On breaking up the large banks

It appears some people would like to break up the large banks.  It might be wise to interpret this to mean increasing competition.

This would be a good thing for consumers.  For there to be perfect competition no player in a market should be large enough to influence prices either by withholding a product or service or by refusing to purchase. So to make the case for breaking up the large banks one should evaluate their effect on pricing in each market in which they operate.

If the case can be made then the thing is to increase competition which means looking at licensing.  Licensing programs are one of the ways in which governments restrict competition.  They way to deal with too large banks would be to allow more players onto the field.

Competition also requires that all players in a market should know everything.   Therefore we should require banks to make more disclosures about their own financial conditions.  This would be difficult because the greatest fear of every bank executive is a run by depositors demanding the withdrawal of their money.  I predict there are very few bank managers who would hesitate to lie to hold off a run on their banks.

In dealing with banks we also need to remember their involvement in money creation.  This gives them a great deal of power because our economy depends upon adequate money and because bankers get to determine whether or not a project goes ahead and who gets to do it.

Breaking up the large banks, or rather increasing competition in their markets, would be good for consumers although it may not be so good for at least some people in the industry. I wonder which group are most effective at lobbying.


With the world’s population about to reach seven billion, famine in the Horn of Africa and reports we are using 150 per cent of the resources required for sustainability, we have to be sensitive to overpopulation.

Probably there are too many people on this planet and as individuals the only thing we can do is to limit the size of our own families.

Agriculture and environmental issues

Since writing the previous post I came across this article on environmental issues associated with agriculture.  There are even more reasons to be concerned although one must note agriculture is supporting more people than ever and at least some people are living longer than ever.

What’s happening in agriculture?

With supermarkets, big box stores, fast food outlets, convenience stores, farmers’ markets and Wal Mart all overflowing with food, some of us (especially those of us with access to the internet) tend to take food for granted and ignore what is happening on the farm.  But how would we fare if the North American food factory were to break down?  Famine is something that happens in far away places.

We like to think our’s is mostly a service and information economy.  However, we can put time and effort into these things only  because of efficiencies in agriculture.   When I studied European economic history, the prof  placed a lot of emphasisi on improvements in farming techniqes.  (He then went on to write an excellent book on the Industrial Revolution:  The British industrial revolution in global perspective by Robert C. Allen.  Cambridge University Press, 2009)

There are a number  of  potential problems in agriculture: monoculture,  topsoil depletion, soil erosion, climate change, short-term extreme weather, the use of chemicals and subsidies.  It may be that farmers, like the rest of us, act in their own short-term interests as opposed to the long-term interests of everyone.

It could be that these problems are a greater threat to us than other concerns such as nuclear war, environmental degradation or global warming.   We should be probably be paying more attention to what is happening on our farms and if necessary be prepared to put pressure on farmers to ensure the food supply does not come to a halt.

Women in the boardroom

The Economist has  an article examining why there are so few women the board rooms and executive levels of business.

It may be there are so few women in the higher ranks of business because many women are smarter than men and know better than to take on the extra repsonsiibility and  stress.  Some women also know there are more subtle and effective ways to get what their way.

Resource projects and natives in British Columbia

B. C. first nations need to embrace natural resource projects

This is the headline for a column on the front page of today’s Vancouver Sun in which  Barbara Yaffee   argues that British Columbia natives should embrace rather than oppose three high profile and controversial projects in the northern part of the province – a mine, a oil pipeline and a tanker port to export tar sands oil.

It is not just native peoples who are against these projects but when the economy is tough the search is on for scapegoats.  It is sad that the way we have treated natives and the way their leaders have demanded they be treated is setting them up to be scapegoats.  But then maybe societies need someone to blame when things get difficult.

Ms. Yaffe points out Canadian natives suffer from lack of clean water (that is not the case in Kitamaat village near where the port would be located), high unemployment, high suicide, high incarceration and a lower life expectancy than the rest of us Canadians.

It is not clear to me that these project would solve any of those problems.  There will be shor-term  benefits but these projects could well be against the long-term interests of all of us.

Yes, we do have to make tradeoffs and sometimes they should be in favor of environmental concerns.

The strength of the economy

In the lead  to a report on Barack Obama’s speech at the University of Maryland the CBC quotes him as saying the strength of the economy will depend upon how the U.S. deals with its debt.  I couldn’t find any reference to that in the story but  whether or not he said it, I want to disagree.

The strength of the economy depends upon the quantity of goods and services which can be produced and that depends upon such things as the state of agriculture, the resource base and the energy required to extract  those resources.  Money is important because it facilitates the extraction of resources and the exchange of goods and services.

Following is the CBC’s lead in paragraph and here is the link to the actual report

U.S. President Barack Obama says the strength of the economy will depend on how the country deals with its massive $14.3 trillion debt — in remarks after the Senate rejected the Republican’s budget-cutting plan. 11:36 AM ET video

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