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Andy Duncan. Like Andy, I have read Thomas E. Woods’ Meltdown book and I wrote out some thoughts about it here. And here. Glad to see Andy is writing away. Old Samizdata hands may remember he used to scribble for us occasionally. June 11th, 2010 | 2 comments - (Comments are closed)
 Steve Baker MP’s maiden speech. Tried to finish a longer piece involving that link, but failed. There’s the link anyway. Now rushing out to a meeting organised by the very organisation that published that blog posting. Such is life. June 9th, 2010 | 2 comments - (Comments are closed)
The ultimate cause of the problem with the banks was indeed chronic government interference, in the form of implicit and explicit guarantees supplied to them free of charge, which hopelessly weakened the entire industry. Reserve ratios – the percentage of deposited cash which is actually retained by the bank rather than lent out – has fallen from over 50% in the 19th century to 2-3% today (or a negative percentage in Northern Rock’s case). That could not have happened in a free market, at least not on an industry-wide scale; nobody would lend to a bank if it tried to take on that much leverage without a government guarantee. The banking industry had been rendered so unstable by government intervention that it was only a matter of time before it had a crisis, and the crisis could have been brought about by any number of proximate causes. Unfortunately most commentators blame the proximate causes, the particular individuals who happened to be involved at the time, and “free markets”. In a free market, firms fail from time to time; they aren’t bailed out, people don’t expect them to be bailed out, people arrange their affairs accordingly and so the failure of one firm doesn’t bring down an industry or an economy. Banks were a long way from being a free market. – “Some Guy” (that’s what he calls himself) commenting on the Bishop Hill piece also linked to below by Johnathan Pearce in connection with Matt Ridley’s inglorious career as a banker June 4th, 2010 | 26 comments - (Comments are closed)
This is a quick thumbnail of money supply for those of you having trouble finding understanding in the tsunami of Keynesian Kool-Aid coming from our ‘betters’. On October 3rd of 2008, Republicrats and Democans responded to the failure of Lehman Brothers, bankruptcy of Bear Stearns, incipient collapse of AIG Insurance, threatened insolvency of other major financial institutions, and general panic in the financial community, by passing Public Law 110-343. This law contained two basic sections. The most infamous brought us the first of the ‘TARP–ulus‘ genre. But a very important offsetting function was contained in another place in that same law that is known as the Emergency Economic Stabilization Act of 2008. Way down in the fine print, it authorized the Federal Reserve Bank to begin immediately paying banks to not loan out money. That was not their exact choice of words. In fact, read Section 128 where they did it and it is almost impossible to tell what exactly they were doing. Three days later on October 6th of 2008, the Federal Reserve Bank announced it would begin paying banks to not lend money. Again, not their exact choice of words. Within less than a month the Federal Reserve Bank began discreetly ‘monetizing’ by purchasing Fannie and Freddie debt. By March of 2009, attempts at discretion fell by the wayside and the Federal Reserve began buying US Treasurys outright. Put simply this means that the Federal Reserve began ‘printing’ money and giving it to the United States Treasury to spend. During this period of time (from September 2008 through current) the St Louis Adjusted Monetary Base went up by approximately 1 trillion dollars. Since that time, consumer prices have anomalously trended flat (click ‘view data’ for specifics) in spite of the adjusted monetary base more than doubling. How can this be? → Continue reading: Money supply, the stimulus & where is the inflation? June 3rd, 2010 | 52 comments - (Comments are closed)
June 1st, 2010 | 13 comments - (Comments are closed)
Mr Congdon said the dominant voices in US policy-making – Nobel laureates Paul Krugman and Joe Stiglitz, as well as Mr Summers and Fed chair Ben Bernanke – are all Keynesians of different stripes who “despise traditional monetary theory and have a religious aversion to any mention of the quantity of money” – This is the, er, money quote, so to speak, from an article by the erratic Ambrose Evans-Pritchard, quoting Tim Congdon May 27th, 2010 | 11 comments - (Comments are closed)
“The core problem over the past few decades was not bankers’ greed or the complex financial instruments that enabled them to satisfy it. It was the immense pyramids of debt built up by the Anglo-Saxon half of the world, and the equally massive mountains of savings created in the other. Almost everything that occurred in the past couple of years was, directly or indirectly, a consequence of this.” – Ed Conway, Daily Telegraph. He has not bought the whole free market line on what is wrong with finance today, but this is pretty good. May 25th, 2010 | 16 comments - (Comments are closed)
As recounted here in a justifiably passionate editorial about the European Union’s plans to beat up the City of London, we are reminded that, whatever the vote might have been in the May general election, that with qualified majority voting in the EU, states can – and do – gang up to put a particular country’s economic affairs in grave difficulty. Paris and Frankfurt have, in particular, resented the prosperity of the City. And as the recent travails of the euro show, there is precious little to be said for the supposedly wiser governnance of the euro zone. There was a certain amount of gloating after the US and UK got hit by the sub-prime mortgage meltdown (some of that gloating might have been justified) but it is quite clear that the rigidities of the euro zone remain a severe problem. Why we are in the EU again? May 17th, 2010 | 13 comments - (Comments are closed)
“Yes, we might all think that sending a virtual red rose over Facebook is silly but those sending them (and presumably to some extent those receiving them) do value them. And that value is what we measure when we talk about GDP and it is the creation of that value that allows people to make profits. There is absolutely nothing at all in the capitalist system, the free market one (these are two different things please note), the pursuit of profits or even continued economic growth that requires either the use of more limited physical resources or even the use of any non-renewable resource.” Tim Worstall, nicely skewering the idea that economic growth is the same as ever rising consumption of finite resources. Not the same thing at all. May 14th, 2010 | 7 comments - (Comments are closed)
Well, for all you gold bugs out there, here is a spiffy new banking facility, although it so far is confined to the Gulf. Ayn Rand and Ludwig von Mises would have approved, I’m sure. By the way, the price of gold is currently around $1,250, a new record. Given the various “quantitative easing” programmes of central banks in recent months, the hunger for the yellow metal is not surprising. I must say that at current levels, it does seem a pretty risky idea to push even more money into gold, since there has been so much of a rally already. If – and this is one hell of an if – some governments start to reduce their debt burdens and try to squeeze monetary growth in some parts of the world (like in Australia), then some of that “fear premium” in gold may start to fade. May 14th, 2010 | 17 comments - (Comments are closed)
Sam Bowman, whom I mentioned in my previous posting below about the IEA, responded by emailing me further proof that he is taking his Cobden Centre duties seriously:
Outstanding. And good on the IEA for lending them the place to do this. Badgering politicians is worth a go, because you can get lucky, and because even if they don’t listen, someone else might, especially in an age when letters can double up as internet postings. But politicians will mostly just do their thing, which is fire fighting the fires on their desks within the limits set by public opinion, or by what they suppose to be public opinion, and within the limits that they all set amongst themselves. What matters is the long-term intellectual struggle, that is, the process of creating the limits within which politicians and other decision makers will operate in the future. The above enterprise is a fine example of how you go about doing that. In the age of social media, blogs, emails and so on, it is tempting to suppose that personal contact is a bit superfluous. But I suspect that the most lasting impact of such novelties is creating and strengthening old fashioned face-to-face contacts, between people who might otherwise never have been introduced. I wonder if there is an upper age limit. May 13th, 2010 | 4 comments - (Comments are closed)
The Institute of Economic Affairs is the mothership of the free market think tanks, certainly in Europe. Or, it was. Because now, the IEA’s reputation is almost entirely based on the stir that it managed to make when it was presided over by the stellar duopoly that was Ralph Harris and Arthur Seldon. Those two men ensured that the classical liberal intellectual tradition remained alive in Britain, and they brought it, and the developing tradition of Austrian school economics, to bear on the failed Keynesian consensus of the 1960s and 1970s, laying the intellectual foundations for the Thatcherite economic rescue act of the 1980s. Harris and Seldon had always been very careful, first, to ground their activities in pro freedom scholarship. The intellectual war was what they cared about most. Seldon fought that war. Harris, although also a considerable warrior himself, concentrated on making sure that the war effort was paid for. Second, they were careful not to get too closely intertwined with the Conservative Party, to the exclusion of any others. They always kept their lines open to anyone who was willing to listen to what they had to say and to help them say it, of any party or of none. However, when age inevitably caught up with Harris and Seldon, the IEA then chose a man called Graham Mather as its new boss, who proceeded to use the place as his personal campaign office to turn himself into a Conservative MEP, while declaring that “the intellectual arguments have been won”. Mather was hurriedly dumped, and under John Blundell’s leadership the IEA then did rather better, even if it never really lit up the landscape like it had in the old days. To switch metaphors from fireworks to aviation, under Mather, the IEA was crashing earthwards and was about to burn up completely. Under Blundell it glided near horizontally, not at all disastrously, but without any upward impetus that I could see. When I heard that the Institute of Economic Affairs had, however long ago it was, appointed as their new boss Mark Littlewood, whose previous job was as a media relations person for the LibDems, I reacted with indifference. I hardly, that is to say, reacted at all. Mark Littlewood has clearly always understood what classical liberalism and libertarianism are all about, and has done as much of them as he could, given the day jobs he has had. He has always been a friendly and civilised presence, albeit rather too EUrophile for my liking, at the various Libertarian Alliance events I have seen him at over the years, at quite a few of which he has spoken. Nevertheless, I assumed that in hiring such a person, the IEA was merely going to throw a big chunk of its still impressive stash of money at a pointless media-based charm offensive, which would achieve nothing. Pick a nice chap, with lots of contacts in politics and in what they used to call Fleet Street, hope for the best and get nothing very much. After a few years, Littlewood would move on. In due course, the building would be sold and the IEA would move from Westminster to somewhere or to nowhere. Its few surviving supporters would become even more geriatric. Another member of the Political Class, more unscrupulous than Mark Littlewood and cut from the same cloth as Graham Mather, would move in and hoover up all the remaining money, and that would be that. Way of the world. Old order giving place to new. Such is life. Such is death. I never really thought any of this through, apart from the Mather episode, when I became tangentially involved as a junior advocate for the team that ousted him. I merely realise, now, that the above sentiments about Littlewood were what I was thinking, insofar as I was thinking anything at all. The point being that as far as the IEA was concerned, and like many others, I had pretty much stopped thinking. So it was that when I got invited to a Libertarian Alliance dinner about a fortnight ago, at which Mark Littlewood was to speak about how he was setting about his various IEA tasks, I did not, as they say, jump at the invitation. I merely, having nothing else fixed, said yes and went along, expecting little more than some nice food. But as soon as Mark Littlewood started talking, I realised that I had been seriously misjudging him. → Continue reading: Mark Littlewood and the future of the Institute of Economic Affairs May 12th, 2010 | 9 comments - (Comments are closed)
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