Fascinating area of enquiry. Have you read Janet Tavakoli? She is a professor of structured finance and actually understands this stuff. She is unequivocal that what has taken place was fraud.

My personal take on all this is that we have a case of weak owners. In the seventies we had weak management and the labour unions took advantage of that (aided by the legal environment). We now have a situation where the management cadre are in effect a union which exploits weak owners. There interests are not aligned with the owners as they should be. Hence the ridiculous bonuses.

All too clever for me I'm afraid, but the upshot is that I do not trust the sharemarket despite being a moderately successful businessman. This cannot be good.

Good stuff neville it is clear that there is now (was there ever?) no such thing as a "free market". It is simply impossible to ensure distribution of symmetrical information to all participants - blatant manipulation is the consequence. Could you provide hyperlinks to more of Leslie Young's work?

Have a minute in smoko break from splitting wood for next winter. Until this evening I give you this great article to ponder, especially those blinded fools that think deregulation pushed by big money lobbiests or co-opearatives that infiltrated government has not brought the modern financial system to the brink of collapse:

"Since launching its reform program in 1984, New Zealand, a nation of only 3.5 million people, has outdistanced every other country in reducing government's size and streamlining its operations. In that time, two successive New Zealand governments-the first led by the formerly socialist Labour Party and the second by the nominally conservative National Party-carried out a massive program of deregulation, downsizing, and privatization that makes Thatchernomics seem plodding.............

Douglas and Richardson needed considerable help in drafting their programs, getting them through the cabinet-where most of their colleagues cared very deeply about being re- elected-and driving the reforms down through the bureaucracy. What is startling is where that help came from.

It came in the shape of the Treasury, New Zealand's most elite and powerful department. Treasury provided not only the intellectual foundation for many of the reforms but also the technical expertise needed to translate theory into reality. "The Treasury became the life- support system for Douglas, Richardson, and other politicians trying to reform the system," says one longtime government watcher.

Treasury also brought an intellectually rigorous approach to New Zealand's reforms that had no parallel in either the Reagan or Thatcher administrations. "It became a 'think tank' for the neo-liberal [in the classical sense of the word] movement," writes political scientist Enid Wistrich, "using its authority as the top government department to influence the political leaders and secure the implementation of its blueprint." It was as if the Office of Management and Budget were run by University of Chicago economists..........................

Appointed the second director of Treasury's Economics II division, which was charged with long-term economic thinking, Kerr quietly set about changing the institution. Speakers gave seminars on the latest economic thinking, exposing the Treasury staff to new monetary thinking, organization economics, supply-side economics, and public choice theory. "We got into the game of tapping into the really good brains from around the world," remembers Kerr.

Kerr also began aggressively recruiting the country's best young minds from the universities. Kerr "was an intelligent coach," recalls Rob Laking, a Treasury colleague. "He had a tremendous ability to pick out, recruit, and cultivate talent."
http://www.reason.com/news/show/30260.html

I revise my bullshit comment.

That applies to anybody who thinks this financial crisis is a crisis caused by capitalism. It is not, for there was not one laissez faire capitalist economy coming into this crisis. This crisis came from the fractional/central banking system, etc, etc, that is, in that corrupt area where the State meets a mooching perverted controlled capitalism, which was never a capitalism at all.

very interesting and thought provoking article thank you Neville

As long as the carburetor is tuned to deliver created credit to the societal motor as compound interest bearing debt to form societies monetary base at levels that far exceed the natural resource supply to support it, the societal motor will never run in socio-economic or environmental balance. You can play all you like with any components past the carburetor, Socialism, Communism, capitalism, Monetarism, Keyneism, any ism you like, but as long as the tuning of the carburetor remains in the hands of slavery conservative central bankers(primary bond dealers) the societal motor will never do anything but clunk its way to premature demise and Fascism be the result. Fascism being when the basically decent majority end up serving a slaveminded few.

Mark - If the mountain of regulation out there has been influenced by the slavery conservative neo-cons and is infact designed to create and channel a disproportionate amounts of created credit into their personal trust funds it amounts to trumping legislation of good intent with an over kill of legislation of indecent intent, thus for mine is the equivalent of reducing or deregulating regulation to such an extent it no longer offers any protection of the basically decent majority at the hands of the slavery conservative minority, thus we have already experience your laissez faire(anything goes) caveat emptor(buyer beware) system and it really sucks.

The carburetor needs to be retuned to deliver created credit into circulation debt free as the monetary base, in only a productive fashion with the greatest importance placed on the obvious limitation of natural resources or the societal motor will inevitably continue clunking to premature demise.

The reason current bailout packages will fail is not down to more or less regulation but simply the decency or otherwise of that legislation and the intent of those that write it.

I wonder whether non economists such as myself are right when they just "smell a rat"? Frustratingly though, I can't prove it!

Sorry if this looks a little spammy Bernard, but I have little time left before getting some shut eye for another day on the road early in morn. I just want to give Mark a collection of articles that I believe supports my above post and is further proof that we have already suffered the laizzez faire capitalism that he is still barracking for, that it stinks and he's a little late. And, also prove that John Key and his banker buddies are looking to derugulate further by indecent regulation removing nationstate protections in order that our necessities of live can be sold to the highest bidder, no matter who they are or what their future intent is, as long as their slaveminded individualist few accumulate the largest capital gain they can.
"As the push for new legislation heats up, lobbyists quip that raising the issue of financial modernization really signals the start of a fresh round of political fund-raising. Indeed, in the 1997-98 election cycle, the finance, insurance, and real estate industries (known as the FIRE sector), spends more than $200 million on lobbying and makes more than $150 million in political donations. Campaign contributions are targeted to members of Congressional banking committees and other committees with direct jurisdiction over financial services legislation."
http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

The below is a list of preliminary recomendations put forward by a taskforce appointed by the National Party Executive and headed by Rob Cameron who has recently just formed a partnership with Rothchilds Australia:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1052...

"2. Raise threshold for subsequent equity issues. The taskforce recommends the raising of the threshold for shareholder approval and disclosure documents for subsequent equity issues to existing shareholders from NZ$5,000 to NZ$25,000. As an alternative, the taskforce suggests that the requirement for listed issuers to prepare a prospectus before issuing equity to existing shareholders be removed entirely because the issuer is already subject to continuous disclosure. "
http://www.bellgully.com/resources/resource.02046.asp

I would suggest that Cameron should be standing down from the above task force for the same reasons as Fontera's Henry van der Heyden as a NZX Director:
http://nzx.com/news/markets/2670464/Fonterra-chairman-quits-NZX
Do you thing it will really means he burns his NZX hat or just stores it in the cupboard for when he needs it?

Get ready Mark I got a feeling your going to see a lot more laizzez faire-caveat emptor yet!

Iain, you have no understanding of laissez faire capitalism, none at all. You keep banging on about crony capitalism, that debasement where firms gather around the State to earn monopoly rents made possible only by the existence of the State distorting the market. Yes, that is the problem, but it has nothing to do with capitalism, per se.

As for your theological argument about righteous legislation, hell, all you're arguing for is the Telibanisation of capitalism.

I won't have a bar of your brand of slavery. It's nonsensical rubbish, and if I could ever get a grip on it, most probably highly dangerous.

Oh heck another deciple of the delusional chap that promotes the mythocal utopian of Liberterian anarchy funded by voluntary taxes. Atleast everyone can see where the funding of any Debt Free BASED Monetary System comes from, from the reduction of the $39 billion that left this nation in rent of our money supply last year, money backed by our own resources as colateral, money that we could, and many an official inquiry has stated, we have the right to bring into circulation ourselves, in the same manner as the private central bankers(underwriters, primary bond dealers) do now, but cutting those crubby mongrels from crabbing their middlemen cut for a service they are not providing.
Mark you need to read a little wider:
"The great wealth that the financial sector created and concentrated gave bankers enormous political weight"”a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent."

"Instead, the American financial industry gained political power by amassing a kind of cultural capital"”a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America's position in the world.

One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup's executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson's predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets."
http://www.theatlantic.com/doc/200905/imf-advice/2

Doug - "The Fed and Treasury know the US cannot sustain their debt obligations, so are simply printing and selling bonds until the value of the debt itself is washed out, or the global monetary system itself crashes and is replaced with a new global currency. It is lunacy, but there you have it."

Economic, financial - and any other sovreignty - will not be a concern then.

Lunacy, hmmm??....dunno, it's almost like someone's planned it.... whad'ya think?

Mark Hubbard...- It is shame u are so dismissive and derisive of Iains point of view... by labeling it Telibanisation of capitalism.
Crony Capitalism is probably the best term that describes the form of Capitalism we have seen for at least the last 100 years.

Laissez faire Capitalism is a fanciful utopian ideal... We have never had it and we never will..... ( Laissez faire is french for ..."leave alone")..... ( we can't change human nature)

It is actually Crony Capitalism that explains the apparent contradiction that you pointed out.
In the 1990s' there was a very, very clear warning,..with the failure of LTCM.... that maths can never properly explain the markets... Maths can NEVER accomadate the unexpected... The writings of Nassim Taleb and others have pointed this out for many years.....
SO.... why did it happen again...???? GREED...... Just like a consultants report.... the use of stupidly complex maths lets everyone off the hook..... No one needs to take responsibility.
CRIMINAL FRAUD... is the only way I can descibe what has unfolded.
And like a glove that fits a hand.... the response to the crisis has shown just how much cronyisim there is out there..... It is just so obvious.
There was alot of hope that , somehow, Obama would be different... but no signs of that so far.....
The honesty, wisdom, integrity, and intent is not there...to do the right thing... It has nothing to do with more or less regulation.... I would almost call the USA response to the crisis...CRIMINAL FRAUD.. Is this environment there are no other solutions.

The irony is that the very best response to this crisis was probably to let it all unwind( laissez faire).... and support the economy (people) at the "everyday marketplace" level.... where most of us live...buy our food...clothe our children"...

Getting back to your comments about Iain.... I believe that most of what he says is valid... I have made a point of trying to understand Monetary systems.... I can understand most of what he is saying.... I don't necessarily agree with it.

A debt free monetary system maybe more beneficial to the "state"... but it is still inherently unfair and dishonest (in my view)..... but what we have at the moment is just as bad...if not worse.

Anyway.... As Warren Buffett said...."It is only when the Tide goes out that we see who has been swimming naked".... WELL...this crisis has certainly shown just how dishonest and corrupt things have been.

"WELL"¦this crisis has certainly shown just how dishonest and corrupt things have been"
hahahaa, Roelof, you aint seen the half of it. Most of the crooks and useless politicians just swam out with the tide and they will swim back on the turn as well.!
We only get to see the ones too thick to learn to swim.

"...the laxiity of professional standards (and audit professionalism) - that is, not enough regulation." Professional standards implies that as a professional you should know what is the correct moral standard to work to....so no I dont see this as not enough regulation...its more like this was done by amoral ppl.

Roger Thompson: "Chinese are demonstrating a more efficient capitalist system, and less corruption".....I wouldnt have said so....have you been to China? delt with chinese businessmen? China isnt more efficient it has a cheaper Labour input...it also pollutes and dumps waste heavily....so less expense....as for corruption....in China its pretty much endemic at every level, and accepted as such....

Just maybe we should have listened to the only leader of this nation to put his life on the line for it, the much maligned Rob Muldoon:
The New Zealand Economy, A Personal view, by Rob Muldoon 1985(yes 1985)
page 66;
In my 1968 budget I referred to the establishment by the International Monetary Fund of a new international reserve asset, the special drawing right(SDR) and the problem of smaller countries which depend for their export earnings on commodities, the prices of which fluctuate violently. I have spoken on that theme at IMF meetings and elsewhere ever since.
page 153;
The international institutions must be reformed with a mandate that fits the needs of the 1980s and into the 21st century. The immediate debt crisis must be dealt with, not as a bale out of either the heavily indebted countries or commercial banks but as a means of averting the collapse of the worlds financial system with a resulting world wide depression such as we have not had since the 1930s, a depression from which no countries economy would be immune.
http://socialcreditorbust.blog.co.nz/muldoon%20made%20bankers%20scapegoat/

Sorry folks, only one more tonight I promise. Speaking of US being corrupt I don't think anyone in the interest.co community has mentioned this interesting little event:

"Secrecy surrounding the clandestine visit of a top American spy was blown when the cavalcade taking him and his Kiwi counterpart to lunch dropped them off in front of a journalist.
Lieutenant General Keith Alexander, head of the United States National Security Agency, was in Wellington yesterday for talks with local intelligence and security officials a visit the Government and the US embassy hoped to keep under wraps.
But his cover was blown when the convoy of four Crown limousines carrying him and Government Communications Security Bureau head, Air Marshall Sir Bruce Ferguson, stopped outside the Reserve Bank Building.
The building houses the domestic and external security group among its many tenants and was also where a journalist from online news service Newsroom had agreed to meet a friend for lunch."
http://www.stuff.co.nz/national/politics/2580795/Top-US-spys-secret-visi...