We're back in the days of Dumas' Cardinal Richelieu (*), as London Banker points out. He quotes Section 8 of the proposed new US financial legislation:
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
How is this to be subjected to democratic accountability?
I essayed a paranoid spoof on Friday, only to find it exceeded by reality. See Karl Denninger for more details of the amazing, autocratic powers proposed in the new US financial legislation.
This is not a sweary blog, but if that becomes law, head for the bl**dy hills.
Denninger also explains how the $700 billion limit can be manipulated to absorb infinite amounts of bad debt, by discounting on resale and then taking on more fresh garbage. He says:
I predict that if this passes it will precipitate the mother and father of all financial panics, although exactly when the "short bus" riders who inhabit the equity market will figure it out remains to be seen.
_____________________________
(*) see Wikipedia:
"Dec. 3, 1627
It is by my order and for the good of the state that the bearer of this has done what he has done.
Richelieu"
Sunday, September 21, 2008
Another letter to the Spectator
Let's see if they bin this one: (n.b. I've made a few alterations in the hour since posting)
Sir;
Your leader (“Long live capitalism”, 20 September) calls for a “kick up the backside” to the banking industry. That kick should be aimed elsewhere.
Light regulation and free markets, which the Spectator advocates, depend on the self-regulating properties of a sound money system. But like many others, the British government has long used the fiat nature of its currency-cum-credit to solve temporary problems and create permanent ones. The long-term real growth of GDP is said to average 2.5% annually, yet since 1963 the Bank of England’s own statistics show that the M4 money supply has grown by about 13.5% p.a. Over the same period, RPI has averaged about 6.5% p.a. At this rate, the banks will ultimately own everything.
For the first 5 years of the New Labour administration, M4 growth was, not exactly prudently, but less recklessly, restricted to around 8.25% p.a. However, by 2003 the FTSE had halved from its 2000 peak, and there was gloomy talk of recession; and over the next five years M4 suddenly averaged nearly 14%. Then house prices doubled; hinc illae lachrymae.
How did this happen? The system of fractional reserve lending means that banks can loan out a multiple of what they retain in their vaults. State regulators set the rules for the required marginal reserves, and when reserve requirements are halved, lending can double, and usually will; like Labradors, bankers will have whatever is put on their plate.
Knowing this tendency, the British and American governments have not merely permitted this crisis to happen, but positively created it by a deliberate relaxation of monetary controls. Worse still, they have now decided that instead of destroying excess credit by asset deflation, bankruptcies and share collapses, the monetary inflation is to be consolidated by absorption of bad debt into the public finances.
I don’t see how this can end well. Some commentators are already saying that, if passed unaltered, the proposed American financial legislation could, once properly understood, trigger a major crash in US financial shares, possibly before this letter is published.
I think the Spectator and its economically savvy readers should put on fresh pairs of winkle-pickers, and gather in Whitehall and Washington for some kicking practice.
Yours faithfully
Sir;
Your leader (“Long live capitalism”, 20 September) calls for a “kick up the backside” to the banking industry. That kick should be aimed elsewhere.
Light regulation and free markets, which the Spectator advocates, depend on the self-regulating properties of a sound money system. But like many others, the British government has long used the fiat nature of its currency-cum-credit to solve temporary problems and create permanent ones. The long-term real growth of GDP is said to average 2.5% annually, yet since 1963 the Bank of England’s own statistics show that the M4 money supply has grown by about 13.5% p.a. Over the same period, RPI has averaged about 6.5% p.a. At this rate, the banks will ultimately own everything.
For the first 5 years of the New Labour administration, M4 growth was, not exactly prudently, but less recklessly, restricted to around 8.25% p.a. However, by 2003 the FTSE had halved from its 2000 peak, and there was gloomy talk of recession; and over the next five years M4 suddenly averaged nearly 14%. Then house prices doubled; hinc illae lachrymae.
How did this happen? The system of fractional reserve lending means that banks can loan out a multiple of what they retain in their vaults. State regulators set the rules for the required marginal reserves, and when reserve requirements are halved, lending can double, and usually will; like Labradors, bankers will have whatever is put on their plate.
Knowing this tendency, the British and American governments have not merely permitted this crisis to happen, but positively created it by a deliberate relaxation of monetary controls. Worse still, they have now decided that instead of destroying excess credit by asset deflation, bankruptcies and share collapses, the monetary inflation is to be consolidated by absorption of bad debt into the public finances.
I don’t see how this can end well. Some commentators are already saying that, if passed unaltered, the proposed American financial legislation could, once properly understood, trigger a major crash in US financial shares, possibly before this letter is published.
I think the Spectator and its economically savvy readers should put on fresh pairs of winkle-pickers, and gather in Whitehall and Washington for some kicking practice.
Yours faithfully
Saturday, September 20, 2008
I'll stay on the outside, thanks
Actually, I hope all the top bankers and star traders keep their huge bonuses (one year's worth of which would keep people like us for life), and I hope none of them gets jailed for their corruption/criminal incompetence.
Because otherwise, I might have to believe in Big Brother, and love Him.
Because otherwise, I might have to believe in Big Brother, and love Him.
I don't BELIEVE it
So I asked for a strong tea. And when I lifted the lid to stir it, I saw they'd put in a single bag, but only half-filled the pot with hot water.
Suddenly, I'm less deterred by fuel surcharges on foreign holidays.
Suddenly, I'm less deterred by fuel surcharges on foreign holidays.
Friday, September 19, 2008
Here is the news
In the public interest, short-selling is banned until further notice. Minimum buying prices will be observed, enforced by the new market regulator, OfPuff. If necessary, all sales of stocks will be subject to official clearance. Traders must demonstrate an awareness of their social function or attend re-education classes.
Gloom and despondency are prejudicial to the health of our economy, and no responsible Government would stand by while bad news was published without restriction. By order of the Privy Council today, all editors of print and electronic news media (*) are, by virtue of their position, to be deemed civil servants and will be bound by the Official Secrets Act, to which certain annexes have just been appended.
We have pleasure in being able to disclose the final results of the 2010 General Election (for full details, see page 32, or Ceefax page 801). The landslide victory will be welcomed by all true patriots, as will our decision to cancel the Election, for reasons of economic efficiency and also because, given the inevitability of the outcome, the process is otiose and a wearisome distraction for voters and a reinvigorated Government that is determined to get on with the job of steering us through these challenging times.
UPDATE - MY SPOOF WAS FAR TOO TAME:
(*) I should now add, all financial institutions:
"(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;"
See Karl Denninger on this latest, utterly undemocratic outrage by the US Government.
Gloom and despondency are prejudicial to the health of our economy, and no responsible Government would stand by while bad news was published without restriction. By order of the Privy Council today, all editors of print and electronic news media (*) are, by virtue of their position, to be deemed civil servants and will be bound by the Official Secrets Act, to which certain annexes have just been appended.
We have pleasure in being able to disclose the final results of the 2010 General Election (for full details, see page 32, or Ceefax page 801). The landslide victory will be welcomed by all true patriots, as will our decision to cancel the Election, for reasons of economic efficiency and also because, given the inevitability of the outcome, the process is otiose and a wearisome distraction for voters and a reinvigorated Government that is determined to get on with the job of steering us through these challenging times.
UPDATE - MY SPOOF WAS FAR TOO TAME:
(*) I should now add, all financial institutions:
"(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;"
See Karl Denninger on this latest, utterly undemocratic outrage by the US Government.
Is the USA still ruled by law?
The London Banker gives the US a magisterial damning, citing many instances of the Executive acting in ways he considers ultra vires in the financial arena.
This sort of talk from someone who generally appears to be a sobersides, echoing the volatile but technically savvy Karl Denninger, really does alter the tone of the debate. Read it yourself, and judge.
UPDATE
Jesse, too:
... Men sneer that outmoded laws and useless principles must fall to vital expediency so that we might be saved. The will to power begins to erode and overthrow justice and the rule of law.
And at certain times in history, in their fears and insensible numbness, people concede first the discretionary choices, then their moral outrage, then the weak, then their wealth, their freedom, and finally comes madness, and then the deluge.
And Tyler:
I'm afraid to say, we're facing much more regulation.
And much more government.
And much less willingness to trust markets.
We're in the Slough.
This is a sad, keening chorus of responsible bloggers.
This sort of talk from someone who generally appears to be a sobersides, echoing the volatile but technically savvy Karl Denninger, really does alter the tone of the debate. Read it yourself, and judge.
UPDATE
Jesse, too:
... Men sneer that outmoded laws and useless principles must fall to vital expediency so that we might be saved. The will to power begins to erode and overthrow justice and the rule of law.
And at certain times in history, in their fears and insensible numbness, people concede first the discretionary choices, then their moral outrage, then the weak, then their wealth, their freedom, and finally comes madness, and then the deluge.
And Tyler:
I'm afraid to say, we're facing much more regulation.
And much more government.
And much less willingness to trust markets.
We're in the Slough.
This is a sad, keening chorus of responsible bloggers.
It won't work
Karl Denninger pours scorn on the latest banking "solutions". I don't pretend to be as techno as he, but I trust my instincts, and they say that this is all like a Christmas play. If Fairy Bogbrush can wave her bristly wand and shazam! the grisly bathroom throne of modern finance is sparkly clean, then why can't she wave it again and make us all rich into the bargain?
But if it was that easy, who'd staff the checkouts, sweep the streets, change the bedpans etc?
Nope, it'll have to be paid for somehow, and I don't think the rich have reserved that pleasure for themselves.
But if it was that easy, who'd staff the checkouts, sweep the streets, change the bedpans etc?
Nope, it'll have to be paid for somehow, and I don't think the rich have reserved that pleasure for themselves.
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