If you’re in the US, the coming days will be spent in the company relatives, some of whom may not be totally approving of your red-blooded capitalistic career in finance. How can you deflect their criticism? Fortunately, Deutsche’s new Konzept Magazine offers some hot tips.
In a piece titled, ‘On your Marx, Bankers vs. Politicians,’ Deutsche’s global head of FX research, Bilal Hafeez suggests the Marxist method of de-fanging bankers – government ownership – wouldn’t work.
“State-owned or dominated banking systems are no better than private ones at averting crises,” says Hafeez. “If anything they do worse. Japan, with its intimate link between government industrial policy and bank lending in the 1980s, could not prevent the subsequent decades of stagnation. Moreover, an IMF study of all the major bank crises since 1970 found that indeed state ownership of banks was a
Rather than exposing the wrong doing of the privately-owned banking sector, Hafeez says the recent financial crisis showed that every kind of financial system was susceptible instability. US investment banks were as affected as small regional banks in Europe and high street banks in Britain. The reason for this, he argues, is that bankers themselves weren’t to blame for the problem. “The root cause of the crisis was a binge in credit that fuelled household debt and and real asset boom that eventually went bust.”
Moreover, Hafeez says simply regulating banks is insufficient to prevent future crises. This is because bankers aren’t the only ones with a vested interest in driving asset booms which turn to busts. Politicians and homeowners are equally culpable and no one’s talking about regulating them.