Following my recent needling of Mr Allister Heath at City AM in response to his article calling for a new Ronald Reagan, he has kindly responded thus:
I agree with you that monetary policy was too loose in the US and in the UK (disastrously so under Lord Lawson in particular). However, I was focusing on Reagan's fiscal policies and didn't mention his monetary policy in my piece. While the latter was bad, it was no worse than what we have seen later and still see today - so I don't think it's an especially anti-Reagan point (we also saw far worse prior to him; in fact, the history of modern monetary policy has been one of failure in almost all economies). In fact, it is simply wrong for you to claim that monetary over-expansion started in the 1980s - we have been plagued by it ever since fiat money (and even before, for example when gold was brought back in large quantities to Europe by Latin American explorers).
As to the statistical dispersion of post-tax incomes you refer to, I agree that it has increased since the 1980s - but I do not believe inequality of outcomes as a goal, evidently unlike you. I do not believe that this kind of inequality causes crime. I'm much more worried bythe fact that some groups and individuals in society lack opportunity, for example because of poor state schools or because of perverse incentives created by the benefits system. But I think that low marginal tax rates maximise opportunities and economic growth, and hence welcome what Reagan did on that front.
To which I have framed a reply, as follows:
Dear Mr Heath
Thank you for responding. I am sorry to reply late but must plead pressure of work. May I perhaps take up a couple of your points?
1. I accept that Reagan's successors tended to permit the same disastrous over-expansion (I said "acceleration") of the money supply that, I must insist, did indeed begin on his watch. I shan't bore you with the graphs but the facts are undeniable. Yes, the money supply has had previous bursts - e.g. in the lead up to the 1929 debacle (and I'm familiar with the gold-supply-boosted inflation of the 16th century) - but 1980-ish was definitely a watershed in the postwar era. It's reaching a bit too far back to make tu quoque an excuse. However, I certainly don't exonerate his successors, either.
2. I also accept that when tax rates are high, tax cutting does help increase tax revenue as well as stimulating enterprise. But I'm not sure how much more tax rates should be cut from the 15% or so that effectively the American rich are currently paying. At the other end, I seem to recall research by - was it the IFS? - that shows the poorer sort are paying proportionately nearly as much tax as the middle class (something like 40%), thanks to indirect taxation.
3. You don't have to be a socialist - and I am certainly not - to query how (for example) the top ten US hedge fund managers can now be averaging $1.75 billion earnings p.a. This sort of thing is hardly the only alternative to "equality of outcome", a phrase whose implications are somewhat mischievously deployed by you in a discussion that ought really to be rather more nuanced.
4. Fiscal policy that focuses solely on State spending and debt is what has led us to this pretty pass. The Flow of Funds data shows that US local and national government debt declined from 52% of total credit market debt in 1952, to under 15% in 2007. That is not what has blown up the economy. Australian economist Steve Keen maintains, plausibly in my view, that what we have seen is a private debt crisis, not a public one. And this was stoked by the ability of banks to inflate asset prices through reckless lending; as well as government interference in the housing market, on both sides of the Atlantic. The failure to control the egregious greed of bankers must be laid at the door of governments, who doubtless saw votes for themselves in an overstimulated financial environment.
5. As the late Sir James Goldsmith (no slapstick socialist he, either) observed as long ago as 1993 when GATT was under way, it is globalisation that is destroying opportunities for those sectors of society for which you express some concern. Indeed he foresaw the breakdown of social cohesion in the West which we are now beginning to witness, and which the extremely high and growing disparities of wealth and income are doing nothing to heal. Certain clever and unscrupulous individuals have exploited the massively enriching (to themselves) opportunities latent in this situation, so I think it's fair to suggest that there is a causal relation between the prosperity of the super-wealthy in the modern financialized economies, and the impoverishment and social decay in the same.
6. You say that poverty does not cause crime (though recent UK statistics are showing a significant increase in burglaries). I would suggest that the underclass has, to some extent, been bought off by the payment of various kinds of social benefits, although there has been a concomitant deterioration in morale and behaviour, the effects of which are becoming increasingly difficult to manage and which is breeding a growing number of angry and confused children. Schools are doing what they can, but people must have hope of a better life and the prospects of meaningful employment and self-determination. This is unlikely to be achieved when our government exploits economic migration to hold down wage rates. More exam passes (inflated grades or no) may merely create a class of Eliza Doolittles with attitude.
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.
Saturday, July 16, 2011
Tuesday, July 12, 2011
Some European debt ratings
CMA Datavision reports on credit default swaps for sovereign debt and so its information, based on market rates, is not quite so compromised as that of some major rating agencies. The global rankings are for 67 countries. The eurozone includes 4 of the 6 best, and 3 of the 4 worst. It is not surprising that the euro garment cannot fit all sizes in this range and the problem was identified by some commentators over a decade ago when the Euro was introduced.Note: Spain is the 21st worst - consider it deep orange!
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.
Monday, July 11, 2011
Sunday, July 10, 2011
The end of democracy
I often read on the Net that "the people" won't stand for this or that. Fantasy. As I have commented elsewhere:
How would the people raise a hue and cry?
- The papers and TV don’t represent us, we are merely a market sold to their advertisers
- MPs and Lords similarly have little interest in us, pursuing their own agendas and in some cases actually bought and paid for by powerful interests such as the EU with its revokable pensions
- Americans can demonstrate outside the White House but here it is now against the law to do so (even peacefully, such as reading aloud the names of recent war dead) within a measured distance of Downing Street
- public houses are no longer the gathering places and discussion centres they were
- the market places have been replaced by one-stop, fast-moving commercial fleecing operations like Tesco (when is the last time you stopped for a good natter and grumble there, on the way to the checkout? We stand in line like immigrants at the airport and are processed in near-silence).
- Internet, email and phone calls are mass-scanned by powerful computers for any sign of dissent.
Any means by which people used to assemble, discuss and become collectively activated has been neutralised. Most of us bloggers don’t know each other, where we live or what we look like. We merely raise a feeble protest and the powers that be, knowing that many of us are of a demographic that will not trouble them for many more years, permit our impotent grumbling.
I shall continue, not in hope that it will change things much, but as a standing reproach to those who have sold the freedoms that took our predecessors centuries of blood and toil to achieve.
How would the people raise a hue and cry?
- The papers and TV don’t represent us, we are merely a market sold to their advertisers
- MPs and Lords similarly have little interest in us, pursuing their own agendas and in some cases actually bought and paid for by powerful interests such as the EU with its revokable pensions
- Americans can demonstrate outside the White House but here it is now against the law to do so (even peacefully, such as reading aloud the names of recent war dead) within a measured distance of Downing Street
- public houses are no longer the gathering places and discussion centres they were
- the market places have been replaced by one-stop, fast-moving commercial fleecing operations like Tesco (when is the last time you stopped for a good natter and grumble there, on the way to the checkout? We stand in line like immigrants at the airport and are processed in near-silence).
- Internet, email and phone calls are mass-scanned by powerful computers for any sign of dissent.
Any means by which people used to assemble, discuss and become collectively activated has been neutralised. Most of us bloggers don’t know each other, where we live or what we look like. We merely raise a feeble protest and the powers that be, knowing that many of us are of a demographic that will not trouble them for many more years, permit our impotent grumbling.
I shall continue, not in hope that it will change things much, but as a standing reproach to those who have sold the freedoms that took our predecessors centuries of blood and toil to achieve.
Tuesday, July 05, 2011
A reply to Mr Allister Heath
UPDATE: No answer as at 12 July. Are journalists even more arrogant than politicians?
________________________________________________________
Allister Heath at City AM has written a piece in praise of Ronald Reagan and tax cuts. I have emailed him as follows and look forward to his rebuttal:
Dear Mr Heath
Bring back Reagan? You'd have to be amazingly selective about which policies. It was under him and Mrs Thatcher that the reckless acceleration of monetary expansion began, and if you track money supply against GDP you'll see that the response of the latter, though statistically significantly positive, was also significantly less than the increase in the money supply. We got roaring inflation, but this time in the stockmarket and housing, turn and turn about. These two and their successors have led us to the present, tragically debt-laden pass.
We also got, thanks to the cuts in income tax, an enormous increase in inequality, now the subject of much well-informed comment in the USA. We'll be lucky if we don't end up with a Colombia-type society where the rich live in gated compounds (sorry, "communities") and go shopping in armoured cars, though that appears to be trending here.
I don't suppose that either the affable Reagan or the honourable and principled Thatcher, both of them fervent patriots, intended any of this, but their financial naivety was grossly exploited by the money men.
Perhaps you could submit something on how "conservatives", aren't. Or how politicians generally need to be taught far more thoroughly on the E bit of PPE.
Yours faithfully
Rolf Norfolk
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.
________________________________________________________
Allister Heath at City AM has written a piece in praise of Ronald Reagan and tax cuts. I have emailed him as follows and look forward to his rebuttal:
Dear Mr Heath
Bring back Reagan? You'd have to be amazingly selective about which policies. It was under him and Mrs Thatcher that the reckless acceleration of monetary expansion began, and if you track money supply against GDP you'll see that the response of the latter, though statistically significantly positive, was also significantly less than the increase in the money supply. We got roaring inflation, but this time in the stockmarket and housing, turn and turn about. These two and their successors have led us to the present, tragically debt-laden pass.
We also got, thanks to the cuts in income tax, an enormous increase in inequality, now the subject of much well-informed comment in the USA. We'll be lucky if we don't end up with a Colombia-type society where the rich live in gated compounds (sorry, "communities") and go shopping in armoured cars, though that appears to be trending here.
I don't suppose that either the affable Reagan or the honourable and principled Thatcher, both of them fervent patriots, intended any of this, but their financial naivety was grossly exploited by the money men.
Perhaps you could submit something on how "conservatives", aren't. Or how politicians generally need to be taught far more thoroughly on the E bit of PPE.
Yours faithfully
Rolf Norfolk
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.
Monday, July 04, 2011
Liberty, subjection and destruction
Happy Fourth of July, America!
The same date is also the anniversary of the battle of Mantinea (362 BC), in which the Theban leader Epaminondas inflicted his second (after Leuctra) decisive defeat on the Spartans. A victory, one could have hoped at the time, for the democratic city-states of Attica and Boeotia.
Previously, warlike Sparta had overcome Athens and gone even further, crossing the Hellespont and seizing Persian territory in modern Anatolia. Now they were bottled up again in their Peloponnesian peninsula.
Bur alas for Thebes! Epaminondas died at Mantinea, together with his two possible successors, and when the weakened city of Thebes requested the help of the Macedonian Philip II in the quarrel with their neighbouring Phocians, they found an ally more dangerous than their foe.
In Athens Demosthenes, the greatest of orators, stirred his fellow citizens to resist Philip and persuaded Thebes to join them. Thus Athens lost her liberty; but it was worse for the Thebans, who when they revolted in 335 BC were all slaughtered or enslaved, and the city razed.
Who today is Sparta, who Thebes, and who the Macedonians? And who are the fatal orators?
The same date is also the anniversary of the battle of Mantinea (362 BC), in which the Theban leader Epaminondas inflicted his second (after Leuctra) decisive defeat on the Spartans. A victory, one could have hoped at the time, for the democratic city-states of Attica and Boeotia.
Previously, warlike Sparta had overcome Athens and gone even further, crossing the Hellespont and seizing Persian territory in modern Anatolia. Now they were bottled up again in their Peloponnesian peninsula.
Bur alas for Thebes! Epaminondas died at Mantinea, together with his two possible successors, and when the weakened city of Thebes requested the help of the Macedonian Philip II in the quarrel with their neighbouring Phocians, they found an ally more dangerous than their foe.
In Athens Demosthenes, the greatest of orators, stirred his fellow citizens to resist Philip and persuaded Thebes to join them. Thus Athens lost her liberty; but it was worse for the Thebans, who when they revolted in 335 BC were all slaughtered or enslaved, and the city razed.
Who today is Sparta, who Thebes, and who the Macedonians? And who are the fatal orators?
Monday, June 27, 2011
The old order changeth, yielding place to new
David Cameron, slated in an anonymous article by an old-guard Conservative MP in the Daily Mail on Saturday, is further embarrassed the next day by selective and distorted revelations of a confidential briefing by his "close friend" Christopher Shale (full document here), who is then found dead in a toilet at the Glastonbury Festival. I think Cameron is on notice and conscious of this, is likely to make some further misjudgments in the effort to regain control swiftly. It's very odd he should remark "a big rock in my life has suddenly been rolled away", which to some ears would have a most inappropriate Biblical association.
On the other side of the House, Jack Straw has returned to the fray with further carefully-calculated populist topics. The burka controversy stirred the pot nicely in 2006, when it had become clear that Gordon Brown wasn't up to filling the saddle from which he'd thrown Tony Blair. Now, it is equally clear that the voters are less than impressed with the Miliband brothers' exaggerated sense of political entitlement. So Straw has let it be known last week that he thinks the euro is doomed, and this week that he is mightily concerned about the selling of consumers' personal data by car insurers and others. His comments have been well taken up by the allegedly Tory-hating media and perhaps we are meant to start thinking that it is time that Ed should make way for an older man; never send a boy to do a man's work, and so on. But I think Richelieu deceives himself if he dreams of becoming King.
The next General Election will be interesting. Perhaps we will finally see the collapse of both main political parties, a wish Peter Hitchens has repeatedly expressed.
On the other side of the House, Jack Straw has returned to the fray with further carefully-calculated populist topics. The burka controversy stirred the pot nicely in 2006, when it had become clear that Gordon Brown wasn't up to filling the saddle from which he'd thrown Tony Blair. Now, it is equally clear that the voters are less than impressed with the Miliband brothers' exaggerated sense of political entitlement. So Straw has let it be known last week that he thinks the euro is doomed, and this week that he is mightily concerned about the selling of consumers' personal data by car insurers and others. His comments have been well taken up by the allegedly Tory-hating media and perhaps we are meant to start thinking that it is time that Ed should make way for an older man; never send a boy to do a man's work, and so on. But I think Richelieu deceives himself if he dreams of becoming King.
The next General Election will be interesting. Perhaps we will finally see the collapse of both main political parties, a wish Peter Hitchens has repeatedly expressed.
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