In yesterday’s Australian, Adam Creighton wrote a wonderful piece on the state of the Australian Financial Services “industry” – Time we lifted the lid on these sheltered workshops.
Whilst waiting for someone to lodge a complaint against Creighton and the Oz with the Australian Human Rights Commission for the derogatory use of the term “sheltered workshop”, Spartacus was reminded of the wise words of Nassim Taleb as it relates to breaking up the vertically integrated financial services behemoths.
Taleb wrote/said (can’t remember which) that any organisation that is the beneficiary of a government guarantee (actual or implied) is for all intents and purposes a government entity. And as such, the managers of such quasi government entities should be remunerated as public servants. At least until these entities are no longer the beneficiaries of government guarantees.
Taleb posited that if such rules were applied, these entities would be broken up so fast, our heads would spin.
He gave 2 examples to support his idea:
- In the feeding the people industry, restaurants go broke every day without anyone noticing. Yet, were a large supermarket chain (yes like you Coles and Woolworths) to get into financial distress, the conga line of lobbyists and glad handlers would converge on Canberra faster than a rat on cheese.
- In the financial trading industry, hedge funds also go broke every day. Yet, and readers may recall 2007/2008, were a large bank to get into trouble from trading (and notably not from the provision of core banking), a conga line of regulators would converge on Canberra on behalf of the banks.
The Australian Financial Services industry has long ago moved into the State Monopoly Capitalism territory where it is no longer survival of the fittest, but rather survival of the fattest. And in this case, the banks are Hansel and Gretel and the Government is grandma fattening them up so as to eat them. In this case however, not to exactly eat them but rather to tax them within an inch of their lives. You see, in a competitive market, there are no super-normal profits and hence no rivers of tax gold for our political overlords to spend on things.
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