Tuesday, 30 December 2008
Another interesting prediction of the credit crisis from 2005
Came across reference to this book - http://www.amazon.com/Second-Great-Depression-Warren-Brussee/dp/1591136881 - haven't got a copy myself (and have no financial interest in promoting the book) - but reading the summaries gives you a feel for what Mr Brussee covers.
Why Gormless Clown is wrong to say he wasn't warned
Gormless Clown will keep trying to tell people that the recession in the UK is not his fault.
This article from the Daily Telegraph on 12 July 2006 (a year before Northern Rock while he was still Chancellor) proves hm wrong:
'City faces meltdown if debt crisis hits' - http://www.telegraph.co.uk/finance/2943149/'City-faces-meltdown-if-debt-crisis-hits'.html.
Well done to Edmund Conway and the team for bringing this to our attention again.
This article from the Daily Telegraph on 12 July 2006 (a year before Northern Rock while he was still Chancellor) proves hm wrong:
'City faces meltdown if debt crisis hits' - http://www.telegraph.co.uk/finance/2943149/'City-faces-meltdown-if-debt-crisis-hits'.html.
Well done to Edmund Conway and the team for bringing this to our attention again.
Friday, 12 December 2008
Keep government out of childcare
Please read the following article from Tom of the Idler - it is spot on:
http://www.telegraph.co.uk/family/3534184/Parenting-The-Idle-Parent.html .
Thank you Tom.
http://www.telegraph.co.uk/family/3534184/Parenting-The-Idle-Parent.html .
Thank you Tom.
Friday, 5 December 2008
Thank you Professor Philip Booth
Today's Telegraph had a very interesting article (http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/12/05/do0503.xml#comments) from Professor Philip Booth, the editorial and programme director at the Institute of Economic Affairs.
Before reading it you should understand that, in the good Professor's own words: "I did joke to somebody this morning that the headline should have read: "Rapid, unexpected deflation will harm a lot of people" but then not many people would have read the article."
It's a shame the sub-editors did not consult the author or read the article - it might have prevented a lot of readers from getting so hot under the collar (though that might make their posting less interesting).
Finally, I'd like to thank the Professor for his kind comments in response to my postings, when he said: "I like all the Austrian stuff on your blog." I have to confess that I'd never thought of my postings as being Austrian (I take it he is referring to a particular school of economic thought and not my Tyrolean window boxes) but I will now take time to read up on the subject.
Before reading it you should understand that, in the good Professor's own words: "I did joke to somebody this morning that the headline should have read: "Rapid, unexpected deflation will harm a lot of people" but then not many people would have read the article."
It's a shame the sub-editors did not consult the author or read the article - it might have prevented a lot of readers from getting so hot under the collar (though that might make their posting less interesting).
Finally, I'd like to thank the Professor for his kind comments in response to my postings, when he said: "I like all the Austrian stuff on your blog." I have to confess that I'd never thought of my postings as being Austrian (I take it he is referring to a particular school of economic thought and not my Tyrolean window boxes) but I will now take time to read up on the subject.
Redefining deflation
Our current problems were caused by the misguided notion that in a free market the state should still dictate the price of money through control of the base rates. Artificially forcing rates low has led to the mis-pricing of risk and a gross mis-allocation of resources into assets such as property (which is why the price of domestic property is still way above its economic value in terms of the cost of housing services).
Yes, low inflation is better than high inflation (as Zimbabwe knows) - but a genuine free market would see the cost of money being set by the market to reflect the genuine risks of lending money (which are currently quite high) if that leads to falling prices so be it.
So let's change the word deflation to digestion and recession to retrenchment - then we can all be happier about falling prices. OK so it hurts (particularly at an individual level) but so does inflation.
However, whereas inflation leaves you penniless, debt ridden and leveraged to the hilt just in time for the next crash, digestion helps consolidate wealth in the hands of prudent savers while cutting out excess capacity and speculation from the system.
State employees will also enjoy seeing a sharp rise in their real income. And people will use their capital goods more efficiently (so rather than buying a new car every year, people will drive more carefully and car makers will transform into car make-over technicians).
There will be less junk going to landfills, our ceaseless and senseless quest for new modes of consumption will slow and people will buy assets because of their effective yield rather than in the hope of price rises (so people will buy houses as if they were going to rent them to themselves - take a look at some of the buy-to-let calculators if you want to see what your house is really worth to you in terms of "lifetime cost of housing services").
Asset prices won't fall to zero simply because eventually they will reach a point where they make economic sense (when buying a new car makes more sense than reconditioning the one I have, when buying a house is cheaper than renting - taking into account the opportunity cost using my savings as a deposit).
In a couple of years time I should be able to buy a nice house with my deposit not a one bed flat. Now where's the problem with that?
Yes, low inflation is better than high inflation (as Zimbabwe knows) - but a genuine free market would see the cost of money being set by the market to reflect the genuine risks of lending money (which are currently quite high) if that leads to falling prices so be it.
So let's change the word deflation to digestion and recession to retrenchment - then we can all be happier about falling prices. OK so it hurts (particularly at an individual level) but so does inflation.
However, whereas inflation leaves you penniless, debt ridden and leveraged to the hilt just in time for the next crash, digestion helps consolidate wealth in the hands of prudent savers while cutting out excess capacity and speculation from the system.
State employees will also enjoy seeing a sharp rise in their real income. And people will use their capital goods more efficiently (so rather than buying a new car every year, people will drive more carefully and car makers will transform into car make-over technicians).
There will be less junk going to landfills, our ceaseless and senseless quest for new modes of consumption will slow and people will buy assets because of their effective yield rather than in the hope of price rises (so people will buy houses as if they were going to rent them to themselves - take a look at some of the buy-to-let calculators if you want to see what your house is really worth to you in terms of "lifetime cost of housing services").
Asset prices won't fall to zero simply because eventually they will reach a point where they make economic sense (when buying a new car makes more sense than reconditioning the one I have, when buying a house is cheaper than renting - taking into account the opportunity cost using my savings as a deposit).
In a couple of years time I should be able to buy a nice house with my deposit not a one bed flat. Now where's the problem with that?
Beware of the Dolores Umbridges of the world
We should be more scared of the Dolores Umbridges of the world than of any number of death-eating terrorists. These are the people who tell us that we have nothing to fear from their new laws – because they would never abuse them in the ways imagined. Yet both the admission and the threat are implicit - the admission that the powers might be draconian in the ‘wrong’ hands and the threat that we should be fearful of ever voting for anyone else (“Mother knows best, Mother will protect you” – and in the end we become a nation of Sharon Matthews, doped out of our minds on propaganda and cowering under our metaphorical beds).
Terrorism, while devastating to individuals, families and communities (as the horrific events in Mumbai show) is as nothing compared with state sponsored terror – just look at Sudan, Zimbabwe, Chechnya etc.
Even now in this country we see the creeping, insidious low level terror of an increasingly draconian society: can you remember when Dixon of Dock Green turned into Judge Dredd; when traffic wardens went from being figures of fun/ridicule to being sources of fear and intimidation, when putting out your bins stopped being a convenience and became a cause of concern, when people stopped gently correcting minor infringements of civil behaviour and started using the jackboot ASBO (based on hearsay not evidence) to intimidate and criminalise those with whom they disagree?
When terrorism becomes institutionalised, then all our liberties are threatened and with them our modern, society of enlightened self-interest: particularly when you have a government apparently willing to "do anything" and "whatever it takes" to stay in power.
However, rather than face up to the charge that their ‘progressive’ policies are in fact regressive and leaving us vulnerable to attack from within, this government takes the route of all desperate regimes, which is to disparage dissent. To give just a few examples, they have dismissed well founded questions and criticisms of policies and actions as:
“unpatriotic”
“party political”
“despicable”
“unwarranted speculation”
“playing politics with security”
“a council of despair”
“dangerous”
“undermining public respect for politician”
“alarmist”
“sanctimonious cant”.
As a first step to countering this reluctance to engage with the issues, we urgently need to de-politicise the Civil Service. The best way would be to make the Civil Service answerable to Parliament, not the government of the day. All reports and papers would be made freely available to all members of parliament. If that is a step to far then at the very least the shadow cabinet should see exactly what the real cabinet sees from civil servants (obviously internal party documents could stay confidential). This way the opposition and parliament would be as well briefed as the government. Debate would be better informed and more open. There would be no need for leaks. Perhaps then we would have had a more open debate about the merits of bidding for the Olympics – and maybe even a more informed debate on the issue of WMD in Iraq.
Richard Feynman urged research scientists to publish all their results - not just the ones that supported a particular view - an impartial Civil Service should do the same.
Terrorism, while devastating to individuals, families and communities (as the horrific events in Mumbai show) is as nothing compared with state sponsored terror – just look at Sudan, Zimbabwe, Chechnya etc.
Even now in this country we see the creeping, insidious low level terror of an increasingly draconian society: can you remember when Dixon of Dock Green turned into Judge Dredd; when traffic wardens went from being figures of fun/ridicule to being sources of fear and intimidation, when putting out your bins stopped being a convenience and became a cause of concern, when people stopped gently correcting minor infringements of civil behaviour and started using the jackboot ASBO (based on hearsay not evidence) to intimidate and criminalise those with whom they disagree?
When terrorism becomes institutionalised, then all our liberties are threatened and with them our modern, society of enlightened self-interest: particularly when you have a government apparently willing to "do anything" and "whatever it takes" to stay in power.
However, rather than face up to the charge that their ‘progressive’ policies are in fact regressive and leaving us vulnerable to attack from within, this government takes the route of all desperate regimes, which is to disparage dissent. To give just a few examples, they have dismissed well founded questions and criticisms of policies and actions as:
“unpatriotic”
“party political”
“despicable”
“unwarranted speculation”
“playing politics with security”
“a council of despair”
“dangerous”
“undermining public respect for politician”
“alarmist”
“sanctimonious cant”.
As a first step to countering this reluctance to engage with the issues, we urgently need to de-politicise the Civil Service. The best way would be to make the Civil Service answerable to Parliament, not the government of the day. All reports and papers would be made freely available to all members of parliament. If that is a step to far then at the very least the shadow cabinet should see exactly what the real cabinet sees from civil servants (obviously internal party documents could stay confidential). This way the opposition and parliament would be as well briefed as the government. Debate would be better informed and more open. There would be no need for leaks. Perhaps then we would have had a more open debate about the merits of bidding for the Olympics – and maybe even a more informed debate on the issue of WMD in Iraq.
Richard Feynman urged research scientists to publish all their results - not just the ones that supported a particular view - an impartial Civil Service should do the same.
Thursday, 4 December 2008
Finding loopholes in Brown's scam
Here's how a fictitious parishioner of mine (with a £450K house and an a £350k mortgage) might already be planning to exploit this scheme.
She is transferring savings into her children's names (in trust to pay the private school fees), she is buying a two new cars (one to "garage for the future"), she is buying more art and jewellery (high class stuff that will "hold its value") and she is adding to her wine "savings plan" with BB&R - all of which she will simply not declare - "I will show them my three bank statements all overdrawn and my unpaid credit card bill and plead poverty". She will be made redundant in 8 months time (she knows this because she runs her own company - and "it makes strategic sense").
I have no idea if what she is planning will work - but I do know that she is not the only one seeing this scam as a chance to work their own scam. I guess this means the government will employ even more "means testing officers" in strategic marginal seats to administer this byzantine system. But I doubt they are as clever as the professional scammers.
So say after me, nice and fast now, just like in the old Pepsi ads: "vote buying, saver screwing, tax wasting, resource mis-allocating, market distorting, liberty destroying, bubble blowing, mis-managing, deceit spinning, desperate "do anything" Labour!"
She is transferring savings into her children's names (in trust to pay the private school fees), she is buying a two new cars (one to "garage for the future"), she is buying more art and jewellery (high class stuff that will "hold its value") and she is adding to her wine "savings plan" with BB&R - all of which she will simply not declare - "I will show them my three bank statements all overdrawn and my unpaid credit card bill and plead poverty". She will be made redundant in 8 months time (she knows this because she runs her own company - and "it makes strategic sense").
I have no idea if what she is planning will work - but I do know that she is not the only one seeing this scam as a chance to work their own scam. I guess this means the government will employ even more "means testing officers" in strategic marginal seats to administer this byzantine system. But I doubt they are as clever as the professional scammers.
So say after me, nice and fast now, just like in the old Pepsi ads: "vote buying, saver screwing, tax wasting, resource mis-allocating, market distorting, liberty destroying, bubble blowing, mis-managing, deceit spinning, desperate "do anything" Labour!"
Brilliant post by Howard Wiley
Thank you to Mr Howard Wiley who posted the following pithy defence of capitalism on the Daily Telegraph website (and for giving me permission to quote him on this site) - while Mr Wiley might not agree with anything I say - I agree with every word of the following.
"Capitalism isn't about fractional reserve banking or irresponsible lending. Capitalism doesn't allow fiat money or destructive Keynesism. It is not robbing off one and giving to the other. That's tyranny (taxation).
In a true Capitalist society, you only get what you earn, to spend it on what you will. Important: Investment comes from saving, not borrowing. Evan Marx knew that. Governments don't like it because in a Capitalist system you couldn't raise the money for massive projects like war without going cap in hand to the tax payer. Do you think we'd be in Afghanistan if the Government had to come to us for extra taxes to build a war chest?
Capitalism is based on transaction and is the only truly human system of monetary policy. If I make something you want at a price you can afford, you'll buy it. If I don't, you won't and I'll go bust. Socialists can't go bust (the ultimate regulator) so in a socialist system everything get's corrupted.
Nobody deserves anything except their liberty. A demand is not a right and with freedom comes responsibility."
Posted by Howard Wiley on The Daily Telegraph website - December 4, 2008 10:24 AM
"Capitalism isn't about fractional reserve banking or irresponsible lending. Capitalism doesn't allow fiat money or destructive Keynesism. It is not robbing off one and giving to the other. That's tyranny (taxation).
In a true Capitalist society, you only get what you earn, to spend it on what you will. Important: Investment comes from saving, not borrowing. Evan Marx knew that. Governments don't like it because in a Capitalist system you couldn't raise the money for massive projects like war without going cap in hand to the tax payer. Do you think we'd be in Afghanistan if the Government had to come to us for extra taxes to build a war chest?
Capitalism is based on transaction and is the only truly human system of monetary policy. If I make something you want at a price you can afford, you'll buy it. If I don't, you won't and I'll go bust. Socialists can't go bust (the ultimate regulator) so in a socialist system everything get's corrupted.
Nobody deserves anything except their liberty. A demand is not a right and with freedom comes responsibility."
Posted by Howard Wiley on The Daily Telegraph website - December 4, 2008 10:24 AM
Mortgage bail out - just another big con!
Someone with a £400k mortgage (that's 10 times the average household income and would buy a house worth more than twice as much as the average house) and savings of LESS than £16k does not need sympathy or support they need a hard lesson in prudence - and if that means losing their home so be it.
To hell with the economists and meddling politicians who got us into this mess. Brown is simply screwing savers, people who rent, the self employed, the retired (who have prudently paid of their mortgage) and the taxpayer. Quite frankly, if you can't be arsed to save enough to have savings of at least 10% of the value of your mortgage (so savings of £16k would means a mortgage of no more than £160k)then you deserve to suffer if you suffer a drop in income and you have only yourself to blame.
The average household (not person - household) has income after tax and benefits of £35,000 a year. In fact 80% of households have incomes of less than £40,000 a year. The average income of the top 20% income earning households is less than £60,000 a year. (All ONS stats for 2007).
So this is very much helping to bail out the highest earners who haven't bothered saving (or have but have used various dodges so that it won't affect their means testing). Expect to see some very well healed people still swanning around in their big cars (bought on the never-never) as they get an interest holiday on their mortgage. (Presumably if they can't keep up payments on their car Gormless will give them a break on that too!)
This does not solve the problem that houses are still ridiculously over priced (compared with rental values and average incomes) and need to fall in value.
Gormless presided over govt policy that encouraged this bubble - by distorting the measures of inflation and by constantly talking up the market with the myth of a housing shortage (yes, maybe long term, but no not at all at the moment - hence a glut of properties for rent and sale and 1m standing empty).
So there you have it: More vote buying - more savers screwed - more tax wasted - more mis-allocation of resources - more distortion of markets - more bubble blowing - more desperate bankrupt policies from a dangerously desperate "do anything and whatever it takes" to stay in power government of discredited socialists. Shame they never do the right thing and admit their mistakes and resign.
Oh - and by the way - "SAVINGS GATEWAY" - who the heck is Gormless kidding - there's no point saving with this bunch of socialists. Savings get zero interest today but will be destroyed by inflation in five years time and then taxed and means tested to oblivion. They don't want you to save they want you to spend, spend, spend! But then who will be left to pick up the tab?
To hell with the economists and meddling politicians who got us into this mess. Brown is simply screwing savers, people who rent, the self employed, the retired (who have prudently paid of their mortgage) and the taxpayer. Quite frankly, if you can't be arsed to save enough to have savings of at least 10% of the value of your mortgage (so savings of £16k would means a mortgage of no more than £160k)then you deserve to suffer if you suffer a drop in income and you have only yourself to blame.
The average household (not person - household) has income after tax and benefits of £35,000 a year. In fact 80% of households have incomes of less than £40,000 a year. The average income of the top 20% income earning households is less than £60,000 a year. (All ONS stats for 2007).
So this is very much helping to bail out the highest earners who haven't bothered saving (or have but have used various dodges so that it won't affect their means testing). Expect to see some very well healed people still swanning around in their big cars (bought on the never-never) as they get an interest holiday on their mortgage. (Presumably if they can't keep up payments on their car Gormless will give them a break on that too!)
This does not solve the problem that houses are still ridiculously over priced (compared with rental values and average incomes) and need to fall in value.
Gormless presided over govt policy that encouraged this bubble - by distorting the measures of inflation and by constantly talking up the market with the myth of a housing shortage (yes, maybe long term, but no not at all at the moment - hence a glut of properties for rent and sale and 1m standing empty).
So there you have it: More vote buying - more savers screwed - more tax wasted - more mis-allocation of resources - more distortion of markets - more bubble blowing - more desperate bankrupt policies from a dangerously desperate "do anything and whatever it takes" to stay in power government of discredited socialists. Shame they never do the right thing and admit their mistakes and resign.
Oh - and by the way - "SAVINGS GATEWAY" - who the heck is Gormless kidding - there's no point saving with this bunch of socialists. Savings get zero interest today but will be destroyed by inflation in five years time and then taxed and means tested to oblivion. They don't want you to save they want you to spend, spend, spend! But then who will be left to pick up the tab?
Wednesday, 3 December 2008
ID Cards will be compulsory - and enforcement will be draconian.
Stop kidding yourself that ID Cards will be anything but compulsory.
When a dangerously desperate government spends so much money and political capital on such a despotic tool of state as ID Cards then it is self-evident that it will "do whatever it necessary and whatever it takes" to force people to use the cards.
Some ideas will seem innocuous at first (identifying yourself for public services such as library cards) but will become increasingly intrusive (entry to any public building, use of public transport... until it includes such things as entry to any public space, park, shopping centre) and enforcement of the petty rules will become increasingly draconian.
Just see what they have done with bin-collection and the anti-terror laws (which should be renamed the "local government right-to-terrorise laws").
This is all part of the socialists' overriding ambition, which is to control all aspects of our public and private lives in an attempt to control the economy and the country ("Blue ID card holders - your shopping day is Thursday and this week you need to buy double your quota of shop-soiled tat").
Hayek warned us of this sad progress in "The Road to Serfdom" - if you read only one book this Christmas make it this one (and give it as a present to all your friends).
When a dangerously desperate government spends so much money and political capital on such a despotic tool of state as ID Cards then it is self-evident that it will "do whatever it necessary and whatever it takes" to force people to use the cards.
Some ideas will seem innocuous at first (identifying yourself for public services such as library cards) but will become increasingly intrusive (entry to any public building, use of public transport... until it includes such things as entry to any public space, park, shopping centre) and enforcement of the petty rules will become increasingly draconian.
Just see what they have done with bin-collection and the anti-terror laws (which should be renamed the "local government right-to-terrorise laws").
This is all part of the socialists' overriding ambition, which is to control all aspects of our public and private lives in an attempt to control the economy and the country ("Blue ID card holders - your shopping day is Thursday and this week you need to buy double your quota of shop-soiled tat").
Hayek warned us of this sad progress in "The Road to Serfdom" - if you read only one book this Christmas make it this one (and give it as a present to all your friends).
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