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“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)
 My favourite commentary on all the financial mayhem of the last few days and hours is this, from Scrappleface:
I’ll skip the next paragraph, if only so that I can say read the whole thing without having already stolen the whole thing, but the final paragraph demands inclusion:
One of the reasons I like this is because it makes me laugh, while at the same time allowing me still to be Thinking About It All, rather than just escaping into pure escapism. One thing I do strongly believe (“know” would be putting it too strongly) that is relevant to all this mess is that the Great Depression was not caused by the Wall Street Crash, but by the mistaken things done before and after – especially after – the Wall Street Crash. To say that the Crash caused the Depression is that old folly of blaming the messenger for the message. It is now clear to us all, to those to whom it was not clear at the time, that the mistakes made during the previous few years have done a lot of damage. But I fear that the mistakes being made right now will prove even more costly. And if I had to decide about all this, right now, knowing only what I know now, I’d say: let the market now do its job. The economy has been fatally mixed in recent years. Unmix it. If you have just lost your shirt, the taxpayer won’t buy back so much as a button for you. Yes, cruel, and I certainly wouldn’t say that every shirtloser has been stupid, as Scrappleface’s Presdent Bush does. And such cruelty is certainly not how you win elections. But far more cruel would be (will be?) changing the rules of the entire game for the worse. Update: Von Mises Institute Bailout Reader. September 27th, 2008 | 6 comments - (Comments are closed)
This Sunday Essay at Coffee House, entitled How cutting corporate tax rates raises revenue, written by Matthew Sinclair of the Taxpayers’ Alliance is a reminder that however well libertarianism, free marketism, classical liberalism, whatever, may be doing – in the sense of increasing the number of individual libertarians, free marketeers, classical liberals, whateverists – public opinion about taxation, out there beyond the battles of the mere ideologists, seems to remain stubbornly unaltered. Taxes should be as high as we can afford, but no higher than we can afford. That’s what public opinion still seems to believe, and people like Matthew Sinclair cannot afford to challenge this opinion. The Taxpayers’ Alliance is, you could say, built on not challenging it. It is an alliance between those who want taxes cut, and cut, and cut, until they scarcely exist, and those who believe that, just for now, taxes are too high, and that public spending should be done better, so that public spending can be boosted rather than the very idea of it discredited. Sinclair justifies lower tax rates, at any rate in this piece, entirely by pointing out that lower corporate tax rates will yield higher tax revenues. As they will. But could the same not be said for other taxes? By talking about lowering corporate taxes, Sinclair confirms the prejudice that tax cuts are only for a certain sort of person and a certain sort of institution. The libertarian political nearly-nirvana – a world in which politicians agree that taxes must be cut and cut and cut (see above) to the point where tax revenue, having done its predictable surge upwards, then starts instead to surge downwards again – but quarrel about exactly whose taxes should be cut first, and exactly whose benefits should be cut first and exactly which tyrannical bureaucracy should be shut first and exactly which costly laws and regulations should be repealed first, even as total tax revenue continues to go down, seems as far away as ever. I still want to believe that under the radar – under the Laffer Curve, you might say – the change I really want may actually be happening. I want to believe, and I do actually think it makes some sense to believe, that the majority that favours high (as I would call it) taxes and high spending (just not too high) may be diminishing, and that the minority that wants taxes and spending both to be cut radically may be increasing. I also believe that the Taxpayers’ Alliance is doing more good than harm on this front. But Sinclair’s piece tells me little about that, one way or the other. The Chief Executive of the Taxpayers’ Alliance, Matthew Elliott, is giving the after dinner speech on the Saturday of the Libertarian Alliance’s annual conference in October. He speech will be entitled “Reasons to be Optimistic: Why we are winning the battle for lower taxes”. Lower rather than low is the point there, I think. September 22nd, 2008 | 100 comments - (Comments are closed)
Lower Marsh, just beyond Waterloo Station from me, is one of my favourite London streets. It has carts loaded up with goodies from vans, and amongst these goodies are classical CDs sold by a bloke called Neil. A few yards due west from where Neil plies his trade, there is Gramex, a regular shop, which also sells an abundance of classical CDs. These CDs cost far less than downloads from the internet, and unlike downloads they are things, which I prefer. When you drop a Wagner opera on CD on your foot, it hurts. That’s what I call real value. Anyway, yesterday, in the autumn sunshine (finally!) I came across this, which surely says something profound about the current state of the financial markets, although I am not sure quite what:  There was another one next to it, the same only black. These pigs are quite big and very solid, made of cast iron I suspect. Don’t drop one of them on your foot. They were going yesterday for a tenner each. Hurry while stocks last. More banking and piggy banking photos by me here, and further market speculations here. The smiling china pigs are currently on show in the window of a fancy goods (I think they call such places) shop in Strutton Ground, another market street in my part of London, just off Victoria Street. For some further commentary on what things cost these days, try this very Dail Mail piece by Robert Hughes. Hughes ought to realise that ‘artists’ these days are like small and badly behaved children. The more you complain, the happier they are, because what they crave most is attention. September 20th, 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)
Peter Tatchell, selling Green policy under the guise of giving advice to the PM, has a number of suggestions. One of them fully restores the Green Party’s reputation for plain weirdness:
That top limit of £25,000 implies he’s leaving personal allowances where they are for people earning over £25,000, so that they drop by £1,000, twice. Lots of people, including me, have suggested reshaping the tax system by raising allowances. But no-one I think has before suggested that it would be a vote-winner openly to treat very large numbers of people to marginal rates over 100% by clawing back an extra £200 when they cross an arbitrary threshold. Twice. At close to the median earnings level so the maximum numbers notice. In fact, it was a disaster for Gordon Brown when he did it as a concealed one-time-only adjustment. Possibly it was the disaster for Gordon Brown, where he finally came unstuck. It’s probably not something he wants to try again once, Peter. Let alone twice. September 19th, 2008 | One comment - (Comments are closed)
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. September 15th, 2008 | 23 comments - (Comments are closed)
Here is a comment at Coffee House on this posting:
This is from “alan” and is comment number nine, at 8.09am. As a political prophecy I think it is barking moonbattery. But as a description of economic reality, does what alan says, suicide note capitals and all (“SUCH a policy”), perhaps have merit? I have long believed that leaving the EU would be good for Britain’s economy, quite aside from such incidentals as the rule of law rather versus rule by the mere say-so of rulers, and in due course getting dragged into whatever European civil wars accompany the eventual break-up of the EU. But I have tended to assume that leaving the EU in the nearer future would inevitably involve a period of economic bad news, during which the associated dislocations – and the EU’s enraged punishments – would be immediate, but during which the clear eventual benefits to Britain’s economy would be somewhat slower to materialise. However, would leaving the EU be a short-term fix for Britain’s present economic woes? Would it have the immediate benefits that alan claims for it? If so, that would be a meme worth getting behind. UPDATE: Some interesting EUro-commentary from Guido. September 12th, 2008 | 30 comments - (Comments are closed)
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. September 10th, 2008 | 17 comments - (Comments are closed)
Although of course it is a joke, see the posting immediately below. As Jonathan has already noted, Guido Fawkes has had a lot of fun over the last few months noting that every time Gordon Brown comes out in support of anything, it immediately tanks. Andy Murray was Mr Brown’s latest victim, apparently. So when I read on the Coffee House blog this morning that Gordon Brown now supports Barack Obama, I knew that Guido would be crowing with laughter, if not now then very soon, and sure enough, he is. Obama, says a delighted Guido, is now officially doomed. Luckily, before posting this, I also checked out Samizdata to see if anyone else here was having a laugh about this, and of course, they are. Apologies if you think I am duplicating here, but behind the hilarity of all this is to be observed an interesting re-arrangement of the political conventions, which is why I still put this thought up as a separate posting. More and more mere people, especially political people, like the ones who read Samizdata for example, have their particular preferences not just in their own countries and constituencies and districts and states and towns, but in ‘foreign’ parts also. The logic of the internet – even of instant electronic communication itself, which got started getting on for two hundred years ago – has always, to me, suggested global political affiliations, and in due course, global political parties. Certainly the Communist movement thought so. Maybe language remains a big barrier, but geography now matters less and less. Remember that counter-productive attempt by the Guardian to swing the last (was it?) Presidential election against Bush? Many concluded that this proved the wisdom of political people staying out of foreign elections. To me it merely proved that if you want to help this or that side in foreign parts, make sure that you really are helping. Because attempts to help like this are absolutely not going to stop. As the very existence of Samizdata now nicely illustrates, this is all now one big Anglospherical conversation. Obama’s idiotic campaign trip to Germany was, you might say, a self-inflicted version of that same Guardian blunder. But nor does that folly prove, to me, that campaigners should never go abroad and seek foreign support when campaigning, merely that they should choose their foreign supporters with more care than Obama did. Having the right sort of foreigners waving and cheering next to him can do a politician all kinds of good, now that the pictures can be flashed around the world in seconds. Under pressure from the McCain camp, the Brown regime is conducting another of its hasty and shambolic retreats. All sorts of stuff gets read out by Mr Brown, or appears under his name in printed articles. But you don’t suppose that he actually reads it all beforehand, do you? Mr Brown’s people are now assuring us that it was one of them who inadvertently revealed this sentiment, rather than Mr Brown himself who actually said it. All Mr Brown did was allow his name to be attached to the bottom of a newspaper article. So once again, there is this pattern, of the political leader trying, but failing, to observe the old and obsolete conventions, against his natural instincts, but his mere people not being so inhibited about saying what they think. Sooner or later the world’s leaders will all follow their mere supporters, and stop pretending to be neutral in foreign elections. Their line should be, because this will be the truth: of course I’ll work with whoever wins, I’m a politician. But meanwhile, yes, I do most definitely have my preferences. The particular awfulness and embarrassingness of Mr Brown’s particular expression of a preference in the US Presidential election should not detract from the more general interestingness of this little event. Inevitably, most of the commentary will be about how the Obama campaign may now have peaked (the comments on Jonathan’s previous posting are already saying yes it has), and about how the Brown regime is unravelling, definitely, again, some more. But I find the more general global political party angle at least as interesting. After all, this is not now only Brown preferring Obama, which we all know he does despite any denials (does anybody at all in what is left of the Labour Party not prefer Obama to McCain?). This is also now the McCain team opposing Brown, and not caring who knows it. And by extension, and whatever Mr McCain may personally feel or even know about the man, helping David Cameron. After all, the heading at Coffee House says: “The McCain campaign mocks Gordon Brown”. So now Mr McCain is doing it too, whatever denials he may subsequently issue. September 10th, 2008 | 12 comments - (Comments are closed)
More important, would a U.S. government default indeed be “the end of the world”? …..One could plausibly argue just the opposite. In fact, a firm refusal to bail out the mortgage agencies would establish a strong barrier between U.S. Treasuries and the fortunes of not only the mortgage agencies themselves but also the myriad other institutions that we can imagine receiving similar treatment. Wouldn’t that in fact help maintain confidence in U.S. government securities? Similar arguments, of course, apply to state bailouts of other institutions, such as UK mortgage lender Northern Rock, for instance. Thanks to Reason’s Hit & Run blog for the pointer. September 9th, 2008 | 4 comments - (Comments are closed)
London mayor Boris Johnson chides the United Nations for urging the planet to go vegetarian as a way to conserve resources. Instead, says Mr Johnson, the UN should, as it used to do, focus on the problem of “over-population”. I have written quite a lot about how fears about a population “explosion” have often proved wide of the mark. Suffice to say that in western Europe, for example, birthrates have been falling; the problem if anything is the reverse. Of course, as a father of four children, Mr Johnson does not think that concerns about too many people should be a reason for making changes to his own personal sexual behaviour. No siree (as he would no doubt put it), that’s for other people, old bean. Meanwhile, here is an old and wonderfully acerbic review of a book touting Malthusianism by Ronald Bailey. September 9th, 2008 | 17 comments - (Comments are closed)
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