Sunday, September 21, 2008

Financial Facepalming

It would be reasonable for many people to think that the explanations and issues behind the current economic clusterfuck were as opaque and convoluted as the financial instruments that managed to hide the bad debt for so long.

The whole event, however, especially for political commentators, has been more like a mirror. And also - as usual - what is most important goes unreported.

Let's look at the mirror analogy first though. Leftists who have stated clearly that they have absolutely no idea how the current financial system works still see fit to lecture us with explanations from Marx. You know - explanations, theories and the like provided 125 years ago - and that's being generous, assuming that in his sixties, Marx hadn't already developed that "where the fuck am I?" look that we see on the face of that ubermensch of U.S. politics, McCain (backed up of course by uberwench 'I know about foreign policy because Russia is next to Alaska' Palin).

Is it an accident that right-libertarians are massively overrepresented with professional economists and that left-libertarians continually fail to understand them (and, it seems, are intent on misrepresenting right-libertarian positions into perpetuity?). It's not as if the right-libertarian camp has not, consistently, pointed out that popular references to the "free market" refer to something that is actually fundamentally unfree. Characterised as it is by corporatism, corruption, monopolies and protectionism, this monster is objected to no less strenuously by right-libertarians than it is by left. So why the continuing, and often purposeful, misrepresentation?

Cries are ringing out proclaiming the "end of capitalism" and the "end of the free market". Given that the former term (capitalism) is often used as a euphemism for "everything I don't like" and adjusts its meaning according to it's users' whims that's a fuck load of things to be ending suddenly. Be very careful in any discussion of "capitalism" that you both share the same definition first. It's a popular and dishonest debating tactic used by dogmatic leftist propagandists to hold an assumed meaning without telling you what it is. It doesn't help that a lot of them can't make a meaningful distinction between "corporatism" and "capitalism".

One of the reasons I ended up taking such a strong interest in right-libertarian thinkers was that many of them seem to have a very sophisticated and nuanced understanding of economics and it's relationship to everything else in life. The modern right-libertarians deal with the nitty-gritty questions of detail that absolutely plague left-libertarian philosophies, yet for which the latter have no answers. Not only that, but the right-libertarians appear to have a sympathetic understanding of left-libertarian positions, (see for example, this interview Murray Rothbard), yet the converse isn't true. I'm wondering if from now on I should simply refer to 'the prophet Marx, peace be upon his name'.

A major part of this problem issues from the fundamental schizophrenia in the leftist camp that isn't present in the right: (left) Anarchists and State socialists mix, and often take the same sides, quite happily without any sense of irony or contradiction. I guess I shouldn't be surprised then that in the wake of this week's events I've head anarchists demanding "more regulation" (i.e. more state interference).

It's something else again that highlights the complete inadequacy of 'left-right' line - giving as it does, a false choice between one statist ideology and another. Only the left-Anarchists don't seem to get it yet. It's why I specifically use the terms 'right libertarian' and 'left-libertarian' to distinguish two groups of people who - supposedly - have very similar goals - broadly mini-archist (minimal state) through to anarchist sentiments. It's not a problem on the 'right side'. Market Anarchists / Anarcho-Capitalists mix well with mini-archists. Yet the converse does not occur on the 'left' side. They mix, and apparently sympathise instead with statists. It's bizaare. The left-libertarians should be allied with their right-libertarian cousins. Instead though the former would rather pretend that the latter doesn't exist and stick their fingers in their ears.

I think they're afraid and feel threatened by the cogency of the right-libertarian groups and philosophies. It's worth bring up a reminder too that the last two successful invasions of parliament weren't carried out by any hard bitten left-anarchist group. No, it was Fathers for Justice and The Countryside Alliance. They're not necessarily of right-libertarian stock either, yet it's embarrassing for the schizophrenic leftists. Someone else took their ball(s).

So, back on topic. Well - More regulation. Yes more! Here's some regulation right here. Err.....

"It is popular to take low lending standards as proof that the free market has failed, that the system that is supposed to reward productive behavior and punish unproductive behavior has failed to do so. Yet this claim ignores that for years irrational lending standards have been forced on lenders by the federal Community Reinvestment Act (CRA) and rewarded (at taxpayers' expense) by multiple government bodies.

The CRA forces banks to make loans in poor communities, loans that banks may otherwise reject as financially unsound. Under the CRA, banks must convince a set of bureaucracies that they are not engaging in discrimination, a charge that the act encourages any CRA-recognized community group to bring forward. Otherwise, any merger or expansion the banks attempt will likely be denied. But what counts as discrimination?"

(emphasis mine)

Oh dear. It's a Godzilla sized law of unintended consequences. Again. This was where the sub-prime crisis started. The State will know best as long as prophets of Marx are in charge. Oh yes.

Also bear in mind what Guido Fawkes said recently:

"The investment banking model since the 1990s was flawed not by lack of regulation, it was flawed because of poor governance. Traders and management were incentivised to take risk for reward with minimal personal downside. Bank shareholders have lost money hand over fist whilst their hired employees have been paid hundreds of millions. The complex derivative structures that underpinned sub-prime lending were opaque to the point of incomprehensibility."

The popular meme amongst the "radicals" appear to be to tar everyone involved in the industry with the same brush. The ignorance is mind boggling (check "opinion former" Urban 75 if you don't believe me).

Anyway, back to our dearest ex-chancellor. According to Gorgon, we should be blaming:
1) The U.S. (never mind that our economies are fundamentally intertwined, especially since Gorgon (or fuck knows who made the actual decision - it's not as if the media has been asking) decided to go long on U.S. Securities....
2) Short sellers.
3) The price of oil.
4) "Off balance sheet liabilities"

On 1), well I think we all know that an American economy and foreign policy without a corresponding Anglo intertwinement would be like balls without a bag.

On those securities by the way..... Securities - Treasury Bills (or 'T-Bills') are seen as a 'safe investment'. It's no surprise then that many investors are pulling money out of what were seen previously as relatively safe bets such as Morgan Stanley and Goldman Sachs and buying T-Bills instead. What is a surprise is that the UK government, having invested in hundreds of billions of dollars worth of T-Bills over the last year appeared to have foreknowledge of this more than a year ago. See my blog, 'Britain does shoeshining' here. This wasn't an accidental decision (oops, just found $200 billion down the sofa to invest). We've been bullshitted AGAIN.

Ian Hislop on Question time this week - pointed out that Gorgon has not "taken us out of Boom and Bust" (but he said he would damnit!), he's just got rid of 'Boom'. All the while he was sat next to that sketchy cow Harridan Harperson.

Gorgon says: "The US government now owns much of the US mortgage market and a large part of the world's biggest insurer." Lenin is face-palming as we speak. I'm face-palming. Everyone is face-palming.

It was Gorgon who presided over the house price and credit fuelled "boom". It was also Gorgon who presided over PFI (Private Finance Initiative - we borrow at exhorbitant cost from the future to build things now that we still won't own at the end of it. "We" being the taxpayer schumcks - you and me). And he probably knows full well that he might be saved from the consequences of PFI by becoming unelectable when, in just a couple of years, the real costs of PFI will start appearing:

p.s. PFI is one of those "Off balance sheet liabilities"

More cooking the books. More bullshit.

Quelle Surprise?

That oft-overlooked point that a free market of goods and services also requires a free market of information. Short selling is an important part of this, it provides information on the state of the company. Speculation and shorting of stock can excacerbate the situation, but it isn't creating it. Its been another thing the followers of the Prophet have been jumping on without really understanding. By the way, here's the 29 stocks on the London Stock Exchange you can no longer go short on
- they're financial institutions of one sort or another. There's a big problem, however, as Guido points out:

"The banning of short sellers is a side show, it is merely populist politicking. It will make conservative hedging very difficult, it raises the cost of capital to corporates and it will not change the underlying fundamentals. It will also create liquidity problems and a whole host of technical difficulties."

But it's ok because the short-sellers are EVIL CAPITALISTS. Followers of the prophet don't understand it so it's de facto evil.

Follow the gummint bullshit and swallow it hook, line and sinker why don't you. Meanwhile, while you weren't looking (again) - The U.S. Secretary of the Treasury is about to become the most powerful person in the world. (Not that the fourth estate was looking either).

The phrase "too big to fail" with regard to these horrific corporatist entities should be replaced with an old one - "unsinkable". Every similarity in the analogy I'm alluding to there is deserved. It should also be applied to government (you know, my fellow anarchists that BIG GOVERNMENT that you claim to hate), and that rotting carcass of shite that is claimed to be representative of radical thought in the U.K.


Oh and someone should kick Harridan Harperson's face off, because everytime that gobshite speaks, this happens I have to facepalm and my head is starting to get sore.

So folks, who's gonna get us out of this mess? Zanu Labour, Blue Labour, or The Illiberal Undemocrats. You know where I'm pinning my colours, but then what the fuck do I know?