Do Zombies sleep?:: bankers are ‘kept awake’ by fears of new crisis | Herald Scotland


This shouldn’t come as a great surprise…no, not the fact that bankers have a conscience (the article doesn’t go that far and I doubt the research would have obtained a believable response)!!!

We are ALL worried about the impact of a  “global recession” but banking has been in a cultural crisis for years. Financial and political “mismanagement” led to a financial crisis that, without decisive action, has created a Social crisis.

Now, finding a solution IS something that is worth losing sleep over! But, on the evidence of the last few years the answers will not come from the people who brought us here…at our expense.

Another global recession triggering a catastrophic banking crisis is keeping bankers awake at night, according to a survey of the world’s banking industry from the Centre for the Study of Financial Innovation (CSFI).

The main cause of anxiety is the eurozone crisis, with the shock of a euro collapse liable to hit banks not just in Europe but in all major regions of the world, says CSFI’s annual Banking Banana Skins survey, produced in association with PwC.

via Bankers are ‘kept awake’ by fears of new crisis | Herald Scotland.

Banking: “culture” a greater threat to ROE than Basel


When the obvious conclusion is “politically sensitive” it is best for firms such as McKinsey to talk in terms of what returns investors want from the future banking model. But isn’t this part of the problem?

(McKinsey)…estimates show that if banks maintain their existing business models, their average return on equity (ROE) would fall to 7 percent by 2015, from its current level of 11 percent, against a cost of equity projected to be more than 9 percent.

Investors want to see the management teams of banks propose credible, far-reaching plans to close this gap. The message that investors are now sending—shares of banks will be valued at levels implying that they will not earn their cost of equity—has profound implications for a US economy dependent on a healthy banking system to support recovery and fuel growth.

Of the three threats, the most significant comes from the Basel III requirements, proposed by the Basel Committee on Banking Supervision. Without mitigating actions, they could reduce the ROE of some banks by as much as five percentage points. While the details are still being determined, we estimate that the US banking system will need an additional $500 billion in retained earnings or new equity to meet the new capital adequacy standards (assuming the current asset level and mix).

The second threat is the continuing deleveraging of consumers. The history of the past 100 years suggests that when excessive borrowing is a principal cause of a recession, consumers and businesses spend the next seven to eight years rebuilding their balance sheets…

How can “entrepreneurial spirit” and "creative destruction" flourish without nourishment?


Joseph Schumpeter reinterpreted (from Marx economic theory) and popularised the expression “creative destruction” to describe the process by which established ways of doing things are destroyed from within (by new thinking, tools and processes) – at this point the scientific community may draw attention to the 2nd Law of Thermodynamics: that a system tends toward entropy (chaos or disorganisation) and consider the state of our global economy.

Hugely expensive and experimental life support for “clinically dead” institutions, markets, currencies and flawed philosophies equates to – at best – stagnation and at worst starves innovators of the means to accelerate a new evolutionary phase: instead of “creative destruction” we have “destructive creation” in the form of more regulation! Read more of this post

If you think "ruling elites" are a fantasy…think again


Now I am not suggesting that the US is representative of the rest of the world but I would certainly be curious to know how the UK picture looks! According to Michael Moore circa 400 families in America have more money than the other 300 million!

Hopefully, the “apathy” that allowed this situation to develop is a thing of the past. We were all too busy buying into the consumerist myth of “financial independence” (that was really the DEPENDENCE that fuelled individual (ego) and institutional greed)  So, unless “the 99%”, quickly, rediscover the power of INTERDEPENDENCE and utilise the communication tools at our disposal, life in the post-critical society i.e. after the next financial collapse, will make austerity measures look positively appealing! Read more of this post

Public Sector: “complexity paralysis” – creator and casualties


No matter how you express it, in a dynamic (non-linear) system, that is, by definition complex, “what goes around comes around” – the “feedback loop” – complexity begets complexity until the system reaches breaking point – “critical complexity”.

But the closer the system operates to this point the more fragile and unstable it becomes.

Things can, do, get ugly, painful, dangerous and costly on a variety of levels and the impact is felt across domains.

Public Sector: “complexity paralysis” – creator and casualties Image by michael.heiss via Flickr A recent blog about procrastination led me to get this off my mind. It has been rattling around in there for some time… Ever had so much going on in your head that you don’t know what to do first? Too many tasks, too little time: which “master” to satisfy? Every issue or task has its own factors to consider: short term effect; long term impact. Assessing cause and effect or imagining problems, leading you to “f … Read More

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