I interpret the words “gain” and “in the year” to imply he’s talking about income. Can’t see any other meaning of the words, really.

If it’s income, his comparison must be wrong. $90bn/120m = $750. That simply cannot be the per capita income of 40% of the US population. There’s no need even to look it up. It’s an order of magnitude out.

Not quite so sure, but $90bn for the Waltons also sounds too high. It would depend on the majority of their income coming from companies other than WalMart. Not impossible, but if I were an editor I’d want it fact-checked I think.

So he’s done something else here. Confused wealth and income would be my first guess.

Or he might have done a Worstall and confused decimals and percentages (sorry – couldn’t resist it).

Sub-Marxist claptrap by the mile.

That’s what I find so depressing about such debates; not that the author is misguided but that he’ll find umpteen cheerleaders and even a few who’ll say he hasn’t gone far enough.

Thes opinions are like vampires; they need a stake through the heart plus garlic and heaven kn ows what else to keep ‘em check.

They come back, generation after generation, like the most persistent weeds.

I think it was very good that Northern Rock tried a new way of doing things. New things must be tried, risks must be taken. We didn’t *know* in advance whether it would work or not, and for quite a long time it seemed to work, but in the end it didn’t.

It is called Creative Destruction (from Schumpeter) – and it may be the greatest strength of capitalism – that it mostly fails.

Same as natural selection – most genetic mutations are harmful (indeed lethal) but without failures you never get adaptive evolution.

The work of Paul Ormerod http://www.paulormerod.com has measured the truly _vast_ level of failure in capitalism, especially in the most successful big capitalist economy over the long term (the US).

Of course, this means that Northern Rock must be allowed to fail, must not be rescued or nationalized (just as Tim has consistently argued).

But why can’t we say: it was good that Northern Rock thoroughly tried a bold new business model, and it will be good if they are allowed to fail.

(Good for most people in the long term, I mean – I live in Newcastle upon Tyne, and am friends with ex NR Chair Matt Ridley; so I am aware that there are – as always – local and short term harms from failure.)

They have to say /something/….

‘One day, though, we’ll have the enzymes that can digest the corn stalks, and then the equation will flip round.’

I understand what you’re saying, but do have to point out that we shouldn’t be planning to make cellulosic ethanol from corn stalks because

- corn stalks (stover) are far more useful when shredded and put right back onto the field (no-till and para-till)
- corn stalks are a poor-yielding source of cellulose (in terms of tons of cellulose per unit input)
- corn stalks take additional energy to harvest separately from the corn fruits.

If cellulosic ethanol has a future, it will be from a feedstock which gets around those problems. And commercially-viable enzymatic hydrolysis is still quite a ways away.

llater,

llamas

One day, though, we’ll have the enzymes that can digest the corn stalks, and then the equation will flip round.

Dwayne Andreas, who was for 26 years CEO of ADM, was (in)famous for making gigantic donations of his own and ADM’s money to politicians of every party imaginable. He has donated large and comparable sums to every leading political candidate in US politics, from George Bush ’41 to Jesse Jackson, and everyone inbetween.

And it works. His quarter-century of giving has resulted in a quarter-century of gargantuan Federal and state subsidies for corn-based ethanol, which have channelled billions of dollars into the coffers of ADM. Corn-based ethanol remains marginally-effective (at best) at reducing GHGs and/or foreign oil dependence, and it is hopelessly uneconomic, but it has made ADM rich at the expense of ther US taxpayer.

Truly, when politicians decide what shall be bought and sold, and for how much, the first things to be bought and sold will be politicians. And the example of Dwayne Andreas and ADM shows that they can be bought and sold for cheap – a few million in campaign contributions yielded billions of Federal dollars for ADM.

llater,

llamas

I don’t think so. It wasn’t really in his spare time, and his employer didn’t claim IP rights over the work. Not sure how easy that would be to replicate in a big (or small) corporation (back then, at least, when pioneering commercial Internet stuff was to charge £10/month for a dialup connection).

All these facts were in the public domain, any FT reader should have noticed. I certainly did.

As you say, the shares peaked in Feb 07, in other words, they started going down again. Which is what I said, isn’t it?

“Such obviously dangerous course”
“NR had been showing all these signs for quite a few years”

Not so obvious that the City, which is made up of very highly-paid and highly-skilled analysts, noticed – Northern Rock’s share price peaked in Feb 2007, 50% higher than it had been at the start of 2006.

You’re basically saying that the governing authorities should have intervened in a company the City was valuing higher than any of its peers. I can’t imagine how over-excited this blog would have been then – idiotarians, statists, all the usual insults.

In fact this blog was still saying Northern Rock’s problem was one of liquidity not solvency even after the crisis broke, comparing it favourably (and entirely wrongly) with a German bank collapse.

Tim adds: NR’s problem still is one of liquidity, not solvency.

I hate the fact that journalists feel the need to comment on that which they have no clue. Credit derivatives are fairly basic things that even a journalist could understand if they bothered to read about them.

We will only know to what extent they were rated badly in a few years from now. The problem was caused primarily by a lack of liquidity, not by defaults on loans. Ratings do not promise you a liquid market, only that a borrower will be able to repay.

Moreover, did you get any of these sold to you by your bank? Are widows and orphans going hungry? Of course not, the investors that got stung were professionals. They knew the risks they were taking.

Finally, thanks to subprime lending, there are millions of folks in the USA who have become home owners. Do we think that they shouldn’t have had the chance?

NR had been showing all these signs for quite a few years, it came from a negligible share of new mortgage lending up to about 20% of new lending or something staggering like that; it borrowed heavily (rather than taking deposits) and that in itself was an unusual business model.

NR’s share price had been sliding for six months before it went *pop*.

The current regulators should be taken out and shot, frankly.

“if indeed NR hadn’t been stopped from pursuing the path it did in the first place” ?

Tim adds: When the BoE was in charge of the financial markets (as opposed to the FSA currently) banks which followed such obviously dangerous course would be called in for a quiet chat and heads knocked together.