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]

Inflation: what happened last time

A lot of people in the media are calling it the “cost of living crisis” but us lot who were around in the 1970s know it as “inflation”. Back then – if the government’s figures are/were to be believed – it peaked at 25%. The 1970s were a pretty horrible decade all round. As well as inflation, there were constant strikes, bankrupt nationalised industries and a general air of doom. A Samizdata contributor, growing up in France even had an economics text book with a chapter entitled, “Britain: headed for the Third World?”

Since the mid-1980s inflation has been much lower. It’s been present but until now it has been far less of a day-to-day problem. So, what happened? The Thatcher government put up interest rates. For reasons that I may have once understood, but no longer do, this reduced inflation. But it came at a price. Huge numbers of businesses went bust or reduced their workforces. Unemployment skyrocketed. By the mid-1980s growth had returned but many previously industrialised areas did not recover and still haven’t. I doubt they ever will.

Are there lessons in this? Harbingers more like. Interest rates have been very low for a very long time. Homeowners – as opposed to businesses last time round – have borrowed a lot. If you are on an average income and want to own your own house and bring up a family that is what you have to do. Should interest rates go up, millions will find they cannot pay their mortgages. A cynic might argue that at least in the 1980s, the pain was borne by people who weren’t going to vote Conservative anyway. This time, that’s not so clear.

Update 16/4/22. I see from the comments that a lot of people in the US have fixed rate mortgages. Very sensible. I wonder if that is the case here in the UK? Also, how easy is for banks to call a loan in?

It occurs to me that lots of people with fixed-rate mortgages might not be all that good a get-out-of-jail-free card. If interest rates do go up that would severely depress house prices. Sure, homeowners would still be able to pay off their mortgages but their properties would be worth a lot less.

Homeowners of course are not the only borrowers. A few years ago – when I was into this sort of thing – I came across a couple of reasonably-large, barely-profitable companies with large amounts of debt that periodically needed to be refinanced. If interest rates go up they would be in a lot of trouble. I wonder how prevalent this is?

Saying it like it is

Samizdata quote of the day

“As long as life sustenance remains the ultimate goal of individuals, they are likely to assign a higher valuation to present goods versus the future goods and no central bank interest rate manipulation is likely to change this. Any attempt by central bank policy makers to overrule this fact is going to undermine the process of wealth formation and lower individual’s living standards. It is not going to help economic growth if the central bank artificially lowers interest rates whilst individuals did not allocate an adequate amount of savings to support the expansion of capital goods investments. It is not possible to replace savings with more money and the artificial lowering of the interest rate. It is not possible to generate something out of nothing. Likewise, by raising interest rates the central bank cannot undo the damage from the previous easy interest rate stance.”

Dr Frank Shostak, writing at the Cobden Centre website. (Thanks to Paul Marks for the pointer.)

What new depravity is this?

“UK supermarkets accused of ‘bombarding’ shoppers with cheap meat”, whispers the Guardian’s Denis Campbell in shock:

Britain’s biggest supermarkets stand accused of “bombarding” shoppers with offers of cheap meat, despite pledging to promote more meat-free diets to improve health and tackle global heating.

They are using money-saving promotions, such as two for the price of one, as a way of “pushing” meat, at odds with moves in the UK and globally for consumers to eat less of it, research found.

Tesco, Sainsbury’s, Asda and Morrisons are each offering scores of deals every week on meat products such as burgers and sausages to drive sales and boost their profits, according to a report from the

Marketing directors of Tesco, Sainsbury’s, Asda and Morrisons? Apparently not. This disturbing news comes from the…

charity Eating Better. It is an umbrella group representing more than 60 organisations including WWF UK, Greenpeace, public health bodies, dietitians, the RSPCA and food charities.

Net Zero is “in Nigel Farage’s sights”

I have considerable respect for the Guardian‘s John Harris. Though a Remainer himself, he was one of the first left-wing journalists to see that the campaign to leave the European Union had popular support, particularly among the working class, and the reason he could see that while others could not was because he and his colleague John Domokos did what others did not and put in the legwork to report from “Anywhere But Westminster”.

But respect does not mean agreement. Mr Harris writes that “Nigel Farage’s hard-right faction won Brexit. Now net zero is in its sights” like that’s a bad thing.

Mafia Economics

This description of Russia’s economy grows into an interesting analysis of how power and economic reality interact.

Some bits may strike you as not so very unlike Biden’s US.

Of course, it was all investigated. Of course, dishonest CEO of Russian factory was arrested. Fortunately, they found out that the governor was innocent & didn’t know about CEO’s shady schemes. … Fortunately her patriotism and hard work were well-noticed by Putin and he promoted her. Now she’s an Auditor of the Accounts Chamber of the Russian Federation. She’ll be checking the transparency of other branches of government and make sure they use government funds efficiently.

Other parts, however, give examples of how economic activity in places like Russia and Mexico is determined by things that we in the anglosphere are not too familiar with (yet!).

Russians are good in sciences and very good in math. … How come Russia can’t produce anything competitive on the world market? Apparently it’s not a technical skill that is a limiting factor.

Having asked the question, he goes on to provide answers.

Samizdata quote of the day

The West’s Green delusions empowered Putin. While we banned plastic straws, Russia drilled and doubled nuclear energy production.

Michael Shellenberger

Turkey – circling the drain with a gold grab

Little noticed in the UK media, reports from a financial vlogger Joe Blogs (that is his handle) on Turkey tells us that the government is ‘asking’ citizens to hand over their gold and foreign currency, at a time of 50% inflation, but citizens will get Lira in return.  There are 30,000 gold shops in Turkey and five major refineries. Do not worry that Erdogan is a (not so) covert Islamist, he is first and foremost a Keynesian.

The Turkish government is not simply standing by and watching as the Lira inflates away, the government has cut tax on food from 8% to 1%, and this in the context of a currency crisis, the lira falling 44% in 2021 against foreign currencies. So they know that cutting taxes eases burdens on people. Unfortunately, Atatürk’s doctrine of ‘statism‘ lingers, with lots of Turks employed by the State.

Meanwhile, the Turkish Finance Minister has been in the UK and reported had a ‘fantastic‘ meeting with potential investors. And the goverment is determined to keep on down this path, telling the private banks to step up their efforts to help by handing over foreign currency deposits. (Doubtless this is all voluntary).

Here is a graph of recent Turkish inflation rates. Are we going to be seeing a ‘crack-up boom’ in real time any week now? Turkey is reportedly informally dollarising, with over 50% of transactions in Turkey in dollars (Why not the Euro?).

I can’t help thinking that in the UK, the government is looking at Turkey with envious eyes, dreaming of taking steps to inflate away what remains of our prosperity and to seize our assets.

And it is not all bad from the Turkish government, they have changed the name of the country in a re-branding exercise, changing it from ‘Turkey’ to ‘Türkiye’, apparently to avoid confusion with the bird of the same name.

Joe Blogs also has some interesting coverage on the Chinese property conglomerate Evergrande, and the efforts of a US Hedge Fund to take ownership of collateral in Hong Kong.

Some proposed amendments to the programme of public events when the revolution comes

So who is to be first against the wall? The traditional view is that it should be the Sirius Cybernetics Corporation. While anyone who could call a robot “Your plastic pal who’s fun to be with” deserves their fate, bear in mind that Douglas Adams died before the triumph of the chatbot.

“For God’s sake, chatbots, let me talk to a human being”, cries Jessie Hewitson in the Times. She had a rotten time when both her bank cards stopped working.

Cross though the bus driver looked, he took pity on me and waved me to a seat. When I got off at the Tube station I tried again with the card readers at the gates. Same problem. My cards weren’t working, so there I stood, stranded, unable to get to work.

I called Barclays. After ten minutes of extreme faffery, an automated voice told me that I had to use the chat function because I had downloaded the phone app. So, thumbs frozen outside the tube, I typed my problem into the “chat”.

It was more like an endurance test, where the bank pushes you to the limit of your resolve. To see how long you will hang on to speak to a real person, if indeed you can figure out when you finally are.

In comparison to that “your plastic pal” doesn’t seem so bad. At least you can hit it. Let us spare the Sirius Cybernetics Corp. for a little while and execute the entire British banking establishment instead. But even they, citoyens, do not go first. So far, Ms Hewitson’s article is a pretty standard moan about the way the telephone number of your local bank now sits alongside the nuclear codes as a closely-guarded secret. Things are indeed grim. They, the chatbots, have taken to giving themselves names. Happy female names, mostly amusingly mis-spelled variants of human ones. We may also have to kill everyone who has ever used the term “customer engagement”. But bad as our current plight is, there are very few bad situations that government “help” cannot make worse:

Why are financial companies doing this? The obvious reason is money, but there’s another one: banks, broadband providers et al are keenly aware of the complaints figures that are given to the Financial Conduct Authority and other regulators.

If they manage to reduce these, customers view them as more trustworthy. The harder they make it for you to speak to a person, the fewer complaints that will be logged. And so you have a warped situation where the good banks that encourage people to raise problems look worse than the bad ones that don’t.

I present my revised schedule for the public entertainments on Day One:

3. The Sirius Cybernetics Corporation
2. BarcWestLloydHSBCrap
1. The Financial Conduct Authority

Samizdata quote of the day

“The politicians’ challenge is to wrest well-functioning energy and financial markets back from a financial, activist and media class that seems unshaken by the anticonsumption, income-redistribution miseries their agenda is inflicting. Culture war, indeed.”

Joseph C. Sternberg.

Samizdata quote of long ago versus yesterday

“The idea that you are successful because you are hardworking is pernicious and wrong because it means everyone who is unsuccessful is stupid and lazy.” Minouche Shafik (LSE director, quoted in The Observer / The Guardian, Saturday 22nd January 2022)

“I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.” (Ecclesiastes 9:11, King James Version)

I prefer the Bible’s less judgemental, more qualified take to the LSE director’s woke-sounding justification of why she wants to reset capitalism, replacing the “extreme individualism of the last 40 years” with the “shared endeavour” expressed in her book ‘What We Owe Each Other’. ‘The preacher’ did not say it was ‘pernicious’ to think swiftness, strength, wisdom, understanding and skill favour success – just that you’d be wise to understand that time and chance also play a part.

And other things too, perhaps. As recipient of a “too good to miss” offer from the LSE after several years at the World Bank and two years as (youngest ever, IIRC) number 2 at the Bank of England, Minouche Shafik’s career would be very impressive indeed if one assumed that her Egyptian ethnicity or female gender had been always and everywhere only a handicap to her.

Rising to the top – to resident of the White House, for example – may indeed not denote swiftness, strength, wisdom, understanding or skill (or even the honest counting of all and only legal votes), may indeed be compatible with stupidity and laziness. Being unsuccessful – losing a university post, for example, or not gaining it – may indeed not denote stupidity and laziness, may indeed be for failure to tolerate these attributes. Many an ‘expert’ isn’t.

There’s a pernicious idea around these days – that anyone who is unsuccessful is not so because they are stupid and lazy. If Minouche heard someone say “The idea that you are unsuccessful because you are the victim of prejudice is pernicious and wrong because it means everyone who is successful gained it solely through luck and privilege”, she’d not be so slow to see the need to tone it down. And that, I think, is why she’s so slow to see the absurdity of her ‘everyone’.

How to end poverty

A new article by Max Roser, founder of Our World in Data, spells out exactly how to end poverty.

I calculated that at a minimum the world economy needs to increase five-fold for global poverty to substantially decline. This is in a scenario in which the world would also achieve a massive reduction in inequality: inequality between all the world’s countries would disappear entirely in this scenario. It should therefore be seen as a calculation of the minimum necessary growth for an end of poverty.

Anyone arguing that economic growth is in any way bad, or needs to be reduced, is saying that they have enough and they do not care about anyone else.