Thursday, April 02, 2009

Pointlessness and the Blot Man

I have been too busy and brainless to blog. In fact, having written that sentence, my mind goes entirely blank. It's the G20. In any geographical area only so many points can be made within a given period. Millions of points are being made at the G20. This is overloading London's point-making capacity. As a result, I have become entirely pointless. For example, I learn that 87 years ago today Hermann Rorshach died. I can't think of a single point to make about that, though I do note that, surprisingly, he looks a little like Brad Pitt.


  1. Bryan, was that you I saw on the telly last night, attempting to eat a banker with Tristram and Jocasta? You're blog silence was noted and connections were made.

  2. Volkswagen once had a G60, worth three times as many points ?

    Gordon has finally shape shifted into a Cheshire cat, doesn't Barack's missus seem to be plentifully supplied in the arse department and aren't Angela and Nick now an item, some lucky building materials supplier shifted an awful lot of plywood, apart from that, anyone care ?

    On the strength of a 10 minute photo opp the BBC now think Gordon will win the next election. The pace of their journey into madness increases daily.

  3. So you looks at Rorshach and you see Brad Pitt. Interesting....

  4. Never mind, the closer we get to doomsday, which I am reliable informed is Dec12 2012 ( I saw it on discovery channel so it must be true) the more and more pointless the world and life will become.

    Maybe the diplomatic Olympiad being staged in London is really a cover for the worlds leaders to organise an orderly bankruptcy and closing down sale?

    I mean it stands to reason, Sarah Brown though it was so pointless she could not be bothered washing her hair.

  5. The problem was lack of regulation so the regulators have decided to spend five trillion dollars more of our money pretending to save us with more regulation.

    Except the problem wasn't lack of regulation. Sub-prime disaster arose because of politically correct government interference from 1993 onwards in a US mortgage market that had been healthy for many years previously. The whole of the shadow banking edifice was an attempt to get round regulation that existed but was too clumsy. The Basel II protocols embedded Value at Risk in banking regulation worldwide, with disastrous consequences once the other problems hit.

    It took a lot of very bad regulation in other words, plus stupidity and greed - interest rates held too low by central banks and a consequent asset boom - a lot of time to do the damage we finally saw. There's only limited time for the uber-regulators to do their work though. Because the markets could so easily recover of their own accord. And that would end the pressure for more regulation and spending.

    Behind this are people who prefer to make money in a more 'regulated' system - one where profits are close to risk-free for them and non-existent for more ordinary folk. The effect on the developing world, four fifths of which had been booming its way out of poverty until very recently, may be truly dire.

    Coming up with a sound money system that removes a number of areas of risk-free profit for the super-rich and makes a much more even playing field for the entrepreneurial poor - and they always are - is not I note on the agenda of anyone.

    So I consider this comment on pointlessness the best I've seen on the G20. And about the right length - for the total commentary needed worldwide. No oxygen of publicity. Thanks.

  6. A bit like a corgi registered Gas fitter doing some work at your home as to regulatory requirements and then finding out that the prescribed work was unsafe in the first place, you cant blame the gas fitter for that.

    Will take issue with you about lower interest rates. I am not sure if this would have worked, if the Fed had spotted the capital flows issue (which they did and just ignored it) and raised interest rates, would that not have pulled even more cash towards the dollar? and even cheaper Chinese imports down the road.

    My hunch is that this would have done the Chinese job for them, as they would not have had to bother manipulating their currency. This is the dilemma at the heart of the economic problem we have.

    This might sound a bit stupid, but Sub Prime might have been a blessing in disguise. Imagine if there was no sub prime how long would this trade and capital imbalance gone on without the market kicking back so to speak? 2, 5 10 years, there seemed no end to the housing boom here in the UK. Imagine the costs of what if?

    At the end of the day it was the market that spotted the problem and the market that tried to correct it.
    No regulation or politician spotted it, it was one Banker Taleb who understood the risks the banks where building up, It was Niall Ferguson who understood the historic implications of what was going on, and it was the Austrian school of economics who have been warning of the perils of the fiat currency system and the smaller Minsky school who understood the impact of too much debt in the system.

    Outside of those eveyone knew jack shit.

  7. Sean, I'm grateful for a considered critique.

    My main point was really at the end. There's a tad too much about the G20 right now. Maybe a billion words or so. Maybe it's five trillion. It's hard to tell.

    I don't claim to understand all the implications of the global trade imbalance. We both I assume agree that it's very unhelpful that the Chinese and all central banks have, since 1971, been 'forced' - or have acquiesced, but that brings in the power of nuclear arsenals and other subjects not so pleasant to contemplate - to accept US treasury bills instead of real reserves of gold and silver.

    That is obviously both unjust and stupid. It was or is bound to blow up in our faces. Not even sure which of those it is. But the dangers of that cobbled-together outcome of Nixon's default in 1971 have always seemed self-evident.

    Beyond that, I'm not clear. I need to read Ferguson's latest carefully. But something tells me that sub-prime was hardly a blessing in disguise, as you suggest. As the financial crisis broke last year I paid public tribute to Ron Paul, for his threefold foresight as a congressman of rare independence of mind: over distortions in the mortgage market, the iniquities of fiat money and the dangers of the resultant asset boom. I still hold to that view. Paul even prophesied on the floor of the House that the resulting crash would be blamed on the unfettered free market, in order to justify even more harmful government interference. You can't get it much more right than that, even if nobody in Congress ever votes with you for the measures that would put a stop to it.

    But from that point on I began to depart from Paul and his mentor in the Austrian school, Murray Rothbard, on 100% reserve currency. That was as I came across Antal Fekete and his emphasis on the Real Bills Doctrine of Adam Smith. It was the historical success of this 1815-1914 that probably carried most weight with me but also the balance Fekete seems to strike between growth in world trade, which I believe always benefits the poorest most (but, it seemed, never more so than in 1980-2005) - as long as the rules are fair - and sound commodity-based money, free from the worst forms of bond market and other manipulation.

    I haven't heard of Minsky, except the one who made his name in artificial intelligence. This may not be the time or place for a full tutorial but a url or two would be appreciated.

    Thanks again. I don't say I'm the only one but I have much to learn.

  8. I agree with everything you said about Ron Paul, I did not exclude him as his is part of the Austrian School. And yes he got it more right than everyone else. Unfortunately in our world, people who tell the truth are first scorned and if that truth bears comes true they are ignored and written out of history by the people who should have listened. Its apparently called "politics."

    My point about sub prime is if this had not happened then the trade issue would have manifested itself in some other way. And the bubble could well have blown up much bigger over time in some other part of the economy.

    My hunch is that without subprime the money would have created a bigger feedback loop into the prime housing market, afterall we like to store our wealth in land if we can.

    Another interesting thing about sub prime is that it only happened in states and areas with lots of land regulations.(more distortions)

    I am not convinced by a sole commodity currency, (I think Keynes proposed something similar as a basket of commodities?) what if commodities started to run out? we would be left holding a very deflationary time bomb.

    I think maybe the answer is some sort of Dual currency system, where the Govt. and central bank issue fiat currency as now but we allow other currency to trade alongside as legal tender, this will help to hold the govt and fiat to some sort of economic standard rather than a political one.

    And with the advent of IT these days using more than one currency is not something we have problems with.

    Moving from the fractional reserve banking system to a free banking system I think would be a better move than pure gold standard. After all it was the banks who created the false money in the first place though credit, with the blessing and authorization of the authorities.


  9. All very helpful, thanks, including the reminder about land regulations. Thomas Sowell is always going on about the unintended consequences in this area for (say) the black family needing "affordable housing". And rightly so, in every sense of the word right. The moral case for free markets needs to be made again and in the days of the Obamas - and isn't Mich nice on camera - that's a fine place to look. Sowell's deadpan retrospective on what affordable housing meant to him in his life, on the day of the inauguration, was a true classic. Starting with $5.75 a week in 1948. Bless that man.

    I'm grateful for the perspective on the benefits of an early bursting of the bubble. That idea will be in there, being mulled, from here on in.

    I'm very much in favour of freeing up what is allowed as legal tender.

    What I'm still unsure about is the creation of credit. Fekete and his (or Adam Smith's) self-liquidating bills of exchange seem to occupy a middle ground there which I think is a valuable addition to our thinking, even with all the possibilities of electronic cash.

    But I'm no expert, in the sense that all those that got us into this mess, and all those that miserably failed to predict it, obviously are.

    Back to the software development then. It's an amazing thing, just ten years after I first came across the wiki idea from Ward Cunningham - and within the first week I was convinced it would change the world - to have you point me to a little known chap called Hyman Minsky on a thing called Wikipedia.

    Sometimes we should stop a moment and think. And be thankful. The silent increases in productivity - and even in joy, on occasions - even when the global planners are doing their worst. Something, of course, they never remotely foresaw. Thank goodness.