I attach no intrinsic value to national sovereignty or to any group rights whatsoever. Whatever significance or value is attributed to national rights (and group rights, minority rights, majority rights, gender rights, linguistic group rights, religious rights, ethnic rights or whatever rights) are derived significance or value - significance or value derived from human rights, that is, rights of individuals.

Given that starting point, it will come as no surprise that I support immediate outside intervention in the human tragedy that is unfolding in Myanmar/Burma. The deeply evil military regime that has ruled and destroyed that country for the past 46 years must be overthrown to safeguard the fundamental and inalienable rights of its people to life, liberty and the pursuit of happiness. This wicked junta now intends to prolong its miserable existence by preventing and subverting the efficient distribution of aid to the countl (more…)

Yesterday, Saturday 11th May 2008, a sixteen year old boy, Jimmy Mizen, was murdered in a bakery shop in Lee, Lewisham, South East London. He had turned 16 the day before, and this was his first day at work. I did not know him or his family, but this killing feels personal, because it took place within a seven minute walk from my home and less than 100 yards from Lee Railway Station, which my wife and I use every day to get into and back from work. I have never been inside that bakery shop, but my seventeen year old son knows it well. His school is just around the corner and according to him the people there are nice and make great sandwiches. (more…)

Slovakia have done it! They have got the nod both from the European Commission and, albeit reluctantly, from the European Central Bank. Following the confirmation of these recommendations by the European Council, Slovakia will join the Euro Area on January 1, 2009. The only question mark that hung over this application for Euro Area membership was Slovakia’s inflation performance. The European Commission was unambiguous on the issue in its Convergence Report 2008: “Slovakia fulfils the criterion on price stability.”

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In a recent Column for the Financial Times, Larry Summers has, once again, combined truth with half-truth and a fair measure of obfuscation, mixing of issues and blurring of key distinctions. What Larry says and writes matters, because he is an influential voice in the Democratic party on economic issues. Both candidates for the Democratic presidential nomination appear to have taken the King’s shilling and are about to set sail on the good ship Protectionism. For the sake of the US economy, its workers and the rest of us, they should think again. (more…)

The Bank of England’s semi-annual Financial Stability Report, whose 23^rd instalment was published a couple of days ago, lists as members of the Bank’s Financial Stability Board, John Gieve (Chair),Martin Andersson, Andrew Bailey, Charles Bean, Nigel Jenkinson, Mervyn King, Rachel Lomax and Paul Tucker. This listing of the membership of the Financial Stability Board raises a constitutional issue and a factual issue. (more…)

Mervyn King, Governor of the Bank of England, is correct in linking the reckless lending by banks and other financial institutions that, together with the matching reckless borrowing, lay at the roots of the current financial crisis, to remuneration structures that rewarded extreme risk taking on poorly designed financial products. The diagnosis is fine. What to do about it is less obvious. These remuneration packages did not fall to earth from the moon. They are the result of a distorted economic environment. The key distortions, unfortunately, cannot be remedied, because they have highly desirable consequences as well as the dysfunctional ones highlighted by the crisis. Let’s consider some of them: (more…)

Tim Young makes three interesting comments on my blog on the Bank of England’s Special Liquidity Scheme:

(1) The Treasury bills involved are of nine months original maturity, not one year.

(2) In the event that the borrower defaults, the public sector gets stuck with a loss if the value of the collateral is less than the value of the t-bill loan, even if the issuer of the securities posted as collateral does not default. Presumably this is much more probable than a simultaneous default, especially if the borrower is widely known to be a holder of such securities.

(3) US mortgages are not in general non-recourse. (more…)

The Olympic games have become a joke. A bad joke. It is time to put the event out of its misery. There was about a 1500 year gap between the last of the Olympic Games in Ancient Greece, and the first of the Games in the new Olympic era. Let’s have another 1500 years without Olympics. Then we can see again. There are three arguments that support this recommendation. (more…)

On my way to Gatwick Airport to participate in a conference in Riga (Latvia) on economic challenges faced by the Baltic countries, I noticed a sign post for the village of Pratts Bottom. It reminded me of why I love living in this country. I am sure I really could find Little Whinging in Surrey if I looked long enough.

This naturally brings us to the question as to whether the Bank of England subsidises the banks through its newly created Special Liquidity Scheme (SLS). The scheme is a swap of one-year maturity Treasury Bills for illiquid mortgage-backed securities, covered bonds (Pfandbriefe), and asset-backed securities backed by credit card receivables. Let’s refer to this collection of bank assets as MBS (for mortgage-backed securities). (more…)

The actual baby turns out not to be too different from the one expected.  The Bank of England is now wholeheartedly committed to acting as market marker of last resort for systemically important securities for which the markets have become illiquid, not to say defunct, since the start of the crisis in August 2007.

The market maker of last resort provides market liquidity in the transactions-based model of financial capitalism the same way the lender of last resort provides funding liquidity to banks in the relationships-based model of financial capitalism.  The same institution, the central bank, can play both roles. All real-world versions of financial capitalism are convex combinations of the transactions-based model and the relationship-based model.  The relative weight on the transactions-based model is highest in the US and the UK.  Anne Sibert and I called for the Bank of England and other central banks to act as market makers of last resort on August 12, 2007, when the crisis had barely hatched from the wind egg of the financial bubble of 2003-2006. (more…)