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Following from my previous article about the alleged size of the role played by China/Asia in the current financial troubles, an eagle-eyed commenter by the name of Marc Sheffner pointed this excellent article out which clarifies a lot. My thanks to Mr Sheffner. God but I love the internet. March 9th, 2009 | 5 comments - (Comments are closed)
 Remember that email I got from Tim Evans flagging up this? Well someone called James Tyler responded to it, also sending his reply to all of us on Tim’s list, with a link to this, which I likewise recommend. It’s a piece in Portfolio.com called “The End of Wall Street”, by the guy who wrote Liar’s Poker. I’m still reading the piece, but this is my favourite bit so far, about the observations of a man called Eisner:
Paragraphs like that make me optimistic that statists just will not be able to pass the catastrophe off as a mere failure of unregulated capitalism. Yes the whole Sub-Prime thing was aided and abetted by Wall Street, big time. But it was set in motion by Washington politicians, and in particular politicians of the Democrat persuasion. This was, as we cannot repeat too often, a failure of the mixed economy, not of the extreme free market of the sort we here favour. The folly of the Republicans, which has already been electorally punished, deservedly, was that most of them didn’t see it all coming and panicked when it did, and those that did smell the coffee were unable to do anything to soften the blows when the coffee exploded, or whatever. My guess is that there will soon be a cull of Washington Democrats as soon as the voters next get a culling opportunity – two years from now, right? And the big question is, what will the new intake’s take be on it all? But, as I often say on my personal blog when discussing gadgetry of various kinds beyond my understanding, what do I know? UPDATE: Although, I’ve now finished reading the piece, and it is clear that its author derives no such anti-statist moral from his wretched story. Wall Street is the villain, and Wall Street is being justly, although very insufficiently, punished. Not a word about Democrats, or for that matter Republicans. March 9th, 2009 | 19 comments - (Comments are closed)
Once every month until I get sick of it, I intend to remind anyone whose attention I can get of this…
It was the redoubtable Thaddeus Tremayne who first mentioned this back on January 25th of this year in an article called ‘Narrative narcosis’. So next time some purblind fool tells you that our economic woes have been caused by ‘capitalism’ rather than ‘regulatory statism’ and ‘big government’, make a print out of that Times article on good high quality paper, roll it up tightly, and shove it very forcefully wherever your imagination and their complacency will allow. March 9th, 2009 | 17 comments - (Comments are closed)
Are you optimistic about the future? Several months ago I was not, but I am now. From what I can see, governments are walking down the path of their complete moral and financial bankruptcy far more quickly than I ever imagined they would. I thought that it would take our overmighty governments several slow, demoralising decades of decline and eventual collapse to completely discredit their authority and control in the eyes of the people. However, our governments appear to be going supernova right now and I suspect they will burn themselves out over a few painful and tumultuous years – destroying a great deal of wealth in the process, no doubt. However, as worrying as that prospect is, it was always going to be that way. And in spite of that, I feel particularly upbeat about the longer term future. Those who know nothing more (and expect nothing less) than widespread government authority and control over all aspects of our lives will have their imbecile – sorry, umbilical – cords to the State cut sooner than expected, thanks to the overwhelmingly reckless (but entirely predictable) government response to the current financial crisis. I really do believe that future historians will pinpoint this crisis as marking the beginning of the end of the big-government era. Do you agree? March 8th, 2009 | 45 comments - (Comments are closed)
Government is an institution that has evolved along with we humans as our best means of applying violence. When you want to break things and kill people, there is no better institution for the job. The problem comes when we attempt to use it for other purposes. Its true skills will out even when the goal is entirely different, as with the current attempts of States to ‘help’ the economy. What I see happening in the US and UK and other places with maximally ‘helpful’ governments is much like what happens when you accidentally spill Nitric Acid on the rug. It steams, bubbles, gets hots and makes a bit of sound and for a short while it appears that ‘something is happening’. Then the smoke clears and you see that it has ruined your rug. Government ‘help’ is like that. March 7th, 2009 | 7 comments - (Comments are closed)
Following on from this, is another theme that came out of that seminar with media/City luminaries I went to the other day. One point that Anthony Hilton mentioned was the “global imbalance” issue. This is all about how the West, which is in net terms, up to its eyes in debt, has been living high on the hog thanks to oodles of surplus savings generated by countries such as China and Japan. In looking to figure out how to play the “global financial crisis blame game”, one argument goes like this: China, with its cheap exports, kept cheap by its artificially low and fixed exchange rate, earned huge amounts of money by selling this stuff to the West; in turn, the Chinese needed to reinvest the proceeds – there would be no point earning money you cannot spend – and they reinvested those proceeds in things like US government securities. As a result, long-term bond yields in the US fell, which enabled Mr and Mrs Westerner to renegotiate their long-term mortgages, release equity from their homes, and spend even more of their inflated wealth on – yes you guessed it – Chinese consumer goods. Result: a whacking great housing and consumer spending boom that inevitably crashed. This argument sounds quite convincing. If it is true, then it also suggests that, contrary to what some of the critics of the Fed or other central banks might say, that there is not much that someone like Alan Greenspan could have actually done to curb domestic US monetary growth if there were such enormous inflows of hot money coming into the country’s debt markets from abroad. Well up to a point, Lord Copper. Much depends, I think, on what proportion of monetary growth in the West was driven by Asian inflows, and what was basically driven by domestic factors. I haven’t seen a lot of commentary on this. If you buy the “Asian connection” argument, a problem, it seems to me, is that it would not have been realistic, for various reasons, for the US to have tried to curb these supposedly dangerous inflows of Asian money by protectionist measures such as capital controls or exchange controls. If one believes that capital and trade flows are good things, then imposing such controls would and could cause more damage than it solved. Exposure to capital flows has, in many ways, driven beneficial economic change. But the argument about Asian money does suggest that had the Fed, etc, raised rates to curb inflationary pressures, all that would have achieved would have been to suck in even more Asian money from investors seeking a higher yield. But presumably, with higher rates, it would have curbed, and did eventually curb, US consumer spending, and hence dent the demand for Chinese and other non-US goods. China is now starting to feel the effects of the global slowdown rather sharply. Even so, the “global imbalance” argument highlights the fact that in a world of fiat money without capital controls, it is now very hard for state central banks, even those with powers as wide as the Fed or the European Central Bank, to set interest rates effectively. Of course, the idea of a central bank setting rates for a complex economy is itself a version of state central planning. Globalisation has exposed its limitations. One of the things I really want to ask Kevin Dowd at his Libertarian Alliance Chris R. Tame memorial lecture next week is how this sort of issue can be addressed. The “Asian dimension” to our current predicament could be the proverbial big gorilla in the living room. Or maybe it is just a small and rather distracting rodent. March 6th, 2009 | 34 comments - (Comments are closed)
Brian Micklethwait, over at his personal blog, links to a sentiment that states that it is wrong to blame the private sector banks for the current problems, given that the underlying cause of the credit/property bubble was cheap credit as supplied, ultimately, by central banks. Central banks are not creatures of the free market and would not exist in a world of pure laissez faire. So obvious to us, it hardly needs to be said. But outside our little intellectual bailiwick, you’d be be surprised – or perhaps not – to realise that saying such things still gets you a funny look. As purely personal evidence, let me cite an experience last evening. I went along to a financial seminar in London’s Bloomsbury district, where various folk, including Anthony Hilton of the London Evening Standard and Angela Knight of the British Bankers’ Association were holding forth. Q&A ensued. Yours truly asked a question about what the panelists thought was the role of central banks and governments in causing the current SNAFU. You could almost smell the palpable relief on Knight’s behalf that she had heard someone not try to pin the blame entirely on private banks. My god, she thought, here’s a guy who has not bought the statist line that what is happening was caused by big, evil private banks. I have to say I found her answer on how the central banks mucked up was quite convincing although she by no means accepts the idea that the existence of central banks as such is a problem. As a lobbyist for the existing fractional reserve banking industry, she is certainly no Ludwig von Mises, but still. I sense that some of the banking industry’s more independent-minded figures are getting really angry at being pilloried for sins outside of their control. The banking industry, however, cannot win any battle for hearts and minds until they are absolutely transparent about their own financial affairs, and until some of the leaders of the banking industry begin to embrace genuine free banking rather than the quasi-statist mess that we have now. Let’s face it, given the reputation of banks at the moment, what do they have to lose? The current option – hope for the best and take taxpayer’s money – is not proving to be very successful. March 5th, 2009 | 7 comments - (Comments are closed)
Life for me is hectic right now – for all the right reasons – but I wanted to quickly put up this link to an excellent commentary by Dan Mitchell of the Cato Institute, concerning the current US government’s drive against offshore tax havens, especially Switzerland. Governments such as that of the spendthrift US, UK and France are getting desperate for cash, and low-tax regimes which respect client confidentiality make for an easy target. I can also recommend Dan’s recent book, co-authored with Chris Edwards, as a fine study of the whole case for tax havens and why they are a thoroughly good thing. Whenever you read someone arguing for ending “unfair tax competition”, what they really in fact want is to create a cartel. Most cartels, if not backed by states, tend to disintegrate in time, but are generally thought of as bad. Tax cartels are a prime example of cartels of the worst kind. March 3rd, 2009 | 16 comments - (Comments are closed)
In an article in its present edition “In Knots Over Nationalization” (page 14) the Economist magazine writes the following about the many trillions of Dollars that President Barack Obama has pledged to spend over and above the wild spending of the hopeless incompetant President George Walker Bush.
Of course the antics of President Obama are not “responsible” at all. If this increase in government spending, not just over this year but over the following years, is “responsible” what would the Economist consider “irresponsible”? Of course there are other articles in the Economist in which the details of President Obama’s tax and spend policies come in for criticism – but the position of general support for his Administration, in line with the endorsement of then candidate Obama last year, would seem to be incomprehensbile for a publication that claims to be a supporter of free market “capitalism”. However, the position of the Economist is not incomprehensible at all – but to understand their articles one must understand some other things first… If I thought that it was a good idea for more money to be lent out than existed in real savings, i.e. all the complex things that are very loosely called “fractional reserve banking”, how would I defend the practice? Actually I do not it is a good idea, I think that all borrowing should be one hundred per cent from income that people have chosen not to consume (real savings), but let us say I did. I would defend the expansion of credit in something like the following way… → Continue reading: What could President Barack Obama do that ‘The Economist’ would consider “irresponsible”? February 28th, 2009 | 27 comments - (Comments are closed)
How to stop this bail-out madness? I think I have an idea that might help. One of the most valuable things that the internet can do is state ideas of the sort that you definitely do want said, but which it would probably not be wise for heads of state or front bench politicians to be saying for definite, for fear of it all getting out of hand. One of the most important memes that the internet has circulated during the last decade has been the extermination option, when it comes to Islam. Extermination of all muslims. Not now, you understand. Just if there continue to be serious muslim-perpetrated terrorist incidents (and especially if there are some much more serious muslim-perpetrated terrorist incidents), and if muslims continue to equivocate about whether they support them, and seriously try to conquer the world with a kind of good-muslim-bad-muslim routine. Which in a lesser way is what they are doing anyway, just not on a scale and with a degree of nastiness that elbows all other problems to one side. But, if you guys crank up the nastiness the way you say you want to and that we deserve, said certain voices on the internet, including certain voices commenting here on postings soon after 9/11 (including my voice), and you’ll get the exact war of Us against You that you are spoiling for, and guess what, we’ll fucking wipe you off the face of the earth. See: Dresden. Don’t make us angry. You really wouldn’t like that. This is not the kind of thing you want Presidents and Prime Ministers to be saying, until such time as things like that actually have to be done. But I sincerely believe that having some people saying things like this, as and when the need arises (therefore including me), is a force for peace and harmony in the world. Seriously. I think the fact that the internet said this stuff to muslims – did a good-infidel-bad-infidel act right back at them – meant that since 9/11 most of the terrorist crap has been strictly amateur. The heavy hitting muslims have confined themselves to propaganda. Good. We can win that one. Certainly we can argue and low-level-fight them to a stand-still. Not everyone on our side believes that, I know, but I do. One of the biggest reasons why major conflicts (and major catastrophes generally) happen is because the participants don’t realise, until it is too late, what they are letting themselves in for. This was one of the major causes of World War 1. They just didn’t realise what horrors they would soon find themselves doing to one another, or (in that case) for how long the horrors would last. Maybe if they’d had the internet in those days, the few people who did realise might have been heard, and that might have caused the contestants to hold back. These apocalyptic recollections have been prompted by the realisation that there is now another extreme meme which the internet now needs to circulate. I refer to the government default option. It needs to be said that under certain circumstances easily now imaginable, many Western citizens would argue, strongly and vocally, that those idiot foreigners who are now lending money to Western governments should in due course be told: sorry sunshine, you ain’t ever going to get it back. Our governments are bankrupt. Why the hell should we and our descendants in perpetuity be paying tribute to you? You knew that the money to pay you back would have to be stolen from us. You assumed we’d just cough up indefinitely. Well, we damn well won’t. You are now a definite part of our problem, and telling you to take a hike is going to be part of our solution. Our thieving class is now “borrowing” money from your thieving class like there is no tomorrow, and we are not responsible for the actions of either gang. A plague on both your houses. We want you foreign thieves to stop lending to our thieves, now. And the best way for us to convince you that you should indeed stop lending, is to tell you that you are extremely liable never to see most of your money back. Which has the added virtue of probably, approximately, being true, already. The usual way such threats are phrased is to talk only, and very vaguely, about how “nobody wants” and “nobody is recommending” the extreme scenario in question. It’s all just too too frightful to think about with any clarity or seriousness. Well, I think that the internet should now aggregate all the voices of those who, like me, think that under certain thoroughly imaginable circumstances the default option would not only be highly likely to go into effect, but also highly desirable. We would support default, argue for default, now. Just circulating this meme in an angry whisper (i.e. in postings in and comments on blogs) will raise the interest rate, a bit, for our thieves, as they frantically mortgage the future tax revenues that they still think they are going to get from us. And that’s good, because it will bring the current craziness to an end that little bit sooner. February 26th, 2009 | 55 comments - (Comments are closed)
Reuters, last month:
Reuters, this month, from Berlin:
Where was Gordon? Apparently he was there. Perhaps he has changed his mind about financial mercantilism in the meantime. February 22nd, 2009 | 4 comments - (Comments are closed)
TARP – Troubled Assets Relief Program – is not an acronym that has yet made its way across the Atlantic in a big way. But it surely won’t be long coming because yesterday it reached me, in the form of an email from Michael Jennings, containing this, which is a pictorial explanation of what it means. Apparently, some of MJ’s Aussie stockbroker mates have been circulating this amongst themselves. A few seconds of googling also got me to a TARP song. Obviously sanity is losing all the policy battles at the moment, big time, but at least sanity is speaking – and singing – out, and may yet win the ideological war. As I said in a comment on a recent Johnathan Pearce posting here, this bodes well for our great grandchildren, if not for our children. February 22nd, 2009 | 10 comments - (Comments are closed)
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