or Soviet communism. What nonsense.

the huge deficits are the result of bailing out massive financial institutions who held a gun to the head of society

not true actually. the bulk of the deficit is actually caused by the long running (and deepening) overspend by the government - the bank bailout didn't help, you're talking about a national debt of 30k per household of which a few quid was caused by the bank bailout. add another 30k of unfunded public sector pensions and you start realising that th bank bailout as relatively small beer.

MadameCastafiore, you are spot on. The great thing is that the people of the country agree with you. That's why we voted Labour out.

i find myself agreeing with coolfonz and policywonk as usual.

it seems clear to me that we are so utterly trained in the importance of the free market...the very self same free market that has just FAILED and brought us to our knees.

it's mad isn't it:

woman marries man. man batters and exploits woman and all this finally goes public in a huge incident which does not allow for this violence and exploitation to be hidden anymore. 2 weeks later everyone advising woman that she must be careful to keep said man happy or else armageddon will ensue.

it's a crap analogy, but i like it.

Yeah yeah yeah, we all love east Germany and the Soviet Union...jesus...

What the fuck is socialist about Labour?

And the rich are the only people who work hard, sigh.