Saturday, January 22, 2011

Blair: a sign of repentance

Mr Blair was also forced to admit his public statements about the legality of the war contradicted those of the then Attorney General Lord Goldsmith.

He said he was making a ‘political point’ not a legal argument ‘but I accept entirely that there was an inconsistency between what he was saying and what I was saying’. - Daily Mail

The Spectator says the Tories are in thrall to Blair - ‘There are two things I’ll always try and clear my diary for,’ one minister told me, ‘watching Brian Lara bat and Tony Blair talk.’

It seems to me that the present administration's admiration is coldly, immorally professional - and deeply mistaken. For the last few years under Blair, as my wife will witness, I simply switched the sound off when he was given airtime on TV news - I couldn't bear to hear the brazen lying.

This is the man for whom current PM David Cameron got his then Opposition party to give a standing ovation in Parliament - a break with that House's tradition. Honourable exception: "Mike Penning, who had been a Tory communications chief before the 2005 election, remained defiantly seated with crossed arms." Perhaps there were others who stayed in their seats that day, and if so I'd like to know who.

But there is some evidence that Blair may not be quite as sold on himself as the rampaging Tory toffs. Although he will defend his wicket stoutly against those, quite possibly no better than he, who are trying to stump him, I begin to suspect that there is still an atom of shame and decency in him, as the end of the following extract shows:

At the end of his testimony, Mr Blair was approached by Reg Keys, whose son, Lance Corporal Tom Keys, 20, was killed by a mob in southern Iraq in June 2003. Mr Keys said: ‘I just wanted to say that you are a disgrace to your office.’

Mr Keys told the Mail: ‘He wouldn’t look me in the eye.’

He may yet, and probably as he sincerely wishes, be saved.

Tuesday, January 11, 2011

A stark warning from Harry Schultz

Legendary investment consultant and trader Harry Schultz has been publishing his financial newsletter since 1965. He has just retired with a sombre finale that is rapidly circulating on the Internet. Peter Brimelow at Market Watch gives us some extracts from that last letter, e.g.:

"Roughly speaking, the mess we are in is the worst since 17th century financial collapse. Comparisons with the 1930’s are ludicrous. We’ve gone far beyond that. And, alas, the courage & political will to recognize the mess & act wisely to reverse gears, is absent in U.S. leadership, where the problems were hatched & where the rot is by far the deepest.”

I think we are now clearly beyond the time when bearish commentators can be dismissed as melodramatic alarmists. Harry Schultz is no Chicken Little blogger but has appeared in the Guinness Book of Records as the world's highest-paid investment consultant. Maybe that makes him a Chicken Big.

The 400-year timescale in the extract above chimes with the ideas of D H Fischer's "The Great Wave" and other theorists who see very long term cycles in economics. But they are largely cycles of human social behaviour, so can we still break out? Santayana warned, "Those who cannot remember the past are condemned to repeat it", so maybe knowing how it's played out before will help.

Schultz is not alone. He himself quotes a former financial officer of Ronald Reagan as saying recently: "We’re entering a global monetary conflagration. If a sell-off of U.S. bonds starts, it will be an Armageddon." In that context, Schultz does not see gold as being in bubble territory yet.

For Schultz's shorter-horizon defensive investment advice, see below as quoted by Brimelow; longer-term, we may have to seriously consider what to do in the event of a major disruption to normal living.

Here's what Schultz says for the boys still absorbedly playing the high-stakes card game in the first-class saloon of the Titanic (or the Laconia, or the Lusitania - whichever one gives you the bittersweet spine-tingle):

• 5-10% Stocks (nongolds).

• 15-20% Commodities: via futures, commodity stocks &/or physical assets.

• 50% gold stocks & bullion: 15% blue chips, 5% junior, 5% bullion via futures, 25-35% in physical bullion.

• 0% currencies (“Close out ALL fiduciary time/call deposits, money market funds & municipal bonds, pension funds…”)

• 1-5% Cash in hand. (“Stored privately.”)

• 0-5% bear stock market protection via ETFs like ProShares UltraShort Dow30

• 15-20% Government notes/bills/bonds (“In 3-6 month T-Bills/bonds only — buy these only in Swiss Francs, Australian dollars, Canadian dollars, Brazilian reals, Singapore dollars, Chinese Yuan only).”

INVESTMENT DISCLOSURE: None. Still in cash, and missing all those day-trading opportunities.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Sunday, January 09, 2011

Jefferson, debt and democracy

"Economy and liberty, or profusion and servitude"...

Now that we are once again in "times that try men's souls" (as Tom Paine put it) many are harking back to the wisdom of Thomas Jefferson and longing for a return to the principles of the United States Constitution. This makes it all the more important to establish exactly what Jefferson said.

Let's take a frequently-quoted passage: “To preserve our independence, we must not let our rulers load us with perpetual debt. We must take our choice between economy and liberty, or profusion and servitude. If we run into such debts, we must be taxed in our meat and drink, in our necessities and in our comforts, in our labors and in our amusements. If we can prevent the government from wasting the labor of the people under the pretense of caring for them, they will be happy.”

This is a hashed-up version of the longer and more elegant original; and even takes liberties with the language (for example, it wasn't "take our choice" but "make our election"). As so often with Jefferson quotations, there is no indication of when he said it, and to whom; and when there is, it may be wrong - this alternative mash-up says it's from "A Summary View Of The Rights Of British America" - it's not (see the 1774 text of the latter here, or here).

No: it wasn't written before the Revolution, but 40 years afterwards, with the weight of experience added to his undimmed passion for liberty, and as a result it's far more interesting.

Writing from retirement in his Monticello home, the 73-year-old is responding to historian and fellow-Virginian Samuel Kercheval, who has written a pamphlet calling for a convention to reform that State's Constitution and is seeking the support of the former 1770s representative to the Continental Congress , who in addition to later serving as President and Vice-President of the Republic has also been Governor of Virginia.

Kercheval strikes gold for posterity, if not for his immediate cause. Jefferson takes the opportunity to get down to first principles, including the "mother principle" of republicanism, which is that "governments are republican only in proportion as they embody the will of their people, and execute it." More than even before the Revolution, he is convinced of the need for "equal representation" in the Senate and House of Representatives, and observes that the machinery of democracy fails these yardsticks in both bodies. He also worries about the near-immunity of the Governor and the supreme justices, and the poor quality of juries chosen not by the people but by legal functionaries. He concludes the first part of his letter by saying that the system has worked well so far not because of the Constitution, but in spite of it, thanks to the fact that "our functionaries" have been "generally honest men"; and then proposes ways to subdivide powers and responsibilities so as to maximise the involvement of "every man who fights or pays."

Setting aside our modern views on slavery, suffrage for women and property qualifications for voting, it's an interesting precondition that the republican should be ready to pay his full share of the price of decisions which he has (or should have) an equal part in making. The people in whom he reposes his ultimate trust, are those who put their property and lives at stake for their liberty. Perhaps Jefferson sees us more clearly through his green spectacles than we see him.

But there is no equality between debtor and creditor, and Jefferson keenly perceives that the money system has the power to destroy freedom. We shall go from debt, to taxation, to oppression. After the bully-boy performance of Treasury Secretary Mr Henry Paulson in October 2008, expressing his "disappointment" with Congress' decision to reflect the will of the people and refuse assistance for several distressed banks, one of which had recently had him as its CEO, do we catch a flash from those Monticello lenses?

Now, at last, to the passage (paragraphing and emphases mine) in which the old revolutionary warns how the Republic can be lost:

"I am not among those who fear the people. They, and not the rich, are our dependence for continued freedom.

"And to preserve their independence, we must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.

"If we run into such debts, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our callings and our creeds, as the people of England are, our people, like them, must come to labor sixteen hours in the twenty-four, give the earnings of fifteen of these to the government for their debts and daily expenses; and the sixteenth being insufficient to afford us bread, we must live, as they now do, on oatmeal and potatoes; have no time to think, no means of calling the mismanagers to account; but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers. Our landholders, too, like theirs, retaining indeed the title and stewardship of estates called theirs, but held really in trust for the treasury, must wander, like theirs, in foreign countries, and be contented with penury, obscurity, exile, and the glory of the nation.

"This example reads to us the salutary lesson, that private fortunes are destroyed by public as well as by private extravagance. And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for a second; that second for a third; and so on, till the bulk of the society is reduced to be mere automatons of misery, and to have no sensibilities left but for sinning and suffering. Then begins, indeed, the bellum omnium in omnia, which some philosophers observing to be so general in this world, have mistaken it for the natural, instead of the abusive state of man. And the fore horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression."

Now some will draw the conclusion that we have been brought to this pass, or close to it, by a system of public benefits; but it's more than that. Powerful private interests have weighed down the people individually with the burden of "private extravagance" and then offloaded their own heavy share of the costs of mismanagement onto the people collectively, while retaining for themselves personally the enormous fortunes they made open-eyed in their corrupt and destructive scheme.

This, over the same 30-odd years that saw the hollowing-out of the nation's economy by exposing it through international trade to competition for which the country was not adequately prepared, any more than the fish of the Atlantic were ready for the incursion of Pacific species to which the opening of the Panama Canal exposed them.

Had the people been informed by a knowledgeable and responsible news media; had they understood and been helped to accept the adjustments that would be demanded of them; had they been represented by delegates who knew their duty to their constituents; had their diplomatic and trade representatives managed the pace and scale of the economic transition; then they could have achieved economy and preserved their liberty, while allowing the less fortunate of the world to rise from unjust poverty. Instead, the aftermath of a profusion which continues to enrich a financial, politically-protected elite has, we must fear, condemned the people to servitude, or at least such inevitable obligations as will shackle their descendants for a generation or more, the attempt to escape which must involve tension and possibly worse between the nations.

Did Jefferson see this 195 years ago? It could have been yesterday.

INVESTMENT DISCLOSURE: None. Still in cash, and missing all those day-trading opportunities.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.