We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
|
I am glad to see that the current moral panic about Britons sliding into a Hogarthian nightmare of drunken idiocy has not put off these guys from selling sparkling wine – or champagne, maybe – for £5 a bottle. I am not sure whether it is going to taste as good as Krug, mind. And of course, with many so-called luxury goods, the business model gets ruined if the prices are cut so massively that the exclusivity is lost, and hence the cachet of buying X or Y in the first place. Would Ferraris, for example, be quite the same if they were as cheap as Fords?
Even so, fair play to the businesses that bring us cheap goods. Globalisation – terrible, isn’t it?
There could be an interesting storm brewing when you see things like this…
Gold has raced to a 16-month high of $700 an ounce as investors seek to shelter their cash after stock markets ended the week sharply lower. The yellow metal has clawed back around $30 this week, raising hopes it could revisit last year’s highs of around $730 an ounce. Although gold is traditionally strong at this time of year, the rout in credit markets is fuelling further appetite for the safest investments.
and this…
A sharp drop in foreign holdings of US Treasury bonds over the last five weeks has raised concerns that China is quietly withdrawing its funds from the United States, leaving the dollar increasingly vulnerable.
I am trying to join the dots but instead of a bull or a bear, the outline looks a bit like a hippopotamus. Not sure what to make of that.
Tim Worstall has a bit of fun with poor old George Monbiot, who frets about the origins of all that terribly nasty “neo-liberal” (ie, classical liberal) thinking that dared to suggest an alternative to Man’s future in a great socialist project.
Well, I have been to a few events hosted by think tanks like the Institute of Economic Affairs, have been a member of the Libertarian Alliance for 22 years (!) and have been even known to correspond with likeminded people in foreign countries. The sheer horror of it, Georgie!
Seriously, articles such as Monbiot’s suggest to me that the “neo-liberals” have been winning at least some debates, or at least getting under the collars of collectivists of various types. That has to be a good thing.
For a grown-up analysis of the revival of classical liberal ideas in the West, Brian Doherty’s book is a great read. It mainly focuses on the US, however.
Let’s see if we can spot the flaky reasoning in this letter to The Times (of London), as prompted by a good(ish) article by Daniel Finkelstein today:
Writing as a parent and as one who stands to inherit a large sum, a far better way to reduce inter-generational inequality would be to set inheritance tax at 100% over a comparatively high threshold (e.g. £500K). Then the older generation would have a strong incentive to sell their large, expensive homes – increasing supply and making property more affordable for the young – and spend the money, boosting the economy, employment and wages. It would also have the benefit of forcing the children of the rich to make their own way in the world – they have enough advantages in life anyway.
First, the writer assumes as a matter of course that “inter-generational inequality” – however defined – is of itself a bad thing, a thing to be prevented by limits on any wealth bequeathed above a certain level. For this writer, he/she assumes that no person should have, in this case, an amount higher than say, £500,000. But why on earth should the state rule that people should be banned from receiving, as a gift, more than whatever some egalitarian thinks is the “right” amount? So the inheritor may not “deserve” it in some sense but so what? If a person does not deserve to inherit £1m, neither do his fellow citizens deserve to have that wealth evenly divided up among themselves, either. I think it was FA Hayek who pointed out that in talking of deserve, we talk of deserve in the eyes of someone else, like a father, boss or God who decides that Johnathan Pearce or AN Other “deserve” to receive X or Y out of the multitudes. But dumb luck in inheriting money or good looks or a high IQ is just that: luck. Luck is neither undeserved or deserved. Through aeons of time, we have evolved into human beings with things like opposable thumbs and relatively large brains. We did not “deserve” those, either, so does this mean we should hold ourselves back to benefit our less fortunate creatures?
→ Continue reading: The fallacies behind inheritance tax
As a counterweight to the doomongers out there, this is a spendid talk on global economic and population trends that one hopes reaches a wide audience. Something pleasant for a Sunday. The video runs for about 20 minutes or so, if my memory serves. It is always refreshing to come across an academic who is not only thought-provoking but also very funny.
Ruth Lea (thanks to Perry for pointing this out to me) has what is a pretty good analysis of the upcoming regulatory juggernaut to hit the City out of Brussels. I won’t expand much further other than to say that without the City, the UK economy would be a shadow of what it is now. Of course, in the short run, the UK government has been content to let financiers make their big bucks because it pulls in so much taxable revenue. More fundamentally, however, London’s position as a great finance capital on the planet is not secure; while regulations like Sarbanes-Oxley have driven some US businesses to the UK, Brussels-generated laws could hamper the UK and drive that business outside the EU, although natural inertia and the benefits of London’s accumulated legal and financial expertise are strong assets. Never forget the Swiss. The weather is okay, the trains work, the Swiss mountains are great for skiing in the winter and although I am happily married, I have always rather admired their women. If you are a 30-something banker with no ties, London is not necessarily superior.
Of course, if the Scottish nationalists were not such lefties, they’d be playing the Adam Smith card and campaign to turn Edinburgh into a sort of tartan low-tax paradise, and take a leaf out of the Irish book on how to revive an economy (no, the Irish economy is not all about EU grants, in case anyone brings that one up).
Well, the Fed has cut the cost of borrowing to avert what many see as a financial crisis. There are several ways to view this move, I guess. One view, as expressed here, is that central banks created the current asset price bubble and appetite for dubious credit products like collateralised debt obligations – bundles of bonds and loans – by cheap interest rates. Central banks caused this state of affairs, so they should let hedge funds and other institutions go bankrupt as part of the natural, if painful Darwinian process of the market. It sounds harsh, but a few casualties, while not much fun for the immediate investors, are a useful warning about how investments can go awry.
On the other hand, the fall in stock market prices since late July has been so fast that it threatens to cause a wider, systemic economic problem, and the rate cut was justified.
I take the former view, by and large. The underlying state of the UK economy, for example, is reasonable, if not great (thanks to the taxes and regulations of our current prime minister, Gordon Brown). But corporate earnings have been strong, consumer spending is okay – it has weakened a bit but hardly fallen off a cliff – and the cost of equities, when set against expected corporate earnings, are pretty cheap by long term standards. (The FTSE 100 index is priced on a multiple of about 12 times earnings, the cheapest since the early 1990s). The Fed, by cutting rates in this way, is more or less saying that stock market bears cannot make money, that the only way to bet is for stocks to rise. This ultimately creates a serious moral hazard by encouraging risky borrowing and lending behaviour.
I think we’ll regret what the Fed did today. Whoever said August was dull?
A report in the Times (of London) states that one of the UK’s leading charities, Voluntary Services Overseas (VSO), has told gap-year students (students taking a period of time off between school and university or whatever) not to take part in costly and often useless aid projects.
Indeed. Far better to encourage students not to take a gap year off at all, but to work hard, get a job, and then use all their energy and idealism to campaign to scrap all tariff barriers, trade “pacts” and other distortions of the world trade system.
As a subject for reading, this I highly recommend. I wonder if any university dons care to put it on their students’ reading lists?
When people start blaming Big Evil Capitalists for the latest SNAFU in the global capital markets – the collapse of many debt products linked to what are called sub-prime mortgages in the US – remember that the problem stems in part from how lenders have been positively encouraged by some states to lend money to risky borrowers and people with a history of debt defaults and late payments (thanks to Glenn Reynolds for the link).
Of course, ultra-low interest rates in many nations, such as Japan, have also fuelled a vast rise in the levels of global monetary growth, which in the near-term encouraged people to invest in any asset class offering a decent return regardless of risk of assets held, like bundles of sub-prime mortgages repackaged into exotica called collateralised debt obligations (please do not ask me to define these, it is too early in the morning and I have only had one coffee). Low interest rates have cut the price that investors typically demand for shouldering risk; now that rates have risen to curb inflation, the price for that risk has gone up.
Milton Friedman and Robert Heinlein may be dead, but the truths they espoused are very much alive. As they said, there is not, and never has been, such thing as a free lunch.
Maybe I should point out this story to my lovely Japanese sister-in-law. I wonder how many ordinary British people, never mind women, do things like this to make money?
Rod Liddle in this week’s Spectator has a fiery article about the English floods (the Scots have not been flooded, but their turn may come). It starts off in poetic fashion. When Rod is good, he’s very good:
England’s habitually well-mannered and inoffensive chalk streams have been uncharacteristically full of themselves this last week or so — as you may have gathered from your television evening news programmes or, if you’re unlucky, your kitchen.
The Pang in West Berkshire, for example, rarely bothers anybody. Scarcely 15 miles in length, its job is simply to adorn the Thames in agreeable manner, as if purchased from a sort of riparian Accessorize. Not this week, though. It has puffed its chest out and pretended to be one of those hectic, rough, uncouth northern rivers — the Tees, say — all swirling brown water and ill-concealed anger. It is possibly in your front room right now, making itself at home. The same is true of those other gently bourgeois downland streams; the Windrush, bored of the Cotswolds, engulfing the village of Standlake. The Ock pelting down from the White Horse hills, spilling its load hither and thither, the Lambourn doing its best to drown all those expensive horses. What has got into them all of a sudden? Not just rain, surely?
Liddle then goes on to argue that the floods are not really caused by global climate change – we have had lousy wet summers before – but by a different change: mass housebuilding. He argues that as more homes and roads are built, rainfall has fewer places to soak into the ground and runs off quickly, creating “flash-floods”. As more houses are built, so the argument goes, the flash-flood problem will get worse. Solution: build fewer homes, or at least build them in places where the drainage has been sorted out. This makes a degree of sense.
The problem I have with this article, however, is that Liddle misses obvious points and then goes on to ride his hobby horse, anti-immigration, in a rather trite way. Here’s one paragraph:
Three fairly calamitous floods in the last seven years, for example (2007, 2004 and 2000), the latest seriously affecting a vast swath of the population, something like five million people in all. And the cost is already estimated at more than £3 billion. Meanwhile insurance premiums are likely to rise between 15 and 20 per cent as a result, according to the Association of British Insurers.
I suspect the total insurance bill could be even higher. If insurance premiums do rise, then if housebuilding did operate in a genuine free market – it does not, unfortunately – then those higher premiums would incentivise housebuilders and would-be occupiers to build them in places at low risk of flooding. That is why I fervently hope that the government does not try to limit increases in insurance costs, but on the contrary, lets them rise sharply to remind people of the costs of living in a flood plain. If the government tries to artificially subsidise people by capping insurance costs – as I believe happened in the Mississippi Delta in the US – it creates a moral hazard problem.
However, Liddle does not make this point. Instead of using insurance premiums as a market method of constraining construction on flood plains, he wants to limit housebuilding by direct state action, and goes on to argue that Britain does not need new homes anyway, since our indigenous population is quite stable. No, it is all those smelly foreigners and welfare-sponging migrant workers:
Nobody has factored in the cost that accepting migrant labour — a workforce characterised by low skills, low aspirations and of a necessarily temporary nature — will incur. But we might hazard a pretty good guess. A higher crime rate occasioned by the entirely understandable sense of injustice experienced by a poorly paid immigrant labour force; a concomitant constant drain on our health and education and social services, resulting in higher and higher council tax. And the provision of cheap, ugly housing which, remarkably, manages to square the circle of increasing the likelihood of both flooding and chronic drought. More cars, roads, shopping malls, petrol stations, leisure centres. Whole cities of pale faux-brick starter homes, the rainwater deprived of an opportunity to sink down into the earth.
Migrant workers may not be rocket scientists, but it is surely a sweeping statement to say that they have low skills and have low aspirations. If a person gets off his behind to travel thousands of miles to get work and live elsewhere, that strikes me as pretty aspirational, actually. If the problem is that a lot of these people are low-paid, it is because the marginal price of the work they perform is quite low. Of course the solution to such a problem of supposedly pointless migrant labour – at least as Liddle sees it – is not to stop migrant labour, but to ensure that no welfare and other tax-funded benefits will be paid to such migrants for a period of say, at least 5 years. Immigration and welfare states do not mix: if you want one, you cannot have the other without creating a genuine sense of injustice among the existing taxpayer population. But to argue that housing shortages will no longer be a problem if we close immigration off is wrong. The days when people lived as one family, of several generations, under one roof, has gone: grannie has her flat, young singles do not want to live with their folks into their 30s, and divorce and other facts have increased the number of people living on their own. Even had the domestic population been static since WW2, we would have had an increase in the demand for homes, not to mention for things like second homes as incomes grow.
No, if the problem of the floods is that it is caused by building on flood plains, bad drainage and so forth, the problem is government. The government refuses planning permission in areas where the drainage might be good, such as the “green belt” land surrounding London, yet it encourages building in areas already at risk. It should let the market force of insurance premium increases do its job in encouraging building in places of low risk and deter it where risks are high. Bashing immigrants and imagining we can keep the UK population stable is not, frankly, sensible economics. It is about as intelligent as King Canute ordering the tide to flow out from the beach.
The UK floods are still wreaking havoc. I have friends who live in the Thames Valley area and they are out of danger, but many other people are not so fortunate. Besides the damage to homes, another problem will be the damage to crops. In my native East Anglia, the wheat harvest – the area is a sort of mini-version of the North American plains – is likely to be poor. Horticulture, in areas like Lincolnshire and Cambridgeshire on the Fens, has been hammered, although thanks to modern greenhouses and the like, not everything has been lost. We can expect prices of groceries, or at least some items, to go up, at least in the short run.
That got me wondering about our food supplies. As I mentioned in a previous post, the terrible summer of 1845 led to the Irish famine. In centuries past, bad weather was not just destructive in some ways but it also meant people starved in their millions. That is unlikely to happen now. And one reason for that is that we are no longer reliant on home-grown food. Food production is not only much greater because of modern techniques, drainage, use of fertilisers and machinery, but also because the 60m souls on this sodden island have access to a global market for food. Free trade can be a risk – this nation’s food supply routes need to be protected by naval forces, as we found out during the German U-boat menace – but in normal circumstances, having a diverse range of non-UK supplies for food makes great sense, particularly as climatic conditions change, as some argue.
The next time you watch a programme or read an article going on about the wonders of self-sufficiency and which bash supermarkets and global trade in foodstuffs, ponder what would happen if we really were reliant on the local farmers for everything we eat.
|
Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
|
