91Èȱ¬

The EU are probably right in directing their thoughts towards better regulation in the future.

At present there is not a consistent EU approach to countering this depression and there probably never will be.

Even the professional financial "experts" cannot agree on a united approach to conquering the present downturn, so there's no chance of the politicoes coming up with a solution, when they are weighed down with all their political baggage.

"Let's just say the European Central Bank does not look forward to the prospect of choosing which Euro government bonds to buy. It's doing everything to persuade itself it doesn't have to."

Perhaps they should do more to encourage the Chinese to sell off some of their devalued US$ debts and put that cash in Euro-bonds !! Of course, every time they try to be nice to the Chinese, Sarkozy will put a torpedo through their efforts !!

C'est la vie, as the English say !!

Our Treasury now admits that it did not even understand the potential for a crash inherent in the dash for cheap money asset price growth. They got it wrong - but why on earth is it that they still have jobs? Nick Macpherson, the Permanent Secretary who earns GBP 196,400 a year and a knighthood has been running the county since 2005. Does he have no respect for our intelligence? Does he think we haven't noticed the financial mess that he has been in charge of regulating? Does he think we are all fools? The media are conniving with the Good and the Great to blame the Fred Goodwin's when in truth the real people in change are getting off Scot free (no pun intended).

We go to Europe and expect such men (Nick Macpherson, Mervyn King, Hector Sants and the entire MPC) to be respected when they contributed so greatly to the calamitous collapse. We must be joking! They shame us all!

If we are to be respected again in the corridors of power in the World or Europe we MUST change the people who caused the crash. Their fixed and arrogant philosophy, flawed economic theory and management gave us the bubble and it is inconceivable and totally irrational that they can remain in office whilst we have to fix the problems they have caused.

We are the laughing stock of the financial World. The country is being taken for fools.

Stephanie
Thanks very much for this post - very clear and informative.I wonder to what extent the straitjacket of the euro affects the approach. Everyone is worried [ or should be ] about avoiding currency freefall and making a plan to get back to fiscal sustainability - so that credibility is maintained. There's a type of stabiliser in devaluation.

But with Mervyn King telling us that international regulatory change is too big an objective for April's summit, one wonders what else can the G20 usefully do. Gordon Brown has been going on about the lending capacity gap left by exiting foreign banks and the collapsed securitised debt markets. Any chance this black hole can be filled? What are the summiteers saying about this crucial issue?

"The European Central Bank does not look forward to the prospect of choosing which Euro government bonds to buy. It's doing everything to persuade itself it doesn't have to."

Who cares what option they opt for ?

These transactions will only benefit the banks. It's still creating something out of nothing and even if that something is paid back on maturity its paid back with lost value.
Temporarily increasing the money supply, (buying bonds) is simply a way to divert us from this issue.

Inflation Inflation Inflation !

Without a joined up view between the major industrial countries and the buy in of the still emerging countries on the way forward a fragmentation of interests will rapidly spread into short sighted and protectionist measures that will undermine the effectiveness of any stimulus.There can be little doubt that we are still in the knee jerk stage of policy making and that much more time should be taken to align measures and interests in order to ensure buy in across the globe. Of greatest concern is that all that is being proposed at present is aimed at resurrecting a stunted and damaged version of what we had before rather than coming up with a plan for the future that will stand the test of time for the next few decades.No doubt the opportunists are continuing to milk the system for all it is worth as cash is splashed about with almost reckless abandon. This is almost as shameful as the incompetence that got us here in the first place.History will not judge us well as we condemn future generations to servicing the huge debt we are building whilst condemning the worlds poorest to deprivation beyond belief.The judgment will be even harsher if all the money spent still does not produce a result.

"But France still lags behind" Actually France is unwittingly way ahead, having banned subprime mortgages, introduced stricter accounting rules and gone into a lot of public debt before everyone else!

I'm going to write about the ECB's problems with QE on another day. Let's just say the European Central Bank does not look forward to the prospect of choosing which Euro government bonds to buy. It's doing everything to persuade itself it doesn't have to.

If I recall correctly, the ECB isn't allowed to buy Euro government bonds so it can't participate in quantitative easing, besides the German representative in ECB would shout NEIN faster then you can say "quantitative easing".

#4 shireblogger:

"Gordon Brown has been going on about the lending capacity gap left by exiting foreign banks and the collapsed securitised debt markets. Any chance this black hole can be filled? What are the summiteers saying about this crucial issue?"

+++++++++++

I am not sure anyone knows the size of the Black Hole. If they do know, it may be so horific that they are keeping the lid on it. It may be so big that it impossible to fill.

'Securitised Debt Markets' They will never be the same again.

Looks like nothing much will come from G20 then, Stephanie?

Stephanie wrote:

"So yes, the battle over financial markets has been won" - WRONG! or should I say - so has it?

The illuminati of the economics world who are so frightened that they will lose their cushy jobs have piled in behind their paymasters - but this does not make their policies appropriate. The problem is that these are the same economists who were all for the prevailing orthodoxy of the last twenty years and it is this prevailing orthodoxy that has proved so disastrous.

In Britain we have suffered a very bad case of Chicago School economics and we have the furthest to go to correct our error. Our journalists and economists have been selected and educated into the whole wrongly based economic philosophy - this is the burden that we in Britain carry. This is the burden that the British people carry. The economists have destroyed the wealth of the Nation and by continuing the wrong policies of 'digging the hole' with the hope of re-inflating the credit bubble they will cause even more suffering.

Quantitative easing is insane when accompanied by zero interest rates and unless and until this is stopped the country's economic condition will continue to deteriorate. Money is now being destroyed at an even more impressive rate than it was in the last year. This is insane and illogical. Money needs to have its price restored. Money must again regain its price. Economic activity will continue to fade away for as long as money is deliberately destroyed. It is impossible to make rational business decisions with the expectation of zero interest rates and this is why rates must be increased now.

Today, Lord Mandelson's nonsense about not intending to bail out business shows just how little he understands of the nature of the rescues under way in the banking sector. I would go so far as to suggest that it represents arrant nonsense and a combination of ignorant claptrap and hypocrisy. None of them get it!

Asset price inflation matters as inflation, and is not an engine of economic growth - this is the fundamental untruth that they still fail to comprehend. We 'lived' of off equity release translated into consumption for a decade or more - this 'wealth' was, and is, illusory and we will have to pay for it until the assets are properly priced again. This is my main reason for believing that the UK recession will be the worst in the World. This is also my reason for believing that the best model for this depression is the (twenty year) Long Depression of the 1870s (1873-1896 in the UK) not the share price collapse driven depression of the 1930s

Share prices can drop and the market can correct very rapidly and normal trading can commence whereas asset price collapse takes far far longer to correct and this is why our house price depression will take twenty years or so to properly correct and drive the Nation down for very much longer than in the 1930s. This price stickiness is a huge barrier to our recovery. There is no quick fix.

It seems Europe's trouble is much smaller than the infectious trouble which was designed and created by US and UK financial centers. New York and London are the epicentres of the casino capitalism which has spread like a modern version of the 'plague' around the world. A bit of Anglo-Saxon humility would seem to be in order given these facts. Very surprisingly there is still no open discussion of the function of tax havens and offshore banking in all of this, where several trillion dollars are hidden away, parked away, stashed away, looted away, waiting for the next round of speculative fever.
Huge sums of money come and go in tax havens, hedge funds mingle with billionaires and tax evaders, and the whole world turns a blind eye! Why? Are too many of the world's elite directly or indirectly caught up in this international shadow banking system? It is astonishing that a parallel world of banking seems to exist, hiding away trillions of dollars, and nobody wants to seriously talk about it.
Serious journalism is needed here!
Please read more at:

10 John-From_Hendon Agree with virtually all of a good contribution.... I think though that trying to 'tie' this recession/depression/slump to others in History is understandable ...but maybe not completely helpful.

What I mean is that all the previous slumps are products of their place, time and contributory factors.... ours is a product of OUR place, time etc.

In History I tend to agree with Gandhi's view when asked about the effects of the French revolution; that it was 'too soon to tell'

Having said that I may as well walk into the same camouflaged bear trap and say that if this can be tied to anything in History I tend to think John Law's Louisiana super-bubble is the nearest---in that a desperate ruling class connived in something they knew wasn't actually entirely sound (Though they didn't understand enough to know HOW horribly unsound it was).

To many good authorities the weakening and enfeeblement of the French economy led to the whole disastrous run of events through the 18th century and culminated many decades later in the French Revolution, triggered by the famines that eventually knocked over the whole palsied edifice of the Ancien regime.

I'd say the difference today is the velocity of events...so we may not have to wait 70 or 80 years--- in the always on, inter connected world events follow each other much faster...or at least, that's what we are supposed to believe..

Though by now ( in the John Law example)..he'd been hounded from office, his many chateaux confiscated, and exiled to Venice.... his Pension not safeguarded/his reputation in tatters.

So perhaps the comparison isn't totally applicable...

Though Law WAS Scottish.... like Messrs Goodwin, Darling and Brown---- I say that with great reluctance, as someone who loves Scotland; but one cannot deny facts simply because of one's own prejudices..!!

More irrelevant yapping from the non-descript talking-heads of politics. They really have no idea what to do, do they? To paraphrase Peter Schiff:

"They're like a bunch of school-kids with a chemistry set, throwing together different chemicals in the vain hope of stumbling across an economic miracle. But they won't find it. Instead, they're just going to blow us all up!"

John_from_Hendon # 10

"In Britain we have suffered a very bad case of Chicago School economics and we have the furthest to go to correct our error."

And now we are all going to suffer an even worse case of neo-Keynesian economics! The end result of which is likely to be complete currency destruction.

Stephanie:
I have to agreed with the posting # 1, theory; Regarding the idea of European Union moving towards more regulations in the long-term...
~Dennis Junior~

Stringent State regulation of the financial market didn't seem to do the Chinese much harm; look up SAFE (State Administration of Foreign Exchange) and CBRC (China Banking Regulatory Commission) !!

Their problem now is seeking fresh and/or more stable markets for their goods. They announced that they will approach in a two-prong manner - internally by encouraging internal consumption and externally by increasing exports to Africa and Latin America by selling them goods they want *AND* can afford instead of big ticket items they do not want or can afford !! Even the Japanese are going that route.

Meanwhile the Koreans, having been colonised by one or another of their neighbours for over two thousand years, tried a little colonisation of their own and got smacked on the wrist by the current Madagascan government !!



If Crash Gordon wants to garner any international respect at all, he will have to do more than merely posture. He will have to produce the goods !! These attendees are all leaders in their own right and they didn't get there by being fools !! As St. Paul wrote to St. Timothy, "Show me first your works and I will show you my faith !!" This is in the Bible !!

The suggestion that Europe is behind the curve is predicated on the assumption that the curve being followed elsewhere, notably in the UK, is the right one. I'm with John-from-Hendon in thinking that the current fashion for zero interest rates and printing money is doomed to failure.

It is desperate attempt to pump money back into a burst bubble. The newly borrowed money is not being invested in anything that could generate future income: we are borrowing to pay off past debts (the unquantified black hole).

LibertarianKurt put his finger on it - Chicago School economists got us into this hole and Neo-Keynsian economists are digging us in deeper. The fact is that they are all trying to impose their theories on reality - rather than learn from it.

As for Europe: things will get worse before they get better, but that's just as true in the UK. The fact that the ECB has not reduced interest rates to zero (although they're pretty low) and that Germany and France are not printing money might just mean that Europe will come out of this mess with it's currency, and wealth, relatively intact.

Is the reason UK commentators want Europe to join them, in the hole and still digging, the hope that if everyone goes down together nobody will lose face - or 'market' share?

I should like to agree with invisiblehandadvisor at 11 in everything he says. Serious journalism is indeed needed here. Britain has been a supporter of taxhavens for far too long. It has also been critisised on the continent for ever and a day and the subject is certainly on the agenda these days. I consider it outright dishonest for it not to be mentioned. A BLACK LIST is being worked on and lets just hope that tools are put into place to remove this cancer that is sapping the strenght of all decent and hardworking people/nations.

# Toldyouitwould - I'm with you

" A crucial policy
issue is therefore whether the Lending Panel Banks have the capital and
funding resources to at least maintain their lending levels and ideally to
expand to fill some of the gap left by the disappearance of other sources
of lending capacity. Lending Panel data analysis has now been put in place
to assess the relative importance of demand and supply constraints in the
extension of credit to household and corporate sectors." Financial Risk Outlook 2009

This is a real big issue slipping under the radar. It looks as though lending has collapsed to a figure higher than the 180billion value of securitised assets as at Q4 2007. That valuation figure is, we know, being written off by significant percentages. The minutes of the meetings between Mandelson , Darling and the Lending Panel Banks are not being published.

Stephanie, can you get these vital calculations out into the public domain so that the depth of the problem becomes visible? "Mushrooms and cow do-do" come to mind!

"We're not talking a global financial regulator. No-one wants that."

Not correct - global financial regulation seems to be quite a popular idea.

A collection of good and relevant points.

!. GB's concern about 'protectionism' is overwhelmingly his fear at the loss of foreign investment ie. 'financial protectionism' as upwards of £600Billion has already exited from UK banks in the past year and most importantly QE and the APS schemes for RBS and HBOS are likely to continue the trend of depleted foreign investments that were about 40% (£700 Billion)in 2007.

2. I agree that Moneterism of the Freidman school has always been invalid and it has been a surprise that given the disasterous 'balanced budgets' of both Thatcher and Reagan when they inflicted vast fiscal deficits on their recpective governments the theory should have been dumped in the wastebin of failed economic doodlings.

3. I fear that clinging to Keynes will prove not helpful as his theories were developed based on manufacturing lead economies that had fiscal and trade surpluses (the UK and the US are nowhere near the model Keynes analysed.

4. As an aside I am a fan of john-of-hendon as I and Mandelson went to Hendon County school (I went well before Mandleson but well after the school had been a mental asylum!)

5. I fear that GB believes that if he can re-ignite the still well overvalued housing market he might cling on to power regardless of the ongoing cost to future taxpayers.

6. Finally I am sure many have noticed that the £600 Billion UK APS Scheme is no more than a variation on the stricken AIG that has so far eaten $160 and rising Billion of US Taxpayers money (Thought who in future is going to fill the shoes of AIG andthe UK's APS?).

The UK situation is simple. For more than 20 years it has lived beyond its means. The consensus was that that didn't matter as long as it was not HMG which grew indebted. Then came the crash. Only fools can think that a crisis brought about by too much credit-financed consumption can be healed by easier credit to support consumption. Even if the pound lost even more ground than it has so far, making British exports cheaper, just what can Britain export now? The main export item used to be financial services. But who wants to buy financial services from a system that has proved to be full of incompetent people and scoundrels? The future -- not just in the UK, but very likely in all OECD countries -- is one of producing more and earning less. The sooner we all realize it the better.

Finanzo "The future -- not just in the UK, but very likely in all OECD countries -- is one of producing more and earning less. The sooner we all realize it the better."

But you did (rightly) also say "just what can Britain export now?"

Until people start facing up to the reality that people can not survive on 'services' alone, and come to terms with the fact that the quality of (genetic) human capital in this country has been winnowed away through myoptic policies differentially skewing the birth rate (as I have explicated in a earlier thread) over a long period, all this 'verbal' is going to continue going nowhere. I like reading what Stephanie and Peston write, but I fear it doesn't really tell anyone anything........... really...does it?

I suggest what we've seen spread across the globe over recent decades is anarchistic economists' chutzpah. They've ignored a century of sound research into human cogntive/behavioureal diversity (not only within national groups, but between them), claiming that it's been free-markets which have driven prosperity, when in reality, it's been automation, i.e effectivity.... which is as far from what they preach as anything ever could be.

#23 Hooray !! You mentioned the dirty word - effectivity !! These days, it's all about the "dignity of man" (meaning "I want a good life and I want it now")and nothing about effectiveness of work !! High pay for low effectiveness seems to be the order of the day !! This is as true in the boardrooms of the high and mighty as in the shopfloor !!

Furthermore, the surge towards white-collar work with an equivalent disdain for blue-collar work has brought Britain into an unsustainable position where it *has* to depend on foreigners to feed it !! *AND* it has brought in a flood of foreigners to do the blue-collar work so disdained by the locals !!

Perhaps this coming G20 meeting is where some home truths are spoken and the day of reckoning is brought about !!

Britain imports more than it exports and can't pay its bills. If that is not inefficiency, what is ??

#23 explication - just to be clear, by 'effectivity' I'm referring to 'effective processes' (cf. Post, Church, Turing etc) i.e algorithmic, computational processes which cut labour costs and inefficiencies. In early days, just Ford-Taylorism.

The way out of this is for asset prices to fall and then normal economic activity will resume again. The trouble for the politicians is that if this happens they will be kicked out!

Our wealth consists of what we have now and what will happen in the future. Interest rates determine how we value that future.

This whole problem is not a market failure but a political failure. A single economic event caused this. Interest rates less than asset inflation.

America did it first after 2001 and then Politicians entered into a Faustian Pact with the Devil. Low interest rates gave years of good times but at the end you give up your soul to the Devil for eternity.

Deep down, Blair, Brown, Bush, all knew what the bargain was but their mind boggling lust for power meant that they led us into this disaster without any regard for the common good.

Bush is now gone and Brown must now meet the same fate before we can make any headway.

Hi Stephanie

Thanks for this post. I agree that the political consensus is for more regulation...

However it will be essentially the same people who got us into this mess who will be setting the new regulations. So are we pursuing the wrong solution as they failed before and are therefore likely to fail again? There is a danger that we get expensive new regulation which benefits only the regulators. Isn't there supposed to be no reward for failure?

On another tack your post highlights a flaw straight through the middle of the Euro project which so many of its proponents either do not understand or have ignored. To have a monetary authority you also need some joint fiscal control or system and it doesn't have this.Which leaves us with the question what options does the ECB have? I was amazed to see Shirley Williams a big proponent of the Euro project talking warmly about QE on Question Time the other week. This is because her favoured system which she has been a proponent of for years has no such options.It would need a major reform first.

This comment was removed because the moderators found it broke the house rules. Explain.

#26 gruad999

the single tipping point was not interest rates but the price of oil, all of the last four economic crises in the west have been directly related to the demand and price of energy (those who do not learn the lessons of history....)

If and When we get out of this partcular crisis, just where do you think the increased energy demand will be supplied from, do you really want to be hostage to the Russians (former cold war enemies) Middle East (current axes of evil) South America (future axes of evil).

It is a good thing that our domestic industry is shutting down, that our manufacturing output is being crippled, not because ordinary workers will be thrown onto the scrapheap never to work again in fulltime employment but because it hampers this governments ability to take us to war to protect their vested interests

A The author is ex Living Marxist (Trotskyite), and what she says about Watson's views are just false, but she is right that we are sleep-walking into a dangerous area now that more people are accepting what they read because they 'like' it, and rejecting other material because they don't. Many are no longer judging what they see and hear on the basis of its truth value/scientific/empirical merit, but on how they emotionally feel about it. This is regressive in that our emotional behaviour is handled by phylogentically older/lower levels of the brain.

We should be extremeley worried if important economic and political decisions are being made this way.

gruad999 # 26

You are on the right track but focus more on the Fed's interest rate/monetary and credit expansionist policies from December 2000 to June 2004.

According to Greenspan (Bernancke concurs), the crisis started because of a savings glut from emerging economies such as China. This glut was channeled into long-term US Treasuries and other US assets and thereby depressing their yields.

But is he right?

"10. At 10:53pm on 20 Mar 2009, John_from_Hendon wrote:

In Britain we have suffered a very bad case of Chicago School economics"

Right... Because keeping interest rates as low as possible is one of the key tenets of the Chicago school of economics.

LibertarianKurt (#31) "According to Greenspan (Bernancke concurs), the crisis started because of a savings glut from emerging economies such as China. This glut was channeled into long-term US Treasuries and other US assets and thereby depressing their yields.

But is he right?"

How exactly did they ever determine that objectively? It looks to me like another one of those multicolinearity sleights of hand which we see throughout the social sciences where causuality is attributed just about anywhere the ideogue wishjes in their multivariate model.

Why don't they just say "the crisis began when mean human capital in the USA reached a critical level through dysgenic fertilty/immigration, and mass predatory lending to illiterates/inumerates who couldn't make sense of the bad deals being foisted upon them, began to unwind because those trying to obfuscate their high risk, unscrupulous, behaviour through securitization were exposed as white collar 'venals'?"

would be much clearer wouldn't it? Some of us have been warning about this for years.

As usual the "truth" lies somewhere between what has been written above.

There is little doubt now that both the UK and the US have major sytemic problems. Those problems have many similarities.However there are major differences betwen the 2 economies. It's not just a question of size. The 2 economies are individual and require individual solutions to fix them. the idea that the G20 can even start to deliberate a "one size fits all" solution is just plain silly.

The same goes for the EU. Germany will ultimately have to define its own solutions given its individual circumstances. The same goes for France and the other member countries. The BIG problem for thy Eurozone is just how individual can those solutions be whilst still retaining some credibility for the common currency?

For months we have been saying that the World economy is in a mess and we still don't know the full extent of that mess. We have blamed both major schools of economic theory. I've even read that Milt. Friedman (were he still alive) should be shot and Keynes hanged. Let's forget about them!!! Their theories were developed in another time. The principles which held good then no longer exist. So, rather than referring to the pastwe need to turn our minds to the development of new theories based on the now.

Perhaps a good start point would be a re-definition of 'the global economy' and it's sister globalisation. To my mind the first is really just only the summation of indivdual trade events whilst the second is the biggest fraud that has ever been foisted upon the 'developed' economies in persuit of short term gain and long term strategic loss.

If any of these thoughts have any value then i believe that sooner or later, along with all of the other economies, we will have to abandon the whole concept of global and even continental economic strategies and return to a national focus. We can only fix what we directly control. So protectionism will have to be a part of the solution.

This does not mean the end of international trade but it does mean the end of policies being foisted upon national economies that may not be in the best interest of that economy.

Foredeckdave
I agree that individual countries need to put their own houses in order as a matter of priority. Inevitably this will lead to protectionist tendencies too.

I am mindful however of the extreme political and economic dangers coming out of any overtly protectionist policy.

It would be good if we could have open-ish markets everywhere......with very open-ish markets where it is especially suitable to have such.

JadedJean # 33

Leaving aside your dysgenic fertilty/immigration, and mass predatory lending to illiterates/inumerates theory for the moment, let us examine Greenspan's and Bernanke's contention. To use Bernanke's own words in a speech he gave to the Council on Foreign Relations on 10th March 2009:

"Like water seeking its level, saving flowed from where it was abundant to where it was deficient, with the result that the United States and some other advanced countries experienced large capital inflows..."

The "savings" that Greenspan and Bernanke are referring to are nothing more than US dollars accumulated by these emerging economies. However, these accumulated dollars cannot increase the pool of US dollars because they are an existing part of that pool. For example, when an American importer pays a Chinese exporter, the OWNERSHIP of these dollars has changed NOT the quantity.

Therefore, ceteris paribus, a sustained decline in long-term yields requires an increase in the pool of US dollars; the increase of which would result in the prices of goods and assets (e.g. property) moving upwards and the yields on Treasuries and other financial assets moving in the opposite direction.

However, what Greenspan, Bernanke et al are asking us to believe is that if the accumulated dollars of emerging economies are only invested in US Treasuries; then a sustained fall in long-term rates without an expansion in the pool of dollars is possible.

The question is: Is this contention correct?

#34 foredeckdave

"it does mean the end of policies being foisted upon national economies that may not be in the best interest of that economy."

I presume you mean the economies of individual "states", not "nations". Exactly the same situation exists in multi-national states such as the UK. The decisions taken by the most powerful state doesn't necessarily benefit the national economies of the others.

Even within the nations, the economies vary widely. Why should the interests of the South East of England prevail over the North, simply because more people live in the South? Indeed you can drive such an argument down to the level of neighbouring towns. There seems no rational basis to elevate the current states to some magical economic utopia.

#35 iceland_express

In the Uk we have not even started to really examen what parts of the economy are strategically vital to our national wellbeing. We alrady know 2 facts - we cannot be isolationist we need imports to survive plus we need to balance our economy (ie reduce our reliance upon financial services). Therefore the protectionist policy that could be developed in the UK would have to be different in form and philosophy to let's say the 1930's USA isolationist policy.

I get the feeling that many politicians do not understand the difference between isolationism and protectionism. They therefore keep chanting the global market mantra and claiming that protectionism would hurt recovery. Well, they don't seem to be doing to well fixing the global economy so I don't think that they have much chance of fixing a national one!

So France is lagging behind the rest of us?

I was reading an article at the weekend where 2 german investment analysts were assessing the current situation. Their conclusion was that the correction should have been left to the market, that the government "stimuli" could only help in the short term and were only making the longer term situation worse and that the most likely outcome for the US and UK is 6-12 months of deflation followed by hyperinflation as QE takes effect.
If this is the future we are preparing for ourselves, I can understand the French not wanting to follow.
I shall try to remember to post a reference for the article later on.

The ECB will not be allowed to start QE, it would be the end of the Euro. The Germans have very bad memories of QE, followed by hyper-inflation and the destruction of the currency.

Never mind Ireland or Spain trying to leave the Euro, if the ECB tries QE the Germans will be pulling out and without them the Euro is destroyed as a hard currency.

agc3167 # 39

Well, "your" two German investment analysts are correct in their conclusions!

LibertarianKurt # 41

I believe so as well. It is interesting to note that many German analysts follow Austrian economic school theory (perhaps unsurprising considering they are so close) and it seems to be mainly the politicians and their advisors who look to Keynes. Perhaps this is because the Germans have had 2 doses of Keynesian thinking in the last century to destroy the currency. Keynes is fundamentally flawed in this situation as it assumes the public purse is unlimited (whereas ours will become only too limited as things progress). However the politicians look to Keynes as the Austrian school tells us we are headed for disaster and that's the last thing to tell the electorate.

Given such recent history in a country very close by perhaps the proverb for the UK should be "Wise men learn by other men's mistakes, fools by their own"?

LibertarianKurt (#36) "The question is: Is this contention correct?

My point is that truth-functional questions can not be answered in these contexts (you yourself asssrted that Austrian School economists are not empiricists, and I've explained elsewhere how and and why economics, other than Behavioural Econonmics, is not truth-functional). Efforts to explain the feckless (impulsive/narcissistic) behaviour of the dysgenic populations of the USA and UK (but especially the opportunistic predatory behaviour of the unscrupulous middle men in Financial Services in NYC and less extent in London), to the surfeit of mass savings in the PRC looking for returns is precisely what I mean by the sleight of hand we see from these pseudo-scientists with a gift for spin. If we didn't have growing dysgenic populations, with sub-groups eager to profit at their expense in the above whist asseting that we all live in a gloabl economy (i.e with no national loyalty), we would have had regulations and better overight which would have prevented all of this.

Neo-liberalism is just a cloak for predatory behaviour.

errata #43. For explain substitute attribute. Apologies for other typos, but I hope the point is reasonably clear.

The most egregiously ceteris paribus asserted by most economists is that human cognitive diversity is uniformly distributed both within nations and between them when it is not (see above articles). Yet this myth is powerfully reinforced by Liberal-Democratic, neo-liberal, politically correct (Cultural Marxist) education and economic dogma which falsely asserts that low attainment is a consequence (rather than correlate) of low socio-economic status, which in turn is falsely alleged to be a consequence of limted access to resources. The inconvenient reality is that it's far more likely, given decades of failed funding pumped into programs like HeadStart and similar initiatives, (as well as a mountain of other research), that cognitive diversity is a function of genetically genes, and that education is therefore a selection process, not an enrichment process. China practices eugenics as well as population management (see their, controversial to the West/UN 1995 legislation). With the size of their population, its higher mean IQ than the West, it's Stalinist constitution, almost zero dysgenic immigration, along with continued differential and dysgenic fertility in the West, it should be obvious what's going to happen .

It's not a matter of argument. It's a matter of empirical evidence and lawful relations between measures of behaviour which is largely the expression of genes (that little bit which is not, can be put down to post-conception physical damage by the environment).

I'm no economist, but isn't the IMF analysis (or at least their data tables) flawed? By showing the change in debt percentage from a 2007 baseline they effectively ignore the real starting point for each country, don't they? So the fact that the UK percentage debt increase is expected to be much larger than that in France, Germany, or the US is surely just a consequence of starting from a lower base?

No doubt someone will explain why I am misunderstanding the position....

#44 Jaded Jean

Cognitive diversity has obviously caused you to be unable to string a proper sentence together.

Recent empirical research has been able to link China and India's greater proficiency at mathematics to their long term cultivation of rice. The agriculture of rice demands much more planning, logic and mathematical accuity. Over the years this "nurture" of mathematical accuity has built a human difference in particular aspect of IQ (as defined in the west).

Thus genetics doesn't provide all the answers.

Indeed when humankind is faced with such as (potentially)SARS, AIDS and other pandemics, the mix of genes ensures that there will be statistically some chance that humans survive.

To argue that we all ought to live in genetic silos goes against evolutionary principles. Just ask the pre-Columbian native Americans.

#46 tonyparksrun

But what if the Chinese are better at maths because of evolutionary selection pressures favouring those with the mathematical gene?

tonyparksrun (#46) I am less interested in 'stringing a proper sentence together' than I am in relaying important empirical facts which have a critical bearing on our economy and social stability. I'll happily leave what you like to spin doctors more interested in peddling nice stories than relaying empirical facts.

Jared Diamond is part of the same brigade of tricksters who brought you 'Not In Our Genes'. See link elsewhere for how they peddle one story for themselves and another for outgroups. This is classic group politics/group-competition. The mean IQ of India is no better than Pakistan and Bangladesh. It has a very large population, and it has a caste (eugenics) system. Some of their population are similar to Europeans. One has to look at gene migration over the past 100,000-30,000 years. As to East Asians, they have higher mean IQs than Europeans. Environments, I remind you, select genes.

You clearly don't know what you are talking about. The point you need to grasp is that we can not improve educability through schooling. Let that sink in. There is no evidence that we can do this.

Do you understand this? There is none yet people talk as if the opposite is true, essentially because they have absolutely no understanding at all of how behaviour is shaped through reinforcement.

If memeory serves me right then this blog is supposed to be concentrating upon economic principles and practice. However, it apears to be being hijacked by JadedJean and his extreeme views of human behaviour and capability!

WHAT IF?

foredeckdave (#49) Tell you what, why don't you provide some evidence which refutes what I say?

In the absence of that, the implications of the behavioural genetics and behavioural economics (note Kahneman got his Nobel in 'behavioural economics', albeit for a watered down/translated, version of Operant Behavioural Economics) casts serious doubts on all these promises of recovery does it not? Or are you happy to ignore that in favour of what's peddled day by day from our politicans and economic advisors even though they were totally wrong (cf. Greenspan, Turner)?

Have you asked why they were wrong and why you expect them to get things right now? Maybe you should ask if in their hidden ceteris paribus clause is false?

foredeckdave # 49

I agree. But I fear that you just may have invited yourself to some more finger-wagging lecturing from (is it?) him/her.

JadedJean # 43

"...you yourself asssrted that Austrian School economists are not empiricists, and I've explained elsewhere how and and why economics, other than Behavioural Econonmics, is not truth-functional."

The reason why the Austrian school does not rely on empirical facts is that they can only tell us what has happened in the past and not what is likely to happen in the future.

Economists have always thought that by introducing the methods of the exact and natural sciences, a major breakthrough in our understanding of economics could be achieved. Whilst a laboratory is a valid way of doing things in the natural sciences, it is not so in economics.

Why is that? A laboratory is essential in physics. For there the scientist can isolate various facts relating to the object of inquiry. Although he can isolate the facts, he does not know the laws governing these facts. All he can do is hypothesise regarding the "true law" that governs the behaviour of the various particles identified. He can never be certain with regard to the "true" laws of nature. About this, Rothbard wrote:

"The laws may only be hypothecated. Their validity can only be determined by LOGICALLY DEDUCING consequents from them, which can be verified by appeal to the laboratory facts. Even if the laws explain the facts, however, and their inferences are consistent with them, the laws of physics can never be absolutely established. For some other law may prove more elegant or capable of explaining a wider range of facts. In physics, therefore, postulated explanations have to be hypothecated in such a way that they or their consequents can be empirically tested. Even then, the laws are only tentatively rather than absolutely valid."

Contrary to the natural sciences, the facts pertaining to human action (praxeological) facts cannot be isolated and broken into their simple elements. The realities of human action are complex historical facts that have emerged on account of many causal factors. However, contrary to the natural sciences we know the meaning of human action.

One can observe that people are engaged in a variety of activities. They are performing manual work, they drive cars, and they walk on the street and dine in restaurants. The distinguishing characteristic of these activities is that they are all purposeful.

Manual work may be a means for some people to earn money, which in turn enables them to achieve various goals like buying food or clothing. Dining in a restaurant can be a means to establishing business relationships. Driving a car may be a means for reaching a particular place. In other words, people operate within a framework of ends and means; they use various means to secure ends.

In short, we know that actions are conscious and purposeful. Also, note that this knowledge that human action is conscious and purposeful is CERTAIN and not TENTATIVE. Any one who tries to object to this in fact contradicts himself for he is engaged in a purposeful and conscious action to argue that human actions are not conscious and purposeful.

Various conclusions that are derived from this knowledge of purposeful action are valid as well, implying that there is no need to subject them to various laboratory tests as is done in the natural sciences. For something that is certain knowledge, there is no requirement for any empirical testing.

#50 JadedJean

The majority of us can spout academic claptrap in our own paticular fields ad nauseum. However this would merely serve to bore and annoy the other bloggers.

So come down off your lofty perch. Practice a little KISS principal and say what you really mean. Provided that is that it is intended to further the debate on economic matters.

LibertarianKurt (#51) I asked you to question your tacit ceteris paribus clauses. If you do, you may find that a) you stop arguing (see the first part of he next link) from the anarchistic Austrian School's ethereal stance and b) that you may better understand why I'm urging you and others to look at the , which I, and others, assert are highly relevant to the current .

#52 LibertarianKurt

You've made a sound case that at least some human actions are conscious and purposeful, but you can't generalise that to all human actions just because the action of debating the point is purposeful!

LibertarianKurt (#52) "The reason why the Austrian school does not rely on empirical facts is that they can only tell us what has happened in the past and not what is likely to happen in the future."

This just shows that you don't understand what the term prediction means in science, or what empiricism is. Prediction really just means that if one takes one set of variables (independent) and another (dependent) one can establish a pragamtically useful, reliable (usually contingent with an error term), lawful relation between them. Time (i.e forecasting) is not critical to prediction. How big the error term is is critical to the power o the science i.e the control one has ove rthe variables. All measurement and analysis, if you think about it, is of past observations.


"Whilst a laboratory is a valid way of doing things in the natural sciences, it is not so in economics."

Not true. Kahneman's work is empirical. It's just not as well controled as say Herrnstein's, Chung's or Rachlin's. The work done in Behavioural Economics is very well controlled. If yuou listen to what I am saying you may learn something useful, as you keep posting in ways which a) reveal that you don't know about this and b) that you do have the ability to learn (aka change your verbal behaviour).

"Contrary to the natural sciences, the facts pertaining to human action (praxeological) facts cannot be isolated and broken into their simple elements. The realities of human action are complex historical facts that have emerged on account of many causal factors. However, contrary to the natural sciences we know the meaning of human action."

This is simply not true. is the reason why I say that. What you are writing is false propaganda. If you look through the history of this you will find that just as people write a lot that is false about research into inteligence ('g') they also write a lot that is untrue about the science of human and other animal behaviour. It is quite remarkable just how much is written today wich is profoundly untrue, especially in the area of education.

People confuse what they think is true with what is true. Beliefs are intenSional. These are not truth-functional. Some people believe things which are not true. This is a profound point about intenSional verbs of propositional attitude. Note, this is a powerful logical point about the reliability of logical inference and thus the rational limits of Natural Language.

To take a practical diversion. Do you know what the assets are which the US Treasury is now so keen to offload onto the taxpayer of the future? How many of these are mortgages, how many car loans, college loans, business loans, personal loans....? is't that what banks and accountants put on their books? Isn't that audited? Why is it 'impossible' to reverse engineer the securitizations? Whose interests does all that obfuscation serve?

"In short, we know that actions are conscious and purposeful."

Actually, we don't. In fact, the reason why there's empirical evidence that what we call intenTions come after actions (i.e operants) are initiated is summed up in the idiom 'reasons are not causes'. The entire language of (folk) psychology (as most people understand it) is intenSional, not extensional. Only Behaviour Analysis (see above) is . To grasp this one needs to learn proto-extensional languages. Some don't want people to learn this language as it suits them that consumers are locked into supertitious Kabbalah.

I suggest you listen to some of . Note that most of these people have no time for 'psychology'.

I remind you that Rothbard was an anarchist. Austrian School economics is anarchism as economics. It is used to erode/subvert other people's governments/ways of living.

You might ask to what/whose ends and whether all who do so know what what they do.

JadedJean # 56

Well, if my wife could not logically deduce that me visiting the bathroom this morning was a conscious and purposeful act (based on a physical urge!), then she would not have known what I was doing in there and therefore would have had to resort to some sort of empirical test find out why I did it.

Now, obviously she can draw a logical conclusion from my act, and that that conclusion would be valid because it is axiomatic that humans need to visit the bathroom. However, she would be unable to predict with 100% certainty that I will do the same thing, at the same time, tomorrow.

What you are suggesting is that behavioural economics can precisely predict all human actions based on empirical evidence and thereby counter what you perceive to be irrational, sub-conscious and non-purposive behaviour.

Quite clearly, this is absurd!

LibertarianKurt (#57) Try to learn what you can from the SEAB link I provided, and ask yourself what the Austrian school economists drew upon other than their (rather limited) empirical knowledge of behaviour.

JadedJean # 59

Why do I - or anyone for that matter - need to learn what is self-evident?

LibertarianKurt (#59) "Why do I - or anyone for that matter - need to learn what is self-evident?"

Have you heard of Copernicus, , Darwin or Einstein?

To some it was self-evident that the sun went round the earth, as everyone cculd see that it rose in the East and went all the way over to set in the West.

Entryist morphing Trots.. .

Do me a favour and listen to (at least) the last one on page. Leyt me know what you think (read the cards as well). If you can still find 'On Having A Poem' on the web, that's worth listening to as well (it's not about poetry).