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Showing posts from January, 2008

The End of Fed discipline

When people borrow too much, the best thing that can happen is a large dose of inflation. The nominal value of the debt stays the same, (plus interest) but the real value of the debt falls dramatically. The second rate cut from the Fed in less than a week now takes interest rates under the US inflation rate. The consequence will be a sharp fall in the US Dollar. All the massive debts that the US has contracted in Dollars will now fall in real terms. The Fed is debauching the currency: the cardinal sin of Central Banking. The consequences will include the end of the US Dollar as the sole reserve currency. Meanwhile the ECB is maintaining interest rates in an attempt to reduce Eurozone inflation. This will hurt in the short term, but in the long term, it will prove to be a far wiser policy that the recklessness of the Fed.

What George W. Bush might have said

Madam Speaker, Vice President Cheney, Members of Congress, distinguished guests, and fellow citizens: Seven years have passed since I first stood before you at this rostrum. In that time, our country has been tested in ways none of us could have imagined. We faced hard decisions about peace and war, rising competition in the world economy, and the health and welfare of our citizens. These issues call for vigorous debate, and I think it's fair to say we've answered the call. (LAUGHTER) In that time I have honestly tried to put the interests of my country before all else. I have taken the words of the oath of office that I have twice made with the utmost seriousness. I know that in this, an election year, there will be new leaders emerging, Republicans and Democrats that will contemplate the oath I have taken and I know that all will consider the interests of our country and show that they can compete for votes and cooperate for results at the same time. (APPLAUSE) In the past se

Trying to do too much

The dramatic falls in global markets over the past couple of weeks have created a rather panicky mind set amongst many of the key players. However, whatever Ben Bernanke may hope, the global financial crisis is not going to come to an end because of emergency rate cuts by the Fed. The fact is that the credit binge now needs to unwind to a still greater degree before stability can be restored. This is not a situation that is likely to respond to the short term moves that policy makers primarily use to influence the markets. On the other hand, the idea the George Soros puts forward that the current troubles are the end of a "sixty year super cycle" seems to take his theories of "reflexivity" into the sci-fi realms of Hari Seldon's Psychohistory created by Isaac Asimov. Nevertheless, that the credit markets and the housing boom now need some significant structural adjustment, is a given, the question is one of scale. It is also a question of timing. A few months a

The Curse of Blog

Well, a rather smug and arrogant British politician is forced out of ministerial office following the referral of his financial dealings to the Metropolitan Police- I see that Guido Fawkes is happily dancing on Peter Hain's political grave, and indeed claiming his political scalp as the first victory of the insurgent blogosphere over the political class, and indeed the "old media". The blogosphere redux ? Well, I am not too sure about that. The medium has changed quite a bit from the heady days of last year when a blog was being created every blink of an eye. Despite the supposed triumph of the transforming technology, I see that several very good blogs, like InnerWest , seem to have passed beyond, and even A Liberal goes a Long Way - a former Lib Dem blog of the year- now seems to have dropped out. Newmania, for the more rabid Tories, also seems to have disappeared too. Sure, there is a limit to what a given individual feels like telling the world. More the point, perha

How TV works

I am occasionally asked to comment for Business TV channels on aspects of my work in emerging markets. Today, as I walked to get my lunch, I saw a TV crew- as you often do around the streets of London. The only difference was that I know the journalist and stopped to say hello. As you do with journalists, we had a chat and arranged a drink. Five minutes later he called me. The US Fed had just made an emergency rate cut and all the stuff he had been doing was now out of date. Could I help? Well, my specialism is quite specifically emerging markets, but for such a big story it was not hard to come up with the three lines that the news story called for. So I gave my views to camera on the street outside my office. When it was over I asked my friend which obscure business channel we were on. BBC News at 10, apparently- so "Hello Mum!"

Mayor of London: Time to get serious

The steady stream of exposees and innuendo about Ken Livingstone have become a crescendo. The latest is the full length Dispatches programme, which comes on top of a consistent set of stories from Andrew Gilligan in the Evening Standard . The implication is that Ken Livingstone is a drunk and sleazy politician. As regular readers of this blog will note, that is a view that I have put forward for some time. I do not believe he is fit for office. I do believe he should be replaced. However, the leading opponent of Crony Ken is currently the equally absurd Boris Johnson . The litany of Johnson's questionable career begins with the fact that he was sacked for making up quotations for an article he wrote as a trainee journalist. Despite his starter marriage, which ended in divorce, and a further marriage which produced four children, Johnson caught the public eye when he lied rather obviously about his considerable philandering, including a four year affair with Petronella Wyatt amongs

Sunshine on a rainy day

I have been exceptionally busy here in Tallinn, so inevitably blogging has been sparse. Indeed I missed all of the excitement on this very blog. I think it speaks volumes about what people think of Peter Hain, that even the rather tired joke about him on these pages has received such wide currency! The fact is that whatever happens now, Peter Hain is a politician who is well passed his sell-by date. In fact the entire government have that slightly stale smell about them. Even David Milliband our kid foreign secretary does not look fresh. Indeed his absence of gravitas is so extreme that it is practically comic. The ongoing crisis between the UK and Russia is watched with considerable interest in Estonia, where they have all too much experience of the crude and rather brutal methods that the current mob of crooks in the Kremlin have used as their foreign policy. I met with Mart Laar, the former Prime Minister, yesterday and exchanged thoughts about the problems of Russia. While Edward L

No Snow

This time, another trip to Estonia Always a pleasure to come to a country where the safety Nazis do not have the last word Also a place where Liberalism is a given- the answer is always "why not?"instead of "why bother?" The whining Daily Mail subtext of fear and defeat seems to be a very long way from a country where the worst already happened. When you meet Estonians the verbs are never "can not", only "possible, although difficult ". What a relief from the fear and negativity of 98% of British politics. Perhaps that explains why Estonians will be richer than the UK quite soon, even after the recesssion that strikes Estonia before Britain....

Where does David Cameron stand on Europe?

Liberal Democrats are not anti-European. We believe that the European Union needs significant reform, but we also believe that it is a positive force for the political and economic well being of British Citizens. What, however, are the Conservatives? Are they Anti-European, as so many of their members seem to be? Are they Pro-European, as Christopher Beazley, a veteran Conservative MEP, certainly is? For many Conservatives, membership of the European Union is, as it is for UKIP, a complete anathema. However, David Cameron says that he does not want to withdraw from the European Union . Personally, therefore I get a little tired of being accused by some Tory nutters of being some fanatical anti British traitor because I also support membership of the EU. The furious rage and malice that these anti-European Conservative people often bring to their arguments is usually highly unpleasant and almost entirely counter-productive. The contempt, for example, that these Yahoos have poured on Ch

Hain: Disorganised Indeed

A secretary was leaving the Department of Work and Pensions last Friday evening when she encountered Peter Hain , standing in front of a shredder with a piece of paper in his hand. "Listen," said Mr. Hain , "this is important, and my secretary has already left. Can you make this thing work?" "Certainly," said the secretary. She turned the machine on, inserted the paper, and pressed the start button. "Excellent, excellent!" said Mr. Hain as his paper disappeared inside the machine. "I just need one copy."

Nick Clegg finds his voice

This feels like the beginning of something big. If Nick Clegg had said this during the leadership campaign I would have unhesitatingly voted for him. This is an authentic Liberal voice, and one that is going to make a dramatic difference. A few of the quotes I would highlight: " The first step is to scale back the vast monster of Whitehall. Whitehall should get out of the business of the day to day running of public services in Britain. That strategy doesn’t work. We will draw up plans for radically shrinking the size of all our public service departments - to re-focus them on setting broad objectives for the local agencies and people who deliver on the ground ." " Marrying our proud traditions of economic and social liberalism, refusing to accept that one comes at the cost of the other. On that point, if not all others, the controversial Orange Book in 2004 was surely right ." " There are two crucial dividing lines in British politics. First - the dividing lin

An end to the Night-Mayor

Last night was the first of doubtless many debates between the candidates for Mayor of London. To be honest I have been in a gentle kind of despair about the idea of Ken Livingstone, who I believe to be incompetent, doctrinaire and rather crooked, holding on to his job. Certainly, the idea of Boris Johnson- the clownish, gaffe prone Conservative candidate- replacing Livingstone is really not appealing at all. I think I prefer the dubious crook to the embarrassing clown. However, one candidate last night actually did come over as a sound and sensible figure. Brian Paddick was a guy who one can imagine dealing with - God forbid- a major terrorist incident. He also has interesting ideas about how to tackle the mess in transport and already knows far more than other two do about Policing. He is clearly thoughtful and intelligent. Between the posturing of the two gargoyles -Ken and Boris- Brian Paddick looks extremely good. If Boris's campaign implodes , as it easily might, and the ru

Blair is no Cincinnatus

There is a story in ancient Rome of Cincinnatus - the hero who took political power at the specific request of the Senate and then saved the city when it was menaced by the Volscians and the Aequi. The same thing happened again when the city was faced with a revolt by the plebians- the same class as Cincinnatus himself. In each case, when his job was done, he relinquished power and returned to his farm where he lived modestly. I don't think he filled his boots with consultancy jobs which he was not really qualified for and which were offered to him entirely because he had previously held supreme power. He therefore did not aim to make as much money as possible by exploiting his previous status. No- that epitome of greed is one Tony Blair.

Liberal Democrats v Conservatives: the battle in the blogosphere

It is probably fair to say that the advent of Nick Clegg, the new leader of the Liberal Democrats, has not been greeted with unalloyed joy by our Conservative opponents. Indeed, it would hardly be wrong to say that the past few weeks has seen some "pretty robust" debate between Conservative and Liberal Democrat bloggers. Even the Queen Mum of blogging, the generally genial Iain Dale seems to have been featuring as many stories as he can to try to show Liberal Democrats in as poor a light as possible. Neither, to be fair, has the traffic been all one way: I have "fisked' Mr. Cameron's rather half-baked proposals on health, and attacked several of the Conservative positions that have emerged from the fog of their policy making process. Most Liberal Democrats have attacked the Conservatives probably with more vigour even than the distrusted, discredited Labour government. So what lies behind this sharper debate, this emerging war in the blogosphere? Partly- in my

A new start for Georgia

Despite the continuing pressure from Russia, Georgia has been able to hold presidential elections that have been generally recognised as free and fair. The incumbent, Mikheil Saakashvili, has been able to hold on to office, with about 52% of the vote. It is a slap in the face to Russia, which is the only country that has refused to recognise the elections as free and fair. Despite the intimidation, subversion and occasional violence, Russia has not been able to achieve its goal of undermining the independent minded Mr. Saakashvili and replacing him with someone more compliant to Russian wishes. When the Russian fomented protests forced the election, there were concerns expressed that Mr. Saakashvili would attempt to create an authoritarian regime, similar to those in neighbouring Azerbaijan and Armenia. However, the continued engagement with liberalism, openness and democracy by the government has allowed a democratic solution to emerge. Despite desultory protests, the fact is that the

A Pipe, A Chancellor, Security and the New President of Russia

Nord Stream is the extremely controversial plan to build an undersea gas pipeline from Russia to Germany. It is controversial for two different sets of reasons. One is concerned with the potential environmental damage of the pipeline on the already damaged and degraded waters of the enclosed Baltic Sea. The seabed of the Baltic is said to contain a large amount of different poisons in its sediments that would be stirred up by the construction. Such poisons included heavy metals, phosphate and other pollutants that have run off from the land, but also includes the remains of large numbers of mines that were laid during the first and second world war, which have not been fully mapped and have never been entirely cleared. However it is not so much the environmental issues that have created the greatest controversy, it is the political issues. Firstly, the undersea route by passes the already existing pipelines between Russia and Western Europe- it avoids land transit through countries s

The UK is NOT richer than the USA

I see that something is being made of a new statistic that purports to show that Britain is richer than America for the first time in over a century . Well, as Disraeli might have said there are"lies, damn lies and statistics" In fact the reality of the difference in wealth between the two countries should reflect the relative purchasing power of the Dollar versus the Pound. There are several ways of measuring the difference in purchasing power, and one of the best is the Economist " Big Mac index ". The Big Mac is a standard basket of different goods: bread, meat etc. The price of the hamburger is easily measured and can be compared between different currencies. If one normalises the prices, then we can obtain a crude measure of purchasing power parity. When we do this between the US and the UK, we find that the Big Mac is 18% more expensive in the UK than in the US, in other words, we could say that Sterling is 18% overvalued versus the Dollar. So, far from Britis

Brown at the midterm

In the six months since Gordon Brown became Prime Minister there has been an extraordinary volatility about British politics. Opinion polls have shown first a strong Labour lead, then, following the mishandling of the speculation concerning a possible autumn election, the Conservatives took the lead. The election fever that gripped the country created unexpected pressures: the Conservative leader was able to relieve the pressure on him by some astute handling of his party conference. Liberal Democrats, by contrast, were squeezed so intensively that Ming Campbell felt compelled to stand down. Now, as we enter 2008, a new political agenda seems to be emerging. Gordon Brown, somewhat battered by the blow back from the election that never was, has begun to launch a charm offensive in the media: a long interview with the Observer yesterday was paired with an appearance on the Andrew Marr show and then this morning he was on the Today programme. A veritable blizzard of appearances from a

The 44th President

The great machinery of American democracy has seemed incredibly flawed in recent years. I have occasionally felt very close to Marcus Tullius Cicero: a man who wanted to defend the Roman Republic's tradition of liberty, but who was defeated by the corruption and decadence of the Republic's own institutions. Incidentally his 2101st birthday took place yesterday. I, like Patrick Henry in 1776, have felt that Western Liberalism stands upon a knife-edge: "I know not what course others may take; but as for me, give me liberty or give me death!". I feared that the entrenched political elite in the United States has eliminated all but the already rich and powerful from the national political process. I feared that the Senators, that club of billionaires, no longer speaks for State or Union, but solely for the power of money. The final insult, it seemed to me, was the flawed election of George W. Bush, which seemed to ignore the form of democracy, let alone its spirit. With


Sean Thomas, writer, contributor to and wannabee right wing nutter has managed to make me laugh for several minutes through what starts off as a seemingly straight piece of travel journalism. The easily offended should not click on the link, everybody else should make sure that they are in a place where laughing loudly will not cause embarrassment .

Cameron: OffSick

Where to start on David Cameron's dim witted idea to fining health care trusts that do not hit targets on MRSA ? The last thing that hospitals that are already struggling with erratic funding need to deal with is some extra complication that could reduce the transparency of their funding still further. A free market would probably respond by pricing in an acceptable level of MRSA risk- is that what Mr. Cameron really wants? Well, no, he probably wants to eliminate MRSA risk completely. That however requires strict hygiene rules- probably including drastically limiting visitor access to the wards- a policy likely to be highly unpopular. However Dave doesn't think about "unintended consequences". As for the "independent" regulator of the Health service- presumably called OffSick in line with OffWat and OffTel- I have to ask why the current Department of Health is not able to perform this function? How much disruption and extra cost would the creation of such