Hot on the heels of yesterday's post, the Social Mobility and Child Poverty Commission, chaired by Alan Milburn, have released their first annual report. BBC coverage of the report is here. The findings are stark. First, real incomes have been flat-lining for a long time, meanwhile prices have been going up. Second, for the first time in over a century, the current generation of children are going to be worse off than their parents. Third, social mobility (i.e., the ability of people to better their lives and those of their offspring) is dying. For me, the big question is do politicians really care about this issue? If so, what can they do about it?
As an undergraduate, I was taught about the failure of Herstatt Bank in 1974 and Herstatt risk. This bank was only the 35th largest bank in Germany at the time so why would anyone be interested in studying its failure? Herstatt failed because of its involvement in risky foreign exchange business. When it closed its doors on 26 June 1974, counterparty banks (mainly in New York) had not received dollars due to them because of time-zone differences - this is known as settlement risk. The cross-jurisdictional implications of its failure resulted in the Bank for International Settlements setting up the Basel Committee on Banking Supervision and Herstatt's failure was a key reason for the establishment of real-time gross settlements systems, which ensures that payments between two banks are executed in real time. The Bank of England's Ben Norman has an interesting post on Herstatt over at the Bank's new blog ( Bank Underground ). As well as giving an excellent overview of