Markets just a game for glorified gamblers

I USED to know virtually nothing about economics and finance. In fact, it wasn’t very long ago that I discovered they aren’t quite the same thing – although the precise difference between the two seems to be a matter for some debate, even among the experts.

For years, I watched television reports and discussions on the ups and downs of local and international money markets, and learned little, except the extent of my own ignorance.

I still have no idea what most of the terminology means – economies of scale, balance of payments, capital goods, index numbers, derivatives; hedge funds and so on – and how it all interrelates.

I laboured for a long time under a feeling of inadequacy, suspecting that only I among the public hadn’t the faintest idea what economic correspondents and the experts they interviewed were talking about.

Invariably, during a TV debate, I would find myself siding with the person who sounded or looked the best, even though I know from experience this is a fool’s guide. Some of the biggest eejits I ever met in politics – the kind who have seldom ever entertained a rational thought, never mind an original one – happened, perversely, also to be among the best television performers I ever came across.

“Is there such a thing as economic dyslexia and might I be suffering from it?” was a constant nag. Then, in the course of a recent discussion on the BBC Newsnight programme, I had an awakening: suddenly the world of economics started to become a lot clearer.

A British Labour Party spokeswoman, whose name I forget, suggested that it might be a good idea to create a firewall between retail and investment banks. There must be a clear separation, she said, between high street banks, which are entrusted with the savings of ordinary people, and the investment arms of the banks’ parent organisations, which use these savings to gamble on the international markets.

This rang a bell. Surely the Labour Party woman was describing a situation that existed until relatively recently in both the US and the UK. Even I, an economic illiterate, knew that much. But to my amazement Jeremy Paxman and his other guests seemed not to. For a moment they considered the suggestion as though it were as novel as its proponent made it out to be, before plunging back into a sea of jargon.

Their reaction made me think I might be mistaken, so I checked. Sure enough, I was right. After the Great Depression, the 1933 Banking Act was passed in the US to separate commercial from investment banking and restrict the speculative use of bank credit.