From Lord Turner, Chairman of the UK’s Financial Services Authority, in August 2009:

Lord Turner of Ecchinswell, an influential figure in the reform of banking rules in London and beyond, said that the City had grown “beyond a socially reasonable size”, accounting for too much of national output and sucking in too many of Britain’s brightest graduates.

“I think some of it is socially useless activity,” he said, adding that the financial sector had “swollen beyond its socially useful size” and seemed to make excessively large profits.

FT.com / Comment / Opinion – Why market sentiment has no credibility.

Robert Skidelsky is always worth reading. He’s on from here:

Why has the financial press been almost unanimous in condemning the modest pre-Budget measures announced by Alistair Darling, chancellor of the exchequer, to protect total spending in the face of a massive collapse of private demand? Why are the markets howling for “fiscal consolidation” now – ie cutting fiscal support to the economy immediately – when it has plainly not yet recovered?

To understand “market sentiment”, one has to go back to two ideas in the minds of most financial analysts which almost unconsciously shape their arguments. The first is the belief that economies are always at full employment. The second is the belief that even if they are not (obviously contradicting the first), they very soon would be if only governments would stop bailing them out.

He’s right.

Someone tell George Osborne.

Well worth reading when he says things like this:

But [for the economists] there is always “market sentiment” to fall back on. The government must cut its spending now, because this is what “the markets” expect. These are the same markets that so wounded the banking system that it had to be rescued by the taxpayer. They are now demanding fiscal consolidation as the price of their continued support for governments whose fiscal troubles they have largely caused.

Thanks heavens for sane people. And Keynesians.