My students invariably want jobs in the financial sector and there is nothing wrong with that. Indeed I hope they do a lot better than the current generation. Lloyd Blankfein of Goldman Sach keeps saying he is having to pay top notch for the Best and Brightest link and the need to ensure long run returns for the shareholders. How he is able to get away with such statements unchallenged beggars belief!! Below is the performance of Goldman Sachs, Bank of America, Citigroup and Apple shares...two of them are actually LOWER than 12 years ago Goldman is barely changed and meanwhile Apple is up over 2000% - so please give me a break. You could do better putting money  away in Treasuries at 4% for 12 years you would be 60% up after compounding ! The Best and Brightest actually seem to be at Apple. Meanwhile shareholders in these banks are just getting robbed... consumer prices have risen some 30% in the last 12 years so in real terms their losses are even greater.

Sandy Weill former CEO of Citigroup has stated big banks should be broken up. Citigroup was made up of a merger of Citibank and Travellers Group in 1999 and was greeted with massive enthusiasm from WallStreet at the time. Well the stock has performed appalling it was trading at $564 at end of 2006 and trades at around $26 today....and that is after all the taxpayer money that was diverted to support this too big to fail bank. Not only are these banks to big to fail they are also too big too complex to understand and manage. We need more competition and smaller banks so that when they fail it causes less disruption. when they are smaller they can be quickly taken over by taxpayer and we can wipe out their investors without massive disruption to the financial system. Link to Bloomberg article and a Chart of Citigroup stock last 5 years below.

Bloomberg Story

Yep the stats show that following a -0.7% fall in GDP for the second quarter of 2012 that this recession is the worst one on record. This is with record fiscal deficits and record low interest rates and £375 billion of Quantitative Easing ! My view is that the policy response has been woeful, too much focus on bailing out the financial system and not enough focus on helping the 23% of 16-24 year olds that are unemployed. Also cutting interest rates to absurdly low levels is just penalizing savers and those looking to save for their retirement and bailing out the banks.  Below is a figure looking at the current recession versus other recessions showing the "recovery" is extremely weak and we are still 4% below the level of GDP 4 years ago.

The rating agencies have gotten off pretty lightly in my opinion for their role in the financial crisis. They were rating junk as AAA and AA and so failing in their duty to properly asses risk. In particular, they assumed house prices would continue going up and not modelling the risk that they could fall 30 % or more. When analysing and assessing risk it is essential to consider negative possibilities - its is as simple as that ! Here is the link to a nice story by someone who worked in a credit rating agency during the crisis that gives some useful insights into what went wrong.

BusinessInsider link

A nice bloomberg article on how the US taxpayers cash is still going into the banking sector which is getting ever more concentrated and even much bigger to fail than it was before the crisis.

Bloomberg link

Below is a link to an interview I did the other day on the Spanish crisis on Press TV. My message is quite simple. In a capitalist system you don't bail out bank managers, shareholders and bond holders you let them suffer because of their poor investment decisions. If they fail they get taken over by more successful banks or nationalized and then the state sells off the assets.

Interview link

Nice Video below. In it Peter Schiff warns that the next big problem is likely to be in the USA. Printing money as Bernanke has been doing is simply not solving the problems the USA is facing. Meanwhile "Helicopter Ben" is preparing QE3.

Eroding confidence in the financial system. As the LIBOR scandal, JP Morgan losses, overpayment of bankers for terrible performance and many other scandals have been hitting the financial system then investors are getting increasingly concerned. It seem that we are a long way from restoring the necessary confidence in the financial system - much more needs to be done! Nice Yahoo/Reuters story below.

Yahoo link

Nice interview with Nouriel Roubini predicting a new Financial crisis in 2013 and also slamming the banks for their role in the financial crisis.

Roubin Interview

Hey folks this is the first BusinessEconomics.com blog post and I thought I would link to a nice little video from Richard Quest explaining the current mess of the financial system and how we got to where we are !

Richard Quest video link