On Hans in Luck effects

In the Brothers Grimm fairy tale, Hans in Luck, the protagonist starts with a lump of gold but ends up with nothing after a number of trades each of which seems reasonable on its own. This is a metaphor for a lot of behaviour in politics and economics.

The point is that you cannot always judge an outcome by the individual actions that lead to it. Each action Hans takes is understandable in itself but their cumulative effect is to impoverish him*. Which is an example of the Sorites paradox. If you take a grain of wheat you’ve got next to nothing but if you do so often enough you’ll eventually have a silo full of the stuff.

The fund management business operates on this principle. A modest annual management charge looks like a single grain of wheat, not worth noticing. But if you take it every year it eventually adds up to a silo full. An extra half percentage point a year in fees can easily compound over ten years to a charge of over £750 on every £10,000 invested. There’s a reason why fund managers are rich, and it’s not because of their investment skill.

Similar things happen in politics.

For example, any individual tax break might seem reasonable. But their cumulative effect is to produce an overly complex tax system which diverts entrepreneurial effort away from productive activity and towards tax planning and which merely enriches lawyers and accountants.

Ditto other fiscal measures. If a man gets a job with some boondoggle, he’ll feel grateful to the Chancellor for creating it. But if he gets a job because of good macroeconomic conditions he’ll feel less gratitude because it’s harder to link his good fortune to the Chancellor’s actions. In this way, Chancellors are incentivized to come up with gimmicks such as freeports rather than to focus upon proper macroeconomic management. Each individual boondoggle looks reasonable, but the aggregate effect is a political culture which devalues good macro policy and overvalues gimmicks.

Perhaps Brexit fits this pattern too. A bit of extra paperwork is only a small hassle, and who cares about prawn exporters anyway? But a small friction here, a small one there, plus macroeconomically imperceptible year-on-year impacts on productivity and innovation, eventually add up to something significant (pdf).

Yet other examples of Hans in Luck effects might be found in the Labour party. Many on the left have been perplexed by the fact that whilst most Labour economic policies in 2019 were popular on their own, in totality they were not. A similar thing might be true of Starmer’s use of focus groups. In any individual case, it seems reasonable to use such groups. But the total effect could be to alienate voters by giving the impression of somebody who lacks his own ideas or convictions.

Some forms of racism also look like Hans in Luck effects. Victims of racism often speak of a “drip, drip” effect. Any individual remark might seem innocuous to a white person: “why are you so touchy?”. And any single hiring of a white person over one of colour might seem a reasonable marginal decision. But the totality of remarks and marginal decisions and mild stereotyping adds up to something wholly different – systematic racism which is experienced as stressful and exhausting.

Which is why I agree with those who have criticized the Society of Editors’ claim that the press is not racist.

Let’s take the now-notorious contrast between the press’s coverage of Meghan and Kate. When Kate touches her pregnancy bump, she “tenderly cradles” it whereas when Meghan does so it is a show of “pride and vanity.” And so on. If we take each case individually, it seems hard to read racism into it unless you are predisposed to find it. If, however, you look at the totality of editorial judgments a clear pattern of systemic double standards emerges. As in the Hans in Luck story, innocuous individual decisions cumulate to something nasty.

In this context the Society of Editors’ denial of racism perhaps reveals a different kind of media bias – a failure to see the wood for the trees. If you look only at stories in isolation, as journalists tend to do, you can miss the pattern. To do that, you need a form of sociological imagination – the ability to pan out and see the big picture which is not necessarily the sum of the parts. But journalists are not trained in the sociological imagination. That’s part of their deformation professionnelle. There are therefore limits to what you can learn about society from even good journalism. And that is why we need social science.

* The opposite is also possible. Kyle MacDonald famously traded a paperclip for a house. That could be a metaphor for the story of economic growth.

Comments

[AakashM]

'zoom out', not 'pan out'. You pan left and right; you zoom in and out.

[aragon]

Could you have chosen two more privileged and self entitled individuals.

https://www.spiked-online.com/2021/03/08/the-unbearable-victim-complex-of-meghan-markle/

"Harry and Meghan aren’t fighting the establishment; they are the establishment now. Meet the new aristocrats, even worse than the old."

https://www.spiked-online.com/2021/03/10/harry-and-meghans-woke-empire/

"Far from questioning the relationship between royalty and empire, Harry and Meghan breathe new life into the colonial mindset. Harry may have abandoned his Nazi dress-up regalia and finally learnt not to use racial slurs. But in his world, the entire continent of Africa is both playground and pulpit – a springboard for sermonising. Meghan claims that the young girls she met on her royal tour of Africa see themselves in her. ‘You have to see it to be it’, she said when trying to justify the empress of the commonwealth role she was hoping to carve out. The duke and duchess of Sussex love to patronise the masses in Africa, and love to condemn the British masses as backward.

[Jon]

I think this is a great post. One other factor is that if you complain about one “innocuous “ remark you look hypersensitive, and may actually be wrong. If you complain about the generality it lacks substance. So it is almost impossible to fight back.

[Blissex]

«An extra half percentage point a year in fees can easily compound over ten years to a charge of over £750 on every £10,000 invested.»

That is rather a large understatement, one has to compare instead:

* The 1-2% of total fees that "active" fund management takes every year from a person's pension fund, which is charged during the accumulation phase before retirement and the withdrawals phase after retirement.

* The 3-4% of withdrawals that the pensioner makes every year, that are made only after retirement.

Summing up the 1-2% over the whole duration and comparing with summed up 3-4% during only the shorter retirement phase shows that in a share based pension fund around 30-60% of the pension is paid to the fund managers rather than the pensioner. That compares to less than 1% overheads for the management of state pensions.

That is why fund manager were willing to pay commissions of 30% of the value of the fund to salesmen who persuaded suckers to cash in a final salary pension to a personal one. There was still plenty left to take for them even after paying a 30% commission.

[Dave Timoney]

"Many on the left have been perplexed by the fact that whilst most Labour economic policies in 2019 were popular on their own, in totality they were not."

I don't think this is correct. Most voters were unaware of the totality of Labour's offer (only a tiny minority will have read the manifesto and they will have been predisposed to like it). What mattered were a few emblematic proposals that the media chose to misrepresent and amplify: "broadband communism", "nationalised sausages" etc. In other words, this was more an example of negativity bias, i.e. "give a dog a bad name and hang him".

You're quite right to note that a structural factor in the media's bias is the lack of a sociological imagination, which causes editors to underplay the impact of individual incidents of prejudice, but as well as that absence there is also a presence: a parisan desire to embellish or inflate specific incidents as part of a deliberate campaign of misinformation.

[Blissex]

«Chancellors are incentivized to come up with gimmicks such as freeports rather than to focus upon proper macroeconomic management.»

To me this is the usual indefatigable wykehamist of our blogger, as he fantasizes that there is some kind of "proper macroeconomic management" as designed by unbiased and just 'philosopher kings' in 'the national interest', replacing the sordidness of politics.

Because "gimmicks such as freeports" is another example of wykwehamism, for they are not a short term trick or an innocent mistake, but a long term strategy to create areas with lower taxes, freer immigration, fewer labour rights, so businesses would move into them, and then justifying their extension to the rest of the country with that success. The model is the Free Enterprise Zones of Dubai or the Mariana Islands, or the "maquiladora" areas on the mexican side of the border.

[Blissex]

«the protagonist starts with a lump of gold but ends up with nothing after a number of trades each of which seems reasonable on its own. This is a metaphor for a lot of behaviour in politics and economics. [...] The opposite is also possible. Kyle MacDonald famously traded a paperclip for a house. That could be a metaphor for the story of economic growth.»

Taken together they show why I think the arguments in this post are fundamentally misguided and even ridiculously neoliberal (economic growth does not come from mere trading, buying low to sell high).

What the two 'many small actions, big coonsequences' stories, whether one way or another suggest seems to me:

* If the many small actions are synchronic and independent, that is a demonstration of emergent effects.

* If the many small actions are diachronic and dependent, that is a demonstration of statefulness/path depedency.

Those are two very different concept that should not be confused.

[ltr]

"But the totality of remarks and marginal decisions and mild stereotyping adds up to something wholly different – systematic racism which is experienced as stressful and exhausting."

A brilliant essay that I am ever so grateful for.

[ltr]

The prejudice of the British press continually bothers me, so that when former Brazilian President Lula is found innocent of corruption by the Supreme Court, I know the Guardian will follow with an article comparing Lula to Donald Trump or just another Bolsonaro populist. Of course, the Guardian proved me right in only a few hours.

BBC and Economist coverage of China is impossibly prejudiced...

[Blissex]

«BBC and Economist coverage of China is impossibly prejudiced»

My impression is that all popular media have been "normalized", one way or another.

But what worries me more is that they follow the establishment propaganda line even as to foreign affairs, even giving it prominence, even if it is largely electorally irrelevant, most domestic voters hardly care about foreign affairs, and even if they do even more rarely their vote is driven by foreign affairs.

Historically heavy foreign affairs propaganda has been instead to prepare the public opinion for "patriotic" foreign wars. One of the most terrifying articles of recent times is from the "sensible" pages of the "Financial Times":

https://www.ft.com/content/271127af-9b74-4d90-b0f2-4ecca6946206
“The elite US special operations forces are ill-equipped for high-tech warfare with China and Russia, experts warn”

Is this something that is currently a serious planning concern?

[rsm]

"Victims of racism often speak of a “drip, drip” effect. Any individual remark might seem innocuous to a white person: “why are you so touchy?”. And any single hiring of a white person over one of colour might seem a reasonable marginal decision. But the totality of remarks and marginal decisions and mild stereotyping adds up to something wholly different – systematic racism which is experienced as stressful and exhausting."

You can apply this "drip, drip effect" to economics: we daily experience arbitrary prices and glaring market inefficiency, yet we excuse these as outliers and atypical, thus denying the inescapable systemic arbitrariness which is experienced as stressful and exhausting, the more arbitrarily low your labor is valued.

That is why buying low to sell high (and selling options high to buy them back later low) should be seen as a harmless pursuit whereby one can take advantage of arbitrary free lunches that pop up in paper markets. Prices are arbitrary, and any economic growth theory is as guilty as systemic racism of dismissing clear everyday evidence of arbitrariness in pricing and business logic.

[georgesdelatour]

What makes racism sytematic?

I think the Bumiputera laws of Malaysia are a clear example of systematic racism - of racism built into the current operating system of Malaysia as a state. These laws require you to be racist in favour of Malays and against Chinese and Indians. You can - literally - be fined for failing to be racist. If you sell your house, you’re legally required to sell it more cheaply to a Malay than a Chinese. If you want to employ a Chinese, you first have to show that no qualified Malay is available to do the job. That’s system level racism, systematically applied. We have nothing like that in the UK.

But here’s the thing. Even with this system-level, government-mandated, government-enforced racism, Chinese Malaysians are, on average, twice as rich as Malay Malaysians. All over South East Asia, ethnic Chinese people form what Amy Chua calls a “market dominant minority”: a small proportion of the population, disproportionately successful in business or trade, but easily dwarfed by other groups in terms of their access to political power. In the Philippines, Chinese people are just 1% of the population but own over 50% of the wealth. They have somehow achieved this even with the “drip drip effect” of Spanish colonial massacres, expulsions and discriminatory laws. The possibility of pogroms is still a real one today.

In England, historic racism against one particular market dominant minority is arguably our oldest form of racism. It’s generally agreed that Aaron of Lincoln was the wealthiest man in Norman England. He funded the building of many of our finest gothic cathedrals. But wealth alone couldn’t ultimately protect his people from the 1290 Edict of Expulsion.

[rsm]

@aragon (since comments are closed to the last blog): why can't basic income let us play in financial markets without mortal risk? The idea that the Fed has distorted prices ignores that prices have always been distorted; was the price of slave labor fair? Were falling wages and frequent boom-bust cycles due to insufficient private credit elasticity the right kind of price discovery, between the Civil War and the Fed?

[ltr]

Blissex:

My impression is that all popular media have been "normalized", one way or another.

But what worries me more is that they follow the establishment propaganda line even as to foreign affairs, even giving it prominence, even if it is largely electorally irrelevant...

[ I would agree, but think foreign affairs largely electorally relevant. The trick is to turn foreign affairs to domestic and even local affairs. That trick is repeatedly managed.

"China" is now importantly driving Tory domestic policy initiatives, against British domestic economic needs. Labour is fine with using "China" to go along with limiting British trade and investment policy when China would be a perfect British partner for domestic economic affairs. ]

[ltr]

In England, historic racism against one particular market dominant minority is arguably our oldest form of racism....

[ This English racism was not directed against "one particular market dominant minority" but simply against people who were Jewish. ]

[ltr]

Amy Chua strikes me as a questionable analyst in relation to the tying of ethnicity to elite status. Her writing is troubling, but I may fail to understand her ethnicity-based arguing.

As for the Philippines, I am unsure what constitutes being "Chinese." Could the wealth by ethnicity figure possible be correct?

Please do continue.

[aragon]

@rsm

Justification for the stock market is the efficient allocation of capital (See previous article - buy shares, collect dividends).

Reality is that innovative financial instruments (xDO's, Derivatives etc) and the Greenspan put just make it a shell game (Casino) for the distribution of Government funds to asset holders (and Banks).

The resulting public debt is used to justify eternal austerity as we must balance the books!

Therefore the asset holders have increasingly more assets (and influence). The poor endure the continued transfer of wealth upwards.

Democracy migrates to Oligopoly. The current situation arguably in the United States of America.

[ltr]

Oh, as for the prices of British and American stocks, Shiller price earnings ratios are historically quite high so that an investor should keep in mind that returns are likely to be relatively low or lower than average in say the coming 5 to 10 years.

The Shiller (CAPE) ratio for American stocks is about 35.

[ltr]

Blissex:

But what worries me more is that they follow the establishment propaganda line even as to foreign affairs, even giving it prominence, even if it is largely electorally irrelevant...

[ This strikes me as an especially important comment, though I would argue that repeatedly foreign affairs is used as a rationale and prod for domestic policy. British voters supported Brexit for domestic purposes, but Brexit was driven by the way in which foreign affairs was portrayed.

Development policy in Britain is driven now by foreign affairs with regard to America and China... ]

[aragon]

Let's get real. It's not about Hans in luck effect.

We don't start with a lump of gold.

Some start with a silver spoon (billions), like the Duke of Westminster, others start with nothing.
Not only that, but when you start with capital, you can extract compound interest, extract rent from property, and

invest in shares and the Government will inflate your asset prices.

If you are poor, you cannot avail yourself of the above, but it is not a case of luck. You are subject to the bee

stings of poverty. But poverty effects more people than race.

http://archive.boston.com/bostonglobe/ideas/articles/2008/03/30/the_sting_of_poverty/

"Few economists are familiar with Karelis's work, and when it's presented to them, they tend to be skeptical of its explanatory power. If Karelis is right, we should see even more defeatist behavior than we do from the poor, says Kevin Lang, chairman of the Boston University economics department and author of "Poverty and Discrimination." Plus, he argues, there's little evidence that simply making poor people less poor increases their work ethic - and some evidence that it does the opposite. In the early 1970s, a large-scale study gave poor people in four cities a so-called "negative income tax," a no-strings-attached payment based on how little money they made. The conclusion: the aid tended to discourage work."

https://www.theatlantic.com/ideas/archive/2021/03/stocktons-basic-income-experiment-pays-off/618174/

"He noted that receiving the money had made him more civically and politically engaged, if also more infuriated at the country’s scorn toward low-income households. “It’s like it’s a big game,” he said. “These people are living with a silver spoon, talking—but how about you walk this life? Have you ever even seen it?”

Finally, the cash recipients were healthier, happier, and less anxious than their counterparts in the control group. “Cash is a better way to cure some forms of depression and anxiety than Prozac,” says Michael Tubbs, a former mayor of Stockton, who spearheaded the project. “So many of the illnesses we see in our community are a result of toxic stress and elevated cortisol levels and anxiety, directly attributed to income volatility and not having enough to cover your basic necessities. That’s true in the public-health crisis we’re in now.”"

In the U.K. the elite will outsource the market for labour to the world and subject you to regresive taxation,

like Council Tax and V.A.T. and subject to austerity.

It is not through bad luck people are poor, or through race (Asians are been classed as White!).

https://www.spiked-online.com/2021/02/25/asians-are-doing-well-lets-re-label-them-as-white/

"When immigrant groups are successful, the woke lobby will say they have ‘white’ traits."

"So, the woke folk finally figured out how to handle the success of those pesky Asians – just re-label them as white!"

It is the elites determining Government Policy and directing wealth to the wealthy as always.

[rsm]

@aragon:

"The resulting public debt is used to justify eternal austerity as we must balance the books!"

Why should your statement be true? The Fed balances its books by creating currency liabilities at will to purchase junk assets. Why shouldn't we challenge the economic assumption that deficits matter? Reagan and Trump did, and Biden is continuing to ...

Economists should stop implicitly agreeing that public debt necessitates austerity.

Challenging economic myths entails re-envisioning the whole justification for the stock market as a n efficient capital allocator. Every trader already knows the efficient market hypothesis is wildly off, and always has been.

Traders like to trade. Where is the necessary harm? Let the Fed insure everyone by printing and automatically inflation-proofing a basic income. Encourage self-provisioning technology that only basic income supported engineers will develop, because markets incentivize centralized, enclosed production to which subscriptions are sold. Engineers know there are better ways, but finance guys give them orders now. Basic income changes that power dynamic.

I am proposing we jettison economics entirely when making public policy. We should accord economists about the same weight as psychics when making policy.

[aragon]

@rsm

"we must balance the books!"

Is just the justification used as the economy is like a household reflects individuals own experience.

Modern Monetary Theory rejects this framing of the debate.

In particular refers work of Wynne Godley on Sectoral balances (sectoral financial balances).

https://en.wikipedia.org/wiki/Government_budget_balance

"This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level."

Gamblers are free to gamble and many be saved from penury by a basic income. But the Government shouldn't deny them the joy of bankruptcy :)

The Government should not underwrite and inflate: house prices, the stock market or the banks. (aka the rich).

Or use the resulting public debt to reduce Government services to the poor.

[rsm]

aragon:

MMT is just warmed-over mainstream economics. MMT, like orthodox economists, shares job fetishism over no-strings-attached basic income.

MMT, despite handwaving at financial markets, ignores their dominance over the real economy. Prices are (arbitrarily) administered in paper markets, not determined by supply and demand for physical resources. MMT's blinkered focus on the real economy encompasses only 5-10% of the full picture.

MMT's sectoral balance sheet approach was predated by Gurley and Shaw, and Minsky. MMT however ignores that balance sheets balance to Net Worth, not zero. The private sectoral balance sheet includes vast Net Worth assets that originated in the private sector as new net financial assets (contrary to Bill Mitchell's dogma), which are monetized by the Fed as needed. (Privately-originated mortgage backed securities, subsequently monetized by the Fed, are an example.) This is the real world as it exists today. MMT proposes some fantasy world where the private sector doesn't create net assets out of thin air; trying to regulate that world into existence would involve such unintended consequences as to guarantee failure, however. (Misguided macroprudential regulations causing recurring liquidity crises in repo markets are a good example of unintended consequences of well-meaning but ignorant regulations.)

"The Government should not underwrite and inflate: house prices, the stock market or the banks. (aka the rich)."

Why not, as long as everyone is insured with an inflation-proofed basic income? Government should also re-establish the Lockean Proviso by buying back private land as it comes on markets to return it to commons. Then traders can happily trade virtual goods and those with green thumbs can farm on unallocated land ...

[aragon]

@rsm

Finance is the parasite that has not only grown many times bigger than it's host, but also killed it. Finance is the fantasy.

Yes finance dominates the real economy, every where but China where the party rules supreme. Where is the workshop of the world?

Asia. The W2sts economy is moribund at best.

All the banks can do is create debt, a liability for the real economy, and an asset for the bank. But the banks excessive creation of debt (many times the real economy) would bankrupt the banks.

Of course the FED monetizes the debt, creating assets in the real economy, as the banks are too big to fail (also Q.E).

Of course this results in public debt, in the form of Gilts bought by the banks and paying compound interest. (It is circular with the banks extracting profits). And the public sector debt grows justifying austerity.

Financiers have destroyed companies like IBM, Intel and Boeing with their greed.

Not to mention the fraud that was Enron etc.

The implosion of Mortgage Backed Securities, marketed as investment grade CDO's collapse,
resulted in the 2008 financial crash.

Banking and Financial innovation is often = FRAUD.

Finance steals from us all.

"Give a man a Gun, he can rob a bank.
Give a man a bank and he can rob the world!"

Mr Robot (S02E01).

[aragon]

W2st = West

Re: Lockean Proviso.

The justification for Private Property.

We have already seen how the Duke of Westminster acquires property, through inheritance, and how that land has been improved by society from swamp to Oxford Street etc.

https://en.wikipedia.org/wiki/Lockean_proviso

"at least where there is enough, and as good, left in common for others"

Proviso is not met, the Queen appears to own even the least valuable land (e.g Seabed)

This alone justifies a Land Value Tax and Inheritance Taxes.

I prefer John Rawls "veil of ignorance"

https://en.wikipedia.org/wiki/Veil_of_Ignorance

" Each citizen is guaranteed a fully adequate scheme of basic liberties, which is compatible with the same scheme of liberties for all others;

Social and economic inequalities must satisfy two conditions:

1. to the greatest benefit of the least advantaged (the difference principle);

2. attached to positions and offices open to all."

"Recently, Thomas Nagel has elaborated on the concept of original position, arguing that social ethics should be built taking into account the tension between original and actual positions."

Of course gamblers may like the odds of been in the 0.01%. Of course desperation can make gamblers of us all.

"Get rich quick or die trying"
50 cents (rapper)

[aragon]

William Hague on China.

https://www.telegraph.co.uk/news/2021/03/15/can-cope-rise-china-will-take-unique-approach/

"At the same time, says the Realist, we have to prevent the influence of Chinese money and presence around the world from corroding the essential attributes of democracy by suppressing dissent. We have to make sure that universities, political parties, broadcasting, social media, and all the innovations that the 2020s will bring do not succumb to any one state or idea. And we have to speak up vigorously for those persecuted for yearning for freedom of speech, in Hong Kong or elsewhere.

Ah, says the Hawk, this is like a new Cold War then? We talk to them about arms control but otherwise it becomes a wholly confrontational relationship? No, the Realist has to explain. Arms control is not the only thing for which we need China. The USSR didn’t own trillions of dollars of US treasury bonds. Nor was it vital to prevent the growing threat of global pandemics. And it wasn’t an indispensable part of global agreements on climate change and biodiversity, which are now inescapably urgent."

[...]

"The Realist knows there will be a tension between not being dependent on China and finding a new way to work with it. Managing that tension will be the great challenge of foreign policy."

Realists often just lack self awareness.

[rsm]

@aragon:

I agree with much of your diagnosis but disagree on the policy solutions.

"Finance is the fantasy." So what? People like fantasy and we can use policy to let finance enclose itself voluntarily in a sandbox where it no longer affects the real economy.

"Where is the workshop of the world? Asia." You yourself point out China is authoritarian and shuts down finance only through brutal repression.

"Of course the FED monetizes the debt, creating assets in the real economy" More accurately, the Fed backstops privately-created new net financial assets after the fact.

"the public sector debt grows justifying austerity." Just monetize the debt, as private debt is monetized by the Fed.

"Financiers have destroyed companies like IBM, Intel and Boeing with their greed." So give financiers a purely virtual sandbox to play in where they get higher returns than selling real widgets.

"Proviso is not met, the Queen appears to own even the least valuable land (e.g Seabed) This alone justifies a Land Value Tax and Inheritance Taxes." Or just print money to buy back land and return it to Commons ...

[rsm]

@aragon: Specifically, I agree on basic income as a policy solution, but disagree with policies attempting to regulate away finance. A regulatory approach will just end up in another endless war causing more problems than it solves, like the War on Drugs.

[aragon]

Who needs regulation.

Glass–Steagall kept Merchant banks in their box from 1933 until Bill Clinton let them out.

The separation of commercial and investment banking prevented securities firms and investment banks from taking deposits, and commercial Federal Reserve member banks from:

* dealing in non-governmental securities for customers,

* investing in non-investment grade securities for themselves,

* underwriting or distributing non-governmental securities,

* affiliating (or sharing employees) with companies involved in such activities.

But how about a suggestion from that well known left wing rag, the economist.

https://www.economist.com/finance-and-economics/2020/12/05/will-central-bank-digital-currencies-break-the-banking-system

"There are many potential advantages to publicly backed digital currencies. They might make payments easier. They might “democratise” central-bank money, the part of the central bank’s balance-sheet which, unlike physical cash, only banks can access now. And they would reduce the risk that cryptocurrencies replace government tender;"

[...]

"The problem of disrupting the banks may be avoidable with clever engineering. But it would be wise to consider whether it even needs avoiding in the first place. For those willing to entertain futuristic ideas, CBDCs may offer an opportunity to rethink the financial system from the ground up."

[...]

"Another idea is to make banks fund themselves with much more equity, rather than rely on deposits. That would make them look more like today’s mutual funds or other unleveraged investment vehicles. This is precisely what economists such as John Cochrane of Stanford University and Laurence Kotlikoff of Boston University have long advocated: that lenders should shed their dependence on flighty sources of financing, and that households’ funds should instead be parked in completely safe assets. For Mr Cochrane, CBDCs are an opportunity to pursue such “narrow banking”."

[..]

"Making subsidies explicit, however, is not always comfortable for the beneficiaries—or for regulators; obvious support attracts more public opprobrium. The real risk of CBDCs to the financial system may be that they eventually precipitate a new kind of run: on the idea that banks need to exist at all."

To summerise:

"CBDCs may offer an opportunity to rethink the financial system from the ground up."

"the idea that banks need to exist at all"

Now there's hope for the future!

[Blissex]

«more civically and politically engaged, [,,,] the cash recipients were healthier, happier, and less anxious»

Consider a large part of the public opinion: "Why should I give a damn about my money making someone else more engaged and happier? What's in it for me and my family?".

There is a compelling answer, but it is based on mutuality/reciprocity rather than wishful dogoodery.

Besides the argument for UBI in the UK or Sweden based on humanitarian dogoodery feelings about "more engaged" and "happier" suffers from a fatal charge of shameful hypocrisy: if there is a case for for an UBI paid by the taxpayers of UK or Sweden because of humanitarian principle, it should go entirely or almost entirely to the poor of South Sudan or of Afghanistan. But try to sell politically that the UK or Sweden UBI should be paid in South Sudan or Afghanistan.

[aragon]

"if there is a case for for an UBI paid by the taxpayers of UK or Sweden because of humanitarian principle"

https://quoteinvestigator.com/2012/04/13/taxes-civilize/

"Taxes are the price we pay for a civilized society.

Taxes are the price we pay for civilization.

I like to pay taxes. With them I buy civilization."

Supreme Court Justice Oliver Wendell Holmes, Jr.

My pitch fork is much closer and we still have a Gibbit in Halifax like in the French Revolution, all it requires is a little grease.

"the poor South Sudan or of Afghanistan."

Aren't they about to become China's problem, as China is the workshop of the world and soon the leading economy?

Cynical, No just boundaries. Their is such a thing as Society. Especially within walking distance (Jarrow Marches)

[aragon]

The main problem "the poor South Sudan or of Afghanistan." or even Yemen is War often Civil War and like in Libya external powers use it as a proxy for access to valuable resources (oil, in South Sudan and Libya) a source of population for Pakistan (vs India).

In the case of Gordian Knots, I have a sword, but it might not make a popular foreign policy.

https://en.wikipedia.org/wiki/Gordian_Knot

[ltr]

"At the same time, says the Realist, we have to prevent the influence of Chinese money and presence around the world from corroding the essential attributes of democracy by suppressing dissent."

This is racist rubbish. Sheer racism, but that is what such malicious folks are all about. Precisely what scape-goating in the Germany of the 1930s was about.

I am having no more of British racism.

[ltr]

William Hague on China....

[ These are the people who repeatedly slandered and defamed and finally ruined Jeremy Corbyn. These are the people for whom prejudice is a weapon. Such people are about ruining Britain for all but themselves. Prejudice is about gaining control of others. ]

[ltr]

https://www.project-syndicate.org/commentary/uk-government-covid19-personal-protective-equipment-shortages-by-sanjeev-krishna-and-yolanda-augustin-1-2021-03

March 16, 2021

The UK Government’s Pandemic Shame
COVID-19 infections and deaths in the United Kingdom are now falling, largely as a result of a rapid nationwide vaccine rollout. But the government’s incompetent provision of personal protective equipment means that frontline health-care workers remain in the pandemic’s crosshairs.
By SANJEEV KRISHNA and YOLANDA AUGUSTIN

LONDON – Many rich countries have at times failed to provide enough personal protective equipment (PPE) for their health-care workers during the coronavirus pandemic. But the performance of the United Kingdom’s government – which has repeatedly urged the public to “Clap for Our Carers” – has been particularly shameful.

Although the government’s vaccination drive now dominates the headlines, we must not lose sight of the fact that at least 850 health- and social-care workers in England died from COVID-19 between March and December 2020. And these workers remain at risk.

The medical professionals who lost their lives include Peter Tun, a senior doctor managing COVID-19 patients at the Royal Berkshire Hospital in Reading, who pleaded for vital PPE supplies three weeks before he died from the disease last April. Similarly, Andrew Ekene Nwankwo, a locum nurse at Broomfield Hospital in Chelmsford, died of COVID-19 after desperately trying to buy his own PPE online. How many other UK health-care workers would still be alive had the right equipment been available?

The UK has so far recorded more than 4.2 million COVID-19 cases and over 125,000 deaths. The exact number of infections among patient-facing health workers is not known. But one study estimated that they accounted for around 10% of all cases between April and June 2020, with health-care workers being six times more likely to become infected than the general population.

A separate study in late April 2020 found that health-care workers in Birmingham had a rate of seroprevalence – the presence of antibodies to the SARS-CoV-2 virus that causes COVID-19, indicating previous infection – that was four times higher than the local population as a whole (24% versus 6%). These figures do not include the first peak of the pandemic in the UK in late March and early April.

At the end of March 2020, one in four National Health Service doctors were sick or in isolation, according to the Royal College of Physicians. With the NHS facing a PPE supply crisis, the British Medical Association (BMA) reported that some doctors and nurses – like Nwankwo – were buying their own face masks in order to come to work....

[rsm]

@aragon: The problem with Glass-Steagall is that the definitions are highly gameable. Banks were already doing this. Repeal was just an acknowledgement of reality, much as the recent setting of the fractional reserve requirement to zero is an acknowledgement that banks were always getting around the regulations.
.
@Blissex: basic income should not be funded by taxes but by money-printing. Inflation should be handled by Cost Of Living Adjustments, Treasury Inflation Protected Securities (to protect savings). Central banks should also set inflation expectations by using open market operations to buy and sell inflation swaps to control breakevens.

@aragon:

"Taxes are the price we pay for a civilized society. Taxes are the price we pay for civilization. I like to pay taxes. With them I buy civilization."

Totally not worth it. I want the commons back so I can self-provision. Why are suicides rising, if civilization is so great?

[James Charles]

"From 1946 to 2021 is 75 years. In 63 of those years the UK government borrowed. In 12 it repaid debt. Total borrowing will have been £2,174bn. Repayments have been £38bn. So, for every £1 borrowed 1.7p has been repaid. In that case what is the debt repayment obsession all about?”
https://twitter.com/RichardJMurphy/status/1366746422872338434?s=20

[James Charles]

" . . . hope for the future!"?

'We' have ten years?

“ . . . our best estimate is that the net energy
33:33 per barrel available for the global
33:36 economy was about eight percent
33:38 and that in over the next few years it
33:42 will go down to zero percent
33:44 uh best estimate at the moment is that
33:46 actually the
33:47 per average barrel of sweet crude
33:51 uh we had the zero percent around 2022
33:56 but there are ways and means of
33:58 extending that so to be on the safe side
34:00 here on our diagram
34:02 we say that zero percent is definitely
34:05 around 2030 . . .
we
34:43 need net energy from oil and [if] it goes
34:46 down to zero
34:48 uh well we have collapsed not just
34:50 collapse of the oil industry
34:52 we have collapsed globally of the global
34:54 industrial civilization this is what we
34:56 are looking at at the moment . . . “

https://www.youtube.com/watch?v=BxinAu8ORxM&feature=emb_logo