Religion

YES WE CAN!! have a global depression if we really continue to work at it…

February 1, 2009 9:50 pm

I used to be optimistic about the capacity of our political leaders and central bankers to avoid the policy mistakes that could turn the current global recession into a deep and lasting global depression. Now I’m not so sure.

I used to believe that the unavoidable protectionist and mercantilist rhetoric would not be matched by protectionist and mercantilist deeds. Protectionism was one of the factors that turned a US financial crisis into a global depression in the 1930s. Protectionism imposes large-scale structural sectoral dislocation, as exporters are ejected from their foreign markets and domestic producers that depend on cheap imported imports suddenly find themselves to no longer be competitive, on top of the global effective demand failure we are already suffering from.

I used to believe that our central bankers would overcome their natural conservatism, caution and timidity to do what it takes to bring to bear the full measure of what the central bank can deliver on a disfunctional financial sector and on a depressed economy, at risk of deflation. Now I’m not so sure. While the Fed is turning on most of the taps (albeit in a unnecessary moral hazard-maximising way), the Bank of England and the ECB are falling further and further behind the curve. What the Bank of Japan does, no-one fully understands, and I will observe a mystified, if not respectful silence.

I used to believe that our fiscal policy makers would, when faced with a combination of national and global disaster, manage to come up with a set of national fiscal packages that would be modulated according to national fiscal spare capacity and that would be designed not only to boost domestic and global demand but also to eliminate or at any rate reduce the underlying global imbalances that are an important part of the story of this global crisis. Instead we find the US engaged in fiscal policies that will aggravate the underlying global imbalances.

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Posted in Economics, Ethics, European Union, Financial Markets, International Trade, Monetary Policy, Politics, Religion | Permalink

Spineless in Washington: Obama and Guantánamo Bay

January 13, 2009 10:11 am

The moral turpitude and ethical spinelessness of the Bush administration over the Guantánamo Bay detention camp have also infected president-elect Barack Obama. The offshore detention and torture camp still holds 248 detainees. During his election campaign, Obama promised to close it. His proposed time table does not impress, however. While Obama is now expected to issue an executive order during his first week in office closing down Guantanamo Bay, the measure will not be implemented, that is, the camp won’t actually be closed, during the first hundred days of his administration.

Barack Obama’s lack of moral fibre on this issue is manifest from his own words.

“It is more difficult than I think a lot of people realise”. Indeed, doing the right thing is often difficult and can be personally or politically costly. Difficult decisions should not come as a surprise to the president-elect. It’s what you expect to get on your plate when you run for president of the United States of America, rather than for dog catcher.

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Posted in Culture, Ethics, Politics, Religion, Terrorism | Permalink

In praise of government incompetence

December 28, 2008 3:02 am

A monopoly is a bad thing. It invites abuse of the power it controls. Sometimes it is not the worst thing that could happen. Anarchy or the ‘state of nature’, can be worse. I don’t know whether Thomas Hobbes was right for all time and places in asserting that man is not by nature a social animal and that society could not exist except by the power of the state – the wielder of the monopoly of legitimate coercive power.

There may have been some bucolic, idyllic communities that dispensed with the institution of the state, where the fundamental rights of people (life, health, liberty) and property rights could be enforced effectively by individual action or through acts of spontaneous cooperation without external, third-party enforcement. But once we get to communities exceeding a dozen or at most a gross of people, an institution endowed with the monopoly on the legitimate use of force against its own citizens appears to have evolved, to have been created or to have been imposed everywhere.

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Posted in Chindia, Culture, Economics, Environment, Ethics, European Union, Politics, Religion | Permalink

Another unholy mess created by a message from the Pope

December 27, 2008 2:31 am

The Pope ruined my Christmas.

What is it about the Judeo-Christian-Islamic religious tradition that leads so many of its most prominent spokespersons to make hateful, bigoted, life-diminishing and personal security-endangering statements when it comes to human sexuality? Perhaps there was something inherent in the environment and culture of the Fertile Crescent, and of the Middle East in general, that predisposed the religions it brought forth to declare anathema anything other than abstinence and heterosexual behaviour (the latter only in a setting of monogamy or polygyny, not polyandry, of course). Even so, one would have hoped that the civilising influence of Greek and Hellenistic culture would have filtered most of the sexual bigotry out of the European religious mainstream, and out of its offshoots in the former European colonies.

Apparently not. The current Pope, Benedict XVI is right at home in the abhorrent main-stream Christian tradition of sexual intolerance. In his address ‘Christmas greetings to the members of the Roman Curia and Prelature (December 22, 2008)’ (available thus far only in German and Italian from the Vatican website), the Pope makes a number of extremist, bigoted and intolerant statements about homosexuality and transsexuality.

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Posted in Culture, Environment, Ethics, Politics, Religion | Permalink

Car manufacturers: the case for doing nothing for the sector

December 20, 2008 2:02 am

Automobile producers all over the world are in dire straits. Sales and production are plummeting. Unsold inventories are building up on dealers’ lots. Christmas is coming too soon for many workers whose normal end-of-year break has been extended by days or even weeks. Losses are rising fast. Bankruptcy is looming for quite a few household names. What, if anything, should governments do?

The US government has just announced a $17.4 bn loan to the three American automobile producers GM, Chrysler and Ford, $13.4 bn up front, with the rest coming in February 2009 – on Obama’s watch. The loan is short-term, until the end of March, 2009. The bulk of the money, if not all of it, is likely to be drawn by the two basket cases – GM and Chrysler.

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Posted in Culture, Economics, Ethics, European Union, Financial Markets, International Trade, Monetary Policy, Politics, Religion, Terrorism | Permalink

Sleepwalking into a police state

December 7, 2008 12:49 am

This post will start with a report on a prima-facie parochial issue: whether to record student attendance at classes and seminars in British universities. It ends with an issue that ought to be of general concern, in the UK and elsewhere: the hammering of yet another nail into freedom’s coffin in the UK, as the state requires universities and those that work in them to act as informers for the immigration authorities.

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Posted in Culture, Ethics, Politics, Religion, Terrorism | Permalink

When good politics makes for bad economics

December 4, 2008 6:22 pm

Good economics serves efficiency and fairness. Good politics serves the survival of the incumbent government. Sometimes all these considerations point in the same direction. Sometimes they don’t. Yesterday, in the UK, they did not.

The UK government yesterday announced that they were introducing retroactive mortgage payment insurance protection free of charge to qualifying residential mortgage borrowers; the cost of the insurance to be born, in as yet unknown proportions, between the tax payer and the mortgage lenders.

This policy is a typical example of ‘insider protection’ at the expense of outsiders and newcomers. Rent control is another example of the same phenomenon. ‘Employment protection’, aka as ‘protection of the jobs of those who have jobs at the expense of those without jobs and looking for jobs’ is another prominent example, especially popular in some continental European countries.

The details of the UK programme for a partial mortgage interest holiday, for up to 2 years, for households where there is a major loss of income (due, say, to a family member losing his or her job) are unclear. It may apply only to mortgages below £400,000.00. You may not be eligible if you have savings in excess of £16,000.00 – a nice example of how a policy proposal in one policy area – reducing repossessions of homes, and the fear of repossession of homes – creates perverse incentives in another – inducing households to save more during the high-earning years of the household life-cycle. The Chancellor of the Exchequer, Alistair Darling, may not be a manic micro-tinkerer like his predecessor, Gordon Brown, whose left hand had no idea of the (unintended) incentive effects of what his right hand was doing, but he can create Brownian distortions and disincentives with the best of them.

Why is this temporary mortgage interest holiday a bad idea?

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Posted in Economics, Ethics, Financial Markets, Monetary Policy, Politics, Religion | Permalink

Even central bankers should be held accountable: they play with public money after all

November 29, 2008 7:54 pm

Bloomberg News filed a federal lawsuit on November 7, 2008, to force disclosure by the Federal Reserve, under the US Freedom of Information Act, about the lending by the Federal Reserve system to private banks. Bloomberg wants to know the identities of the borrowing banks, how much each one borrowed, and the assets the Fed has accepted as collateral for these loans by the Fed.

The request is not prima facie unreasonable. Under the 11 facilities cited in the lawsuit (which don’t include the $700 bn of the TARP, which is a Treasury programme), the Fed has extended well over $2 trillion worth of credit. Initially, most of this was secured. With the growing volume of Fed purchases of commercial paper, and given the range of options for outright purchases of private securities provided by the $800 facility announced on November 26 ($200 bn for consumer credit and $600 bn for purchases by the Fed of mortgage-backed securities and of debt issued by mortgage lenders), the Fed is now also a major unsecured creditor.

The Fed’s exposure to credit risk is likely to escalate rapidly as the Fed engages in large-scale quantitative easing, taking onto its balance sheet, either as collateral or through outright purchases, ever larger amounts of every poorer quality private securities. A trillion here, a trillion there - even in Washington DC, you are talking real money for which accountability to the Congress, the US tax payer and the wider public is essential.

Our financial leaders certainly talk the accountability and transparency talk.

Consider Treasury Secretary Paulson’s words at the September 23, 2008 hearing of the Senate Banking Committee about the need for transparency in the purchase of distressed assets (the original intent of the TARP as a fund for price discovery for toxic assets was still alive then): “We need oversight,… We need protection. We need transparency. I want it. We all want it.’‘ On September 24, 20098, Bernanke also sang the Transparency Hymn in relation to the TARP: “Transparency is a big issue,”.

Transparency is such a big issue, apparently, that it cannot be squeezed into the Fed’s procedures for managing its lending facilities. Following an initial request for this information by Bloomberg in May 2008, the Fed stonewalled, never gave a formal answer, but hinted that it could not provide the information because of a commercial confidentiality exemption clause in the Freedom of Information Act.

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Another poke in the eye for freedom

November 28, 2008 2:56 pm

I have long held the view that our freedom, our civil liberties and human rights, and indeed our open society, pluralist political system and way of life are endangered more by the response of the UK and US governments to the threat posed by Al-Qaeda and other terrorist groups, than by the terrorists themselves.

A further reminder of just how assiduously the British government has been chipping away at our freedom is provided by the arrest of the opposition spokesman on immigration, Mr. Damian Green, by counter-terrorism officers, his questioning by these counter-terrorism officers for nine hours and the search of his home and office. The ‘terrorist conspiracy’ being investigated concerned Home Office leaks.

According to the BBC’s website, among the recent leaks that got Home Office knickers twisted so viciously were the following:

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Eurosceptics remedial education class 1

November 8, 2008 6:49 pm

If I got a pound – even the current rather devalued pound – every time an English eurosceptic (it’s almost always an English eurosceptic, hardly ever a Scottish, Welsh or Northern Irish one) utters something utterly insane and hilariously wrong about the EU, the euro area or the euro, I would by now be rich enough to count Peter Mandelson among the regular visitors to my yacht.

Unfortunately, if complete nonsense or an outright falsehood is repeated often enough, it tends to become part of the mental furniture of the public. This would be unfortunate, because now more than ever, it is essential that the UK give up its opt out from the third stage of Economic and Monetary Union and join the euro area as soon as possible. I have therefore decided to use this blog to expose and denounce the half-truths, outright lies and nonsense promulgated by the eurosceptic media in the UK. This is the first of what could become a long series of remedial education classes for eurosceptics.

My target today is Neil Collins’ column in the November 6, 2008 Evening Standard, London’s only remaining evening paper (not counting the two free rags). I will quote him at length so he can do himself an injustice:

“IS BOND MARKET TELLING ITALY ITS NUMBER’S UP?

If you’re thinking of tucking away a few euro notes in case the pound melts down and you can’t afford to cross the Channel, look at the numbers on the notes first. If they start with an X, and the digits of the serial number add up to a number ending in two, hang on to them. These are good, solid German euro notes, worth their face value. If they begin with S, with digits that add up to a number ending in seven, spend these first. They’re Italian euros, and with luck they won’t stand at a discount in Europe’s shops, or at least not yet.

If you think this is fanciful, look at the chart above. It shows the yield on 10-year Italian and Greek debt, less the return on the equivalent German government bond. I wrote last year that the risk of Italy falling out of the euro was underpriced at around 32 basis points (0.32 percent a year) and now the markets are waking up to the danger.”

The chart, not reproduced here, does indeed show the widening spreads of 10-year Italian and Greek government debt over German government debt (Bunds). On Friday, November 7, these spreads were 1.40% for Greece, 0.92% for Italy and 1.04% for Ireland. As the government securities in question are denominated in the same currency (the euro) and are very similar in all respects except for the identity of the issuer, these spreads reflect differential sovereign default risk and differences in liquidity vis-a-vis Germany.

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