“What is certain is that the EU does not resemble a prosperity club that Britain should work more closely with.”
Fraser Nelson, Spectator.
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October 27th, 2011 | 6 comments - (Comments are closed)
 ‘Why Britain Should Join the Euro’ – a pamphlet by Richard Layard, Willem Buiter, Christopher Huhne, Will Hutton, Peter Kenen and Adair Turner, with a foreword by Paul Volcker. One of the authors, AdairTurner, now Lord Turner, is interviewed in today’s Observer, which is where I saw the link. He has changed his mind a little since 2002, when the pamphlet was written, but not to an unseemly extent. Now Chairman of the Financial Services Authority, he is concerned about the current situation but remains confident that “sensible decisions are going to be made”. So there you are then. Cheer up! October 23rd, 2011 | 3 comments - (Comments are closed)
Here is a good column slating the idea of a Tobin Tax. The key issue that people need to understand is the issue of tax incidence. To put it another way, taxes are a cost (indeed, for some things, such as taxes on tobacco, policymakers stress this point). Costs get passed on. If we tax financial transactions, it will be passed on in the form of lower profits, job cuts, lower savings rates, higher borrowing costs. The tax, of course, will weigh disproportionately on London, given the far smaller turnover of rival European centres such as Paris. As the saying goes, can we leave yet? September 29th, 2011 | 4 comments - (Comments are closed)
My only surprise is that an article as justifiably angry as this has not been written sooner. Here are Peter Oborne and Frances Weaver, in the latest edition of the Spectator. They have also penned an item called Guilty Men, published by the Centre for Policy Studies. There are several institutions that are targeted. And I almost wonder if the authors of the article have been channelling our own Paul Marks on the subject of the Financial Times. Paul has written about the Economist also with venom. An example of what annoyed Paul about the Economist, is linked to here. Here are the paragraphs that stood out for me in the Spectator article:
An interesting side point is that the authors seem to take it as read that individual countries should, as matters of sovereignty, have their own currencies. What the authors don’t state – and I don’t know their views on this – are their opinions on fiat money per se. It is, after all, not much consolation to supporters of free markets to replace one dud monopoly money system with a network of national monopoly fiat moneys instead. What we need is actual competition between and even more crucially, within countries. Remember the old idea of a hard money “parallel currency” that the likes of Nigel Lawson, former UK Chancellor of the Exchequer, toyed with? Transnational currencies such as the euro may indeed be disasters waiting to happen. But national currencies can often blow up too, or devalue slowly but insidiously. That point needs to be made loud and clear. The end of the euro may be cause for grim satisfaction in some corners but that is not the only kind of economic folly out there. September 26th, 2011 | 15 comments - (Comments are closed)
“It is not beyond Germany’s financial power to rescue the ailing eurozone countries. But the increase in political power for Germany which such a rescue implies is surely way beyond what most of the people of Europe would accept. The Germans do not want it either: in agreeing to create the ECB, they willed the means, but not the end. Now that the end is nigh, they are terrified. What Europe faces, then, is a disaster that was predictable – and predicted – and is now unavoidable. In the process, millions will lose their jobs, an entire generation will miss the opportunities which their parents enjoyed, and blood will probably be shed. The rulers of Europe have never been so wrong since the late 1930s.” Charles Moore. His remarks about such EUrophiles such as Chris Patten (remember that pompous arse?), FT journalist Lionel Barber, Hugo Young and of course, Jacques Delors (remember him also?) are gloriously scathing. By the way, here are two books, one by John Laughland, and the other by Bernard Connolly, written some time ago on the architects of the modern EU. I don’t agree with all of their ideas, but they were remarkably prescient in certain respects. Laughland, for example, picks up on Hayek’s point about the dangers of politicised money, which is essentially what fiat money usually is. In case anyone asks, I certainly don’t endorse Laughland’s nationalistic views on the treatment of people such as Slobodan Milosovic. . That is a subject for another day. September 24th, 2011 | 10 comments - (Comments are closed)
This is interesting:
Via the Spectator’s “Coffee House” blog. I enjoyed this paragraph:
Someone explain to me why we are in the EU. I am sure there is a reason, but bugger me if I can remember now. Old age creeping in. September 15th, 2011 | 27 comments - (Comments are closed)
The headline says ‘Europe declares war on rating agencies‘:
Now ponder that for a moment… what is a ‘rating agency’? It is a company that states an opinion regarding credit worthiness. And those opinions are only significant if people who make investment decisions think the opinions in question actually reflect reality, i.e. the opinion has some credibility. So what these quoted members of the political class are calling for is banning credible opinions about the consequences of decisions by, er, people like themselves. Astonishing. And in reality rating agencies have a history of excessive optimism, only downgrading ratings long after the dots were joined by anyone who has been paying attention. July 7th, 2011 | 28 comments - (Comments are closed)
As regulars will know, one of my pet dislikes is “Rod” Liddle, a man who likes to think of himself as a sturdy Leftie but who, in fact, increasingly sounds like the sort of BNP supporter that you might encounter in a bar and who insists on telling you about how so many of our problems are the fault of “the blacks”, etc. Liddle has strayed, arguably, over the line before, but like a man emboldened by his own seeming ability to keep pushing his agenda without severe damage to his bank balance, he has finally gone over the top with all the mad brio of Prince Rupert of the Rhine charging at Cromwell’s infantry in the English Civil War. In a particularly stupid article for the Spectator (behind a subscriber firewall), on page 17 of the print edition, Mr Liddle reflects on the problems of Greece, and its horrendous debt. He rightly regards Greece’s decision to join the euro as a disaster, as Greece has proven itself incapable of handling the sort of interest rate more suitable to Munich or Lyon. However, in his clumsy way, he reflects on the differences he sees between southern Europe and the more “puritan” North. His title for the article (possibly written by a sub-editor), is: “How did I get it right on the euro? Easy. I was racist”.
(Emphasis, mine). Here’s another gem:
What is so cretinous about Liddle is his use of the word “racist” instead of what would be more accurate – “culture”. It is, arguably, the culture of some countries – by no means all – that helps explain such things. But the idea that there is some sort of general rule that says the further south you travel, the worse the population behaves, is bunk. My wife’s small country, Malta, which is even further to the south than Greece, has a conservatively-run banking system, strong public finances and a relatively strong respect for property rights and the rule of law. It is also a member of the euro-zone. Maybe all those years of Malta being under the British Empire might have helped, as our “leftie” Mr Liddle might argue, but Malta exhibited many fine qualities long before the Brits, in the form of Lord Nelson, showed up. It is bizarre to claim that the further towards the Equator you get, the sillier, more corrupt and naughty people become. As Liddle must surely recall, in chilly Scotland, once famous or infamous for its puritanical version of Christianity, for example, a large chunk of the populace now lives on benefits, and many of the traditional characteristics once associated with the land of Adam Smith, James Watt and David Hume seem to be notable for their absence. This is a cultural, economic and political development which cannot be explained by reference to some glib reference to geography, much less the race, of the people in question. Even more unfortunately for Liddle’s notion is the example of Iceland, and its catastrophe of failed banks. Those blue-eyed folk with their blonde hair seriously screwed up. Good ideas can be discredited by bigots purporting to advance them, if we allow these people to speak without rebutting their biases and showing them for the fools and knaves that they are. And Rod Liddle, however amusing he can sometimes be, or correct about something like the euro in one sense, is a bigot, and the kind of friend Eurosceptics can do without (I sometimes wonder whether he is working for the other side). Well, now he is on the record – he’s a racist, and seems to be proud of it. July 6th, 2011 | 21 comments - (Comments are closed)
Another zinger of a piece by Detlev Schlichter. If you are not reading his stuff regularly, you need to deal with that oversight. He’s indispensable:
And he signs off with this:
With some honourable exceptions, I find it hard to think of many even supposedly “private” banks in the world as proper, capitalist institutions in any sense. Their reliance on the crack cocaine of cheap credit has become too entrenched. June 23rd, 2011 | 27 comments - (Comments are closed)
London mayor and newspaper pundit Boris Johnson has a good article in his usual Daily Telegraph redoubt and it is getting a lot of attention, as it should:
Oh, they knew. They wanted this to happen – maybe not in the wrenching, embarrassing way that has manifested itself in the case of Greece, Ireland the rest, but they surely wanted economics to be melded to the service of politics.
Democracy, schemocracy, as Mel Brooks might have put it. June 20th, 2011 | 19 comments - (Comments are closed)
In response to a recent response of the economic collapse of Portugal, commenter EndivioR had the following to say:
Oddly enough, Spain and Portugal remind me of something I have seen before. In the 1990s, we had a telco bubble. In mobile telephony, most places had two or three digital 2G mobile networks built. The spectrum was usually obtained cheaply by these companies, and the resultant networks were valuable, and useful, and there was a good return on the capital put up to build them. One or two companies made enormous amounts of money by figuring out something was happening early in the piece, building suddenly immensely valuable companies, and selling out, often to incumbent telcos who had read things less well than they had. Telecoms equipment manufacturers made huge amounts of money as their business was suddenly much bigger than it had been before. Other people got excited by this, and governments got excited by this, and there was an enormous piling in by new entrants to this industry. The equipment manufacturers (many government backed) wanted to follow up their first round of sales with subsequent rounds, and there was massive pressure to keep building. Many of the people and organisations who entered this business late were, shall we say, more dubious than some of the earlier ones. In many cases, they were the well connected rather than the prescient. One thing that came from this, towards the end of the bubble, was a lot of what is known as “vendor finance”. Someone probably well connected wants to make money by building a telco, and probably selling that company on to someone else once it was built and had a customer base. A telecoms equipment manufacturer would lend the new telco money which the telco would then use to pay the manufacturer to build the network. This was all great as long as the network could be build, credit remained cheap, the network could gain customers and profits could be gained from these customers. In short, it was great as long as the bubble continued. Lots of people were making money as long as the bubble continued, and didn’t really care how it continued. Of course, few of these things remained true. Credit became expensive, and what customers newer telcos could gain were very low value customers. For a time, mobile phone companies were valued simply on the number of customers, with little attention paid as to whether they were good customers. However, this eventually stopped, as it had to. Credit became expensive. Vendor financed networks defaulted on their debts and went bust. The companies that did the vendor financing went bust too. Bye bye Lucent. Bye bye Onetel. Amazingly, the banking system as a whole did not go bust for more than five years after this. Which makes me think of Spain and Portugal. These countries joined the EC (as it was then) in the early 1980s after many decades of authoritarian government: poor, and woefully lacking in infrastructure. They lacked the capital markets, the expertise and the international connections to build modern infrastructure themselves, but there was the potential to catch up rapidly if they were exposed to international markets and international practice. The avenue through which they did this was the EC and later EU, of course. The benefits of rejoining the international economy were immense, and EU aid and expertise did help them and pay for infrastructure. The scale of this in the 1980s and early 1990s was surprisingly modest, actually, and the infrastructure that was built was fairly hardly argue with. Motorways from Madrid to Malaga, or Lisbon to Porto, eminently sensible, and the economic value created by the motorways obviously exceeded costs. Given that they were and are tolled, a fair bit of this value was even captured by the people who built and financed them. Looking back now, it seems fairly obvious that market mechanisms could have build the 1980s and 1990s developments. The sad thing is that market mechanisms did not build them, and Spain and Portugal instead got used to the EU way of doing this. Money flowed from France and (particularly) Germany and French and German banks via the EU institutions, and this money flowed back to France and Germany to the companies who did a lot of the work in building them. Vendor financing, shall we say. No particular harm was done, as long as the infrastructure being built was actually economically sensible. However, the French and Germans and French and German banks, and the Spanish and the French and German engineering companies got used to this. The inevitable greasing of wheels and protection and paying off of the well connected created a while class of people whose interests were in this continuing, long after anything was economically sensible. So in the late 1990s and 2000s, Spain and Portugal got huge networks of motorways in absurd and pointless places. (One evening several years ago, I drove in the evening along the old road from Regua to Vila Real in Portugal. It was a scary, winding, narrow single carriageway. The next day I discovered that there was a new road, which was a beautiful dual carriageway, four lane motorway, apparently being used only by me). These later ones tend not to be tolled, as if you were to toll them it would become immediately obvious how few cars were using them and how economically pointless they are. Then, things got nuttier. Spain got an enormous network of high speed trains. These are particularly good from the EU aid point of view, as there are two different European technologies – one French and the other German – and the contracts can alternate between the two. Pointless, but great in terms of being financed by German banks and then bought from the Germans. Then Spain got the world’s largest system of wind farms. The further we went along, the more pointless the things being built actually became. We started more or less with sense, but because the incentives were all wrong, this evolved into madness. So here we are. The EU vendor finance bubble has ended. The French and (particularly) the Germans created this mess, because their banks and their industrial companies were benefiting in the short term. Blaming the Spanish is beyond the point. The Spanish let the Germans lend them money and then build them stuff with the lent money, and they were foolish to do this, but it appeared they were having a rapid miracle of modernity, and given the history, I can see why they wanted to believe this. The German banks are screwed, after doing the bidding of the German government. If the German government has to bail them out, well they created the mess. Except, the political class made the mess. As that political class keep wining and dining one another as they discuss how to In the case of the vendor financed telco bubble that I discussed earlier, the companies that did the lending and the borrowing generally both went bankrupt, their assets gobbled up by new and more sensible companies. In the case of governments that have done the same thing, cleaning up is messier. The German and Spanish political classes are not just going to go away, however much we wish they would. Perhaps there is anger with the German political class. Support for the traditional Christian Democrats and Social Democrats appears to be in serious decline, which has led to support for the Green party approaching 30%. Which is not going to help. It is hard to see any scenarios in which we are not totally fucked. April 11th, 2011 | 12 comments - (Comments are closed)
That is one suspected reason for why the Icelandic government was so eager to roll over for the Dutch and the British – they were willing to bankrupt the nation to get their snouts trotter-deep into the EU troughs. If this means I can’t join the EU I regard the referendum result as a double win. – Commenter Bjarni April 10th, 2011 | 2 comments - (Comments are closed)
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