if we were all ‘drunk on credit’ then where were we getting the alcohol? Too much credit causes asset bubbles, and the prime player in that is the state via central banks, keeping rates too low for too long etc.

the two schools are rules based and principles based, both failed in the current crisis (USA and UK respectively)

the focus needs to shift to large entities and away somewhat from the consumer (the regulator set up a consumer ombudsman, and a great personal finance site while
Rome burned in the background), brokers (nice and small, easy to push around) were regularly fined thousands of euro for minor breaches while large banks could make errors in the millions and until late 2008 not a single one faced any fine!

we don’t need more rules, we just need the right rules and the focus to be in the right place.

The existing financials in this country have gone insolvent due to heroic levels of Skilled Incompetence allied with the insufferable arrogance of their senior managements (possibly abetted by some directors). Reform!!! Sheer madness. Bankrupt them and be done with it. The State can constitute three new financials to replace the existing rubbish. These new financials would be free of debt - and little burden on the taxpayer. Please start shouting STOP before it is too late to prevent a dreadful economic and social calamity on this country.

Before you formulate your response to my question of ‘what growth’, please consider, carefully and diligently, how we attain growth - what do we consume to provide this growth? Next consider East Asia. Is there a large excess supply of local labour? Yes. Is production and manufacturing capacity available locally? Yes. Who is going to ‘consume’ their production? Not us, were broke, or soon will be. Your response had best be realistic and affordable, not wishy-washy political spin like, ‘We must build a Knowledge Economy and increase our competitiveness’. East Asia has all the Knowledge it needs, locally, and at half the rate we would charge. So what growth?

Brian P

One major reform objective that you did not mention should be ensuring that these necessary changes do not stifle innovation in the economy. Although the more heavily-regulated continental economies did much better in the current financial crisis, over recent decades they have fallen behind (and played innovation catch-up) in terms of entrepreneurial activities. That is the potential downside of the more tightly regulated system that you describe. However much of what you say is quite convincing despite this concern.