A short lesson in economics for bankers

The expression "those bankers just don’t get it" is becoming exhausted through repetition, but their capacity for self delusion still amazes.

It has become fashionable to suggest that they (along with regulators, governments and the rest of us) had got stuck in belief in an economic paradigm based on the supremacy of rationalism.

Recent events, however suggest that they’re not very hot at applying even this old style economics.

The argument that bonuses still have to be paid (e.g. by RBS) to prevent staff migration (e.g. to Barcap) surely flies in the face of traditional economics. Why?

1. The banking sector employs twice as many people internationally as it did 15 years ago.

2. In London that ratio is 3 to 1.

3. The demand for banking services will now shrink as the depression continues, and banks will be shedding staff in the tens of thousands.

4. It’s anyone’s guess but we might assume that two in three wholesale, investment or forex bankers will become redundant.

5. In a buyers’ market the price bankers can charge for their labour will therefore plummet,

6. and they’ll be lucky to have a job at all, let alone a bonus.

But I suggest that there is one area where performance related pay is now badly needed, the Cabinet.

How about making Ministers’ take home pay dependent on the delivery of the pledges in the manifesto and the achievement of all the targets they spray around like a tom cat sprays wee?

That might concentrate the buggers’ minds.

[Ed: I apologise for GOM's use of offensive language; he does get carried away sometimes]

Beyond satire

Satirists might just as well pack their bags at the moment.

No sooner has one had a Swiftean moment than we read that the government has implemented it.

This weekend revealed that the FSA is to award itself £10m of bonuses.

And we have just heard that Tessa Jowell is attempting to remove gender differences from the Olympics by, for example, allowing women to compete in heavyweight wrestling.

I’d be tempted to suggest that the Secretary of State for Health has announced that men will soon be able to have babies, but there’s no point.

It’s probably already in the pipeline.

Not select enough

One of the inquisitors on this morning’s Treasury Select Committee meeting revealed his lamentable ignorance by referring to "siren calls from risk managers", meaning siren as in claxon or fire alarm. And everybody else adopted the solecism without any indication of irony.

So now we know why Bankers and Parliamentarians have so let us down; it’s very simply their lack of a classical education.

Funny how much clearer life gets as one gets older.

Or as my old friend Catullus used to say "Totum ut te facient, Fabule, nasum"