TED Conversations

Sandip Sen

Author,

This conversation is closed.

Will Bankers or the People dominate economic decision making? What is the Future of Democracy?

Global economic policies are being increasingly framed by Banks

Key Questions:
A) Should Banks be recapitalized repeatedly to grow bigger?
B) Can Central Banks Be Trusted To Manage The Global Economy?
C) Are Banks Competant to find solutions?
D) Will A Banker’s Solution Help The Average Citizen
E) Are Banks managing Elected Leaders?

Let us see and debate on what happened recently.

IN THE US : The Federal Reserve pumped in trillions of dollars through QE1 and QE2 in order to ensure liquidity . It enabled Wall Street banks to corner commodities, oil and metals and caused massive price hikes that further tempered global demand As per Gallup and NYS data the Fed initiative had no positive effect on economic growth or jobs and led to protest.
IN ASIA AND AFRICA : Inflation raged in the emerging world including China and India. Central Banks hiked interest rates to control inflation . The supply chain inadequacies were not addressed, but money supply squeezed. This only helped in further rising of prices and dampened growth. Sharp rise in food prices contributed to the start of the Arab Springs.
IN NORTH EUROPE : Rich north European and EU nations pumped in liquidity to prop up banks. Like in the US recapitalization of Banks were done but toxic assets not written off. The added liquidity led to futures market speculation, price rise and protests in London and Rome.
IN EUROZONE : The ECB, the IMF and IIF (the banking lobby) indirectly took over policy making of growth hit high deficit Eurozone economies, like Greece, Spain and Portugal. Severe spending cuts were imposed and growth became near zero or negative in absence of liquidity. Structural reforms like internal competitiveness deregulation and issues of high exports from Germany to Eurozone taking advantage of Euro parity were not addressed. Poverty and joblessness rose in cash starved Eurozone, as protests broke out from Athens to Madrid.

Despite the 2008 Bank crisis, it is Banks that make key decisions !!!

Share:

Showing single comment thread. View the full conversation.

  • thumb
    Nov 8 2011: Interesting to know that you keep away from high-profile banks due to possibilty of high risk....very few customers including me would really do that in practice, though we would perhaps avoid Banks with a poor credit rating or historical record of poor performance or brushes with the law.
    What i do not agree with however is that Banks have the solutions. I would believe a physical trader of wheat or copper would have a better knowledge base of the production, trade and supply chain Similarly GEwould have a better hold on energy issues, though you would find principally Bankers as principal advisors to UN or any Govt Energy comittees just because they do or arrange the funding.
    • thumb
      Nov 8 2011: The only high profile bank I still trust is HSBC. BTW, after I switched to smaller local Banks I have experienced better service, no loss of any facility that I used to have in big banks. In fact, I get better facility and lower interest loans. Such smaller banks are more forthcoming and talk straight, easier to access "higher officials" if need arises, unlike big Banks. Of course, by "small" banks I do not mean the cheat fund type fraud financial institutions/banks with very short term history and low credit ratings.

      Most of the time, educated, middle or lower income group people do not use bank to earn a living, to increase their savings to have a fortune or for opening another business/industry. They just need safe keeping of THEIR money.

      According to my experience, Governments still approach "expert" institutions/industries/people to frame its policies, not Banks; at least in developed countries. But there is the possibility to get biased opinion if all such "experts" come from the concerned industry/lobby, as they will try to push their agenda(s), instead of what is good as national, public policy. We see many such instances in many countries, including India (e.g. biofuel policy). In many instances, Govt keep few people from outside to act as "devil's advocates". Bank executives may act on that capacity.

      I think, Banks have solution because they know the business inside-out, they are the "experts" of that subject. Majority (if not all) of US treasury secretaries or Chairmen of the Federal Reserve comes from there. It makes prefer sense and I am not against that practice. If someone knows real practical solutions of financial problems, then it will be the people who knows it the best, not a technocrat or a scientist or even an academic "economist". I was watching the TV interview by 2 recent Noble laureates in Economics. They had no clue, no answer when they were asked about ways to come out from recent financial mess.
      • thumb
        Nov 8 2011: True a nobel prize winning economist may not have a clue of coming out of the recent financial mess. I don't think even Ben Bernanke had a clue because his solution of liquidity push is not working. Neither economic growth has picked up nor has unemployment reduced, while both the Fed debt and the US Govt debt has baloonedHow can one ever think that the financial mess can be cleaned up without writing off the toxic assets as Ben Bernanke believes. I read your TED conversation Jayanta about steady state economics, but am not sure how it could be achieved without increasing the efficiency of resource utilisation. People will accept zero or negetive growth only once they get more bang for the buck.So perhaps you have to think how you would acheve the same. That is going tobe a big challange but I believe that innovative use of technology could perhaps make it possible
        • thumb
          Nov 8 2011: Without some basic structural reform in general governance, in our basic principles and role of a government- it is not possible to sustain any long term recovery in financial sector, whatever Bernanke may suggest or do. Now it seems that you have reached where I want you to be!
          Without those change in our direction of "growth based" economy and maintaining status-quo of so-called "free market" economy, the long term sustainable development will remain a mirage for any country. Without that structural reform any financial reform will be just cosmetic.
          It is not "more bang for our bucks" even if few people earn more and create some jobs for few others in the short term. Doing business as usual will ultimately reduce our "bangs for our bucks" - in terms of sustainability of investment and quality of living- that includes environmental degradation, increasing pollution (that has severe consequences on our health), reducing personal happiness (that includes financial security or job security, probability to own a home, time available for family activities etc), increase in conflict and in more acute cases- violent conflicts (as we see in post-"liberalized" India as measured by increasing number of districts affected by some sort of violent/extremist movements (mainly by naxals/maoists).
    • thumb
      Nov 8 2011: You may also like to check the discussion on my post - "Will a cap on (outrageous) salaries & executive benefits promote growth of meritocracy in any creative profession, including research?- http://www.ted.com/conversations/6598/why_should_we_not_adopt_or_pro.html
      • thumb
        Nov 10 2011: I am not sure whether any one can accept the theory of zero growth per se However if you are able to improve the resource utilization (bang for the buck) it may still be remotely acceptable

Showing single comment thread. View the full conversation.