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.

Much of the act was repealed during the 1980s, and President Bill Clinton did away with its last remnants in 1999, just a few years before the start of the current global depression/economic meltdown.

London’s so-called Big Bang in 1986 had a similar deregulatory effect on UK banks, clearing the way for their full-scale involvement in money market speculation. The New Labour governments of Blair and Brown continued to deregulate with fervour and helped create the situation we are in today.

After giving due consideration to the goldfish-like powers of recall exhibited by Paxman and his expert guests, I concluded that I, in fact, know enough about economics and finance to be going on with. The jargon I dismiss as a confusing, ever-changing distraction, largely incidental to the few overriding realities outlined below.

Most of the people who pontificate on macro-money matters are involved in a game of semi-educated guessing, so it doesn’t really matter whether they describe themselves as economists or finance experts.

Aside even from the flim-flam merchants and self-promoting bullshit artists, of which among this particular type of expert there seems to be a higher than usual proportion, their views are no more to be relied upon than those of a horse-racing tipster in a daily newspaper. If anything, they are far less reliable.

A tipster only has to take into account breeding, age and form of the horses in a race, factor in the weight each will carry and the jockeys, weather and racecourse conditions, before making his, usually wrong, prediction.

An economist/finance expert has to consider an infinitely greater range of potentially influencing factors before making a semi-educated, and almost invariably wrong, guess at probable outcomes.

The horse-racing analogy can be stretched to include the investment bankers and other money-market traders and shysters, who are little more than glorified gamblers, albeit that they play for much higher stakes than the average racecourse or betting shop habitues. Besides scale, the most vital distinction is that they always gamble with someone else’s money.

I still know virtually nothing about economics and finances, except for one crucial thing: neither, when it comes down to it, does anyone else.

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