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There is an interesting discussion at the Cafe Hayek blog about how much it matters that Americans don’t currently save very much. Well, given that real interest rates (taking into account inflation) are negative, and that holding cash means real wealth declines, it is not surprising that real savings have been steadily eroded. The blog’s author is certainly right about this point, however:
“If saving is good for Americans, the nationality or place of residence of the savers whose saved resources are invested in the American economy is irrelevant. If saving is good for Americans, then given Americans’ saving rate, savings invested in the American economy by non-Americans are a blessing – a blessing that is bigger the greater is the amount of this foreign savings and investment in the American economy.”
“Yes, we Americans would be even wealthier materially if we Americans saved even more – wealthier materially both as a product of many or all of us having larger financial portfolios, and as a product of the economy of which we are a part having an even greater volume of total output. But for this very reason we Americans are made wealthier also when foreigners save more and invest their savings here, regardless of how much or how little Americans save and invest.”
Of course if I can nit-pick, I would make the point that when, say, Chinese investors bought oodles of US government bonds in the years leading up to the credit crunch of 2008, it helped drive US long-term interest rates even lower, hence encouraging even more US domestic consumer spending and borrowing, a process we know went horribly wrong. (The main culprit in all this was the Federal Reserve, not China, I should point out). Of course, if non-domestic savers are channeling those savings into investments that yield a positive future return, such as investments in technological innovations, new products and services, then that’s all to the good.
If we were to move away from fiat money to a commodity-based monetary system and 100 per cent reserve banking for demand deposits, then a savings culture would be encouraged considerably. At present, persuading people to save is understandably hard because people, even if they are not hard-money zealots like me, smell that there is something rotten with our money.
In some ways, I see parallels between the loss of faith in paper money and the declining credibility of the AGW crowd. I think it was Brian Micklethwait of this blog who said something along the lines that we have had junk science, and now junk money. There is only so much junk that human civilization can stand.
Even by his standards, Detlev Schlichter’s latest blog posting is quite a read. Quote:
Evil and dumb people can be dealt with. The deeply-convinced do-gooders in positions of almost unchecked power, those are the ones we should worry about, those who are full of good intentions but suffer from tunnel-vision, incurably in awe of their own theories and incapable of even beginning to grasp how what they are doing could make things worse.
Schlichter seems to me also to be rather worried about something else. What if, in the words of one of our recent commenters (on this), Lee Moore, “the roof falls in” before Schlichter’s book comes out? Given what Paper Money Collapse says, Schlichter will never be an entirely happy man until the world is back on the gold standard, but he won’t be at all a happy man until his book sees the light of day, on both sides of the Atlantic, given the current state of the world’s financial system. If all hell breaks loose before the book even goes on sale, he will merely look like he is analysing the catastrophe, but with the juicy details stripped out. But, if doomsday obliges by not happening quite yet, he will, when doomsday does come, be a prophet of doom proved right. Far better.
Given that timing with books, especially books about soon-to-be-current affairs, can be so important, I am puzzled as to why Schlichter’s book is due out on August 31 2011 here in the UK, but not until October 4th 2011 in the USA. Its American publisher confirms this date discrepancy, although they only talk about August and October (I did the comparison by using this page). Can anyone talk me through this? I know nothing of what the rules are for publishing books on both sides of the Atlantic at nearly but not exactly the same time. Maybe this kind of gap is routine. Maybe, for instance, they figure that what with Schlichter being based in London, London should get to read it first, because maybe London will be particularly friendly. Or, maybe it’s something to do with local book the markets.
More specifically, can any Samizdata reader advise me about what exact date it would make sense for me (given that I am already reading an advance pdf of it) to publish my review of this book? I have already emailed the publishers about this, but they were rather vague. I said “early September” and they said fine. But exactly when would make the most sense? If, now that I have gone public with this question, they want to tell me a more precise date, that would be most helpful.
When I first began to read that David Cameron could soon be toppled by all this News of the World stuff, I was amazed, just as I was amazed when I first heard about the News of the World itself being shut. I still don’t know how badly Cameron is threatened, but if he is threatened, he has only himself to blame.
Cameron got the job of leading the Conservatives because enough of them thought that he would make a satisfactory Blair the Second, to replace the original. The question was, remember, during the Blair years: How shall we spend all this money? The answer was: nicely. Blair is the answer to the question: What sort of chap do you want your daughter marrying? A nice one, that’s what sort.
But well before Cameron became (only just) the Prime Minister, the questions had all changed, from being about niceness to being about what the hell was happening and what the hell should be done about it. Yet Cameron exudes no sense of crisis. On the contrary, he makes a point of not doing so, of suggesting that all will be well provided we don’t panic and just carry on carrying on, when in reality the situation is very troubling and getting worse and worse by the day. It’s as if Stanley Baldwin was still the Prime Minister in 1939.
I have a friend whose take on Britain’s political party leaders has been an infallible guide to their success or failure, during the last two decades or so. Blair? Nice one. Major? No. Hague? Thumbs down. The next bald Conservative chap, ditto. The next Conservative bloke – Howard was it? – ditto again. Brown? A definite thumbs down. But Cameron? I remember particularly asking her about Cameron. What do you make of him?
Shrug. → Continue reading: Is Britain about to shrug off David Cameron?
Liam Halligan has written a not unreasonable article called We should have listened to Zhu Min years ago – don’t ignore him now:
The “twin pillars” of the world economy continue to totter. Global investors, politicians and the financially-literate general public are wringing their hands about two previously “unthinkable” disasters – the US Congress “closing down” the government of the world’s largest economy and the break-up of the eurozone.
American lawmakers may do a deal this weekend, so managing to raise the US debt-ceiling prior to the August 2 deadline. Europe’s monetary union may, for now, be held together with a bucket-load of political fudge. If so, we would avoid both a US default and a “euroquake”, so averting another “Lehman moment”. I certainly hope we do.
[…]
“It’s no use throwing dollars out of a helicopter,” Guido Mantegna, the Brazilian finance minister, has commented.
“QE amounts to economic hooliganism,” the Russian prime minister, Vladimir Putin, observed last week.
Mantegna and Putin are right. We Westerners won’t admit it.
‘We’ westerners? To hijack an old joke about the Lone Ranger and Tonto, Who is “we”, Pale Face? What he is saying is just what Austrian school economist have been pointing out for years.
But he is wrong about sovereign default being a ‘disaster’. On the contrary…the sooner the better, I say. The only cure for the absurdity of bloated state borrowing is for it to become a great deal harder for states to do it… and as there is clearly no political will to tell all the vested interest with their snouts in the trough that the binge is over, not just for the well connected bankers but for the ‘innocent’ voters who are state funded parasites, then the only solution is for lenders to learn that sovereign risk is now actually… risky.
Let even one of the Big National Players default and the money states borrow will dry up like morning dew… and that is a good thing, not a bad thing.
Step by step, the world is edging towards a revived Gold Standard …
– Ambrose Evans-Pritchard. My thanks to Detlev Schlichter for alerting me to this piece. Schlichter‘s forthcoming book would appear to have been timed to perfection. I am reading an advance pdf of it now. If you want a copy I recommend you advance-order it now, or you just might have a rather long wait.
I love David Thompson’s ephemera postings, which he does every Friday. Buried in among the fun and games are often things with a bit of a message, in favour of Thompsonism and against horribleness.
So, today, for instance, there is a link to three lists, of top migrant destinations, top emigration countries, and top “migration corridors”, migration corridors being country pairs, from and to. List one says how many people in each country were not born there, and the second list says how many people who were born there have now gone.
I have always believed that how people have been voting with their feet is one of the most potent judgements there can be at any particular moment in history, on the varying merits and demerits of different countries and different political and economic systems. The USSR bombarded the world with high decibel claims about the wonderfulness of itself and of its various national possessions, but could not explain why so many people wanted out, and so desperately, and so few in. How come the Berlin Wall only pointed in one particular direction? How come they were the ones who built it?
Contrariwise, the world’s anti-Thompsonists of an earlier time cursed the hideous exploitation of the emerging sweatshop (then) economies of South East Asia, but could not explain why people would swim through shark-infested waters, in order to be hideously exploited.
Such numbers also register how welcoming or unwelcoming different countries are towards being “flooded” with incomers. The USA, of course, is the country that positively defines itself as the country of migrants. That the USA, now as always, is by far the top migrant destination, leaving the rest in a clump far behind, says it all about the continuing vitality of the USA as the go-to superpower of the world, still, despite all the blunders its rulers are now making and which the USA itself is so good at drawing everyone’s attention to.
Russia and Saudi Arabia must also be doing something right, despite the stories you hear, and at least compared to the alternatives for those flooding in. Money plus labour shortages would be my guesses, in both cases.
The UK features in the top ten both for migration in and emigration out. That is a telling fact, is it not? India and Russia are also on both lists.
The biggest upheavals are surely the big numbers that pertain to countries with small populations. When you talk percentages, Australia looks to me positively USA-like in its eagerness to attract newcomers. That China, despite its colossal size and formidable recent economic vitality, is not on the top destination list is also quite telling, is it not?
These numbers are more than just ephemeral curiosities, I would say.
In this, which is about some guys from Loughborough who have decided to mark cities (scroll down a bit) like they are undergraduate essays (Alpha+, Beta+, Beta-, etc.), NickM waxes lyrical about Prague:
The coolest city is Prague. Prague is just mental. I’d happily move there tomorrow but for the language which is something else. Just super-cool. On the Charles Bridge there was a rodent balancer. Some bloke in a monk’s cowl was balancing rodents on a labrador for change. And then you just walk past where Kepler lived and customer service is spot-on and it was about a quid a pint for most excellent beer right in the city centre and the food was good quality and good value. Went to a steak house run by former firemen who donned the hats when they put the heat to the meat. Bloody good steak that was. And then down by the river and a load of blokes ride past me in Edwardian garb astride penny-farthings. Prague is just ineffably cool. Just wandering around is wonderful. Just doing that brought me by chance to the church where the killers of Reinhardt Heydrich had holed-up. That was poignant. And then there is the Museum of Communism. This is not a free museum. It makes a point of being a for profit enterprise. It advertised, when I was there, with a Russian doll with fangs. It gives it’s address as, “Above McDonalds and opposite Benetton.”. It didn’t need to add, “And fuck off Lenin”. A joy to behold.
Here endeth the broadcast from the Czech tourism bureau.
But he adds a warning:
But catch it while you can and before EU membership fucks it.
Well, EU membership doesn’t seem to have fucked London yet, despite decades of the EU trying everything they can think of to accomplish that. London, according to the Loughborough guys, is equal top (Apha++) with New York. NickM goes further. He reckons New York is overrated and has London top on its own, as the greatest city in the world “bar none”. He doesn’t say why, however.
Personally, I love London, because I live here and I just do. But I do not know where I think it ranks in the great city stakes because I seldom leave it, and hence can’t compare it with other urban greatness contenders.
I have been to Prague, which I thought was pretty good. The middle is amazing, wall-to-wall listed buildings, as we would say in London. As I assume is the case in Prague too, i.e. you may not smash it down and replace it with a concrete blockhouse, just because you “own” it. Which I understand. But the uninterruptedly historic nature of the centre means that nothing new can now be built. In other words, the centre of Prague feels like a film set, and will feel more and more like one as time passes. See also: Paris.
Steve Baker, the MP whom we here actually rather like, has a piece in the latest Jewish Chronicle, which makes what seems to me like a very important point. I have this point alluded to vaguely, but never spelled out. It is that the outrageous behaviour of the merchant banking fraternity in recent years is as much a product of bad bank regulations as it is of mere capitalistic greed.
It being the Jewish Chronicle he’s contributing to, Baker alludes to some scales that are criticised at the beginning of the Book of Proverbs, Chapter 11 (which American readers may consider rather appropriate, what with the times we (and they) are now living in).
The particular rules that Baker zeroes in on are the accounting rules that define profit:
Among other problems, IFRS accounting rules incentivise trading in derivatives by enabling unrealised, perhaps fake, profits to be booked up-front, leading to large but unjustified bonuses and dividends. They grossly inflate profits and capital and discourage banks from making prudent provision for expected loan losses. They also discard the time-honoured principle of prudence embodied in UK company law. In doing so, IFRS gravely weakens the audit function and the vital check it imposes on bank management. This undermines effective corporate governance in banking. The upshot is that IFRS makes bank accounts highly unreliable; no-one has a true view of our banks’ financial strength. All this contributed greatly to the financial collapse. IFRS made banks appear more profitable than they were. This led them to imprudent expansion, to payments of bonuses they could ill afford to make and to inadequate provisioning for likely losses.
I am not qualified to second guess Baker on this. But I do know, as a general principle, that when one observes something going wrong with the world, one should not immediately assume that yet more laws and regulations are needed to curb whatever it may be. Rather, one should ask what laws or regulations – laws or regulations already in place – are causing or at the very least greatly exacerbating the problem in question, and should accordingly be got rid of.
I came across the following in a research paper about the benefits of “clustering” of financial services and other industries:
“Singapore is a country, which, 40 years ago had the same GDP per head as Uganda. Now, it is the richest country in the world, with GDP per head of $57,238 I 2010, according to the IMF, putting it ahead of the US, Japan, Hong Kong and Switzerland.”
Seems like a classic example of how some places are actually blessed by a dearth of natural resources.
The headline says ‘Europe declares war on rating agencies‘:
Wolfgang Schauble, German finance minister, said there was no justification for the four-notch downgrade or for warnings that Portugal might need a second bail-out. “We must break the oligopoly of the rating agencies,” he said.
Heiner Flassbeck, director of the UN Office for World Trade and Development, said the agencies should be “dissolved” before they can do any more damage, or at least banned from rating countries.
Now ponder that for a moment… what is a ‘rating agency’? It is a company that states an opinion regarding credit worthiness. And those opinions are only significant if people who make investment decisions think the opinions in question actually reflect reality, i.e. the opinion has some credibility.
So what these quoted members of the political class are calling for is banning credible opinions about the consequences of decisions by, er, people like themselves.
Astonishing. And in reality rating agencies have a history of excessive optimism, only downgrading ratings long after the dots were joined by anyone who has been paying attention.
Yesterday, there was a mini-rebellion in Parliament, to be precise in one of its Committee Rooms. Britain’s (increased) IMF subscription was being discussed, and although it got through, there was a little flurry of excitement, as Guido reported:
Something very rare happened in what is usually the dullest of committees. A dozen or so Tory non-members of the committee came and spoke against affirming the instrument. Government whips cajoled the pliant Tory and LibDem members of the committee to vote to affirm the instrument while Tory MPs spoke from the floor against it. Promising new boy Steve Baker and backbench eurosceptic Douglas Carswell were among those who spoke against affirming the instrument.
You can now read what was said in Hansard.
When these kinds of things are argued about, everything depends on whether the contrariness on show is a genuine argument that we should switch to an alternative and better policy, or merely grumbling. If all that is happening is that people don’t like whatever it is, what with them not having created the problems (or so they say) with their decisions, and what with all the cuts they are having to put up with now, well, frankly, that doesn’t count for very much. If the powers that be are able to say: Well, what would you do that would be any better? – and if you don’t then have an answer, you might as well not have bothered. All you are saying is: This hurts. And all that the government has to say in reply is: Yes, we hear you, we feel your pain, but we are going to do it anyway, because despite all the pain, we remain convinced that this is the best thing to do.
Scroll down at Hansard and you can read, in particular, what Steve Baker MP had to say. The thing about Baker is that he really is arguing for a paradigm shift in economic policy thinking. He even quoted a chunk out of Human Action, which I think I will quote here, again:
The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion.
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” (Human Action, p. 572)
Baker is not just saying: this is a crisis. Everyone knows that. He is also saying: and we need to have the crisis, now, all of it and get it over with as soon as we can.
Hayek also got a mention, as did Jesus Huerta de Soto, who gave the Hayek Memorial Lecture last October.
This is the kind of politicking that is capable of having actual impact. Not now, and certainly not right away, but … in the longer run. In the longer run, ideas can change.
LATER: The Cobden Centre blog now has a more user friendly version of Steve Baker’s words, here.
Sport, especially when it gets big and successful and financially significant, is incurably political. This is because, when it gets big and successful and financially significant, it can’t be run like the car industry or the computer chip industry. If you think the current range of cars or computer chips on sale are rubbish, you can go into business on your own, and make better cars or computer chips, or you can import better cars or computer chips, or you can make what you reckon to be better car components or better chip designs and then try to sell them to the various car or chip companies, and if one car or chip company won’t buy them, you can try the others.
Car and computer chip companies can also get very political, but at least there is a decent chance that they will be run approximately like real businesses, competing with each other, and in a form which allows malcontents to express their discontents commercially rather than politically.
But, if you don’t like how your sport is run, you and your friends walking out of the AGM in a huff and starting your own version of that same sport is not any sort of solution. That, actually, is a pretty good one line description of the fundamental problem. (Consider what happened to rugby, when it split into rugby league and rugby “union” (hah!). Think what rugby, league and union, now is. Think what it might have been.)
Everyone who wants to be part of running their favourite sport is stuck with each other. All must somehow agree on the same set of detailed rules. All must cooperate to contrive competitions of the kind they all want, or at least are all ready to live with. All must submit to the same “governing” body. When a car company competes with another car company, they don’t need to communicate at all. When a sports team competes, in the sporting sense, with a rival sports team, there has to be a minimum of civility involved, otherwise they’d never be able to fix a time, a place, or officials to adjudicate. Sporting fixtures need fixing, cooperatively.
Sports only compete in the purely commercial sense, uncontaminated by the need for any “politics”, in that an entire sport competes with other entire sports. In new and small sports, everyone is in a very basic sense on the same side. But when things start to go really well, there start to be fights within the sport, about the rules and for the spoils. Small sports tend to be run well and amicably. It’s only when they get big that the trouble starts.
My particular favourite sport happens to be cricket, and cricket, now as always, is riddled with political problems.
In the course of giving a lecture recently at Lord’s, the highly respected former captain and still current Sri Lankan player Kumar Sangakkara, identified the moment when things started to go wrong for cricket administration in his country:
Sangakkara pinpointed the country’s most powerful moment of national unity – the World Cup final victory over Australia in 1996 – as the moment the sport’s administration changed “from a volunteer-led organisation run by well-meaning men of integrity into a multimillion-dollar organisation that has been in turmoil ever since”.
Precisely.
The other way that sports administration can go horribly wrong is when the politics of the country itself goes so horribly wrong that it screws up everything in the country, sport included. This happened in recent years in Zimbabwe, and Pakistan cricket is a constant source of worry to cricket people everywhere for those kinds of reasons.
It would be tempting, then, for a devotedly anti-politics libertarian like me to crow with joy at a report like this, which is about how the world governing body of cricket is telling national governing bodies of cricket that they must be free from political interference.
However, in this report, we read this:
The change is something the ICC has been keen on for some time, to try and bring governance of cricket in line with other global sporting bodies such as FIFA and the IOC.
The ICC is the cricket governing body, FIFA the soccer governing body, and the IOC the Olympic Games governing body. The latter two are constantly in the news because of political turmoil and because of thoroughly well-founded allegations of corruption. And yet here are cricket administrators, without any apparent sense of irony, putting these two bodies forward as models to be emulated, to create a cricket world free from “politics”. Where, as a Samizdata commenter might say, do you start?
I’ll start with that horrible word “governance”, a euphemism regularly perpetrated nowadays by politicians to describe politics, but without calling it “politics” because politics sounds too sordid and nasty. Talk of “governance” at once tells us that global cricket administration remains what it has always been, a zone of political bullshit rather than any kind of new nirvana of enitrely prudent and totally stress-free sports administration. Only the nature of the bullshit changes. It used to be imperial and British-flavoured; now, as the new money of the Indian middle classes floods into cricket, the bullshit is more Indian-flavoured and commercialised. (See, for instance, what another former international cricket captain, Ian Chappell, has to say about the ICC.)
The truth is that this is not an argument about whether cricket should be political, merely about what sort of politics, national or global, should make the running, in the running of cricket.
In this respect, cricket resembles the world, I think.
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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.
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