Do Banks Rule Government? Rise in earnings with increased volatility, presidential candidate and more

Typical banking situation.

Rising profits

A profit of 27% as a result of trading division rebounds. This was due to increased volatility that profited its core business.

Rothchild is doing well too with an increase in profits to the point that it is looking to expand its US branch. 

Both of the above are extracts from the financial times and seem to point towards an interesting historical suspicion that people have held. Do banks rule the world? Do they rule nations and the mind behind the most esteemed political leaders in the country? These are of course critics of capitalism speaking. Their assertions are indeed worthy of consideration. Was it not Goldman Sachs that triggered the crisis all the way from the USA to Greece? Was it not American investment banks that had a stake in Iceland's property market that in one swing got Europe to its knees?

Pardon the fancy hyperbole but the crisis was real then and the negative impacts of banks are felt even today. It constructs a frame that leads to 3% of the world supplying goods or services in some manner to the remaining 93%. In other words, wealth is managed by the top few. Poverty is a feature by design of the economy. I am not against incentivised work but I am saying that the system is flawed and the first step towards its reform is acknowledging it for what it is.  

Having said that, consider the old accusation of banks running too many governments and central banks in light of Emmanuel Macron's rise to presidency. Now, I have no idea about Macron's leanings in this context but we can say in one sense that money is indeed a defence just as good judgement is. The power of money could indeed be a strengthening feature of his candidacy. His work for Rothchild might not have made him popular with the social opposition in France but if, all in all, he can demonstrate credibility and leverage his financial know-how in the right sense, this might hold France in good stead. 

Having said this, France is still scarred, a decade later, from the financial crisis because the reforms that followed it, whether in the USA with the Dodd frank Act or in Europe through Basel Accords, they have all failed miserably. At best they have treated the symptoms and not the cause. 

That is all for now just as food for that with updates for today. 

This is your weekly economics correspondent from Brighton. 

over and out 

Aman Jamwal 

Behavioural Economics Doctoral Student

Economics of Trust and Reciprocity: Elements of Social Capital

This blog is to create a provocative thought-pad with ideas that are old but need fresh application. In a recent survey I personally conducted, I interviewed 5 people with 5 questions. The first one tested basic IQ skills and attention to detail. The remaining 4 were subjective in nature. The options were oversimplified deliberately to see knee-jerk responses. (Survey is attached in the Appendix). Most people fell prey to the first question which sought to fool people into activating their 'System 1' quick-think response and hence make a silly mistake. The remaining questions were to check people perspectives on the 'Global Economy'. All respondents in Lewes, East Sussex strongly felt that financial prosperity is not a matter of working harder  but better resource allocation at a nationwide and global level. Most of them also agreed that 'Greed' was the root cause of flawed economic systems across the global. 

Indeed, it can be asserted that money is a great servant but a poor master. The love of it can ruin you but the proper use of it can release you into greater riches. 

The purpose of this blog is to redirect economic thinking 20 centuries back. In ancient Israel, the practice of release from debts every fifty years was prevalent. It was a sort of re-set of the entire system. The social fabric of the nation encouraged flow of finances from one person to another. Hoarders of grain were hated because they with-held grain till the prices went up and then sold it. If money is made out of no real value added to the system, it means that somebody is making a profit without earning. It is said that 'let him who does not work not eat'. This saying implies that one ought to get what is due to one person in a place of fairness. 

In ancient Greece, reputation was held in high esteem. Reciprocity was encouraged as a basic principle. Bad behaviour was punished and good behaviour rewarded. Bad behaviour was punished worse than good behaviour was rewarded because of human nature. We hate to lose more than we like to win. 

Returning to the overall  title that we started with, I am seeking to establish stepping stones that have been created and are emerging in Behavioural Economics. A study revealed that if a 'trust game' was played such that A gives a certain amount of money to 'B' and then that money would be multiplied by three times by B and B would then have a choice of whether or not to give some money back to A. The potential outcome of events would be worth analysing and dissecting but what it points to more broadly is the fact that trust is a critical component of this equation. 

I am a firm believer of the fact that the wealth we seek is within us. Therefore, jobs are not greater than their employees and nor are houses greater than the hands that built them. One must realise that it is in labour that value is added to anything. The question is: 'What is your product?' Why is it important and what social situation does it solve? How are you making a difference with the otalents and skills you are gifted with. 

As I'm nearing the end of time allocated to this blog, I invite you to add your comments and responses to anything that has been said. 

Again, just to reiterate, the aim of this article is to increase awareness about social norms: the inherent fabric that holds society together and is at the heart of economic prosperity. 

Until Next Time

Your NextDoor Blogger

AJ 

  

Appendix

1.     A bat and a ball jointly cost £1.10. The bat is £1 more expensive than the ball. How much do both items cost individuals?

2.     Why are economic systems flawed today?

a.     Greed                    b. Fraudulent practices in leadership      c. Excess spending   d. a & b

3.     How would you like to see a change in it?

a.     Equal distribution   b. Reduced Social divides       c. Bigger pie for all d. All four

4.     On a scale of 1 to 5, how strongly do you feel that any individual must pursue careers and activities that he or she is innately passionate about?

5.     Is financial prosperity a matter of working harder or better resource allocation at a nationwide and global level?