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This afternoon I attended an event in the House of Commons organised by the Adam Smith Institute, to launch their publication (published in partnership with the Cobden Centre) entitled The Law of Opposites: Illusory profits in the financial sector, by Gordon Kerr. Kerr himself spoke.
Alas, Gordon Kerr is a rather quiet speaker, and he did not use a microphone. Worse, after the talk had begun, I realised that right there next to me was some kind of air conditioning machine whirring away, in a way that made following Kerr’s talk difficult. Live and learn.
But I got the rough idea. Bad accountancy rules make disastrously unprofitable banks seem like triumphantly profitable banks, and those presiding over these banks are paid accordingly, even as their banks crash around them. And much more. The ASI’s Blog Editor offers further detail.
Good news though. I, like everyone else present, was given a free copy of The Law of Opposites. See if you can spot why I am reproducing the cover here. I am sure this will not take you long. I was interested to see if the effect in question would survive my rather primitive scanning skills. It does:
This publication is quite short, less than a hundred pages in length. Even better news. You don’t have to buy a paper copy like the one I now possess if you don’t want to. You can read the whole thing on line.
I am sure there is some anti-EU moral to be squeezed out of this strange song of worship for a big (and apparently real) German excavator built by Krupps, possessed of a artificial mind, feared even by Beelzebub and used for fighting Godzillas.
My title comes from a comment by one crashstitches79.
Perhaps there is more of a pro-EU moral? Or an anti-Godzilla moral. Awesome, regardless.
I rarely write about party politics as I think it is a waste of time, given that the two and a half main parties in Westminster are largely interchangeable and simply despise them all with an icy passion. But I will make an exception today…
Cameron, far from being a smart political operator, could not even gain a majority for his party against a detested Labour government at the last election. But by saying ‘no’ to Merkozy, he has actually done something that almost 60% of the country appear to approve of. And it has made his LibDem coalition partners publicly incandescent with rage… and therefore also uniquely vulnerable.
So the smart move is to finally tell Nick Clegg to get stuffed and to call a snap General Election. Go ‘nuclear’ and do it right now, whilst the advantage is for once very clearly in the Tory Party’s court. If the LibDems and Labour want a shot at forming a coalition, well give them what will be a ‘hospital pass’ and let them try.
But then this is the Tory Party we are talking about of course, and it would be fair to say they rarely miss an opportunity to miss an opportunity. More likely he will just sit there looking smug and wait for the initiative to pass over to his political enemies once again.
I am on the Cobden Centre email list, and I have to be careful about confidentiality with regard to many of the emails I read. However, the one I just got today from Jamie Whyte is presumably intended to get around:
I’m on BBC’s Radio 4’s PM programme tonight, discussing the report on the FSA’s failure to notice that RBS was about to fail – up against some former official of the FSA. I am afraid they are going to edit what I said (fingers crossed on that) and also that I cannot tell you the exact time my item will come on the programme, which starts at 5pm, I think.
The FSA is the British financial regulator. RBS is the Royal Bank of Scotland. According to the man from the FSA, the Royal Bank of Scotland’s woes were caused by poor decisions.
I’m guessing that Jamie Whyte will be a bit more informative than that. I am out and about this evening, but it looks like there’ll be a recording available, for a while. If nothing else, this is further evidence that the Cobden Centre gang are putting themselves about.
LATER: I managed to listen to Jamie Whyte’s performance, and better, to record it. Here is what he said in his opening statement:
[The FSA] did fail. But I don’t blame it on the individuals of the FSA. I think that they have an impossible task. What’s happened in banking is that because of government guarantees to those people who lend money to banks, explicitly in the case of retail depositors – you and me with our ordinary money in the bank, and implicitly and pretty reliably in the case of wholesale lenders to banks, because they’re government guaranteed, there is no price mechanism any longer in the banking market for risk. So banks can take as much risk as they like and without paying a price for it. Normally what would happen in a free market is that it would become more expensive for banks to borrow money. And that doesn’t happen. There’s no risk premium for banks taking larger risks, because the people lending the money realise that the government will bail them out.
Now the effect of this is that basically the government is subsidising bank risk taking on a massive scale. And the job of the FSA is to counteract that. There are these rules – the Basel rules and so on about capital requirements. And then there are supervisors, regulators, people who go into the banks and check they’re complying, and their job is to counteract the massive incentive towards risk taking that the government has already provided. Now the question is: can they do it? They obviously failed to do it. Can they, if they do a better job? And I think they can’t.
And the reason they can’t is that there are almost infinitely many ways that banks can take risks. The rules will always specify some particular ways, and regulators will go in, looking at that stuff. Are they doing this or that? But the bankers are very clever and they can always come up with other ways of taking risks, and I just think it’s a hopeless task that they’ve been given.
Whyte’s opponent in the debate, a Mr Jackson, got off on the wrong foot at the start of his reply:
I think it’s very easy to blame the regulators.
Which many are indeed doing, but not Jamie Whyte. His point was that their task is impossible.
Mr Jackson went on to say that he thought that the regulators could do better, by, you know, doing better. And the BBC gave him the last word. Which was him saying that the regulators could indeed … do better.
But Jackson never really said why he thought this. There was talk of cats and mice, and of how the mice are very numerous and very incentivised and the cats unable to cope. The general idea was aired of making regulators less numerous, better paid and above all “better trained”, and of having these few regulatory titans apply only one simple all-embracing regulation, rather than lots of regulations (with lots of omissions), namely: Banks must behave well! Putting the regulators entirely in charge of banking, basically, although that was not quite spelt out. It was classic Road to Serfdom stroke Economic Calculation stuff, with one guy saying that calculation is screwed and should be unscrewed by the state retreating rather than advancing, and the other guy saying: we can still regulate better in the future (despite the evidence of the recent past), by making the arbitrary power of the state even more arbitrary and even more powerful (and hence even more likely to screw things up on an even grander scale in the future).
Just who “won” this argument is anybody’s bet. I think that Whyte made a much stronger case than his opponent, but I would, wouldn’t I?
More to the point, anyone generally inclined to favour free markets, capitalism, etc., to favour rational economic calculation and to oppose serfdom, would definitely have scored it a win for Whyte on points. Such a person might even want to dig further into the argument with some internet searching. At which point the fact that Whyte is spelt with a “y”, and that Whyte was introduced only as a “financial commentator” (rather than being from, say, the Cobden Centre) won’t have helped any.
Perhaps this posting will help such searchers after truth rather more.
“Yes indeed, Britain is on the outside: left out of this idyll of anti-competitive regulation and tax harmonisation. I can remember when the greatest Eurosceptic nightmare was a “United States of Europe”. They should be so lucky. The United States of America has nothing like this ferociously imposed central control over the budgets of its member states. Nor does it require tax harmonisation among them. The states of the American union have independent tax systems: apart from federal income tax, the taxes that US citizens pay are determined by the states they are in. Some of those states have high property and death taxes – others (like Nevada, where the revenue from gambling pays for almost everything) have low ones. Some have sales taxes and specific duties which others do not. Hence the great American tradition of driving across state lines in order to buy cheaper alcohol.”
– Janet Daley.
Obama Must Go.
The only shock is why this has not become a meme before now.
So all the UK is isolated from is an impending disaster: the eurozone will fragment with countries leaving and debt defaults. It is like being as isolated as a man who failed to get onto the Titanic before it sailed.
– Terry Smith
I cannot claim to grasp much of the detail of all the drama now surrounding the EUro. This photo, taken by me yesterday, captures the feeling of it all quite well:
Click to get that bigger and more legible.
Is all this drama being cranked up to enable Cameron to take the credit from us Brits for bollocking up the Euro, and simultaneously to enable everyone else in EUrope to blame us? Just, as Americans say, askin’.
One little titbit of news that does strike me as particularly interesting is this, in the Wall Street Journal, about how various governments are quietly pondering EUro-alternatives. At the very least, someone at the Wall Street Journal is asking about alternatives.
It all makes me think of those bridges that Julius Caesar burned, so that his army then knew that they would either fight and win, or perish. Except that this time, various parts of the army are nipping back to the various rivers that they just might be wanting soon to be retreating across, and are quietly building bridges. Just as burning bridges changes the game, so does building them. Even thinking about building them changes things.
I greatly enjoyed this article by Kevin D. Williamson about Thomas Sowell. Sowell is now in his eighties. When somewhat younger, he looked like this:
Here is what is probably the key paragraph in Williamson’s Sowell piece:
Because he is black, his opinions about race are controversial. If he were white, they probably would be unpublishable. This is a rare case in which we are all beneficiaries of American racial hypocrisy. That he works in the special bubble of permissiveness extended by the liberal establishment to some conservatives who are black (in exchange for their being regarded as inauthentic, self-loathing, soulless race traitors) must be maddening to Sowell, even more so than it is for other notable black conservatives. It is plain that the core of his identity, his heart of hearts, is not that of a man who is black. It is that of a man who knows a whole lot more about things than you do and is intent on setting you straight, at length if necessary, if you’d only listen. Take a look at those glasses, that awkward grin, those sweater-vests, and consider his deep interest in Albert Einstein and other geniuses: Thomas Sowell is less an African American than a Nerd American.
My strong is Williamson’s italics.
I’d never thought of Sowell as being anything like this guy …
But yes, I guess maybe there is a resemblance. Here is link to a brief snatch of video of Moss saying something very Sowellish, about the importance of getting a good education.
By the way, I am not calling the actor and director Richard Ayoade a nerd. I don’t know about that. But I do know, as do all who enjoy The IT Crowd, that Ayoade’s TV creation, Moss, most definitely is a nerd, and a nerd first and a black man way down the list, just as Williamson says of Sowell.
Although, as a commenter said of this bit of video: “Richard has a bit of Moss in him.” A bit, yes. But what has really happened is, surely, that Ayoade was a nerdy kid, and has kept hold of it for comic purposes.
I suspect Sowell did something similar, and, as Williamson suggests in his article, in a more courageous and significant way. He too was a genuinely nerdy kid, who could understand truth better than he understood the demands of fashion. Then, when he got older and started to tune into the zeitgeist, he had to decide if he was going to shape up and get with the liberal (in the American sense) fashions of his time or stick with that truth stuff he had got to like so much. He stuck with the truth.
Also, I don’t believe Sowell would ever remove a water tank (see the second of the two video links above) and then be surprised that his plumbing no longer worked properly.
Whilst reading a discussion on the state of Social Security I noticed some conceptual errors, which if not corrected, could lead to very bad results.
Social Security is not a welfare program. It is not a wealth redistribution program. It was created in FDR’s time as a one size fits all retirement fund. Every working person is forced to pay a percentage of their income into it so that upon retirement, they will continue to live in a life style similar to the one they had before retirement. At the time this idea was sold to the public, pure redistributive Socialism and welfare simply were not acceptable ideas in polite society.
If someone from a conservative view point puts forth an argument that applying a means test is a way to save Social Security, a way to turn it into a ‘social safety net’, they are buying into a deadly shift in the ground rules of the argument. Once you agree your pay out from Social Security need not reflect your pay in, you have left the field of play. You have handed the game over to the Socialists and made Social Security a welfare program. It becomes yet another redistribution program ‘for the poor’.
No one should fall into that trap. Social Security is an alternate to private retirement savings plans. It was created out of a mind set that said individuals are not adult enough to save for their own retirements. It was created out of a mind set that said private entities could not be trusted to hold such investments and pay them back as promised.
The terms of the discussion we should be taking part in is that not only are these statements false, they are disastrously, blatantly false. When a private program fails, some number of people are indeed harmed. When the time comes to pay the piper on the Government program, millions upon millions of people will be screwed out of their retirement savings.
We can also make the argument that politics has allowed the entirety of Social Security to become an enterprise so flawed that if similar actions occurred in a private company, they would be decried as criminal offences. Individuals carrying out such schemes would be compared to Bernie Madoff. They would be worse than Bernie: by comparison he ruined the lives of a very small number of Americans, not many tens of millions. Social Security proves yet again that the government is incapable of running pretty much anything. If you want a disaster, let the politicians run it.
When the collapse finally arrives and the Ponzi scheme can go no further; when the taxpayer can no long bail out a failed scheme and hide the criminal nature of it all, I very much hope thousands are indicted for the crime. Every person who served in Congress and the Senate who voted to raid the program or undermined the T-Bills on which it rests and every bureaucrat who ever worked for the Social Security Administration who went along with the fraud deserves a long prison sentence.
We need to give poor Bernie some company after all, and he can learn how it is done by the real Pro’s.
By the end, we may see profligate politicians hanging from lampposts. But there’ll be a lot of bad stuff, too.
– Instapundit
LATER:
But all joking aside, if the current profligacy continues, and America winds up in a Greece-style (or worse) collapse, politicians may not wind up hanging from lampposts (we don’t really do that here), but they will at the very least likely face the kind of investigations, prosecutions, and social opprobrium normally reserved for child molesters and Bernie Madoff types. I don’t think they fully appreciate that. If they did, they’d be acting differently.
Indeed. Press release from these guys:
Good luck with that.
Seriously, good luck with that.
I will try to be there.
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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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