DON'T PANIC!!!
at 9:41am on Wednesday, 30th January 2008
So the chancellor wants to be able to save banks in private. He is keen that, when future Northern Rocks rock, the Treasury should be able to help them out without telling the public everything that is going on, in case they 'panic.' Back in September, Duncan wrote about how the prevailing view among economists saw runs on banks as irrational. Given the huge uncertainty about the stability of Northern Rock, getting my money out would seem to me to be the most sensible possible course of action.
It reminds me of BSE, where the political instinct was to throw a blanket over the uncertainties of whether beef will kill us and reassure the public. The change of mindset required to trust the public to deal with uncertainty has taken years to come. But in economics and finance it seems it has a way to go. Despite the increasing importance of rational expectations theories in economics, financial systems instrumentalise public feelings. Consumer confidence is all. So we can't open institutions up to wider scrutiny.
But as we have learned with Enron, Equitable Life and most recently at Societe Generale, the risks of closedness massively outweigh whatever the suggested benefits might be. People are unlikely to trust something so untrustworthy that it has to be hidden. As with other sectors, finance needs to negotiate a new settlement with the public, not shut its doors.
It reminds me of BSE, where the political instinct was to throw a blanket over the uncertainties of whether beef will kill us and reassure the public. The change of mindset required to trust the public to deal with uncertainty has taken years to come. But in economics and finance it seems it has a way to go. Despite the increasing importance of rational expectations theories in economics, financial systems instrumentalise public feelings. Consumer confidence is all. So we can't open institutions up to wider scrutiny.
But as we have learned with Enron, Equitable Life and most recently at Societe Generale, the risks of closedness massively outweigh whatever the suggested benefits might be. People are unlikely to trust something so untrustworthy that it has to be hidden. As with other sectors, finance needs to negotiate a new settlement with the public, not shut its doors.
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I received the following message from the Rev Amos Arbuthnott McKay MA (St Andrews) BD (Edinburgh) in response to this blog.
"Miserable Sinner!
Missing off the accents on Société Générale is an abomination in the eyes of the Lord!
Repent the error of your ways - use the ASCII code and your keypad!!
Que Dieu ait pitié[ALT+130] de votre â[ALT+131]me!!!"
Allow me to comment. Although the Rev Arbuthnott McKay's remarks may strike some as rather strident, they illuminate some key aspects of contemporary nation-shaping geo-eco-politico forces.
It would be easy to see the Rev Arbuthnott McKay's censoriously critical remarks purely in orthographic terms, as part of a critic-diacritic paradigm where accents are of acute importance and a matter of grave concern.
However, in a world of variable - and ever eclectic - geo-political geometry,a Scots Presbyterian's defence of the French language suggests that, under these shifting supranational currents, a structure based on the nation state and nation state alliances still remains.
It is worth remembering the historical circumstances that gave rise to a Franco-Scottish alliance; the Rev Arbuthnott McKay's remarks suggest that it still retains some force.
But there is another element at work here. The Rev Arbuthnott McKay is defending a structure (accents) that has no visible presence on what are now widely-used anglo-saxon keyboards. To some, this undermines diversity, specificity and identity. In this regard, the Rev Arbuthnott McKay's position is no different from France's defence of its social model against the untrammelled anglo-saxon liberalism associated with globalisation. It operates on a cultural level as well - and not just in France. Witness Canada's (a country with its own Franco-Scottish historical hinterland) attempts to stem what it sees as US cultural hegemony.
For all his talk about reform, it's not clear how far Sarkozy is willing to jettison the French model in favour of some or all of the elements of its anglo-saxon alternative. His desire to see a French buyer emerge in any putative sale of Société Générale is evidence of this.
As Sarkozy's Prime Minister (and sometime poet) François Villon recently said: "où sont les neiges d'antan?"