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]