We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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Yours truly escaped from the credit crunch, his computer keyboard and endless work hassles to get some much-needed relaxation in the Greek island of Crete last week. I can strongly recommend it, although not all aspects of life in that island are an unalloyed joy (they seem to assume that British tourists want chips with everything). I noticed that the locals have an agreeably “f**k you” approach to things like any smoking bans in restaurants, at least judging by my own observations. And I noticed that the driving standards have not improved much since I was last in Greece in 1992. A taxi driver who took me and the missus to the airport held a mobile phone in his hand, had innumerable phone calls and was busily texting his wife/mistress/whoever during a drive down a twisty lane. At one point I even suggested that this might not be a bright idea. I might as well have been talking to a martian.
Of course, such things are foolish and silly. And using a mobile phone while driving is dangerous. But maybe what has happened is not that the Greeks have got any nuttier or more reckless. It is that we Brits have, wittingly or otherwise, become even more safety conscious and worried about risk. Sometimes it takes a passage of time and a contrast with another culture to realise that.
Watching the UK’s Channel 4 programme tonight, hosted by Jon Snow, whose leftist views are easily discernible, I sensed an aspect of the coverage of the present financial turmoil that bothered me. Several times, during various back-and-forth questions with such luminaries as the left wing journalist Will Hutton and the Cazenove economist Richard Jeffries (I know Richard, he is a smart guy), Snow came up with the idea that instruments such as financial derivatives were “peddled” by banks and other institutions to investors. You see, the viewer was supposed to understand, buying or selling a swap, or a future, an option, a warrant, or basket of bonds and equities is like buying or selling crack cocaine or a porno magazine, not that I have a problem with porn magazines.
Of course, given the way in which hedge funds have been accused of colluding to destroy financial institutions such as Britain’s HBOS – which is beyond daft given that only a small fraction of HBOS shares were available to be short-sold in the first place – we can expect more of this demonisation of financial markets. Please understand me, gentle readers. I am not saying that banks and other intermediaries are not at times at fault for what has happened. Clearly it sticks in the throat to see bankers earn vast salaries in the good times and then bawl like so many 1980s coalminers or wheat farmers when the taxpayer refuses to get them out of trouble. I was grimly satisfied to see that the US allowed Lehman Brothers to go down, since it showed that at least some policymakers in the US were willing to see risk-takers pay the price of risks that have gone awry. But let there be no mistake: the financial derivative instruments that are being credited with voodoo powers by financial dunderheads like Will Hutton or Mr Snow are not the essence of the problem.
Derivatives are, after all, borne out of the desire by people to offload risks and by the desire of others to take those risks on; they are a consequence of the different appetite for bearing risk that occurs in any open market economy. Some people like uncertainty, others do not. That difference explains how, in a world of price movement, it is possible for people to swap uncertainty for certainty and vice-versa. It is the basis of insurance, for example. Without speculators willing to bear risks of fluctuations in everything from wheat to interest rates, other, more timid souls would not have fixed-rate mortgages or upfront payments for their wheat. Without those hedge funds, other, more cautious investors would not get prices for their investments, and so on.
We are in the midst of a very scary time in the financial world and there is no point in my trying to obscure that fact. I work in the wealth management business and have seen even some of the smartest minds in the business lose their heads. But I detect a decidedly unpleasant whiff in the air of scapegoating in the current time. One almost can hear an echo of anti-semitism, or something very similar.
Meanwhile, Roger Kimball pins much of the blame on US policies designed to encourage risky borrowers to get credit. He has got a point. I would also repeat the point that with Japan and other Asian countries operating ultra-low interest rates for a long time, these countries acted like ATM machines for the rest of the world. As Paul Marks of this parish likes to point out, until interest rates are based on a genuine balance between the demand for and stock of savings, the monetary system of the world will keep creating bubbles like this.
Update: here is a fine essay by economics historian Robert Higgs about how disastrous policy responses in the US ensured that the Wall Street Crash of 1929 mutated into a decade-long slump. Over and over again, it is necessary to nail the myth of Roosevelt’s New Deal. Far from “saving” US capitalism from itself, FDR lengthened the misery; unemployment was higher by the outbreak of WW2 than when he was elected to office.
“The investment business is based on people being able to do what they want with their money. They may want to do some odd things. “People put their money where their thoughts are,” said one investment banker I interviewed. This means that there are a lot of men who are, so to speak, in financial topless bars, sticking millions of dollars into the G-strings of lap-dancing debts and equities.”
– PJ O’Rourke, Eat The Rich (page 27).
The Spectator has a strong article on just how bad the public finances are in the UK as a result of the private finance initiative (PFI) being used to move lots of public spending items, including traditional “core” activities, “off the balance sheet”. As I have said before, the very notion of “off-balance sheet financing” needs to be smashed into atoms. If someone has a debt to someone else, it has to be recorded somewhere; it does not just vanish into thin air. Gordon Brown was an enthusiastic user of PFI to reduce the recorded total of debt to give the impression that our finances were in better shape than is really the case.
There is a double-standard here. At the moment, there is a chorus of abuse being hurled at investment firms for the problems connected to the credit crunch and some of that criticism may even hold some water. One does not have to be an opponent of the market to be critical of some of the daft investments that have been made. The sheer, brain-frying complexity of financial derivative products appears to have wrong-footed even some of the sharper banks. But politicians have been engaging in accounting practices, such as those involving PFI, which would have corporate executives brought before a court of law or sacked on the spot. The very promises that politicians make over spending commitments such as pensions, for instance, are comparable to hawkers of Ponzi schemes.
There is a real difference between the brutal changes going on in the City, Wall Street and elsewhere, and the unreality of the political circus. With business tycoons, most, if not all of them get the boot if things go wrong, although I doubt many of them will be crying too much, judging by their high salaries. It is a pity that the process of punishing crooked political actions is not as swift.
Meanwhile, the same folk who brought us the likes of PFI will no doubt argue for yet more regulations.
Once the financial markets have hopefully calmed down, this development is likely to gain much greater significance:
Five sharia courts have been set up in London, Birmingham, Bradford and Manchester and Nuneaton, Warwickshire. The government has quietly sanctioned that their rulings are enforceable with the full power of the judicial system, through the county courts or High Court. Previously, the rulings were not binding and depended on voluntary compliance among Muslims.
What has been predicted has come to pass. As I discussed on a previous post while attacking the Archbishop of Canterbury and a senior UK judge on the matter, this move undermines the core principle of a free society, namely, that all are equal under the rule of law, and that a polycentric legl code, while fine in theory, tends to be unacceptable in practice if some people, such as Muslim women, are at risk of being coerced by their families into submitting to such courts. Given that in matrimonial disputes, men are favoured over women under Muslim law, this development is bad for women. Now, where is the chorus of complaint from feminists?
The article continues:
Muslim tribunal courts started passing sharia judgments in August 2007. They have dealt with more than 100 cases that range from Muslim divorce and inheritance to nuisance neighbours. It has also emerged that tribunal courts have settled six cases of domestic violence between married couples, working in tandem with the police investigations.
In tandem?
The rulings of arbitration tribunals are binding in law, provided that both parties in the dispute agree to give it the power to rule on their case.
That has to be the crucial point, but the worry must be that women, for example, will face considerable pressure in marital disputes to submit – that is what Islam means – to sharia law. The whole point about everyone being under the same legal code is that pressure is at least lessened somewhat.
This comment was telling:
In a recent inheritance dispute handled by the court in Nuneaton, the estate of a Midlands man was divided between three daughters and two sons. The judges on the panel gave the sons twice as much as the daughters, in accordance with sharia. Had the family gone to a normal British court, the daughters would have got equal amounts.
Well, exactly. Now that the Tories are miles ahead in the opinion polls, it would not be too much to ask for a future Tory administration to shut these courts down if it can be shown that parties to a dispute had been under any duress to accept them in the first place. Also, where children are involved and therefore the child is clearly not able to consent, such rulings should be declared inadmissable, period. The same point would apply to any other network of courts or arbitrators from any other religion, for that matter. For example, as far as I understand it, Jewish courts do not have binding powers if they are at odds with the existing UK ones.
At the very least, this development plays straight into the hands of bigots of all stripes, including the Far Right, of course. Equality before the law may sometimes be an empty phrase, but it touches on a vital principle in jurispudence in a free society.
The Tories have opened up an almost 30 percentage point lead over Labour in the latest opinion poll in the Daily Telegraph. The opposition party is now polling over the 50 per cent point, the highest it has been since the heyday of Margaret Thatcher. An interesting point, as no doubt the jaundiced readers and contributors to Samizdata point out, is that the Conservatives have achieved this on the basis of remarkably little actual policy detail of their own, apart from stuff about changes to inheritance tax. In the early years, Tory leader David Cameron spent most of the time aping the mushy centre-ground noises of Blairism, with a strong, and possibly even sincere, attachment to notions of environmentalism and socially responsible corporations, the latter stance being a socialistic, or possibly even fascistic doctrine that is at odds with the notion that businesses should be run to serve the interests of those that own and run them.
All that has changed, and changed utterly. For a start, we do not hear much these days about the environment from Mr Cameron. Worries about global warming, at a time of economic fear and after a run of crap UK summers, do not cut it any more. The fact that mean global temperatures have actually dropped over the past 10 years is proving a bit of an awkward one. And the Tories’ economic mistakes of the early 1990s – joining the European exchange rate mechanism – are now far enough in the memory to no longer be as toxic as they once were.
Brown’s reputation is in ruins; his massive spending, raiding of private sector pensions and hideously complex tax changes have come back to haunt him. His creation of a semi-independent central bank no longer looks so clever given that he shifted the Bank of England’s inflation target to a different, and easier to hit, measure a few years ago, hence arguably stoking credit growth by an additional degree. Yes, some of the global credit crunch is outside of his, or indeed Britain’s control. But Brown sought to claim much of the credit for the fat years, so he cannot complain about getting some of the stick for the lean years.
As a side observation, a lady whom I met recently and who knows Cameron told me that he was a total shit. He would feign interest in a subject for about five minutes and then lose all interest. Not a good sign.
Update: The Taxpayers’ Alliance has a good and brutal report on what has happened to the UK economy during the Brown years, which will be available tomorrow. The Tories, if they had any intellectual fire-power, should be producing such reports. The TPA has held the torch for the cause for small government during a period when the Conservatives seemed barely able to mention the words “tax cut” without immediately rushing to tell people that they had no desire to be so cruel and nasty as to actually cut the size of the State. The TPA puts that party to shame.
Bloody hell, I did not see this coming. Bank of America has bought the 94-year-old brokerage, Merrill Lynch, for a cool $50 billion after the latter firm got hammered by worries about its ability to sustain huge losses. Meanwhile, the investment bank Lehman Brothers, one of the veterans of Wall Street’s banking sector, has gone bankrupt. I know a lot of people who work for both places. I imagine that the atmsophere is grim.
About the best that can be said about all this is that at least the Fed, or the US taxpayer, have not been asked this time to ride to the rescue, as was partly the case with the purchase of Bear Stearns by JPMorgan, as that deal was underwritten by guarantees by the Fed. At last, it has dawned on policymakers that hurling more public funds into the black hole of the current financial mess merely prolongs the agony; it does not end it. That, of course, is zero consolation to the thousands of people who will lose their jobs from these institutions.
This may be the “dark that comes before the dawn”, but it will not feel like that if you are close to the action. I just hope that politicians resist the urge to lock the door after the horse has bolted by imposing new reams of pointless legislation. We have already had endless efforts by central bankers and other luminaries to impose capital requirements on banks through what is known as the Basel process, and a fat lot of good that has done. What is pretty clear from my own vantage point is that we are seeing the culmination of a credit and asset price bubble that has burst very nastily. Relearning the merits of sound money is going to be painful.
A point for the economists to ponder over is whether the use of complex financial products like derivatives have concentrated the risks of financial collapses or made it easier to spread those risks around, so that although there is pain, it is not lethal to an entire economy. I incline to the latter view.
Bruce Dickinson, front man for the heavy metal rock group, Iron Maiden, is a qualified civil aviation pilot and was involved in flying home tourists left stranded by the collapse of a UK tourist agency. A nice story.
Of course, if I am on a flight that Bruce is piloting, I’ll insist he plays something really, really loud during takeoff. Go Bruce!
His supreme blogness, Glenn Reynolds, links to an NYT article on how American firms are increasingly warming to hiring former military personnel, on the grounds that the quality of such hires are getting better and are frequently far better than those who have never been in the armed forces. Hmm. It is the sort of story that might be dreamed up by an army recruiter saying: “Join the Army and when you want to quit, make a great life afterward”. That makes a lot of sense. For most people, a lifetime in the forces is not something they would ever want to contemplate, but a short spell, maybe. I know quite a few people who have got decent careers and businesses after having served in the forces, and I notice a few patterns. Of those I know, the following:
My father (RAF navigator): farmer.
RAF jet pilot: air traffic controller, West Drayton.
RAF Defence Rgt: Senior security manager, public transport.
SAS operative: security advisor, South Africa, Middle East.
Army officer, cavalry rgt: salesman, farmer.
Tank commander: hedge fund administrator.
Army officer: wealth management industry job-search executive.
Australian navy officer: property developer.
US navy officer, financial journalist.
US navy submariner: software engineer, paramedic, post-grad student at Columbia.
South African army: landscape gardener, property developer.
Army officer: property developer.
Army officer: pharmaceutical industry executive.
Army sergeant: pest control business owner (no irony intended!).
RAF tailgunner (WW2), social worker.
The last one always struck me as poignant. The man is now in his eighties, was a tailgunner on Lancasters during WW2 and saw his fair share of death and destruction. He ended up running a youthclub for kids in Pimlico for much of his adult life and one of my relations benefited from his tender care.
I’d be interested in seeing if commenters with military backgrounds ended up doing anything comparable to the stuff above, or something totally different.
Here is a tribute to the firefighters who lost their lives on this day, seven years ago, trying to rescue those attacked by mass murderers in New York City.
May they all rest in peace.
There is a new computer game out there, called Spore, which takes up on the theory of evolution. Looks like fun and educational, as many such games are, a fact that critics of computer games rarely seem to take on board.
Here is another item about this game.
Over at the Cato Institute blog, contributor Daniel Griswold argues that the US, the world’s biggest user of energy, is not quite as dependent on energy from only a few nations as one might think. I agree. Energy “independence” sounds like a smart strategy if you fear that a handful of nations, run by thugs, have a heavy armlock on energy supplies. Fortunately, Mr Griswold argues, it is a bit more varied than that.
Of course, part of what bugs me about the constant demand for energy independence is the concern that this might be a form of protectionism in drag, much akin to calls by western farmers for “food independence”, often just a thin excuse for tariffs on imports.
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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