(13e) City of London

Here a very interesting article about the City of London with people who know the place, one of the main, if not the main financial centre on our planet where, if it rains there, it also rains in many other areas of the (Western) world, certainly because it has many connections to those other main financial regions. However, be worn, the article is even longer than the stuff I sometimes write.

As mentioned in the article, things in the financial centres are now even moving faster than during the first part of the financial crisis as computers are even faster and speed is considered money ('time is money' whereby now 'time' is interpreted as 'fast' and 'speed' while maybe the person who first used this phrase used it as the time that is given should be used to good advantage) while computers are taking even more decisions than before. And thus, if things will go wrong again as some of the people who are interviewed indicate, then there will be even less time to respond; we may not even notice a computer made a wrong decision until the system collapses completely and thus even the people working in the sector may be surprised although maybe it are still mainly people who make decisions. In fact, in this system I think there should be mechanisms to ensure there is a significant delay and even double-check before a final approval of a decision is send out into the world so that possible errors can be detected and corrected. Indeed, not one single responsible leader will make a decision without thinking; even concerning possible nuclear disasters and attacks, plans are ready so one doesn't need to improvise at the moment (at least this is what I assume). At this moment, many admire people who make (correct) decisions without having analysed all data so they can respond as quick as possible to ensure they are the first so they can benefit most (or lose everything if things go wrong). And as decisions have to be taken quickly, if one person makes a mistake, others will respond to this mistake without proper check and thus errors multiply very quickly in a very short time while with a delay they may not. Of course, it is important to respond very quick when the information is correct if things go wrong and thus one should be able to assume that the first message is correctly checked without the need for any further major control.

As some admit in the article, it all started going wrong the moment institutional investors became too powerful, when they became able to even force large banks to think only about the interests of the investors against the interests of the company and the global interests. Many of these investors are unknown to most humans, operating in a vacuum and now even changing the minds of more and more people. Indeed, during the recent European elections, many people voted differently, against the establishment and anti-Europe and as a consequence, there are politicians (from traditional parties) claiming the results proof Europeans want even less control and even more rightwing policies. What a joke to think people want even less control. One of the reasons people voted for non-traditional parties is because people find the traditional parties didn't control the powerful people enough while they agree there are too many rules for ordinary people. I think markets can only correct themselves when all players are about equal size and thus can control each other while it is not good when some know they are too big to fail and thus too powerful and therefore can do whatever they want. But there is also the need for a control organisation that is even bigger than the big companies that can punish those who misbehave. Bosses in companies but also other leaders don't have to know everything their minors do as that is not possible; however they should be able to assume employees behave well while if someone misbehaves they should act to control the damage and to show everyone that misbehaviour will be severely punished while they should not hide problems in the hope they will disappear or the bosses will be punished. That is also why in the past, companies that were becoming too big had to sell parts of the company so they continued to be controllable. And leaders should also be an example by restraining themselves when things go wrong and not demanding even higher bonuses for their failures; then theys can demand the same from employees. The principle should be that people receive what they deserve for the work they should do and are punished if they don't do what they should do while maybe sometimes an extra can be given on condition the company makes profits and the employees are worth it.

Indeed, also in the article one person acknowledges that more people should have been in jail and banks should have been allowed to go bankrupt as this would scare many working in the business from future misbehaving; I agree at that time. Then, governments could have repaid the savings (or parts of it, except what people didn't declare) that people would loose after the bankruptcy of those banks instead of giving it to banks so they can continue paying bonuses and doing business as nothing happened. Now communism ruled the world with countries saving banks so they became government-owned without the need for banks to change the fundamentals. The banks have to repay the borrowed money plus interest and sometimes they have to pay fines for the misbehaviour of employees; if those fines are very high, it can get them again into troubles as may now happen with BNP Paribas (but if it mainly hurts a foreign bank and its customers, then the country fining the bank may benefit). If governments had saved the savings of ordinary people instead of the banks, people could have placed the money in saving accounts of banks that behaved and didn't receive any subsidies so they would not suffer from unfair competition by not receiving government money. In addition, if investors would loose money when banks go bankrupt, it would forced them to check companies better before investing in them so they would demand good behaviour while now they force companies to simply increase profits (e.g. fire employees). However, now I fear governments have become too poor to save banks or to pay people's saving if next time banks risk going bankrupt while banks may be allowed to use the savings of people to pay back fines and debts and thus some bankers and institutional investors will win while everyone else may loose (e.g. if a bank goes bankrupt, the main investors are the first to receive money while the smaller receive leftovers if any). A very clever pure evil system to get our money.

And if there may be another financial collapse and people loose everything as countries will be forced to have a balanced budget and thus will be less likely to help (big investors of course have their money elsewhere), people may become very angry for a while (I can be wrong, maybe people will simply say: bad luck), and this may be directed towards the wrong people (such as the lower-paid people working for banks). But ones the main anger is gone, ordinary people may start working together to help each other, bringing people more together again while they may start directing their anger towards the real criminals. But those who have everything, the more they loose (for instance, because climate change disrupts all their plans and destroys their properties), the more angry they may become in the defense of their property. Because even today, they don't mind firing people who were colleagues for many years if that is the way to increase their own profits. Indeed, too much greed always causes its own destruction.

And although I agree banks that fail because of misbehaviour should be allowed to fail while the persons responsible for the failure should be punished, banks should follow some basic rules that are enforced by governments and judges so those investing our money know they can't misbehave or face severe consequences. Because failing governments result in failing societies that become corrupt as people assume they can take as they like. That is also why a worldwide government and jurisdictional system that itself is controlled by its member states is needed to control multinationals while local companies can be controlled by local governments. Indeed, the EU (and others such as IMF) should make sure that multinationals and powerful people pay their taxes, not enforce countries to fire many people (such as those working for governments) and enforce taxes on those with a low income but not on the powerful who use every system possible to lower their taxes. That is also why many multinationals don't like these large strong governments unless they are weak, because then they can't do whatever they like, although in the article they acknowledge it is the only way to control large companies as they are out-of-reach for countries. And thus that means that the EU should not in the first case sanction local business because local governments can do that, but it should control large companies that are beyond the control of local governments although of course, it can reprimand local governments that do not do their duty such as check local business properly and threaten not to help or even sanction if they want to remain a Member State if things go wrong due to neglect.

And as one person says: (big) banks like regulations that are enforced because then banks can be stricter with their employees with less fear that their employees may leave when they can't do what they want. Indeed, banks started misbehaving because certain institutions and investors became too powerful and regulatory agencies too weak so that those investors could force banks to misbehave or threatened to have their money elsewhere (unbelievable how certain people are really larger than imaginable). When there are certain rules that can't be broken, financial institutions can't invent things that are dubious because if basic rules are strict and governments check whether they are not broken, these institutions know within which rules they can operate and which they can't break unless with consequences. Then banks can tell employees who (want to) behave like criminals by breaking those rules that their behaviour will result in imprisonment. As in the past, people will then again be able to thrust banks and bankers may gain respect again (although they may never get the same respect as before). Rules will also prevent that big financial institutions have more power than smaller ones and can afford more; on the contrary, everyone has to obey the same rules and competition is thus more based on the services and good advise people receive than on the fact whether some financial institutions dare to cheat more than others. Look, smaller banks didn't go bust during the crisis because they obeyed the rules while now they may be in danger because the big banks received rewards (financial help) for their corruption without punishment for criminals and the obligation to change while banks that didn't misbehave received nothing as they didn't need to be saved. Banks have to repay the money plus interest, but hey, they can use our savings for repaying the debts. Who will notice as long as people don't remove their money on a large scale (and next time when banks may go bust, our savings will only be paid back to a certain amount if any, the rest can be taken by banks so they can be saved for bad behaviour). Rules don't mean too many rules but simple ones that are easy to understand and implement while sanctions should be clearly mentioned so people know what can be expected if they misbehave (everyone can make mistakes and should learn from them or find another job while that is different from people knowingly misbehaving as that is called a criminal offence).

Hedge funds should be very controlled or even forbidden as people working for these funds often only think about their own profits, not that of the larger community. Indeed, what is called 'shadow banking' can't be trusted as they are not open and thus may do things daylight is not allowed to see (although of course some may mean well).


And this article writes about what I already wrote before: we can't continue getting bigger and fatter as that may become our undoing because too much fat is unhealthy. We really have to change our mind and accept everyone has to calm down instead of always wanting more and more, and certainly the very wealthy as they have to set an example. Of course, it takes time to change our mind, but since 2007-2008 we had enough time to make some fundamental changes which we didn't. Being able to live a more relaxed life is something most people desire: going on holidays, going out with friends, and when we calm down, things will again become more affordable. This can only be done when the same work is done by more people (or how can one otherwise reduce unemployment levels of 50% in some countries?) But, am I a fantast? I don't think so although many think I am, but one day we may all realise we couldn't continue as we did. But I agree, it probably will be after a major punishment forces us to change our way of living. Because at this moment, the ECB (European Central Bank) introduced negative interest rate in the hope it will stimulate banks to borrow even more to customers (making the debt crisis even bigger) so growth can continue and inflation remains around 2%. This is the opposite of slowing down in a controlled manner. At the same time, more people fear loosing their job and thus will consume less, therefore probably the decision of the ECB may not work. Only forcing the rich to share some of their wealth will stimulate more growth until that collapse. So living calmer is probably the only way forward.


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