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]
|
Earlier this evening I attended a talk given by Kevin Dowd, organised by the Adam Smith Institute. It was being videoed, and although it may be of rather dubious technical quality (an air conditioning machine was making very strange noises), a video will, I was assured, be appearing on line. [LATER: Now available, here.]
In the past I have suspected Dowd of failing to do justice to the gravity of the world’s financial circumstances, by being a little too precise in his reform proposals, but there was not even that sort of optimism in Dowd’s speech this evening, which spelt out in some detail the truly horrible scale of the catastrophe. There was a bit at the end about rejigging the banks, but there was no suggestion that this on its own would suffice. Dowd’s central message was that the economic life of the West is now well and truly eff you sea kayed. Currencies tanking, banks bust, governments bust, current policies hastening the stampede towards the abyss. (Our own Johnathan Pearce was also present, so maybe he will tell us a bit more of the details of the doom we are all staring at.)
The odd thing was that Dowd’s speech made me strangely happy, and judging by the mood of the gratifyingly considerable throng that had gathered to hear Dowd’s prophecies of doom, I wasn’t the only one who was cheered up. Dowd himself understands this link between facing the truth in all its ghastliness and the strange elation that this can provoke. He even quoted a Noel Coward song which immortalises this sentiment: “There are bad times just around the corner. … Hurray! Hurray! Hurray!”
The thing is, when your world is staring catastrophe in the face, the people you want to listen to, because you want them to exist, are people who seem to have a serious and really quite detailed understanding of the nature of the catastrophe in question, all of it. You don’t want to be told that things are fine and will sort themselves out with only a little bit of grief, because you know that’s nonsense and who wants to waste time listening to an idiot saying things like that?
It is also necessary, if their audiences are to be made truly happy, for prophets of doom of the Dowd variety not to be total nutters, in the sense of being entirely disconnected from anything resembling polite society. Prophets of doom need at least some influence on events. Someone who is someone needs to be listening.
Steve Baker MP has already been chosen by the fickle finger of fate, by history, or by whatever else you want to call it, as one of the tiny handful of British public figures who are going to tell Britain what the true nature of the problem now is, and what Britain must do about it, rather in the way that Winston Churchill warned Britain about Hitler in the 1930s. And guess what, Steve Baker MP was present in Dowd’s audience this evening. He even asked a couple of questions.
After Dowd’s talk had finished I asked Dowd: Are you in fairly regular personal contact with Steve Baker MP? Is he getting his head around all this stuff, in the way that you already have? Yes, Dowd replied. We have had several meetings, Cobden Centre, de dum de dum. This made me even happier.
LATER (Tuesday morning): More from me, with a photo, about Dowd and his performance last night here.
Zerohedge has noted that the IMF is reactivating its New Arrangements to Borrow facility. This is a backdoor channel for bailing out an insolvent Eurozone. It is time for Great Britain to leave the IMF as it injects money into failure.
As the whole of the international architecture for finance is becoming a byword for bailouts, why stop at the IMF?
I get all sorts of emails, and this one, from a fairly well known money manager in the UK by the name of Terry Smith, is worth reading in full. It is the text of a letter he has sent to the Financial Times newspaper. The FT is behind a paywall so I reproduce it in full:
From Mr Terry Smith.
Sir, I refer to the debate being conducted in the pages of the Financial Times between those who propose further Keynesian measures, such as Martin Wolf (“Struggling with a great contraction”, August 31), and those who do not accept that they will work, such as Wolfgang Schäuble (“Austerity is the only cure for the eurozone”, September 6).
Such so-called Keynesian measures as advocated by, among others, Ed Balls, Samuel Brittan, Paul Krugman, George Magnus and Barack Obama as well as Mr Wolf have not worked to date, and they will not work. Their advocates seem to assume that their repeated failure to solve our economic problems just means that the medicine must be repeated, which reminds me of Richard Nixon’s motto that “if two wrongs don’t make a right, try three”.
I say “so-called” Keynesians because these advocates seem not to realise that Keynes’ theories did not rescue us from the Great Depression. They are also asymmetric in their application of his theories – calling for ever larger deficit spending, having overlooked the bit about running a surplus in a boom. But above all, they do not seem to realise that they cannot work in a period of debt deflation in which a recession is preceded by the collapse of the banking system, as their current failure is demonstrating.
To the ordinary person in the street, the idea that we can rescue ourselves from a crisis caused by excessive borrowing by borrowing even more must seem mad. In this respect they are possessed of far more common sense than those who are currently advocating just such a course of action and purport to be our leaders.
The first step in rectifying this situation should be to make a clear and unambiguous statement about the actual debt the UK is carrying.
To give a lead to this, today we have circulated to every member of parliament a tin can emblazoned with the UK debt figure – £3,589bn including commitments for public sector pension commitments, private finance initiative and banking sector guarantees, so that they can see what it is they are metaphorically “kicking down the road” with their present policies. This, ahead of the party conference season, I hope might spur some considered and honest debate on this issue.
It is time for those who wish to lead us out of this crisis to tell people how bad the current situation really is and the painful remedies which will be needed to remedy it.
Terry Smith, Chief Executive, Tullett Prebon, London EC2, UK
I get the impression that this man is not looking to be elevated to the peerage. Good.
To the ordinary person in the street, the idea that we can rescue ourselves from a crisis caused by excessive borrowing by borrowing even more must seem mad. In this respect they are [he/she is] possessed of far more common sense than those who are currently advocating just such a course of action and purport to be our leaders.
– Terry Smith
Just when we [have] the strongest possible proof that Keynsianism doesn’t work, someone yells for an encore
– Commenter “J Cuttance” on the Telegraph
One of the self-criticisms I hear a lot from Austrian economics devotees is that Austrianists don’t say what should now be done. They write book after book expounding what should not have been done, but most of their responses to the current mess consist of variations on the theme of: not that. Shouldn’t be starting from here.
So, when I read a report like this one, I get interested. Quote:
Within the next few weeks, signatures will be collected to launch an initial referendum that would require the Swiss National Bank to repatriate all of its gold holdings to within the borders of Switzerland, prohibit it from selling any more of its gold, and require a minimum 20% of its assets be gold.
This initiative is likely to be very popular. The Swiss remember that during World War II, the United States refused to provide access to their gold reserves. More important, since 2000, the SNB has sold 1550 tons of gold – more than a half of its total holdings – mostly at prices below $500 an ounce, and bought European government bonds that have plummeted in value by SF40 billion, compared to a total federal budget of SF60 billion.
This referendum will put the issue of gold as money on the political agenda. The next step is to offer a follow-on initiative permitting the free-coinage of GSF.
The creation of a Gold Swiss franc and the free coinage thereof, along with the repeal of taxation by the U.S. of gold and silver coins used as legal tender, would liberate market participants to generate spontaneously a new monetary order. With government barriers removed, people all over the world will find ways to use gold-backed money to facilitate the exchange of goods and services with their counterparts anywhere in the world, and to engage in saving and investing, lending and borrowing using monies whose value would be anchored in the remarkably stable and trustworthy purchasing power of gold.
Initially, such efforts would have little economic consequence. However, in a world of voluntary exchange, good money chases out bad money, turning Gresham’s law upside down. That is why when the dollar’s value was stable, it was the currency of choice throughout the world.
No one can forecast how this process will evolve. However, we can anticipate that the creation of a Gold Swiss franc and the repeal of tax and legal barriers to the use of gold and silver coins as legal tender will be the antecedent to the reform of today’s paper money system – in the U.S and throughout the world.
Assuming that enough Swiss folks vote for such arrangements, will they do any good? Or does such politicking merely flag up the problem, without going any way towards solving it? No doubt the current Rulers of the World will disapprove of such contrivings and do all they can to abort them, but this kind of thing at least might give the rest of us something to vote for, i.e. against the current Rulers of the World. Mightn’t it?
Something Must Be Done This Is Something Therefore We Should Do It is a powerful force in politics. Schemes like this partake of this force. At the very least, they challenge others to do better.
My thanks to Steven Baker MP for the email that alerted me to this. It’s good to know that he is keeping an eye out for such things, don’t you think?
This piece, about how people are moving from states in the USA governed according to lefty principles, towards states governed by somewhat less lefty principles, reminded me of this piece I recently did here, about people moving from country to country in the world. As in the world as a whole, so in the USA.
Come the next round of elections, the numbers of Americans on the move, and the unmistakable direction in which they are moving, will be hard for the lefties to explain away.
In the emerging presidential campaign, it’s easy to see a version of these questions dominating the debate. Why should anyone choose to endorse liberal, Democratic policies when a single year (2009-10) saw 880,000 residents packing up their belongings to place Barack Obama’s Illinois in their rear-view mirror, while 782,000 new arrivals helped drive the robust economy in Rick Perry’s Texas?
California, so the piece says, lost two million people in the years 2009 and 2010. The promised land no more, it would seem.
I’d be interested to hear what American readers make of Governor Rick Perry. Will I like him, as and when I learn more about him? I’ve read people saying that Perry sounds too much like President Bush Junior. But I’m thinking that people are in the mood to listen to what is actually being said, next time around, rather than fussing about the mere manner in which it is said. Or is that being too optimistic?
The Chairman of the Federal Reserve, Ben Bernanke, is due to speak in Jackson Hole, Wyoming, later today and according to some of the investment notes that I receive, he is expected to commit that central bank to a third round of credit creation from thin air, otherwise known in these mealy-mouthed days as “quantitative easing.” There are doubters out there about the wisdom, or lack thereof, of this. We can of course expect the usual devotees of hard money to scoff at this, but what intrigues me is how some economists in the commercial world are hostile. Take this from Steen Jakobsen , chief economist at Denmark-based Saxo Bank:
“When talking about the impact from Quantitative Easing (QE) one has to realise that most academic studies show that the biggest “impact” from QE on markets comes from the actual announcement of it rather than the execution of it. An analysis of the two prior QE introductions point to a 50 to 100 basis point reduction on bond yields and subsequent inflation of equities via “a feel good” factor – the so-called wealth effect.”
“But realistically, what has been the net impact of QE1 and QE2? Chairman Bernanke has used 3,000 billion US Dollars to create what? Nothing! Unemployment is still above 9.0 per cent, the housing market is still in a slump, and now the only successful thing going for the Fed is the stock market’s rise from the floor at 666.00 in March 2009. But now there’s talk of an interbank funding crisis and unrealised losses. It certainly smells like 2008, doesn’t it? Or what about August 2010? – Yes! It is almost a 100 per cent analogy to last year. It’s actually like watching the movie Groundhog Day.”
I like his final paragraph:
“There is another political theory stating that the best environment to create growth in is one in which politicians have no power to pass legislation (similar to the U.S. situation for now until the U.S. elections). Think about Clinton: he had a major “programme” coming in as President, yet failed to get anything whatsoever done in his eight years in the White House which then led to the biggest growth period in U.S. history. What does this tell us? Total radio silence works as the micro-economy – investors, consumers and companies – adjust their behaviour and consumption to the new reality and then start moving forward. The last thing that we need is “political noise” and promises of better days ahead with nothing to back them up.”
I can think of a good book on the collapse of paper money that I can send this man.
A graph on the growth of the regulatory state, courtesy of the National Review Corner blog.
This person at the Daily Caller appears – with some justification I might add – to take a dim view of Ron Paul, the US congressman and Republican primary contender for the presidential ticket known as “Dr No” on account of his saying no to various government measures and enterprises. He is, famously or infamously, a hardline anti-interventionist in foreign affairs, so much so that his views might be dubbed as almost pacifist. He has called for accountability by the Federal Reserve, and argues that institution ought to be closed down. But he has feet of clay, and this article I link to, which is written in a sort of furious burst of anger, focuses on those flaws and makes light of Paul’s merits. In particular, the article unfairly misrepresents the Austrian school of economics and its methodology. It also seems to smear libertarianism on issues like legalising prostitution and drugs, ignoring the obvious arguments that criminalising consensual acts has created huge costs for society.
All the way down at the bottom of a comment thread prompted by this article, is large item by commenter Michael P. Ivy. It is so good that I reproduce it here. There is the odd typo, but it is worth quoting in the raw:
I am always amused by wannabe economists, who call themselves capitalists, but, are unable to embrace or understand the true axioms of capitalism when push comes to shove. Austrian economics spins on essentially to axioms: (1) that there is no free lunch, and (2) all human action is purposeful action motivated by the individual’s (not society’s) desire to move from a less to a more desired state. These are self evident truths, much like the “more is preferred to less” axiom of the neoclassical school. You butcher Rothbard without understanding his work and particularly his crititique of the neo classical school of wackjob indifference curve analysis and welfare economics. The notion that an individual can be indifferent between two different states of the world without ever actually exercising choice is not a reliable basis for recommending redistribution measures of the Kaldor/Hicks kind. Even Samuelson so much as admitted that it is impossible to derive a social welfare function without making assumptions about the marginal utility of money et al (1951).
The problem with Keynes’ economics, is that it must rob resources from one sector of the economy to furnish another and it consumes resources in the process. Moreover, in doing so, the government does so without the knowledge of the benefits that those resources procure that only those individuals holding those resources…know. This is the problem with any measure of government involvement in economics. That they suffer from fiscal illusion (not my money so it don’t matter) is one thing, but, they effectively create an environment of uncertainty by destroying productive incentives. Incentives do matter after all and I have yet to see the mathematical models of the neo-classicals actually recognize this and quantify them. The fact is, is that you can’t unless you invoke a value judgement of the Keynesian/Samuelson kind.
Welfare economics has never worked and it never will work, for as M. Thatcher so plainly points out, “Socialism is a great idea until you run out of other people’s money”. The statement captures two notions: (1) if their actually was a multiplier effect on GDP from government spending, don’t you think this would be a permanent line item of the government’s income/expense statement?, and (2) the No Free Lunch axiom is underscored by the fact that since government is an unproductive entity that consumes resources for its existence without actually creating anything of value is that eventually the productivity of the market is unable to keep up with and compensate for the unproductive actions of government. True capitalists understand this.
And if you think the market is unable to coordinate itself with respect to defense, innovation, policing of private property, mass transit, health, education, indeed all the things you think we require a central planner for, then you obviously have not bothered to school yourself on the opportunities that can and will present themselves if productive individuals are left alone and allowed to participate. Finally, I see that your article is riddled throughout with incorrect and obnoxious assertions about economic theory presented by Rothbard, Mises et al. (semi-autistic dogmatism). The fact is, is that there is nothing dogmatic about the Austrian school. Its core tenet is that the best production, exchange, and coordination of resources occurs when individuals are left free and unfettered to choose. And by whatever math you might care to invoke, given the level of debt ($16T) incurred by the Welfare State, I’d say you’re pointing the dogmatic finger in the entirely wrong direction. THAT is what is dogmatic….doing the same illogical, nonsensical thing over and over again (at the people’s expense), and expecting a different result every time. So before you decide to write another diatribe on someting you don’t know much about, I’d recommend that you review Rothbard…again, and in particular his piece on “Towards a Reconstruction of Utility and Welfare Economics”. There is nothing dogmatic, hairy scary or offensive about it.
Very good.
Ron Paul is very much a mixed bag, and I would not vote for him, and I am troubled by some of his views. But the fact has to be faced that almost unique in Western politics, he has put forward a classical liberal agenda on certain issues, and done so consistently. And he has managed, despite his age, to touch a lot of young people. There is a lesson here somewhere.
As has been noted before, the disaster of the eurozone is, in the eyes of some policymakers, as much an opportunity for further pan-European empire-building as it is an occasion for shame and embarrassment. This week, Angela Merkel, German Chancellor, and Nicolas Sarkozy (remember him? He’s the one who married one of Mick Jagger’s old flames), came up with this barnstormer of an idea, in the form of a European-style “Tobin tax” and a form of increased economic central government. It has the ring of inevitability about it.
The problem for the UK is that said tax, which has been assailed by the likes of Tim Worstall before, would apply not just to the eurozone, but to the UK, which is not in the euro. And given the relative size of London as a financial centre compared to Paris, Frankfurt or Milan, guess which place takes the biggest relative hit? You guessed: London. Never mind, of course, that banks that can do so will put some of their activities outside the EU, or that the costs of the tax will be borne by savers, borrowers and users of financial services generally, in the form of lower rates of savings interest – already negative in real terms – more expensive costs of hedging forex transactions, and the like. This is what is known as tax incidence. Politicians are not, as we know, in the business of understanding the Law of Unintended Consequences. Indeed, we might even define today’s political class as people who defy this law.
Of course, Cameron, Osborne and others (but not their LibDem allies) will protest about such a tax on London’s financial sector, but look how far such protests got us before concerning sovereign debt bailouts by the UK. And such men have shamefully pandered to such anti-capitalist sentiment in the past, so there is a sort of brute justice if they fail to prevent this latest move now. Such men, of course, have enjoyed the fruits of financial wheeler-dealing when the going was good, such as financing of the Tory party by the likes of Michael Spencer, the founder of derivatives powerhouse ICAP. (As an aside, I see that the odious Vincent Cable, Business Secretary, wants to slap capital gains tax on housing transactions of wealthy properties if the Tories decide to ditch the top 50 per cent rate of income tax. Even a land value tax is better than CGT, although not by very much. There is no such thing as a benign tax.)
Alas, banker bashing has reached such heights of hysteria that some might even try and argue that such a tax on the evils of speculation is a jolly good idea. It pained me to see that even that otherwise fine book on the recent market disaster by Kevin Dowd and Martin Hutchinson, floated the idea.
Allister Heath weighs on the latest eurozone wheeze. He’s unimpressed, not surprisingly.
Update: Here is a twist on the issue of tax incidence and taxes on companies. Milton Friedman is magnificent.
The impact of David Cameron’s spending cuts is so impressive.
Update: To be fair, this particular chart does not give Cameron a lot of time to make a difference, but does anyone think it matters?
With respect to the other countries, my gut feelings are that the Spanish numbers are made up, and at least some of the British and Italian debts are backed by real assets that are worth something to a greater extent than are whatever is supposed to be backing the Greek, Irish, and Spanish debts. The Portuguese numbers are probably somewhere in between in terms of believability. Belgium is a riddle wrapped in a mystery inside an enigma inside something French.
HT Tim Harford
|
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.
|
