The latest central bankers’ and finance ministries actions to save banks are further evidence that the economic fallout of The Great Unwind is leading to more aggressive government policies and actions in major countries across the world.
The sovereign nation state is extending its powers as it becomes the effective controller of the free market economic engines within its domain. Since financial institutions — banks, insurance companies and pension funds — are the primary hubs of all financial intermediation, mass nationalisation or overwhelming ownership of such vehicles allows governments to be able to control not only the behaviour of bankers, insurers and pension fund managers but also how these financial institution decision makers allocate capital; the quantum of assets they hold; investments they make; loans they provide; and how they assess the value at risk and their profitability.
Bipolarity, The Concentration of Power and Unipolarity
We got into this global financial crisis because power was overly concentrated within the private pole of financial institutions relative to their knowledge. Yet there was a fundamental equilibrium in capitalism based on the bipolarity of private and public ownership. On one pole stood the private financial institutions as the crown and hub of enterprise — providing the vital function of financial intermediation — and on another pole stood the government and public sector entities.
What has been going on for the past several weeks and months via government intervention to prop up shaky financial institutions in nation after nation, is more consolidation of power in the hands of the government pole, thereby moving us towards uni-polar concentration of power, rendering the delicate private-public bipolar equilibrium of the past dysfunctional and increasingly obsolete. This new concentration of power, instead of making things better, could make things worse because the knowledge to understand capital allocation within the context and operation of free market economics may not exist amongst government bureaucrats just as the knowledge to run government or to understand the full ramifications of public sector policy and solutions may not exist within the private sector.
The mandatory rules (read market skews) dictated by government to their newly chastened or appointed management within financial institutions to maintain lending at a certain level or to come out of certain areas of financial operation altogether may indeed put free market engines into a de-oxygenating and claustrophobic straight jacket.
When we add analyses "The Invisible Quadrillion Dollar Equation " and "Why are the Markets Falling? Derivatives and Deleverage " into the equation what comes out is this: the global crisis of The Great Unwind is bigger than the combined capacities of most sovereign nation states to deal with it if measured from a GDP and national debt servicing capacity perspective.
When coupled with the concentration of power equation going the wrong way, the net result could be a further withering of the peace-dividend, fruits-of-enterprise and private ownership both on the vine and of the vine. The vine in this context being the metaphor for free market economics as the necessary structural underlay of modern capitalism and private enterprise.
The metamorphosis of capitalism underway, in some ways, is the beginning of the complicated solution to get to the ultimate result of The Great Unwind, and many market participants are becoming conscious that the final unipolar government-led answer may become rather unbalanced and disconcerting for free market capitalism to remain intact.
The rising level of government debt of nation states as they rush to save their financial institutions is moving us closer to more drastic solutions in the future and at which point, we will be forced to ask the question, "When is nationalisation a step too far?"
The article for the Financial Times can be read by clicking here.
About dk.matai
DK Matai is an engineer turned entrepreneur and philanthropist with a keen interest in the well being of global society. DK founded mi2g in 1995, the global risk specialists, in London, UK, whilst developing simulations for his PhD at Imperial College.
DK helped found ATCA - The Asymmetric Threats Contingency Alliance - in 2001, a philanthropic expert initiative to address complex global challenges through Socratic dialogue and joint executive action to build a wisdom based global economy. ATCA addresses opportunities and threats arising from climate chaos, radical poverty, organised crime, extremism, informatics, nanotechnology, robotics, genetics, artificial intelligence and financial systems. ATCA has 5,000+ distinguished members from over 100 countries: including several from the House of Lords, House of Commons, EU Parliament, US Congress & Senate, G10's Senior Government officials and over 1,500 CEOs from financial institutions, scientific corporates, NGOs and 750+ Profs from academic centres of excellence. ATCA Open is active on Facebook and LinkedIn.
Philanthropy - DK co-founded The Philanthropia in 2005 - to include the Trinity Club, Syndicates and Ethical Investment Funds - with 1,000 leading philanthropists, family offices, foundations, private banks, NGOs and specialist advisors to resolve complex global challenges through collaborative & sustained efforts. DK's other voluntary interests are Sant Bani (Voice of Saints), a culturally diverse fellowship dedicated to the unity of humankind; World Future Council's Board of Advisors and Donors; The Shirley Foundation; Oxford Internet Institute at University of Oxford; Tomorrow's Company and The Trinity Forum, where he advises on a pro bono basis.
Honours - DK was selected to present knowledge management to The Queen in 1998 and mi2g won The Queen's Award for Enterprise in the category of Innovation for Bespoke Security Architecture in 2003. This led to a visit to Buckingham Palace, a celebration hosted at Lloyd's of London, and by The Lord Mayor at Mansion House, followed by a joint visit to Zurich, Switzerland.
Innovation - DK spends about half of his time innovating with mi2g teams focused on digital banking, digital risk management and bespoke security architecture for major financial institutions, government agencies and multi-nationals in Europe, America and Asia. DK believes passionately that the next generation of private and corporate banking involves the global safe custody of valuable data and intellectual property alongside financial deposits with "guaranteed security". D2-Banking is holistic and includes the online vaulting of genomic maps and medical records; art, photo, music and video collections; digital messages and personal files including wills, deeds and memoirs; and other intellectual property alongside traditional financial services.
Authority - DK is an authority on countering complex global threats; strategic risk management & visualisation; contingency planning; Information Operations (IO); electronic defence; biometric authentication; secure payment systems and Open Source hardened kernel solutions. He is an invited contributor to defence and global security analysis in the UK, USA, EU, Canada, Switzerland, Japan and India. mi2g intelligence has been cited by several government agencies including NISCC in the UK, FBI in the US and United Nations agencies in New York and Geneva.
Background - DK is a British subject, a Freeman of the City of London, a Liveryman of the Worshipful Company of Information Technologists, and a member of the Institute of Directors and The Institution of Engineering and Technology. He has worked formerly in the R&D labs of IBM, Inmos, ST Microelectronics and Helvar Electrosonic on Massive Parallel Processing and supercomputing applications. He enjoys meeting people, sharing thoughts, reading history and learning languages. He is vegetarian, teetotal and an optimist. He has lived in Asia, the Middle East, Europe and North America and he now lives with his family in Europe, with London as hub.
Nationalisaton is a step too far when the economy is standing on it's own two feet with the regulations in place that will make sure it stay's on it's own two feet, and not a minute sooner.
I don't know about other Nations but there are no Commies
)))), here, in the US! Senator McCarthy made sure of that! And, no socialists either, we are down home Capitalists with a capital C!!!
There is always something to worry about. Worry that this depression is greater than the Great. Worry that the Stimulus will fall flat. Worry that the Government is taking over all the banks and not ever going to give them back. Worry that the Communists are coming along with the Extremists. Worry that President Obama will walk too softly and carry a small stick. Worry that Rush Limbaugh will lead the GOP revolution with Sara Palin. Worry, Worry. Worry.
I don't know a lot about Marx's source of inspiration. Was there something that preceded communism in the lineage of its principle? (Like how Anabaptists precede Mennonites, Amish, Quakers?) Did anarchism give rise to his ideas about communism? Or did he simply have a grudge as he stewed in the basement of the British Museum?
I think Marx's big mistake was in believing that capital reformation had to be "engineered" though revolution and that these plans had no room for God's perfect timing. I think every ponzi scheme has its natural conclusion without that sort of man-made intervention.
And I also think that God has every intention of bringing to fruition His promise in the verse from the book of Micah: "Each of them will sit under his vine And under his fig tree, With no one to make them afraid, For the mouth of the LORD of hosts has spoken."
This isn't just notional.