I stumbled on this by Googling Brown + Davos, Gordon Brown’s latest article published in the FT website yesterday.
Gordon begins with his usual ambitious-sounding title –
WAYS TO FIX THE WORLD’S FINANCIAL SYSTEM
By Gordon Brown.
Most political and business leaders gathered at the World Economic Forum this week agree on one thing:
no marks for guessing what that was.
But we should also agree that turbulent conditions, throughout history, have been an opportunity for reform.
I’m sure it wasn’t anything you did Gordon. No I thought not….
In their search for higher returns, investors underpriced the risks in a number of markets, particularly in the markets for complex derivative products…
I don’t quite get it, Gordon. You say that people searched for higher returns, and yet they did that by underpricing the risks? It doesn’t quite make sense. Maybe your diagnosis is, as yet incomplete?
He continues – Recent turbulence, where loan risks were transferred to those least able to understand them, has exposed four big questions and issues for policymakers around the globe.
So we get one sentence of at best an incomplete assessment as to what went wrong. And now a whole book coming up on how Gordon’s going to put things right all round the globe. Amazing.
Ah no. Here’s some more detail on the diagnosis….
If the manifestation of the problems was an underpricing of risk, the source of many of the problems was a deficit of transparency. That transparency deficit needs to be addressed – from within organisations, their auditors, the credit rating agencies and through regulatory requirements, leading to an increased understanding by firms, investors and regulators.
‘transparency deficits’ ? Well, Gordon knows a lot about those.
So one bunch of dealers conned another bunch by using ‘transparency deficits’? The innocents were trying to make ‘higher returns’, but came unstuck from ‘transparency deficits’. And regulation will do a lot to stop these ‘transparency deficits’ in future.
Thank God for regulation, say I. If it’s so easy and effective, why didn’t they use it before, one wonders?
Hang on. Didn’t the Bank Of England carry out an overall supervising role over all banks in the UK and ensure all were operating sensibly and without undue risk, that is before Gordon ended this supervisory role in 1997. Or am I missing something?
And didn’t banks start offloading debts from their balance sheets as encouraged by Basel 1? In fact isn’t this crisis caused more by inappropriate regulation than anything else, much of it directly commanded personally by Gordon Brown?
But wait. Gordon’s speech is moving on. He’s got global ideas now. Mere national crises are obviously too small to warrant his attention.
Second, as financial markets become increasingly interlinked, countries must ensure they have robust and effective cross-border crisis management arrangements. Central banks have already taken co-ordinated action to deal with these short-term problems. We now need not only strengthened national regulatory frameworks, but also strengthened international co-operation.
…..The world has no effective early warning system……. Many of the problems were identified in advance but were not acted upon. We need a clearer, more authoritative watchdog.
So the trouble Gordon’s having with the Northern Rock, for example was caused not by poor supervision by the British government, or inappropriate regulation of banks but by the lack of an international regulator, and co-operation between national regulators.
I particularly like the sentences – ‘Many of the problems were identified in advance but were not acted upon. We need a clearer more authoritative watchdog.’
I wonder – does he have anyone particular in mind?
…and who knew about and ‘had identified’ the Northern Rock troubles in advance, and that British banks were getting involved in ‘transparency deficits’? Well obviously not Gordon Brown, who was Chancellor of the Exchequer from 1997 to 2007.
And yet maybe it was Gordon that knew about Northern Rock in advance and failed to do anything about it, himself.
If the British government is clearly not required or expected to oversee its own banking system, then who pray will Gordon appoint to carry this unfortunate burden for him?
Here is his answer…
The International Monetary Fund should be at the heart of this reform. It was built for the era of national, not global, economics – for dealing with local balance of payments crises, not global flows of capital. To be effective for a new era, the IMF should act with the same independence as a central bank – responsible for the surveillance of the world economy, for informing and educating markets, and for enforcing transparency through the system. ………….. We should also consider how the IMF’s responsibilities for financial stability could be made clearer.
OK – so because national supervisors are failing to oversee their own banks and correctly regulate their financial organisations, and especially Gordon Brown himself must be about the best living example of that, the IMF should be appointed to carry out the task of overseeing those at mere national level.
Third, we need to ensure that fiscal policy can play its rightful role supporting monetary policy, keeping the economies on track while maintaining sound public finances.
So Gordon, do you mean you want the IMF to supervise your Chancellor for you as well? Your fiscal deficit is ballooning as you haven’t got spending under control. It is not helping confidence in the UK, which is why the Pound is falling, and foreign money is moving out. Bloomberg recently referred to you as the ‘sub-prime minister of a sub-prime economy’. You really could be doing more to help yourself. At least in the USA they’ve got some powder dry to address the problems they are facing. In the UK the cupboard is bare. You put nothing by for a rainy day.
Fourth and foremost, the downturn will be compounded if we lurch back into protectionism as more people see globalisation as a threat, not an opportunity.
Amid these uncertainties, we need to show that we can respond to the impact of globalisation, but also show how the global economy can benefit ordinary working families feeling insecure about their futures.
Gordon, now you’re just getting silly. ‘Fourth and foremost’!!!! Protectionism? But you’ve just signed up to Lisbon and are accepting that the EU is responsible for Britain’s trade policies. The EU bars agricultural products from poor countries all over the world who don’t have much else to sell, ensuring they remain in permanent poverty. But what’s this got to do with the Financial crisis that you’ve engineered and supervised these last ten years?
You’re trying to change the subject and go off into one of your grand finales, aren’t you Gordon.
OK get on with it if you have to….zzzzzzzzzzzzzz.
Progressive business and government voices should come together to agree a manifesto for successful globalisation. That manifesto needs to stand behind free trade, open markets, flexible economies and investment in people as the only way forward for rich and poor alike. I will redouble my efforts with the US, the European Union, China, India, South Africa and Brazil to make possible a fair World Trade Organisation settlement on trade. Our prosperity, the credibility of the multilateral system and a chance for millions of poor people to break out of poverty are at stake.
The writer is the prime minister
I see. Create a worldwide financial government. Put Gordon Brown in charge of it. And he’ll be one up on Tony Blair, who’ll only be operating at European level.
When will we see the end of these New labour fantasists, none of whom can even run a whelk stall, let alone a national economy – and god help the world economy if they ever got their hands on that?
The only encouraging thing in this article is that Gordon’s sniffing around for what will come once he’s no longer Prime Minister. Maybe the IMF would be an excellent posting for him. Are there, by any interest any vacancies coming up soon? Please.
The credit crunch was not caused by ‘transparency deficit’. There was not a ‘transparency’ but instead a ‘responsibility deficit’ where governments, risk-buyers and sellers all decided that someone else would carry the can if things went wrong. Brown himself is very much part of that story. I wrote about it recently HERE.
It seems to me that if this is the sum total of Gordon Brown’s analytical skills, it’s no surprise that Britain is in the mess that it is. And as to how the MSM kept writing year in, year out that Gordon Brown is a bookish genius who just cannot socialise, I have absolutely no idea. If this is the standard of his analysis of important events, Brown is quite clearly thick – not to mention a bullying egomaniac.