“The folly and immorality of the “stimulus” plan passed today can be attacked on many fronts. For one thing there’s the awe-inspiring irony of a Democrat-dominated Congress and a Democrat president spending taking nearly a trillion dollars from the hardworking middle class people of this country and giving it to corporations and businesses—and precisely as a result of the apparent improprieties in which those same businesses were engaged! Honest liberals who resent corporate welfare must really have a headache at this point.”
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A good friend of mine, the Norwegian journalist Kristine Lowe, reflects on a recent trip to Iceland, which has seen its government collapse amid the credit crunch. Iceland has, of course, benefited from sensible low-tax policies as well as being buoyed by what now appears to be some foolish banking lending policies. I am not sure I would want to live there, mind. The long nights and expensive beer would drive me nuts. January 28th, 2009 | 9 comments - (Comments are closed)
 [E]verything the government is doing now is going to make the situation much, much worse. They’re trying to reflate this bubble. All along I knew that what would potentially be fatal wasn’t the recession itself but the government’s response. But what they’ve already done exceeds even my worst-case imagination. I know it is only January but this is a real contender for ‘Samizdata quote of the year’. January 24th, 2009 | 3 comments - (Comments are closed)
Jonah Goldberg, who writes at the US conservative publication, National Review – and other places – is over in the UK next week talking about his recently-published book, Liberal Fascism. I have not read it but some of the readership might find it interesting. He’s in London at venues like the London School of Economics. Meanwhile, as our own Brian Micklethwait pointed out the other day on his own blog, Kevin Dowd, an economist very much in the free market camp and an authority of monetary economics, is delivering the annual Chris R. Tame memorial lecture of the Libertarian Alliance in March. Kevin Dowd is not just a very nice fellow and a sharp economist, he is also an advocate of free banking and a critic of state monopoly money. He and his colleagues have been doing important research on the topic up in his academic redoubt in Nottingham. I definitely recommend this lecture. It pays to book early. January 23rd, 2009 | 8 comments - (Comments are closed)
Meanwhile, back in Britain, the markets are continuing to fret over the scale of the financial hole the country is in a day after the UK government stepped in and hosed the banks with yet further large amounts of public funds. According to the media pundit and investor, Jim Rogers, sterling is a sell and the country’s economy is headed for further trouble. Even though Rogers’ prediction of a 25-year commodity boom has not quite panned out – oil prices have crashed from $140+ to about $40 now in just four months – he did predict some of that boom and commodity investors who sold out at the right time would have made a killing in some of Rogers’ funds. His take on the economic situation is worth studying. I see no reason to buy sterling on speculative grounds until Mr Brown is removed from office along with his re-heated Keynesian colleagues. Even then, the return to sound money will be hard and unpleasant. It almost makes me wonder if the Tories would want to regain power with such a poisonous inheritance. Thanks to Guido Fawkes for the Rogers quote. Guido has been a bear of sterling for some time. To stay with the lingo of the markets, investors should be shorting Brown stocks, a heavily touted investment based on no underlying merits whatsover. January 20th, 2009 | 19 comments - (Comments are closed)
First financial, then economic, finally political. The smaller countries will be followed by the larger. In one of his op-eds, Ambrose Evans-Pritchard writes an overview of Europe in which he opines that the outer rim: the post-communist states and Club Med are entering a 30s style depression due to the unwillingness of the European Commission or Central Bank to alleviate their woes. Romania, Bulgaria and the Baltic States are now facing a ‘spring of discontent’ as austerity measures result in rioting and instability. Evans-Pritchard has noted that the European institutions are compunding the problem:
The political consequences of the credit crunch are coming to the fore in the fragile periphery of the European Union: how long before we begin to see the political expression of this discontent respond to the monopoly of the European class, a challenge that will arise outside the mainstream from the extremes. January 18th, 2009 | 9 comments - (Comments are closed)
A year from now, when those who saved see the value of those saving buying a great deal less, and those who did not save see the empty shops and find themselves out of a job, will they see the sheer folly of expecting the state to manipulate the economy back to health? Perhaps they will. Classical liberals and libertarians are often accused of being ‘utopian’ because of our reliance of the self correcting mechanism of markets. “That assumes people act rationally!” our critics say. Nothing could be further from the truth. We know people do not act rationally, oh good grief you statists have no idea how profoundly we know that, and that is exactly why we do not trust the state to have so much power over the domestic life of its subjects. Amongst other things, a strong state, far from protecting us from mean old Big Business, actually entrenches Big Business and lets them limit competition. People are not particularly rational, even less so in large groups… and that includes people with great political power. They make mistakes and then repeat those mistakes again and again and again. The true utopians are those who think it is wise to give demonstrably fallible people vast legal backed power over civil society. But hey, if you clever and oh so rational statists do not get the results you expect from the ‘stimulus package’, just strap in and do it again… and again… and again. Have fun. This is indeed the end of an era, just not the one you think. 
What 79% of Americans want apparently. Enjoy. January 18th, 2009 | 25 comments - (Comments are closed)
Gordon thinks that banks have been wicked and they need to confess:
“Tell me how bad it really is,” is at best irrelevant, and, given we have a crisis of confidence, most likely damaging. But the quintessential moralitarian is not concerned about that. Nor about isolationism, merely because it means poverty and depression. The self-criticism of others must not stop, engagement with the global system must not stop, because otherwise there will be no one else left to blame. There is no chance of him confessing his faults. Our Great Helmsman will stand as a colossus of rectitude and the transparency he demands in others is not necessary for him, lest we be blinded by the light. And yet mighty Oz, aware of his own illusion, thinks banking is a magic that will survive removal of the smoke and mirrors (he almost certainly believes in ‘fair’ prices too). The opposite is the truth. The obsession with stripping the mystery in case someone might be making money, has the predictable effect that making money is harder. Compliance and confession will crash the banks, not stabilise them. They are already doing so, as The Economist points out:
This is the modern equivalent of Keynes’s “cross of gold”. We are being wrecked by the rectitude of mark-to-market. But the governmentalist says the problem is not enough sinners have been whipped, and “orders” that they are. January 17th, 2009 | 11 comments - (Comments are closed)
‘Bail-out fears hit banking shares‘ howls the BBC… “We know of no justification for the fall in share price. We are fully aware of our regulatory obligations and we have not said anything,” said a Barclays spokesman in a statement. Hehehe. Could it be that more and more people do not believe the shit that government and the mainstream media keep peddling any more? The ‘bail outs’ are consuming a larger and larger proportion of the world’s ailing economies, with no end of ‘bailing’ in sight. Frankly why not bail out the porn industry? Why not ‘bail out’ every damn industry! Just print more money! The system is devouring itself and no amount of manipulation can change that… because manipulation is why the system is collapsing. When the correcting mechanisms of markets are not permitted to work, it is like never allowing forest fires to clear out dead wood. In the end all you do it store up problems for later. Guess what? Later is now. Let it burn. January 16th, 2009 | 9 comments - (Comments are closed)
One of the reasons why people get so cross about the cost of petrol is the knowledge that a high proportion of the price paid at the pumps is accounted for by tax, rather than the cost of extracting, refining and distributing the stuff. The same goes for a pack of cigarettes, pint of beer or a bottle of wine, to name a few. With a lot of grocery produce, such as your humble carrot, most people may not appreciate – yet – how much of the cost of getting those vital vitamins is accounted for by government-created production costs. Well, there have been a flurry of stories on the wires about a recent EU Parliamentary vote to ban dozens of pesticides that are deemed harmful. As a result, farming groups claim, output of crops will fall and presumably, if other things remain equal, prices will go up at a time when household budgets are under strain. It does not seem to have occured to policymakers that a simple option would be to put what chemicals are used to treat crops on a packet so that consumers can figure this out for themselves and take an informed decision. The trouble with stories like this is that the votes to ban X or Y at the EU level rarely gain a lot of coverage for more than a day or so, and then the issue tends to fizzle out, of interest only to obsessives and geeks like yours truly. A busy populace, worried more about their jobs, mortgage or children, will hardly dwell on the issue. But when Mr and Mrs Briton wonder why on earth it costs so much to buy basic groceries, the temptation will be to imagine that it is the fault of big, evil supermarket chains, for example. Rarely will the cause of the cost be seen as stemming from bureaucrats and European MPs. Of course, it may well be that the chemicals being banned are as harmful as is claimed, although given the way these things work, I doubt it. We are told that for a healthy diet, your average person requires several servings of fruit and veg a day; such things are considered good for warding off cancer. Even if there is a health risk from chemicals, the health risk of not eating enough vegetables because of high costs is even higher. These things involve a trade-off between one set of risks and another, rather than some imperfect and perfect state. If such chemicals are banned, resorting to grow-your-own is hardly a viable alternative, since modern farming can, through economies of scale, achieve better yields and lower costs-per-output than someone tending their vegetable patch. And importing fruit and veg from countries such as Spain via air transport, for example, is also becoming less attractive an option due to increased fuel prices and governments’ taxes on air travel. Once again, the Forgotten Man gets the shaft. This chemicals ban, like measures such as “employment rights”, paternity leave or 35-hour weeks, impose costs on the populace without a government having to take the potentially visible and unpopular step of raising taxes. Joining the economic dots is hard. I just hope that some in the MSM try and do so occasionally so that the message gets through. We bloggers cannot do it all on our own. Update: in the comments, one person argues that I have contradicted myself by pointing to public apathy or lack of time to scrutinise EU actions, on the one hand, and my stress on the ability of consumers to read packaging labels, on the other. There is no contradiction, though. People shop daily, weekly, monthly, etc. They constantly come up against labels, look at packaging, see advertisements, surf the Net looking at products, and so on. One of the great things about markets is that it is a constant provider of information. Not always accurate, of course. By contrast, once an EU directive has been imposed, that is usually the last that any ordinary member of the public will hear about it. As soon as a law is passed, the media and political wagon rolls on. January 14th, 2009 | 34 comments - (Comments are closed)
This gloomy Bloomberg article, talking of capitalism’s global “winter of discontent”, argues that the current troubles are the first globalized crisis for free enterprise. Well, when an article makes an error in the first paragraph it does rather dim one’s enthusiasm for reading on. Arguably, we have had cross-border crises in markets dozens of times: the recession of 1870s, the Great Crash of the 1930s, the 1970s oil-shocks and stagflations in the US and UK, the early recession of the 1990s in countries as different as far apart as Japan, UK, Germany and US, etc. Maybe the sheer extent of the malaise now is what has struck the Bloomberg writer, but truth be told I think this is a matter of degree. According to this excellent book, markets were in fact more globalised 100 years ago than they are now. To use one of my least favourite words, there is now a constant “narrative” as to how the recent turmoil somehow proves that unregulated capitalism has failed and too closely interlinked. Quite how anyone can, with a straight face, argue that financial markets have been unregulated in recent years is a joke. Here are some of the regulations financiers have been dealing with, often with counter-productive results:
I am scratching the surface and I am sure readers can come up with more rules and regulations. Every time any of you good readers hears this canard about “unregulated capitalism”, call them out gently for this and ask them in what field, apart perhaps from security or medicine, are activities more heavily regulated than finance? Update: oh, I should have mentioned the US federal housing agencies such as Freddie Mac, and their contribution to creating a massive moral hazard problem in the house lending market. January 13th, 2009 | 31 comments - (Comments are closed)
Fraser Nelson over at Coffee House picks up on a point that has been obvious to yours truly for a while as well: the dystopian novel, Atlas Shrugged, by Ayn Rand, nicely charts the sort of demented statist economics that we are seeing back in fashion now. Rand’s novel is more than 50 years’ old and it focuses on the railroad industry, but its themes apply just as well to the world of modern banking or the internet. Even if you decide to skip the enormous John Galt speech at the end of the 1950s novel, reading this book will help clarify a lot of the issues now swirling around. I can think of a few people in public life today who would qualify as the villains. Who, however, are the heroes? Where are the Dagny Taggarts, Hank Reardens or Francisco D’Anconas of today? There are mutterings about the book being made into a movie, starring the likes of Angelina Jolie (who is actually a lot smarter than some of her Hollywood peers), but I am not sure what the situation is with that. Hmm, let me speculate on the glory of an anti-statist movie winning an Oscar. As a side observation, I cannot help but notice that ever since the UK government nationalised banks such as Royal Bank of Scotland, which owns Coutts, the private bank, there have been worries that wealthy clients of Coutts must be a bit nervous about having their finances run by folk beholden to the state. Indeed, as Instapundit’s Glenn Reynolds might say. Those banks which have by luck or deliberate choice avoided state bailouts will benefit. January 9th, 2009 | 26 comments - (Comments are closed)
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