Samizdata

It is difficult to get one’s mind around the vast sums of taxpayers’ money that British finance minister Gordon Brown has planned to hurl at our public sector. The sums are mind-numbing. The spending plans are predicated on some pretty rosy forecasts for the British economy over the next few years, not to mention some fairly dubious accounting methods which reduce the potential bill to the taxpayer from infrastructure projects.

Those rosy forecasts could easily fail to materialise, particularly as mounting red tape, higher taxes and growing interference from the EU clogs the arteries of the UK economy. What is beyond doubt in my mind is that “New Labour”, that strange political entity supposedly different from old tax-and-spend Labour, is dead. Central control of finance, big spending, handouts for the public sector unions – the whole unlovely mix is back. And of course Brown’s announcement on Monday of this spending mania was accompanied by a sharp fall in British equities to the lowest levels in six years. Of course much of the damage to stocks stems from events in the U.S., mired as it is in accounting scandals. But one cannot help but conclude that Brown’s charmed existence for the first five years of his time in the job is about to get a lot rougher.

There may be some upside to all this. Brown’s attempt to improve our creaking health and education system may prove the futility of state monopoly as the ideal way to deliver good service and give the opposition Conservatives ammunition for the case for root and branch reform. But I would not bet the farm on it just yet.

Paul Staines thinks Alan Greenspan as a canny operator who requires some careful interpretation

Yep, the 80s are over, Gordon Gekko is dead and buried, Gordon Brown lives, the stock market is going to the Antarctic, CEOs are going to jail and now the high priest of central banking himself says greed got out of control in the 90s.

I admit to never understanding why Disney’s Eisner would be motivated to work Mickey Mouse harder if he had $300m in stock options instead of $100m, but hey, I thought it was up to the shareholders to decide rather than the readers of the New York Times. Enron was pretty bad, the accountants seem to have been looking the other way and the CEOs were acting like robber barons of yore.

Today the Federal Reserve chairman Alan Greenspan was giving his biannual testimony to congress. Markets stop and listen, particularly when they are in trouble – and boy are they trouble today – I had CNBC (“bubblevision”) playing him live whilst trying to figure out how not to lose money, I heard him say “the latter part of the 1990s … arguably engendered an outsized increase in opportunities for avarice. An infectious greed seemed to grip much of our business community..”

Guilty as charged. For a period in 1999 to 2001 whilst the NASDAQ got gloriously irrationally exuberant, I was completely infected with greed, my altruistic immunity system shutdown. Hot dot.com IPOs? “Gimme, gimme, gimme” I cried. “Yahoo! Lets go Cisco!” I wasn’t the only one, an old friend is currently staying with me. He is a private banker, he grew his family’s nest egg 2000% in four years, then wiped it out in one year. His wife is suing him, not for divorce, but for misadvising her in his capacity as her broker. (Memo to self, never marry an American lawyer).

Greenspan has been very clever in his testimony, he has defended capitalism whilst decrying capitalists and their avarice. He basically said the bull market gold rush of the 90s overwhelmed the checks and balances of American capitalism, but capitalism is good, just some capitalists are bad. I could further summarize what he said but why not click to the Fed’s own page for yourself?

Oh, one of the big insurance companies has just announced that it “is not a forced seller of equities”. Hmmm.

Paul Staines