Mr Bean said that encouraging Britons to spend was one reason why the Bank had cut interest rates.
The Cobden Centre’s James Tyler is not impressed, that being where I found out about this latest piece of Keynesian crassness.
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September 28th, 2010 | 18 comments - (Comments are closed)
 The author of the economics high-seller, The Black Swan, has given a fairly fierce denunciation of US government fiscal policy in recent years. In fairness, he probably is not just beating up the current holders of office, but previous ones too. September 25th, 2010 | 5 comments - (Comments are closed)
Last night, I attended a very entertaining Adam Smith Insitute event at which Eamonn Butler and guests talked about Austrian economics. Mr Butler has a new book out and it is an excellent, succinct summary of what this form of economics is all about. And he touches, very briefly, on the issue that seems to be getting some people worked up into a tizzy: fractional reserve banking. FRB is an issue we have already had a good working over on at this site and a good comment thread. A brief summary of my view is that I don’t think many forms of FRB would be able to survive in a pure free market without bailouts, “too big to fail” protections, government deposit protection, etc. But it should not be banned: if folk want to take the risk of depositing money in an FRB account, then that is their business, like smoking, off-piste skiing and unprotected sex. With currency competition and removal of legal tender laws, such FRB banks would have to be run with ruthless attention to risk control. So I don’t see the need for any restrictions. However, what annoys me about the reaction of fellows like this is that they seem to be supposing that the current banking system, the system that has recently been brought almost to its knees, with such shining examples such as Northern Rock, the Dunfirmline Building Society, Bradford & Bingley, HBOS, etc, etc, is somehow basically okay. Riiiight. They are saying that those pesky Austrians, with their “loopy” ideas about how two people cannot simultaneously hold the same claim to the same money at the same time (which strikes me as a perfectly sensible view, in fact), should shut up. Well, they are not going to shut up. I have to say I find the sheer gall of these “why don’t these guys shut up?” line of analysis to be pretty unedifying. If FRB – at least as it currently operates – is so splendid, and if banking really is about “borrowing short and lending long”, then maybe the defenders of the current form of banking could explain to the taxpayers of the UK quite why we have had had to spend hundreds of billions of pounds in the recent banking clusterfuck. Just asking. September 24th, 2010 | 53 comments - (Comments are closed)
I guess it will be interesting to see whether there is any pressure among backbench Tory MPs – or at least some of the more intelligent ones – for the government to try and edge out “Vince” Cable from his post as Business Secretary, following a terrible speech that has been monstered in many quarters, such as here, and here. The funny thing is, had Cable said something on the lines of “risky gambling by banks and hedge funds has been a problem and has been encouraged by irresponsible central banks”, he’d have a very good point. Had he, in his attack on monopolies, attacked the regulations, taxes and other government moves that drive up barriers to entry, he’d also be correct. But he does nothing of the kind. He’s a sort of economist who, trained from, I suspect, neo-classical textbooks full of elegant supply-demand curves rather than real human beings, imagines that any market that does not have a vast number of identical players with no pricing power or edge is “imperfect”, and therefore in need of correction by government. He ignores how it is the very “imperfections” of the real world – such as differences in tastes, values, levels of knowledge and so on – that give markets their raison d’etre, as understood by the “Austrian” school, with its view of competition as a discovery process, not as a static game full of omniscient Gods. In fact, the government actions that lead to less flexible markets continue to get worse, which is something Mr Cable seems not to be dealing with. At the moment, the Financial Services Authority, the UK financial regulator, is rolling out a programme of “reforms” called, excitingly, the Retail Distribution Review. The aim, which sounds very noble, is to raise the standard and independence of financial advice. The effect, however, will be to drive hundreds of financial advisors out of business – some industry figures predict that as many as 20 per cent of UK IFAs could go by the time the RDR takes full effect in 2012. This, of course, only worsens the problem of how financial advice is often something that ordinary UK citizens rarely use. Here is something I wrote before on attacks on the City. September 22nd, 2010 | 30 comments - (Comments are closed)
I sort of get much of that, although I would definitely have to follow the second link to see how ObamaCare is nationalising student loans, and to find out what on earth “Sallie Mae” might be. But, speaking more generally about this huge furore, I have a real problem with ObamaCare. Not in the sense that it is causing me to lay off hundreds of my employees, but in the sense that I am finding the arguments about it very hard to follow. Mountains of verbiage have already been written about ObamaCare and many more will follow. But I am afraid I missed the early bits, where the actual blow-by-blow damage that ObamaCare will unleash (is now unleashing) was itemised, briefly and punchily. Anti-ObamaCare writers tend now merely to allude to the assumed harm of it, rather than yet again itemising it. Much is made by critics of ObamaCare of the immense length and complexity of the relevant legislation, which it seems most US politicians have no more read right through than I have. But what, approximately speaking, does it all say? I suspect I am not the only Brit who feels this way. Not that long ago, for instance, I heard those comedians on Mock The Week take it in turns to denounce Americans for not welcoming ObamaCare, and I knew they were talking out of their smug and self-satisfied arses (especially that little bald one who is smug self-satisfaction personified, if you don’t happen to agree with something he is saying). Death panels? No. It’s free healthcare for those who can’t now afford it, you obese God-frazzled morons. What could possibly be wrong with that?!? Do you all want to die prematurely of terrible diseases and accidents that the British health service cures immediately at no cost? But had I been on the panel, trying to resist (in particular) the Smug Dwarf’s relentless leftery, I don’t think I would have done a very good job. Most Brits watching, if my reaction is anything to go by, either agreed that all American opponents of ObamaCare are indeed morons, or that they perhaps have their reasons for not wanting it, but that these reasons will for ever be a mystery, probably involving some Americanised version of God. So, commenters, please fill me (us) in. Please help us Brits – this particular Brit especially – to wrap our brains around ObamaCare. What, briefly, are those “mandates” that Doctor Zero refers to? How are student loans involved? And what else is being inflicted? I would like to be able to concoct a further posting entitled something like: “A brief but pretty much complete explanation for confused Brits of why ObamaCare is a really bad idea and why so many Americans are right to hate it”. And maybe, with your help, I will be able to do that. One particular request. What concerns me is not to dig deeply into any particular harm that ObamaCare is doing. What I seek is completeness, combined with as much brevity as can be contrived. In the event that I do manage that follow-up posting that I can now only dream of, I want an American to be able to wizz through it, and say something like: “Yup, that about covers it. That’s why so many of us hate it. I actually don’t think number three is quite as bad as your short description of it implies, and I think number five is far worse even than you say. But, nothing major is missing from that list. Good job.” Maybe such a posting already exists, and I need only read it, and link to it. Or maybe (I’ve just been following the links in the quote above, just to check that they work), my question is wrong. Maybe what I really want is a brief guillotine-blow-by-guillotine-blow guide to the entire Obama legislative “achievement”, of which “ObamaCare” is only a part. Anyway, whatever help anyone can offer along these approximate lines would be most welcome. September 21st, 2010 | 24 comments - (Comments are closed)
Paul Krugman is often described as a winner of the Noble Prize for economics – Mr Noble set up no such prize, but let that slide (after all good people have sometimes been awarded this prize over the years). However, he is in fact not an economist at all – he is just someone who is called an “economist” because he has the position of “Professor of Economics” at a university (as if a job title describes knowledge). Paul Krugman has for decades sneered at the idea that economics is about reason and logic – that it is (as the “Austrian School” claims) an a priori subject. On the contrary, Paul Krugman claims that economics is an empirical subject – all about understanding empirical evidence and making predictions. The links given in this Cafe Hayek featured article show that Paul Krugman does not understand empirical evidence and makes predictions that are wildly wrong – i.e., by his own definition, he is not an economist. Of course there is an alternative view: This would be that Paul Krugman does have some grasp of economics – but chooses to support an ever more interventionist government for reasons of political ideology, in spite of the economic harm he knows such a line of policy will cause. For example, Paul Krugman does not predict that the Obama “Stimulus” spending orgy will succeed (on top, please remember, of all the wild “Stimulus” spending by President Bush) – on the contrary Paul Krugman admits the “Stimulus” absurdity will fail – however he claims that this is because it is not big enough. Almost a trillion Dollars is “not enough” – and however many trillions of Dollars were spent it would still be “not enough”. Any failure of statism is explained away as the result of there not being enough statism. Would anyone still like to claim that Paul Krugman is an economist? September 20th, 2010 | 31 comments - (Comments are closed)
Asks Virginia Postrel in this article. Yes, there are public policy issues involved – such as the declining ratio of workers vs retirees in many developed countries – but she gives a typically constructive, even optimistic take on the issue. Recommended. September 17th, 2010 | 10 comments - (Comments are closed)
I often get the impression – and that is all that it is – that much of the world of government is concerned with achieving stability of various kinds. But there are “good” forms of stability – such as safe and secure property rights, honest money, and laws to protect the person from violence – and “bad” kinds, such as the stagnation of a flat-lining economy (as in 1990s Japan). Consider, we used to hear Gordon Brown drone on, in that manner of his, about “economic stability” (he spectacularly failed to attain it); we used to hear critics of George W. Bush’s foreign policy claiming that he was undermining the supposedly marvellous “stability” of the Middle East; and of course when it comes to issues such as governments’ monetary and fiscal policy, “stability” and the smoothing of all that naughty market activity is taken as a public good. Sure, the last few years have been frightening in some ways on the economics front, but the gains to living standards across the planet, by and large, have not been thrown away. And in a recent book by Deepak Lal, in “Reviving the Invisible Hand”, he notes that some, “unstable” economies such as Thailand have managed to chalk up much greater growth in wealth overall than those which have grown at a more sedate, less volatile way. Of course, it might even be argued that it is difficult to distinguish total stability from death. A straight line on a graph, remember, resembles the line of one of those gizmos that tells a doctor that the patient has pegged out. September 15th, 2010 | 21 comments - (Comments are closed)
Over the weekend, Tim Evans, who has been a friend of mine for about a quarter of a century, and who is now part of the Cobden Centre ruling junta (listen to a recent and relevant interview with Tim Evans about that by going here), has been ringing me and emailing me about this, which is a so-called Ten Minute Bill (I think that’s what they call it) which Douglas Carswell MP and Steve Baker MP will be presenting to the House of Commons this Wednesday, just after Prime Minister’s Question Time. Ten Minute Bills seldom pass. But they are a chance to fly a kite, put an idea on the map, run something up the flagpole, shoot a shot across the bows (see above) of some wicked and dangerous vessel or other, etc. etc., mix in further metaphors to taste. Were this particular kite actually to be nailed legally onto the map (which it will not be for the immediately foreseeable future) it would somewhat alter the legal relationship between banks and depositors. For more about this scheme, from Steve Baker MP (whom we have had cause to notice here before), see also this. Basically, this proposed law says that depositors should get to decide whether they still actually own what they already now think of as their own money when they hand it over to a bank, or whether their money degenerates into a mere excuse to create much more degenerate money, out of thin air. Depositors get to decide, in other words, about whether their bank deposits will be the basis of fractional reserve banking, or not. Or something. Don’t depend on me to describe this proposal accurately, or comment learnedly and in detail on its efficacy, were we to live in a parallel universe of a sort that would enable this law to pass right now. What I do know is that Austrian Economics (or, as I prefer to think of it: good economics), which is the theoretical foundation of the Cobden Centre, ought to have massively more sway in the world than it does now. Recently I have been trying to get my head further around Austrian Economics than my head has hitherto been, and I have also been watching the Cobden Centre as it has gone methodically about its self-imposed task of transforming Britain’s and the world’s financial arrangements, thereby massively improving the economic prospects of all human beings. I have always been impressed by Austrian Economics, ever since I first dipped into Human Action in the library of Essex University in the early 1970s. I knew rather little about Austrian Economics until lately and I still don’t know that much, beyond the fact of its superiority over bad economics. And I am now also very impressed by the Cobden Centre. What this latest parliamentary foray shows is that now Douglas Carswell MP seems to have joined the Cobden Centre network. Or maybe, what with Carswell having been an MP for some while, the Cobden Centre network has got behind Douglas Carswell MP. Whatever, and whatever his rank or title within Cobden Centre pecking order, Carswell is now a senior member of that network. Good. I hope and believe that there are many others now joining too, of comparable weight and intelligence. I could say more about all this, much more. And I very much hope that in the weeks, months and years to come, I will. In particular I hope to explain more about just why the Cobden Centre has so far impressed me so much. But the important thing now is to get something about this up here, now, so that the Cobden Centre crowd (Tim Evans in particular) will have one more little puff of opinion to point at, to help them suggest that the intellectual wind may at least be beginning to blow in their (and my) preferred general direction. September 13th, 2010 | 101 comments - (Comments are closed)
A couple of further cricket games between England and Pakistan have now happened. In the first of these, Pakistan surrendered a winning position. Sound familiar? It should. In the second, they never got to a winning position in the first place. England were efficient in both games. I refuse to provide links to mere match reports. Did the Pakistanis lose because they were paid to, or is it merely that they are now utterly demoralised? Probably the latter, but given that one can’t now be sure it is hard to care. That Pakistan’s cricket bosses had to be bullied into suspending the players revealed as having cheated hasn’t helped. Ijaz Butt in particular looks far more like part of the problem that part of any solution. I’m reading this kind of reaction quite a lot, the one about being shocked, shocked. As in not actually very shocked at all. But the importance of what just happened is not that cricket fans now strongly suspect Pakistan’s cricketers of cheating, but that we now know it. The cheaters are still protesting their innocence, and the wheels of justice will, as is proper, grind slowly on, but the market (i.e. the fans) is already now speaking, loud and clear. Guilty:
“Might” agree. Hah. Now I’m watching the TV highlights of the game earlier this evening. The crowd is tiny, heavily outnumbered by empty seats. Pakistan cricket will not soon be forgiven by the English county clubs now caught up in this mess. They will want someone’s blood, and since they cannot expect much satisfaction from Pakistan itself any time soon, they will probably look closer to home. They won’t have far to look. As Michael Jennings said in a comment on this:
Indeed they do. Meanwhile, in New Zealand, there are fears that revenue from Pakistan tour could suffer. Indeed it could. September 7th, 2010 | 4 comments - (Comments are closed)
Here is a long(ish) article stating that because financial investors think the UK government is serious about slashing the public deficit, this is keeping the prices of UK bonds high – which also means the interest rate that firms pay to borrow long-term is less than in a number of other countries. Obviously, the proof of the pudding will be in the eating. We are now entering a period when the various government departments of Cameron’s administration need to deliver with real cuts, rather than simply talk about them. But it does seem that there is a real difference of perception in how markets view the UK (trying to cut the deficit) and the US (spend, spend, spend!). Other things being equal, it will cost a dollar-denominated corporate borrower more to get financing than a sterling-based one. The UK economy will benefit. Just one more reason to ignore the siren songs of the Keynesians. September 3rd, 2010 | 5 comments - (Comments are closed)
Here is a video worth watching and in an easy-on-the-understanding format: Thanks to The Geek Whisperer for the hat tip. August 26th, 2010 | 37 comments - (Comments are closed)
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