In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress.
– John Adams.
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“Until August 1914 a sensible, law-abiding Englishman could pass through life and hardly notice the existence of the state, beyond the post office and the policeman. He could live where he liked and as he liked. He had no official number or identity card. He could travel abroad or leave his country for ever without a passport or any sort of official permission. He could exchange his money for any other currency without restriction or limit. He could buy goods from any country in the world on the same terms as he brought goods at home. For that matter, a foreigner could spend his life in this country without permit and without informing the police. Unlike the countries of the European continent, the state did not require its citizens to perform military service….The Englishman paid taxes on a modest scale: nearly £200 million in 1913-14, or rather less than 8 per cent of the national income.” – A.J.P. Taylor, English History 1914-1945, page 1. Quoted by Alvin Rabushka in “From Adam Smith to The Wealth of America, page 80. The latter is a particularly good book, written very much from the “supply-side” school of economics with a strong account of developments in UK 19th century politics, Hong Kong, and the Reagan presidency. October 3rd, 2008 | 28 comments - (Comments are closed)
 This is simply brilliant:
The serious point here, of course is that Americans are being asked to bail themselves out, or their more feckless citizens, many of whom are far richer than they. And this is meant to save “unregulated capitalism”, apparently. Thanks to Bob Bidinotto for the link. Bob has been on fire recently. October 2nd, 2008 | 9 comments - (Comments are closed)
Over at EU Referendum blog, there is a good item about the regulatory system which to a degree, lies at the heart of the current market turmoil. It refers to the network of rules known as Basel II, taking their name from the fact that the headquarters of the Bank of International Settlements is based in the Swiss city. BIS is the place that central bankers meet regularly to discuss regulations governing the world’s main banks and other financial institutions. I used to go to Switzerland quite a bit to sit in on some of the discussions surrounding these rules when I used to report on this sort of stuff. Essentially, the rules lay down how much capital banks should set aside to cover against risks. They are extremely complicated, but in a nutshell, they are designed to protect the financial system from a wave of debt defaults. The Basel II rules have in turn acted as the foundation for bank capital regulations in the EU and other major industrial economies. If I have a “point” to make here, it is that the existence of these and other regulations utterly nails the lie, put around by a lot of MSM commentators, that what we are seeing is the demise of unregulated, cowboy capitalism. Au contraire, what we have seen is the failure of a large body of rules, assembled over many years, to do what they were supposed to do. In fact, as EU Referendum persuasively argues, these rules may have even worsened the crisis and encouraged financial players to take certain risks “off balance sheet” to avoid having to set aside capital. But you can bet that policymakers will not draw the conclusion that too much regulation might actually be part of the problem. October 1st, 2008 | 21 comments - (Comments are closed)
Sometimes the odd phrase can tell you everything you need to know about the kind of philosophical assumptions, held either wittingly or not, that people carry around in their heads. In a rather fluffy BBC TV news item this morning about how elderly gardeners are helping young schoolkids to learn about the great outdoors, a character involved said that this showed the “valuable contribution that senior citizens make to society”. For some reason that really bugged the hell out of me. There is this continued use of the word “society” as if this were a sort of person. I have contributions that I make to my married life such as paying certain bills and taking care of my wife if she gets ill or needs help, for instance, and I am very delighted to do so. I contribute to paying my mortgage by going out to work. I make contributions to certain services by paying for them, willingly or not, via private payments or through the violence-backed channel of tax (although “contribution” is not the right word in the latter case). But the idea that Johnathan Pearce’s activities somehow “contribute to society” is so much collectivist nonsense. The turn of phrase shows that how people choose to live their lives is not viewed through an individualistic perspective – the idea that people are entitled to pursue their lives for their own sake and happiness – but according to some sort of utilitarian or altruistic calculus, as Ayn Rand might have put it. There is actually something rather chilling about this, in fact. What if some person decides that the oldies are not making a “contribution to society”? Should they be put down, like a crippled dog? October 1st, 2008 | 31 comments - (Comments are closed)
The Cato Institute blog makes this observation:
I am not holding my breath. It would be interesting to see the reaction if she did give the bailout the finger, though. Judging by some of the media coverage of her and the credit crunch, large parts of the MSM press would lose their minds completely. September 30th, 2008 | 15 comments - (Comments are closed)
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. September 30th, 2008 | 4 comments - (Comments are closed)
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. September 29th, 2008 | 26 comments - (Comments are closed)
“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). September 29th, 2008 | 8 comments - (Comments are closed)
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. September 19th, 2008 | 8 comments - (Comments are closed)
Once the financial markets have hopefully calmed down, this development is likely to gain much greater significance:
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:
In tandem?
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:
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. September 19th, 2008 | 111 comments - (Comments are closed)
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. September 18th, 2008 | 9 comments - (Comments are closed)
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