Tuesday, March 23, 2010
Do they work for us at all?
"I discovered that there was a direct correlation between the highest outside earners and those with the poorest attendance records in the Commons" - Martin Salter
Monday, March 22, 2010
Notes and Queries (2)
Words of the Day:
Hawk: one who hawks, or peddles, his political influence to business interests via the services of a lobbying organisation.
Dove: one who seeks to wash away the sins of Honourable Members, e.g. by retrospectively redefining terms in order to exculpate his colleagues from charges of theft by false accounting. The term is derived from the name of a popular brand of soft soap.
Hawk: one who hawks, or peddles, his political influence to business interests via the services of a lobbying organisation.
Dove: one who seeks to wash away the sins of Honourable Members, e.g. by retrospectively redefining terms in order to exculpate his colleagues from charges of theft by false accounting. The term is derived from the name of a popular brand of soft soap.
Notes and Queries (1)
The collective noun for MPs is "an infestation" (for pairs or small groups, "a scurry"). Although gaining currency, "a prostitution" is incorrect; Professor Blanding suggests that the latter usage may have arisen from the recent public perception that Parliament is a "house of ill-repute".
Sunday, March 21, 2010
Bad news round-up
Jesse discusses recent comments by Japanese economist Yukio Noguchi, predicting national bankruptcy and hyperinflation (the IMF reckons the crisis could hit in 2019). Jesse thinks the UK and some of Europe will go first; even more worryingly, he turns to spiritual matters (which I respect, but it's a sign of how bad he feels the situation to be).
Speaking of the IMF, Richard Daughty rehearses his theme of reckless money multiplication, the inevitable bust and the wisdom (so he thinks) of investing in commodities such as gold, silver and oil. He castigates the IMF and its proposed imitator, the European Monetary Fund, for their part in the inflationary process.
Nathan Martin uses official statistics to show how as debt increases, the additional stimulus to GDP gets less. The break point on the graph seems to be 2015, after which extra debt will reduce GDP.
Warren Pollock delivers a punchy two minutes from the Metropolitan Museum of Art, comparing the past civilisations inside with the doomed one outside, currently enjoying sunshine, hot dogs and a cappella music.
I read all the above people frequently. Each has his own take, his own style, but all seem technically proficient in finance while retaining their integrity, their indignation and their hope that something can be done. Their views are echoed in this week's article by University of Montreal economics professor Rodrigue Tremblay, whose conclusion in part reads:
It seems to me that the U.S. financial system, and even the world financial system, have to be profoundly reformed, if they are to serve the real economy, rather than the contrary. If such a reform does not come about, however, I am afraid that we have entered a period of economic difficulties that may last many, many years. In fact, I think that the world economy stands today at the edge of a large precipice.
Speaking of the IMF, Richard Daughty rehearses his theme of reckless money multiplication, the inevitable bust and the wisdom (so he thinks) of investing in commodities such as gold, silver and oil. He castigates the IMF and its proposed imitator, the European Monetary Fund, for their part in the inflationary process.
Nathan Martin uses official statistics to show how as debt increases, the additional stimulus to GDP gets less. The break point on the graph seems to be 2015, after which extra debt will reduce GDP.
Warren Pollock delivers a punchy two minutes from the Metropolitan Museum of Art, comparing the past civilisations inside with the doomed one outside, currently enjoying sunshine, hot dogs and a cappella music.
I read all the above people frequently. Each has his own take, his own style, but all seem technically proficient in finance while retaining their integrity, their indignation and their hope that something can be done. Their views are echoed in this week's article by University of Montreal economics professor Rodrigue Tremblay, whose conclusion in part reads:
It seems to me that the U.S. financial system, and even the world financial system, have to be profoundly reformed, if they are to serve the real economy, rather than the contrary. If such a reform does not come about, however, I am afraid that we have entered a period of economic difficulties that may last many, many years. In fact, I think that the world economy stands today at the edge of a large precipice.
Saturday, March 20, 2010
House prices could fall 40%
The above graph is from the Financial Times Alphaville website, as part of an article that discusses Britain's exceptionally poor situation compared with other major economies.I bought the house we're in, in 1984. I was stunned when, several years ago, a friend told me what it was worth then. House prices have felt like a fantasy for years - maybe that's why people started to borrow against them for consumer spending sprees. Buying with a credit card (or line of credit on your home) never seems as difficult as parting with folding money. It was all a lovely dream.
Now, we're waking up. Britain's underlying troubles seem to me at least as bad as in the early 80s and the early 90s, so it appears logical that when the government faces up to the challenges (instead of credit-spending its way onwards, as is still happening) house prices will go below the "average" line to match the previous lows.
I think it will be a buyer's market for years to come. So for downshifters, it may be worth selling at what seems a painful discount now, to make sure you have the cash to go buy something cheaper (also at a discount, naturally).
Having said that, I have also observed before that the housing market is segmented according to location and price bracket. Prices may well change more (or houses may trade more slowly) in some categories than in others. To see what houses have actually sold for in the UK, look here; for sold prices in the USA, see Domania here.
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, March 14, 2010
Vote for the Apathy Party
The three Birmingham constituencies aggregated above have over 180,000 registered voters between them, though over 40% failed to use their vote in the last couple of General Elections. Had non-voters come to the polling station and all voted for "None of the above", they would have won in 2005 and 2001, and come second to Labour's "landslide" victory in 1997.One person's vote is worth c. 1/36,000th of the active voters, and less than 1/60,000th of potential voters*.
Little wonder that modern politics is a matter of computer-assisted psephology, spin and deception.
*Nationwide, the average is 69,935 voters per constituency (2007 Boundary Commission review)
Saturday, March 13, 2010
"Consent has not been given" - the EU and cross-party collusion
'It seems a shame,' the Walrus said, 'To play them such a trick,
After we've brought them out so far,
And made them trot so quick!'
The Carpenter said nothing but
'The butter's spread too thick!'
_________________________________________________
Email to Nick Clegg MP via his website, 17 February 2010:
Dear Mr Clegg
I was recently doorstepped by your colleague John Hemming MP, now that my address falls into the Yardley constituency, following recent changes by the Boundary Commission.
Mr Hemming asked whether there were any issues I would like addressed, and my immediate response was Europe, and when we would be allowed a referendum on our membership. He referred me to his support for EDM 20 (18.11.2009) and this, coupled with his courtesy in actually asking for my vote and opinion in person, are factors that, ceteris paribus, would persuade me to vote for him in the next General Election.
However, seeing the behaviour of the other major political parties on that topic, Mr Hemming’s stance will be entirely futile if an EU referendum is not also LibDem policy. Can you give me any assurances that will make it worth while to vote LibDem rather than UKIP in 2010?
______________________________________________________
Reply from Douglas Dowell, 10 March 2010:
Dear Mr xxx
Many thanks for your email to Nick Clegg MP. Nick has asked me to contact you on his behalf. I apologise for the delay in responding but I hope you’ll understand that, due to the sheer volume of correspondence that Nick has been receiving, it can take some time for us to reply.
Liberal Democrats understand that EU membership is controversial and that many people have concerns about it. However, we believe that membership is vital to Britain and we would point out that an exit would be very far from cost-free. It is true that countries such as Norway and Iceland, by virtue of their membership of the European Economic Area, have access to the single market without EU membership: but they have to pay for it. EEA countries pay into the EU’s funds, as do members, but have no ability to amend or change the laws which are enacted at EU level except, in theory, an ability to reject outright – which would be a potential occasion for the EU to terminate the EEA agreement. This is no real choice – simply a requirement to implement most EU laws without a vote on those laws. This is not a model Liberal Democrats want for Britain.
However, we also recognise that the European Union has evolved significantly since the last public vote on membership in 1975. Liberal Democrats therefore remain committed to an in/out referendum on EU membership the next time a British Government signs up for fundamental change in the relationship between the UK and the EU. This is the vote on Europe that really matters – not a dishonest vote on any particular treaty, but a chance for the European question to be settled once and for all.
Thank you once again for emailing.
Best wishes,
Douglas Dowell
Office of Nick Clegg MP
Leader of the Liberal Democrats
____________________________________________________
My response to Mr Dowell, 10 March 2010:
Dear Mr Dowell
Thank you for your courteous and detailed reply.
Your para 2 gives one side of the argument, which is fine, and I'm sure there are arguments to be made on the other side also. The thrust of my question is not primarily about for and against EU membership; if we had an honest debate and a referendum, I would abide by the result of the people's decision, whichever way it went.
In my view, this is the biggest constitutional shift since 1688. The issue is so great that it cannot be limited to an imprecisely-worded rider to a raft of manifesto commitments and aspirations. The fact is, we haven't been asked and the status quo, half in and half out, is one we have come to without proper democratic authorisation. It is like finding oneself being married by proxy, without banns, vows or exchange of tokens. Consent has not been given.
It is nothing like adequate to promise a vote "next time" there is some "fundamental" change. You will be aware of the ratchet-like legal process that has already commenced, and the way in which EU Commissioners and others find their positions and pensions conditional on their active support of ever-closer union.
From the street, it looks as though all three major political parties have colluded to repudiate democracy, and some would say that the political class as a whole has therefore lost the moral right to claim to represent us. This disconnection between rulers and ruled, together with the growing gap between the financial class and the consumers and workers they have abused, may threaten economic and social stability within the next generation.
I simply cannot use my vote to legitimise any party that refuses me a vote when it most matters. The LibDems appear to take the franchise seriously, with your call for the STV/Alternative Vote, and you have worked hard to build connections with local communities; why so shy of a referendum?
Sincerely
_______________________________________________
No further response yet.
Sunday, March 07, 2010
House prices - Wave 2
Karl Denninger looks at recently-failed US banks and by comparing their asset valuations with losses charged to the Federal Deposit Insurance Corporation discovers that they overvalued their properties - at the time of failure.
If you add up the nominal assets of the three banks - $903 million - and downgrade them to their real value as implied by the losses borne by FDIC - $602.3 million - you will find the collective assets were overvalued by 49.9%. In other words, current estimated real estate values should be cut by 33.3%.
These were banks operating in (now) economically distressed states - Florida, Illinois (both with official unemployment rates at or exceeding 11%), Maryland (over 7 % unemployment), so you can't necessarily apply that regrading to the whole of the USA.
Nevertheless, those states are relatively heavily populated, and so are the others now showing high rates of unemployment - see this US population map. So it may well be that the US housing market in general may need to be reassessed. If, as Denninger says, he is "generous" in estimating houses to be overvalued by 25%, that means we need to cut nominal prices by 20%.
This is borne out to some extent by reported house sale prices - see this real estate website - though the Northwest has shown a rise (why?).
And then we have to consider properties repossessed by lenders but not sold, and owners who are sitting on their properties and refusing to sell.
The UK, with its much more densely-populated land, maybe somewhat different; but I think that when all the recent financial stimuli stop and we get past the next General Election, we may see clearer evidence of declining valuations here, too.
ADDENDUM (10 March):
A counter-argument would be that the FDIC has applied a "forced-sale" valuation, as with individual or company insolvency. On the other hand, the FDIC must be in no hurry to overstate its obligations/losses - its own finances are already very shaky - and there are already many forced residential property sales actually ongoing, so the regrading of assets may to some extent reflect actual market conditions.
If you add up the nominal assets of the three banks - $903 million - and downgrade them to their real value as implied by the losses borne by FDIC - $602.3 million - you will find the collective assets were overvalued by 49.9%. In other words, current estimated real estate values should be cut by 33.3%.
These were banks operating in (now) economically distressed states - Florida, Illinois (both with official unemployment rates at or exceeding 11%), Maryland (over 7 % unemployment), so you can't necessarily apply that regrading to the whole of the USA.
Nevertheless, those states are relatively heavily populated, and so are the others now showing high rates of unemployment - see this US population map. So it may well be that the US housing market in general may need to be reassessed. If, as Denninger says, he is "generous" in estimating houses to be overvalued by 25%, that means we need to cut nominal prices by 20%.
This is borne out to some extent by reported house sale prices - see this real estate website - though the Northwest has shown a rise (why?).
And then we have to consider properties repossessed by lenders but not sold, and owners who are sitting on their properties and refusing to sell.
The UK, with its much more densely-populated land, maybe somewhat different; but I think that when all the recent financial stimuli stop and we get past the next General Election, we may see clearer evidence of declining valuations here, too.
ADDENDUM (10 March):
A counter-argument would be that the FDIC has applied a "forced-sale" valuation, as with individual or company insolvency. On the other hand, the FDIC must be in no hurry to overstate its obligations/losses - its own finances are already very shaky - and there are already many forced residential property sales actually ongoing, so the regrading of assets may to some extent reflect actual market conditions.
Wednesday, March 03, 2010
Grit your teeth, Scrooge
Mark Zandi – chief economist for Moody’s – has calculated which stimulus programs give the most bang for the buck in terms of the economy:
From "Naked Capitalism"
From "Naked Capitalism"
Tuesday, March 02, 2010
Hope
My brother sends me a link to a polemic by Joe Bageant. My reply:
A passionate polemic, seductive in its combination of apparent political and financial savviness, high-level generalization, defrocked moral preaching, enemy-finding, self-pitying despair, self-castigation. Clearly one who has adopted Marcuse's Marxian-Freudian notion of "introjection". And one who secretly welcomes gotterdammerung because (surely) it is the necessary precondition of rebirth and the Golden Society. Don't believe his reference to species extinction - if he believed that he wouldn't bother to praise the international South American bartering system.
Yes, the system is in crisis - but it's fixable. The US medical system is about 3 times more expensive per capita than in the UK, there's a lot of room to cut costs. When the dollar crashes and house prices hit the floor, people won't have to earn the same money as before to make a living, and they'll begin to compete in the global market. And we surely don't really need the level of material possessions we have now, nice though it can be.
Where I do agree with this Jeremiah, is that a load of fat b*st*rds will have to be trimmed.
Put me down as a hope fiend.
A passionate polemic, seductive in its combination of apparent political and financial savviness, high-level generalization, defrocked moral preaching, enemy-finding, self-pitying despair, self-castigation. Clearly one who has adopted Marcuse's Marxian-Freudian notion of "introjection". And one who secretly welcomes gotterdammerung because (surely) it is the necessary precondition of rebirth and the Golden Society. Don't believe his reference to species extinction - if he believed that he wouldn't bother to praise the international South American bartering system.
Yes, the system is in crisis - but it's fixable. The US medical system is about 3 times more expensive per capita than in the UK, there's a lot of room to cut costs. When the dollar crashes and house prices hit the floor, people won't have to earn the same money as before to make a living, and they'll begin to compete in the global market. And we surely don't really need the level of material possessions we have now, nice though it can be.
Where I do agree with this Jeremiah, is that a load of fat b*st*rds will have to be trimmed.
Put me down as a hope fiend.
Monday, March 01, 2010
Democracy: why bother?
After all the fuss I make about the right to decide, I thought I'd look at General Election results in my own constituency. No wonder MPs used to think they could get away with pretty much anything they liked - and probably still can.
The winner is: None Of The Above; disqualified (because he doesn't appear on the ballot paper) in favour of the runner-up, Indifference.
Salami-slicing the franchise
One of David Cameron's ideas is to reduce the number of our representatives in Parliament. I don't want fewer MPs, just better - ones who understand their role. In 26 years of living at the same address, I've never been approached in person by my present MP or his constituency workers to ask for my vote, let alone my opinion on anything.
If anything, I'd like more MPs - look at the ratio of MPs to qualified electors in the nineteenth century. I'm not proposing to go back to the 1831 ratio, but we have drifted from having 1 vote in 858 to 1 in 74,000 - our voices are very small indeed, now.
A brief discussion from the blog of Chris Whiteside, Conservative Parliamentary candidate for Whiteside, Cumbria:At today's Conservative conference David Cameron promised real action in six key areas to help get Britain back on its feet
[...]
6: Change politics
Reduce the number of MPs, cut Whitehall and quangos by a third, and let taxpayers see where their money is being spent.
_________________________________________________
Comments to the above:
At 8:32 AM, Sackerson said...
6. Isn't reducing the number of MPs another step in the de-democritization of the UK?
At 1:53 AM, Chris Whiteside said...
Sackerson: a 10% reduction in the number of MPs won't have that effect, no.
At 8:38 AM, Rolf said...
Chris: thanks for your courtesy in responding. I have to disagree: a 10% reduction in MPs is an 11% increase in constituency voter numbers and so a corresponding decrease in the value of my individual vote. And where will it end?
KING LEAR
Ourself, by monthly course,
With reservation of an hundred knights, by you to be sustain'd,
Shall our abode make with you by due turns.
GONERIL (Murmurs to Regan) He may enguard his dotage with their powers,
And hold our lives in mercy.
(To King Lear) It is not well! Dismissing half your train, come then to me.
KING LEAR (To Goneril) What, fifty of my followers at a clap!
REGAN I entreat you to bring but five and twenty:
To no more will I give place or notice.
KING LEAR What, must I come to you with five and twenty, Regan? Said you so?
REGAN Speak't again, my lord; no more with me.
KING LEAR (To Goneril) I'll go with thee:
Thy fifty yet doth double five and twenty, and thou art twice her love.
GONERIL What need you five and twenty
REGAN or ten!
GONERIL or five!
REGAN What need one?
(For those who attended school after the educational reforms of the 1980s, Shakespeare was an English writer and used to be regarded as an essential element of our cultural heritage. Yes, a bit like Carol Ann Duffy, as you say, Blenkinsop Minor; but only a bit.)
Sunday, February 28, 2010
Daniel Hannan and the EU
Look at the clip below - and pause it at 9 seconds in. All you need to know about the EU?
Should we have paid-off everyone's mortgage?
A recent figure I've seen for total mortgage debt outstanding in the US is $14.4 trillion. According to this commentator, the true cost of all the financial crisis bailout measures is $14 trillion. Should we have simply cancelled all mortgages, massively deflating house values but liberating millions of Americans from the threat of repossession and freeing up large amounts of their take-home income?
Probably not. Sudden and simplistic measures can be horribly destructive. But can we permit a system to continue, that is built on inflating (or maintaining the absurdly high level of) the cost of our dwellings? In cartoon-mythical ancient times, all a tribe of cavemen had to do was get rid of the bear - all in a day's work - and now the right to live in your own space takes years and years of toil.
Back to Thoreau and Walden?
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 bl
og.
Probably not. Sudden and simplistic measures can be horribly destructive. But can we permit a system to continue, that is built on inflating (or maintaining the absurdly high level of) the cost of our dwellings? In cartoon-mythical ancient times, all a tribe of cavemen had to do was get rid of the bear - all in a day's work - and now the right to live in your own space takes years and years of toil.
Back to Thoreau and Walden?
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 bl
og.
Big market fall expected, over several years
It seems likely that there will be a new leg down in financial asset valuations, as reality overcomes often not-so-subtle propaganda and disinformation. It may start in March, or it may be a 'market break' that provides a subtle warning for a large decline that begins in September 2010, with multi year progression to lows that are, as of now, almost unimaginable, at least in real terms. I cannot stress this issue of nominal versus real enough. As inflation comes, it will initially be in a 'stealth' manner, with the backing of the currency eroding slowly but steadily, and largely unrecognized for some time.
This from "Jesse", a sober and savvy commentator who deplores the schadenfreude crowd. Do read the rest.
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.
This from "Jesse", a sober and savvy commentator who deplores the schadenfreude crowd. Do read the rest.
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, February 20, 2010
Matt Taibbi on the reinflated bubble
Rolling Stone journalist Matt Taibbi reexamines the world of Wall Street in his latest article of 3 days ago. He finds that the US government, aiming to rid the market of toxic mortgage-related investments, has provided cash for buyers and so inadvertently created a market for the rubbish it's trying to clear. In the third quarter of last year, reports Taibbi, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America bought $3.36 billion of such bad assets, presumably expecting to sell them on at a profit in a government-underwritten buying environment.
Slashing interest rates to get us through the emergency has made ordinary savings accounts unproductive and forced money into investments instead, even when analysis says stay out:
"One trader, who asked not to be identified, recounts a story of what happened with his hedge fund this past fall. His firm wanted to short — that is, bet against — all the cr*p toxic bonds that were suddenly in vogue again. The fund's analysts had examined the fundamentals of these instruments and concluded that they were absolutely not good investments.
"So they took a short position. One month passed, and they lost money. Another month passed — same thing. Finally, the trader just shrugged and decided to change course and buy.
""I said, '**** it, let's make some money,'" he recalls. "I absolutely did not believe in the fundamentals of any of this stuff. However, I can get on the bandwagon, just so long as I know when to jump out of the car before it goes off the damn cliff!"
"This is the very definition of bubble economics — betting on crowd behavior instead of on fundamentals. It's old investors betting on the arrival of new ones, with the value of the underlying thing itself being irrelevant. And this behavior is being driven, no surprise, by the biggest firms on Wall Street."
It takes nerve to stay out of the market when it's rising and when you think you may lose value on your cash held at bank. But unless you're confident that you'll be able to "jump out of the car before it goes off the cliff" (and remember, you don't have access to instant dealing like the City pros), maybe sitting on your hands is the thing to do.
And if price inflation worries you, don't forget, both the US and UK governments still sell guaranteed inflation-proofed investments of their own.
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.
Slashing interest rates to get us through the emergency has made ordinary savings accounts unproductive and forced money into investments instead, even when analysis says stay out:
"One trader, who asked not to be identified, recounts a story of what happened with his hedge fund this past fall. His firm wanted to short — that is, bet against — all the cr*p toxic bonds that were suddenly in vogue again. The fund's analysts had examined the fundamentals of these instruments and concluded that they were absolutely not good investments.
"So they took a short position. One month passed, and they lost money. Another month passed — same thing. Finally, the trader just shrugged and decided to change course and buy.
""I said, '**** it, let's make some money,'" he recalls. "I absolutely did not believe in the fundamentals of any of this stuff. However, I can get on the bandwagon, just so long as I know when to jump out of the car before it goes off the damn cliff!"
"This is the very definition of bubble economics — betting on crowd behavior instead of on fundamentals. It's old investors betting on the arrival of new ones, with the value of the underlying thing itself being irrelevant. And this behavior is being driven, no surprise, by the biggest firms on Wall Street."
It takes nerve to stay out of the market when it's rising and when you think you may lose value on your cash held at bank. But unless you're confident that you'll be able to "jump out of the car before it goes off the cliff" (and remember, you don't have access to instant dealing like the City pros), maybe sitting on your hands is the thing to do.
And if price inflation worries you, don't forget, both the US and UK governments still sell guaranteed inflation-proofed investments of their own.
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.
"Consumer choice" and liberty
A letter to the Spectator magazine, emailed to them today:
Sir: Your editorial (“People Power”, 20 February) welcomes Conservative proposals to extend consumer choice in schools and hospitals, and I hope this will open a wider debate about these imperfect and possibly outdated reifications of learning and health. For example, might we see less bureaucratic resistance to, and more financial support for home education?
But if the Conservatives have rediscovered their appetite for freedom and democracy, why, as Greece, fons et origo of those principles, lies tormented on the Procrustean metanarrative of the EU, are we denied a voice in the ultimate political question, that of national self-determination? Absent a referendum on membership of the Romantic and revolutionary project, we shall be limited-list libertarians, like council house dwellers selecting the hue of their front doors from officially-compiled colour charts.
Are we to be consulted, or must we refuse to vote at all in the coming General Election?
Sir: Your editorial (“People Power”, 20 February) welcomes Conservative proposals to extend consumer choice in schools and hospitals, and I hope this will open a wider debate about these imperfect and possibly outdated reifications of learning and health. For example, might we see less bureaucratic resistance to, and more financial support for home education?
But if the Conservatives have rediscovered their appetite for freedom and democracy, why, as Greece, fons et origo of those principles, lies tormented on the Procrustean metanarrative of the EU, are we denied a voice in the ultimate political question, that of national self-determination? Absent a referendum on membership of the Romantic and revolutionary project, we shall be limited-list libertarians, like council house dwellers selecting the hue of their front doors from officially-compiled colour charts.
Are we to be consulted, or must we refuse to vote at all in the coming General Election?
Friday, February 19, 2010
Jerking the chain: China preparing a proxy US bond dump?
A few days ago on the Broad Oak Blog, I referred to Brad Setser's theory that China has been using the UK to make purchases of US Treasury securities, and that this may offer a different view of what has been happening recently (the apparent reduction in Chinese support for US debt).
In response to a comment, I suggested that the reason for this supposed system of proxy purchases was to allay the fears of the American public.
It occurs to me now, belatedly, that the recent reduction in direct Chinese holdings, coupled with the increase in holding by the UK, may be a preparation for a self-protective (or even punitive) dump of Treasuries using the same intermediaries. If their direct holdings remained relatively unchanged, the Chinese could (if their nominees stayed quiet) deny responsibility and forestall a backlash from American public opinion.
In response to a comment, I suggested that the reason for this supposed system of proxy purchases was to allay the fears of the American public.
It occurs to me now, belatedly, that the recent reduction in direct Chinese holdings, coupled with the increase in holding by the UK, may be a preparation for a self-protective (or even punitive) dump of Treasuries using the same intermediaries. If their direct holdings remained relatively unchanged, the Chinese could (if their nominees stayed quiet) deny responsibility and forestall a backlash from American public opinion.
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