The University of Strategic Optimism

by Chris Bertram on November 29, 2010

Via @leninology



Another Roger 11.29.10 at 12:41 pm

Bloody students…


Trevor 11.29.10 at 3:45 pm

Since banks are publicly funded, why not allow public schools to be founded within their walls?


John Protevi 11.29.10 at 4:13 pm

I love this. Some joyous collectivity in place of the usual sad atomization in banks.


Michael 11.29.10 at 4:29 pm

Oh yes. It has taken a generation plus, but they’re back! Hallelujah!


Utisz 11.29.10 at 4:47 pm

Just hope it’s not an ingenious front for the SWP.


Another Roger 11.29.10 at 8:02 pm

Seriously – what is the purpose of such an ‘event’?

The only actual working people in the vicinity would have been the bank workers and anyone unlucky enough to want to use the bank to pay in a cheque or whatever.

I can’t imagine any of these reacting with anything other than irritation and contempt for these pretentious twats.

So other than it being bloody cold out on Borough High Street wouldn’t it have been far more effective to run a good old fashioned picket of the bank rather than this pretentious little post-modernist homáge to the situationists or whatever it was meant to be?

You, know someone could have actually printed up some leaflets about Lloyds and given them out to the general public – but oh no that would have been too much like hard work for the poor little dears….


John Protevi 11.29.10 at 8:55 pm

Another Roger seems confused about this new-fangled YouTube thingy.


Chris Williams 11.29.10 at 8:56 pm

I’d agree with you wholeheartedly, Another Roger, but the kids have now got access to this amazing invention called ‘U-tube’, which means that they can do this inside a bank, ‘video’ it, put it on DARPA’s internetweb and then hope that thousands of people watch it. It appears to have worked for both you and me – perhaps they might hit treble figures if they’re lucky.


Colin Danby 11.29.10 at 10:19 pm

‘Another Roger’ is obviously part of the show — no student demonstration is complete without a bystander muttering bloody students.


Trevor 11.29.10 at 10:25 pm

I second Colin– ‘Another Roger’, not really getting the point.


Bill Benzon 11.29.10 at 11:01 pm

At the moment, 619 views, no comments, at YouTube. So, they’ve hit treble figures.


afinetheorem 11.30.10 at 1:52 am

Surely there is some worry that these guys don’t really know their facts? For instance, the 850 billion pound figure is a complete misrepresentation. If the UK guarantees 200 billion of loans made by the BoE, you can’t just say that “workers and students” have paid 200 billion. Estimates I’ve seen are that UK taxpayers will be on the hook for no more than 50bn pounds once the banks are resold. In the US context, financial-industry related bailouts cost the taxpayer even less, with the majority of lost money resulting from AIG’s collapse.

I’m all for the democratization of education, etc., but not if it degrades rather than improves the quality of discourse…


Chris Bertram 11.30.10 at 8:23 am

@12 – definitely. Their university charter should be taken away!


ajay 11.30.10 at 10:35 am

Estimates I’ve seen are that UK taxpayers will be on the hook for no more than 50bn pounds once the banks are resold.

Minor point: £50 billion was the 2009 estimate. In March this year it was revised down again to £6 billion, due to an increase in the value of the RBS and Lloyds holdings, and an expected profit from the asset guarantee scheme.


John Quiggin 11.30.10 at 10:56 am

The 200 billion figure is closer to the mark then 50 or 6 in several respects

(i) the relevant figure for the cost of a guarantee (taken narrowly) is the expected loss. Looking at the cases where the guarantee has been called on in full (eg Ireland) it has ended up as a fairly substantial percentage of national income (25 per cent or more). So the fact that the UK and US haven’t had to pay up (much) this time doesn’t mean that the guarantee was costless

(ii) In a broader sense, the bank bailout has been used as the justification/pretext for expenditure cuts that are of the suggested order of magnituded


ajay 11.30.10 at 11:00 am

Could someone check whether 15 is actually by John Quiggin? It doesn’t seem quite his style.


ajay 11.30.10 at 11:09 am

Another update, sorry: reported new estimate of a £27 billion profit by 2015.


engels 11.30.10 at 3:59 pm

this pretentious little post-modernist homáge to the situationists

Fwiw the situationists were not post-modernists. They were, however, French, which for some people comes to the same thing.


David 11.30.10 at 7:51 pm



John Protevi 12.01.10 at 12:09 am

ajay @ 17: this welcome news of profitability means the people will retain their shares in the banks, then, right? If we are to be the guarantors of the risks banks run, we should share in the profits, yes?


Colin Danby 12.01.10 at 4:18 am

bloody socialist


ajay 12.01.10 at 10:07 am

John Protevi: that estimated profit includes the proceeds from the sale of UKFI’s shareholdings, based on various assumptions about the way share prices are going. (UKFI being the state-owned holding company that owns the government stakes in RBS, Lloyds etc.)

The UK bailout consisted of, broadly, three types of aid:
the government lent the banks money when no one else would (and charged interest);
the government guaranteed various loans (in exchange for a fee);
and the government gave the banks lots of money to bulk up their capital reserves (in exchange for shares in the banks).

The final profit we’ll get (assuming this forecast is correct) from the bailout is the combination of the interest, the fees, and the money UKFI will get when it finally sells off the stakes it’s holding.

So we are already being paid for guaranteeing the risks they run (the fees), we’ll make money as the loans are repaid (the interest) and we’ll get a share of the profit through dividends on our stakes, and we’ll make money when UKFI sells off its stakes. After that, no, we won’t get any more profit, because the guarantee will have ended, the loans will have been repaid, and UKFI won’t own any shares.

It distresses me slightly that people don’t actually seem to know this. The general belief seems to be that the government simply shovelled a huge amount of money at RBS, etc, and didn’t ask for anything in return – that the money was a no-strings-attached grant, and that the money’s as gone as it would have been if it had been spent on any other item of government expenditure. This would have been a lunatic thing to do, and Brown and Darling, not being lunatics, didn’t do it.


Alex 12.01.10 at 1:47 pm

The general belief seems to be that the government simply shovelled a huge amount of money at RBS, etc, and didn’t ask for anything in return

This may be a case of the North Atlantic Bullshit Circulation in action.


John Protevi 12.01.10 at 2:14 pm

ajay, thanks for that detail. another question, then: it seems continued public ownership of the shares would, even after the returns in the form of the interest and the fees peters out (though we’d have to factor in continued dividends), be a powerful means (via representatives on the boards) of controlling future bank practices. internal / pre-emptive regulation, in other words. how much would lowering the probability of future speculative crises be worth? i don’t know how one could quantify that gain, but that would be an argument for retaining the shares, wouldn’t there?


John Protevi 12.01.10 at 2:17 pm

quick follow up: maintaining the shares, which means a significant internal oversight, would also lower the costs of external regulation, i would think. so that cost savings would be part of the equation.


ajay 12.01.10 at 4:59 pm

John: a few points on that.
First, you’re right in principle: UKFI has a majority stake in RBS and a 43% stake in Lloyds, and has the right to nominate non-executive directors to their boards: these could definitely be used to affect the banks’ policies.

it’s UKFI’s job to dispose of its investments as quickly and profitably as it can. (This could be changed, admittedly).
UKFI isn’t the only shareholder, and if it tries to force the bank to do things that are good for systemic stability rather than things that are good for the share price, that raises all sorts of issues.
Lloyds and RBS aren’t the only banks in Britain, and there’s the question of why they should be run this way when Barclays (for example) isn’t.
There would also be the issue of whether Lloyds and RBS could be used to make politically advantageous loans, which would not be good for the bank or its other shareholders.
Those stakes represent a lot of money that’s tied up not going anywhere – at last count, well over £57 billion* – and it would be cheaper just to regulate them using conventional means. It might also be more effective: it’s debatable how much more clout or information the government would have as a shareholder than it already has simply through being a regulator. As you’re going to have to keep the regulator anyway (to look after Barclays, Nationwide, etc) why not just let it handle RBS and Lloyds as well?

*the FSA budget is about £450 million. If you sold off the entire Lloyds and RBS stakes right now and invested it in, say, long-term government debt, the interest payment on that would be several times more than the FSA’s budget. Keeping the stake solely because it gives you regulatory leverage is massively inefficient as a use of capital.


ajay 12.01.10 at 5:02 pm

If, carrying on from that, you say “well, let’s keep the investment because it’ll make us a profit” – if you want to get the UK government into the long-only hedge fund business – borrowing money by issuing gilts, and investing that money in the stock market – then a) you should be aware that that’s what you’re recommending, b) they’ll probably lose money doing it because 80% of hedge funds do and c) they should probably be a bit more diversified than just being massively long UK banks.


John Protevi 12.01.10 at 5:36 pm

Thanks, ajay. I was being naive — not deliberately naive, because that would imply I could be non-naive, but just naive. Your explanations are a great help. I share your complaint in #22: why isn’t this stuff more well-known? It’s not overly complex when it’s explained properly as you do here.


Chris Williams 12.01.10 at 5:53 pm

Why not?
On the left: “We gave the money to the banks, so why can’t we give it to (insert public spending under threat here”
On the right: “Nationalisation never works, and everyone* must stand on their own two feet and Brown is innumerate”

*Especially the poor


ajay 12.01.10 at 6:05 pm

29: I’d add in that, if someone on the right said it, they’d think “hmm, that sounds like a remarkably smart thing to have done – saving the banks, but making them pay a hefty sum to be saved. Sensible and hard-nosed. Praised by lots of economists, and likely to turn a profit, you say? Good Lord! Who came up with this splendid piece of policy, that saved a massive part of our economy from collapse and looks likely to make us a profit at the same time?

(head explodes from cognitive dissonance)


Another Roger 12.03.10 at 10:31 am

#18 – if you re-read my sentence it should be clear that it is the deliverers of the homage who are the post-modernists and not the subjects of it.

#11 – so, given that they are clearly students and there seems to be a dozen or so of them, they presumably collectively have several thousand or so ‘friends’ on these new-fangled ‘myface’ and ‘twatter’ thingies that they spend their time updating on those little phone things they all have when they should be paying attention in their lectures.

Eliminate double counting and 619 views seems about right if they all ‘posted’ this little home movie on both this ‘u-tube’ and on this ‘spacebook’ thing and all their ‘friends’ looked at it.

#9 if they give me reasonable notice and pay my train fare up to London I’ll gladly attend their next little evenement and grumpily mutter ‘bloody students’ from the sidelines throughout.

In fact in the best SPGB tradition I’ll even bring along my own leaflets explaining why I don’t support this action.

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