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March 08, 2012

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CharlieMcMenamin

"...banks survived for decades by employing doddering Captain Mainwarings but collapsed soon after hiring physics PhDs."

I think that's my favourite sentence on the subject to date. By some distance.

BT

"And even if inequality did not cause the crisis, it is correlated with it."

Bingo.

The correlation between US Gini index and US private sector debt:GDP ratio is extraordinary.

This can't just be due to GATT/globalisation pushing down US wages or the 'asian savings glut' pushing dow US interest rates. It's also the 2% inflation target, which falls on wages but not asset prices.

Rising asset prices over average income means that those incomes at the very top rise the most, because they benefit most from asset price rises (Finance, Insurance, Real Estate, Lawyers).

Tomboktu

Anthony Atkinson gave a presentation in Dublin in January on work done by Atkinson and Morelli on whether there is a link between banking crises and inequality, drawing on 72 banking crises in 25 countries between 1911 and 2010. Their conclusion: "No".

Paper treatment here:

http://isites.harvard.edu/fs/docs/icb.topic457678.files/ATKINSON%20paper.pdf

ThomasW

BTW: That's where Deutsche Bank is now heading to: Kicking out the last Captain Mainwarings and replace them by the physics PhDs. It is already happening.

Dipper

"...banks survived for decades by employing doddering Captain Mainwarings but collapsed soon after hiring physics PhDs."

"Top-down management structures produce bosses who combine domineering arrogance with ignorance."

JP Morgan, Goldman, and Barcap all have loads of PhD's and whilst I have no experience of these organisations it would seem that the description of management would apply to these as much as other banks. These banks didn't go bust.

Did Bradford & Bingley have loads of quants? Did HBOS's corporate loans department, recently plastered all over the papers, have lots of quants?

This article is a case of post hoc ergo propter hoc?

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