Freedom, system thinking, politics, science, education, economics, pirates

Friday, 31 October 2008

Naomi Klein's take on the Bail-Out

could she be right?

Wednesday, 29 October 2008

US Election Summed Up

Dark Lord to Nominet: Justify thyself

According to the Register today, Mandy is after control of Nominet.

You'd think they would be busy with nationalising the banks.

Tuesday, 28 October 2008

Mandel: It's Not a Crisis of Confidence

From BusinessWeek Today. As someone employed in manufacturing industry, I have been thinking along these lines for years. Cheers, Marksany

"by Michael Mandel

Is the market and economic turmoil nothing more than a crisis of confidence? To listen to Ben Bernanke and Hank Paulson, you might think so. "At the root of the problem is a loss of confidence by investors and the public in the strength of key financial institutions and markets," Bernanke told the Economic Club of New York on Oct. 15.

On Oct. 20, Paulson went further, explaining the bank recapitalization program this way: "Our purpose is to increase confidence in our banks and increase the confidence of our banks so that they will deploy, not hoard, their capital. And we expect them to do so, as increased confidence will lead to increased lending."

The implication of the Bernanke-Paulson view is that the underlying economic system is fundamentally sound, so that restoring trust in the financial system will put us back on a growth course. From that perspective, the infusion of massive amounts of capital into banks, which replaces the money lost in bad mortgages, will enable lending to begin again. Once investors see that all is well, then they will cease their irrational behavior, and start putting money back into stock markets and companies around the world.

Treating the Wrong Problem?

But what if the Bernanke-Paulson view is wrong? What if financial stress is a symptom, not a cause?

What if we face a wrenching readjustment of the global real economy rather than a crisis of confidence rooted in the financial system? What if Bernanke and Paulson are treating the wrong problem? What if investors, realizing that their long held assumptions about the global economy are wrong, are rationally bailing out of stock markets in almost every country, at least for now?

In fact, there's good reason to believe that the current crisis reflects a growing realization: Long accepted patterns of cross-border technological transfer, foreign trade, and global finance are simply not sustainable.

Three Big Flows

For the past 10 years, global growth has been driven by three big flows. The first flow was the transmission of knowledge, technology, and business know-how from the U.S. and other industrialized countries to low-wage emerging economies such as China and India. Under the neutral name of "supply chain management," multinationals taught local suppliers to make shirts, laptop computers, and airplane rudders that could be sold around the world. Moreover, U.S. and European companies gave suppliers access to enough information that they could develop their own cell phones, software, and other tech products. The result: a massive improvement in productivity and living standards in emerging economies.

The second flow was the movement of goods and services from China and other emerging economies to the U.S. Massive amounts of production capacity was built around the world, assuming that the U.S. was always going to be the consumer of last resort. Indeed, the value of U.S. imports—over $2.3 trillion in 2007—was larger than the entire output of Britain, the sixth-largest economy in the world. The result: Rising living standards in the U.S., rising employment, and production around the world.

The final flow, of course, was financial. The rest of the world lent U.S. consumers trillions of dollars to finance the trade deficit. The money flowed into the country in all sorts of ways, including cheap mortgages and cheap credit for cars and televisions that were made overseas. At the same time, companies in emerging markets were borrowing heavily to build the factories that were going to supply the developed world.

Something Had to Give

This tri-flow worked as long as everyone believed that American consumers could finance their debt. But here's the problem: At the same time Americans were borrowing, their real wages were falling—and not just for the least educated. By BusinessWeek's calculations, real weekly earnings for college grads without an advanced degree have dropped every year since 2002.

You can't pay back rising debt with falling wages; something had to give.

The first thing that broke were subprime mortgages, given to less creditworthy borrowers. But once investors started to look, they realized that the entire global edifice was built on an impossibility. The tri-flow that had built global prosperity could not be sustained.

Good News and Bad News

That's why the financial crisis has spread across the globe. Investors are peering at every country, from Kuwait to Korea, asking the question: Is it sound enough to survive if American demand for imports falls? The problem is in the structure of the global real economy, not the financial system.

This is both bad news and good news. The bad news is that government injections of capital into banks around the world can slow the damage, but they cannot fix the basic problem. The global economy has to go through a readjustment process that will be difficult even if policymakers can restore confidence in the financial system.

The good news is twofold. First, the productivity gains in the emerging economies are real. Sooner rather than later, their growth will resume. Second, we do have a tool for easing the adjustment, and that's fiscal stimulus. With private demand for credit weak, governments can judiciously borrow and spend to help pump up growth and employment.

The final implication: Policymakers should stop talking about investor confidence as if it exists in a vacuum. Instead, they should focus on the real goal of stimulating the creation of innovative new goods and services that the U.S. can produce and sell on global markets. That would reduce the amount of borrowing the country has to do, and help create a sustainable global economy. This crisis is not any fun. But if it shakes up companies and government, and forces them to focus on innovation, the end result will be stronger, more solid economic growth.



Mandel is chief economist for BusinessWeek

Luigi Zingales - "Why Paulson is wrong"

A very good (i.e. simple enough for me to follow) explanation of why debt-for-equity is better than the bail-out

Monday, 27 October 2008

Taxpayers' alliance on EU Laws - my comment

Well, the above is true, but what a strange conclusion? We need to leave the EU, not reform our internal processes, which are irrelevant.

The EU is putting non-British laws upon us which we have no control over. The issue is not informing people what laws are from the EU, but the fact that these unwanted laws land here and we have no say in them.

Can. We. Leave. Now.

Hat tip: EU Referendum

Laffer: The end of the age of posterity

"Now enter the government and the prospects of a kinder and gentler economy. To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy."

The rest of the article is linked to the title.

Thursday, 23 October 2008

S&P and Moody's credit raters to go to jail

I wish!

http://www.bloomberg.com/apps/news?pid=20601087&sid=a2EMlP5s7iM0&refer=worldwide

S&P and Moody's credit raters to go to jail

I wish!

http://www.bloomberg.com/apps/news?pid=20601087&sid=a2EMlP5s7iM0&refer=worldwide

Teenage sex

My comment on the BBC story today.

"To reduce teenage pregnancies, this society had better stop financing a lifestyle that young girls aspire to which can only be accessed by having a baby. Despite what Labour politicians believe, young girls have babies so that they can have a flat, some money and leave home. At a time of massive youth unemployment, no other choices these girls can make offer such rewards."

Monday, 20 October 2008

Sense from Frank

Frank Field talks about welfare failure and immigration.

Personally, I think a citizen's income (i.e. for citizens only) is a better solution.

Gods that fail

Capitalism has not failed (yet)

Vodafone doesn't want to play

A small encouragement: networks think the govt's plan for ID to buy phones is a potty idea, too.

Saturday, 18 October 2008

Old Holborn's Ball of chalk

Gem in Polly's comments today

CPhyllis

You don't need to sign on anymore. Register as a self-employed whatever you were before with the Inland Revenue and then find work that pays cash- Cabbie, gardener, caretaker, market staller, flat-roofer- anything and claim Working Tax Credit. You can earn £20 a week for free! and estimate your earnings for the first year as effectively zero. You will get just about what you get on the dole every four weeks and you can work without signing on. You will be able to claim Housing Benefit and Council Tax Benefit too. Next April do a tax return online (self-assessment) after registering for the online service and work through the return using the Help items on each section. It is easier than you think. When the tax is calculated if it is too much go back and see if you can't raise your expenses somewhat and fiddle around until you have a reasonable amount to pay. Submit the return and file the submittal receipt. If you have made zero then show this and your Working Tax Credit will continue at the full amount. If you have made a profit it will be subtracted from your Working Tax Credit and you will be paid the balance. You don't have to sign on every two weeks. You stay in the workforce. You can re-build and diversify your employment activity and quite probably end up as I did with a whole new income and a whole new career. All this pitiful stuff about the dole queue is nonsense. The answer lies in using the system properly and being flexible and entrepreneurial with your abilities. And remember it was Labour who put the system in place. Don't be fooled by the hype regarding the difficulties involved in Working Tax Credits; if you can't fill in a form then go and sign on and be miserable; if you can't do simple maths and see if you are getting the correcty amount without being over or under paid, then sign on and give up; if tax forms send you to sleep then get bookeeper to do your return every year, average cost at the moment in our town: £75 (take this off your gross as expenses!!). None of this is a fiddle and you can have an income of up to £52,000 a year and still be eligible for some WTC. Obviously not much but if you have a huge family and need help with your mortgage do the online check for WTC and it will tell you if you are going to get anything. If you get even a tiny amount it will almost certainly make you eligible for help under Housing Benefit and Council Tax Benefit so do it and get control of your life before you get so depressed that you start to believe the rubbish you will read about the world having ended because there are no nice little PAYE jobs anymore like the one you have just lost. Oh; and vote Labour because the Conservatives will want you to be one of the mass of sheep waiting until they have crap little jobs available for you at below the minimum wage, which they will have scrapped.

Cameron yesterday

“We have to broaden our economic base to include more science, more hi-tech services, more green technologies, more engineering and more high-value manufacturing, drawing upon a much wider range of industries, markets, people, towns and cities,”

Well, I agree with that; but the question is: how? A broad based economy will be a result of policies. What might those policies be, and what are their chances of achieving the aspiration laid out here?

Friday, 17 October 2008

Jeff Randall for Chancellor

"Mr Brown steered the car into a brick wall and is now claiming credit for pulling a rear-view mirror from the wreckage."

McCain - I love this picture

Thursday, 16 October 2008

Frank Field in the Telegruph

I like Frank's articles. A pity he isn't a Labour MP, so his ideas could be taken seriously by the government.

What's that? He is ? Oh well...

Saturday, 11 October 2008

Hypertrophic cardiomyopathy

It might be I have this, so I am seeing a new doctor at UCH. I have a slightly thickened cardiac septum (the wall between the left right ventricle) This may have provided the cause of the electrical currents that resulted in my Ventricular Fibrillation, nearly resulting in SCD (Sudden Cardiac Death)

Thursday, 9 October 2008

Wednesday, 8 October 2008

Uncertainty has now hit the Japanese banking sector

In the last 7 days Origami Bank has folded.

Sumo Bank has gone belly up.

Bonsai Bank announced plans to cut some of its branches.

Karaoke Bank is up for sale and will likely go for a song, while today shares in Kamikaze Bank were suspended after they nose-dived.

Samurai Bank is soldiering on following sharp cutbacks. Ninja Bank is reported to have taken a hit, but they remain in the black.

Furthermore, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank where it is feared that staff may get a raw deal!

BUT there is some good news amid the gloom, a spokesman for Ichifani Bank Corp confirmed- ''we are up to scratch''

Robbery


From The Week today

We won't reward irresponsible and greedy activities

What, like putting your money in Iceland for an extra 0.5%.

Sounds a) greedy and b) irresponsible to me.

0.5% Interest rate cut

Oh yeah, that'll fix it. Let's all rush out and buy bigger houses.

The economy is now in the shitter and tinkering with rates isn't the answer. Why?

We have had years of debt fuelled consumerism. Vast sums on the credit card for plasma TV's from China etc. New cars and bigger houses.

Today we have a mass realisation that borrowing can't go on forever. The brakes are on.

It now feels risky to borrow money, people are worried about their job security so won't extend themselves. Do you want a new mortgage on a house that is still depreciating heavily.

Most of the stuff people have been buying on credit is nice to have: Plasma TV's, new cars, bigger houses, foreign holidays; when their old TV, car or house or a cheaper holiday was perfectly usable. So they can stop spending right now; without much impact on their standard of living. This is shrinking the retail sector, the importers and financial services leading to high and sudden increases in unemployment in these sectors. This is a snowball effect.

It's going to get a lot worse yet.

Mum went to Iceland

So, Gordo gives 100% cover for British savers who put their money in Iceland, but only covers £50k in a British institution.

WTF?

Surely these people knew it was in a foreign country? It must be the Iceland govt's and taxpayers' problem, not ours.

Gordon Ramsey has a lot of money there, is he mates with Gordo Broon?

Bizarre

Tuesday, 7 October 2008

How it ends

depressing, but I have been thinking along some of these lines for a while.

Friday, 3 October 2008

Quote of the day

"In a free society the state does not administer the affairs of men. It administers justice among men who conduct their own affairs."

Walter Lippmann (1889-1974), An Inquiry into the Principles of the Good Society, 1937

Deposits

So you have £35k guaranteed per bank. Increasing this to £50k is some big deal? But if all you have to do is spread your wad around a bit, you can get multiples of these guarantees. So why bother with this limit. Who has sums so large on deposit that splitting it among different banks causes hardship?

He's back


Mandy Vader's back.
Evil Emporer Darth Gordo's plan: to have one member of the UK Govinmint less popular than himself.