Sam Dumitriu
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Three neoliberal ideas from Barack Obama
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Hard Brexit or Soft Brexit?
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Democracy doesn't help growth
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Why Europeans really do need American healthcare
Why Europeans really do need American healthcare

Brussels Dispatch: The perfect storm

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The great thing about this current man-made economic crisis – other than the brilliant cover it has provided for government to launch the biggest financial power-grab the free world has ever seen – is that its bright red flashing light has distracted attention from just how structurally unsound the entirely synthetic euro is proving to be.

Spain’s economy, for example, is asphyxiating: unemployment is running at 14%. Its deficit is 7% - incidentally, that’s over twice that allowed by the Maastricht Convergence Criteria. It also has a current account deficit nearing 9% of GDP (whilst Germany has a current account surplus of 7%).

The next great sub-prime lending disaster is hiding within the Western European loans to Eastern Europe of around $1.5tn. Austria, Belgium, Sweden (and Switzerland) have a loan exposure of between 25% to 60% of their GDP. Italy has a debt to GDP ratio of over 100% (but that’s just to itself).

As of February 2009, the lowest eurozone annual inflation rate was Ireland and Portugal at 0.1%; the highest were Finland 2.4% and Malta 3.5%. In the same month, manufacturing output was declining at record levels, hitting Germany and France particularly badly.

So, it is about the best the eurozone can do at the moment not to fall apart – and the pressure hasn’t even started yet.

According to the European Central Bank, the M3 money supply across the eurozone is growing at 6.5% annually. ECB interest rates are currently at 1.25%

Against any logic (other than straightforward duplicity), the Keynesians have somehow convinced the world that the big fear for the global economy is deflation. Milton Friedman said that inflation was always and everywhere a monetary phenomenon. Inflation is properly understood as an expansion of the money supply (and credit).

In summary, manufacturing output is falling. Certain member states are encumbered by massive debt.  Both considerations will push the ECB to consider lower interest rates. But the money supply is already expanding at a rate far greater than has been reflected by price rises.

Blog Review 927

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The public sector has higher wages than the private. Better pensions....and they're getting better pay rises too. Something's not right here, surely?

Milton's four ways to spend money and when politicians are acting boldly.

Dealing with climate change and Ben Bernanke's PhD thesis. It's uncertainty that's the real problem.

And in dealing with climate change, we could have a complex system that politicians can game and a simple one that they can't. So guess which politicians have chosen?

It's true that newspapers face some difficult technological changes: but they also seem to have a death wish.

A note for drug war warriors. Even when you should be able to control drug production, in fact, even when you do, the effect is only short term.

And finally, this might explain Johann Hari.

167 CCTV camera pilgrimage

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Today, Good Friday, there's a pilgrimage in Westminster, from Methodist Central Hall to the Anglican Westminster Abbey, and on to the Catholic Westminster Cathedral. It's a distance of little more than a thousand yards – about three good fairway strokes for Tiger Woods – down Victoria Street. But over the years that I have worked nearby, I've noticed CCTV cameras springing up here and there along the route. In my book, The Rotten State of Britain, I have documented how we are sleepwalking into a surveillance state (not to mention a database state and a nanny state). So I decided to trace the route myself and count the number of CCTV cameras that I could see.

I started at the North door of the Abbey. I couldn't see any cameras on this magnificent building, though a notice by the door alerts tourists to the fact that CCTV is used inside. As I gaze across Parliament Square, and up the bottom end of Whitehall, with Parliament behind me, I must be on scores. But my eyesight isn't great, and I don't want to whip out my binoculars and start scanning the Treasury and other government buildings, in case I get arrested and held for 21 days without charge as a terrorist. Nor can I cross the Square and take a closer look, because it's full of Tamil demonstrators.

But I can see 8 very easily on the new Supreme Court building, another 6 or so on the Queen Elizabeth Conference Centre, and even two over the entrance of the Abbey bookshop. Thank goodness they didn't disfigure Nicholas Hawksmoor's fabulous West Front with them.

Strolling over the road I find Central Hall pretty well camera-free too, though I know there are some round the bank, and from here I can see 5 down Tothill Street and another 3 on the Treasury building at the end of Storey's Gate. On the other side of Victoria Street, I can see 2 on the Schools Department, and the Department of Business seems particularly anxious about its security, because on this side alone in sports and impresive 11.

As you would expect, when you pass Scotland Yard you are under the gaze of dozens, either on the building itself or on the lampposts outside. I count 18 on the two sides I can see, but there are almost as many at the back. I'm halfway down my route now, and the count has already passed 100.

Past the Albert pub with a very artistic looking CCTV camera pretending to be a streetlight, I can see the Korean Embassy, which boasts another 6, and the Howick Place Post Office, with a modest 1 being visible. But the Ministry of Justice has four heavy-duty cameras with floodlights that look as if they can be swivelled in any direction to meet the need of the hour.

Ashdowne House, which is home to another bit of BERR, is also very security conscious for some reason, with another 6. And at last I'm turning into the marvellous forecourt of the Cathedral. Looking down Victoria Street, I make out 7 on the Kingsgate shopping arcade, 3 on a large pole at the end of the street, and 6 more that seem to be for traffic management. As I reach the Cathedral steps I look back I can see another 9 cameras. And maybe there are more inside the building itself, staring out at me, I don't know.

All in all, I have counted 167 CCTV cameras in my short three-drive walk. I've probably missed a lot more that my poor eyesight and my anxiety to avoid arrest have caused me to miss. And the Home Secretary Jacqui Smith ridicules the idea that we are living in a police state!

Less Than Meets the Eye

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When you read the fine print of the G20 agreement, it shouts 'heroic hypocracy, unreliable sums, weak promises, meaningless language and self-serving commitments' according to the City financial analyst Miles Saltiel in a briefing paper for the Adam Smith Institute.

The hypocrisy is signalled by the communique's call for 'propriety, integrity and transparency'. It's hard to take that seriously when at the same meeting, China and Russia signed up to open markets, and Saudi Arabia agreed to family-friendly employment policies.

As for the sums, the headline '$1.1 trillion of financial stimulus turns out to be more like just $25 billion of new money. The IMF's '$500 billion' and the '£250 billion' in Special Drawing Rights are just an underwriting commitment, with no new cash. The '$100 billion' fund for the world's poorest is largely all announced already, and will come from private rather than government sources. The extra '$250 billion' for trade finance is also mostly a re-hash of old commitments, with less than $25 billion of new money to subsidize trade finance. The '$6 billion' to be raised by selling the IMF's gold reserves boils down to a $2 billion trickle over three years.

Promises to the poorest countries, and commitments to free trade, look weak when the Doha trade round lies derelict. And despite some fine language, there is no clear solution to the problem of toxic bank assets. Meanwhile the proposed international unification of accounting rules is, says Saltiel, 'about as likely as the Second Coming.

"The G20 leaders are more concerned about their domestic problems than their international responsibilities," concludes Saltiel. "They turned up in London for a photo opportunity. Their talks convey a sense that there is little they can do to change events. And they are right. Eventually, the world economy will trade its own way out of the current confusion, as it always does."

To read Less Than Meets the Eye click here

Censoring the Adam Smith Institute

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If it were not for Google Alerts I would never have found this website. In fact, if the number of comments are anything to go by, nor would anyone else. Titled ‘Censoring the Adam Smith Institute’ it contains an article to end all parodies of statists, showing with clarity exactly what we are all up against.

Apparently the author of the blog has:

Asked the Netherlands Interior Ministry to censor the website of the Adam Smith Institute, www.old.adamsmith.org. The Institute is the most influential free-market lobby in the United Kingdom. As with earlier censorship proposals, I requesting listing on the national police blacklist, which results in blocking by providers.  For the procedure and the background, look here:

The request is based on three grounds:

  1. The Adam Smith Institute seeks to subject others, against their will, to "free-market economic and social policies
  2. The organisation did in fact succeed in that, and had great influence on the Thatcher regime
  3. The organisation obstructs the work of regulatory authorities in the financial sector, by harassing them, lobbying against their functions, and by depicting them as 'enemies of freedom' - and in doing so, it facilitated massive fraud and mismanagement.

He has also asked that the “Justice Ministry to issue exclusion orders on the Institute's President Dr. Madsen Pirie, and its director Dr. Eamonn Butler, barring their entry into the Netherlands, on the grounds that they obstruct the work of the financial regulatory authorities. That request is problematic since they are presumably EU citizens, and can benefit from that status in immigration law (although they undoubtedly despise the idea themselves)."

Lunacy, yes; but with the way that freedom is going, the future might just hold such dark visions of justice.

Blog Review 926

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A fascinating paper. Which works best in exploration, public or private? And given the answer, what implications does this have for NASA and the ESA?

Netsmith once bought some old coins to melt for their metal value. So discussing the way in which governments give away an option with their coinage makes sense.

Where the Irish first tread.....although do you think that British politicians should be limited to only a 10% pay cut?

What at first appears to be a strange religious ceremony becomes, in the right hands, a solution to the Middle East.

How to beat the smoking ban.

An awful lot of other so called safety laws don´t work either.

And finally, spelling, musings and sarcasm.

 

Green budget, stupid budget

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Now Alistair Darling and Mervyn King have told him there's no money left for another fiscal stimulus, it seems Gordon Brown is desperately searching for some policy gimmicks to shove in the forthcoming budget. And it looks like his latest big idea is a 'green new deal', which will be "a job creator, a quality of life improver, and an environment-enhancing measure", as he told The Independent.

The trouble is, the money has to come from somewhere. Government cannot give to any one sector of the economy – however deserving – without first taking away from the private sector as a whole. If they tax, then they take away funds directly. If they borrow, then there's less capital available for businesses to access. And however they do it, the government is using resources that would otherwise have been supporting jobs and companies elsewhere in the economy. No new purchasing power is created.

These green jobs that Brown says he'll create will only come at the expense of jobs in other sectors that are not so politically appealing. And the businesses he 'stimulates', will only be stimulated because others are deprived. 

Moreover, are these green industries going to create wealth or are they just going to be a sink for the taxpayers' money? Even if they are profitable, who's to say the same resources wouldn't have been put to more productive use elsewhere? Government is notoriously bad at picking winners. In fact, they're much better at picking losers.

None of this is to say that I don't think the 'green economy' has a future. I do. The possibilities technological advance brings are endless. But they will be better realized if they're subject to the competitive forces and discovery processes of the market, than if they are simply the playthings of politicians chasing headlines.