The price of everything

Govern-mental

“It is not even a full year since the time of Cleggmania, yet, in his own Sheffield constituency, even nursery-age children now come home with Clegg jokes. (“Why did Nick Clegg cross the road ?” “Because he said he wouldn’t.”)”

 

-       Matthew Engel, in the Financial Times’ Budget coverage, March 24^th, 2011.

 

From time to time since the financial crisis first broke, the suggestion has arisen that the crisis itself represented and continues to reflect a failure of capitalism. A motley combination of Keynesians and socialists has needed little excuse to argue for the expansion of the state – and for the accelerated seizure of private wealth that state expansion effectively represents. Another argument, for which we have some sympathy, has it that democracy’s efficacy over other forms of government starts to collapse as soon as sufficient members of the population realise that they can vote themselves privileges. In the early stages of this land-grab of self-selected gifts, the system can continue on the back of those productive elements who haven’t yet been woken up by noises from the party that the rent-seekers are enjoying. But towards the terminal stages of any democracy, the system starts to buckle under the weight of accumulated privilege. Demographics concentrate the problem; the Western welfarist model will break down long before a huge cohort of pensioners are being supported by the efforts – and taxes – of the very last private sector worker.

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Breaking News: Most Economists, Journalists, Are Muppets

“I would appreciate it if all investors and trading participants would respond in a calm and orderly manner.”

 

-       Atsushi Saito, president of the Tokyo Stock Exchange, quoted in a front page Financial Times article titled ‘Japan disaster scares markets’, 16.3.2011.

 

“This is a stew of unfavourable circumstances that is ripping the guts out of global equity markets in a way we have not seen since 1988.”

 

-       Carl Weinberg, chief economist of High Frequency Economics, quoted later in the same article. The article’s authors, Richard Milne and Javier Blas, suggested en passant that “the fear of nuclear catastrophe combined with the losses to life and property in Japan were exerting a suffocating grasp over markets”. Perhaps Saito-San should have included ‘journalists’ in his request.

 

“The behaviour of financial markets over recent days confirms British Prime Minister Lloyd George’s observation that financiers in a panic do not make a pretty sight.”

 

-       Satyajit Das, published on Naked Capitalism.

 

“If you get enough cold water inside you may stop the generation of steam and then life will get easier. Until then it is a bitch.”

 

-       Robert Kelley, nuclear engineer, quoted on Bloomberg.

 

In relation to Japan, is the Internet helping, or making matters worse ? Or perhaps the question should be: are modern media, by and large, pouring fuel on a fire with their salivating, non-stop, hysterical coverage of a human tragedy ? Or not ?

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Mad as hell and Icahn take it any more

 

 

“Independence is for the very few; it is a privilege of the strong.”

 

-       Friedrich Nietzsche.

 

There has been much chatter among the financial chatterati about Carl Icahn’s recent decision to hand back capital to investors in his funds. Since he’s apparently keeping some $5 billion of his own money invested, this doesn’t appear to amount to a closure as such, rather a polite de-emphasis of third party client capital. Here is what he wrote to his limited partners:

“While it may sound “corny” to some, the losses that were incurred by investors in our funds in 2008 bothered me a great deal more, in many respects, than my own losses. Perhaps this is because over the years I have become inured to dealing with large “paper” losses for myself. During 2008 and part of 2009, unlike many other funds, we did not impose “gates” on our investors that would have prevented them from withdrawing capital from our funds if they chose to do so. Therefore investors seeking liquidity did withdraw a fair amount of cash from our funds. Additionally, rather than liquidating positions that we believed in, we infused our own new capital into our funds which provided cash for withdrawing investors. As a result, fee paying assets now constitute only 25% ($1.76 billion) of total assets in the funds of approximately $7 billion.

“While we are not forecasting renewed market dislocation, this possibility cannot be dismissed. Given the rapid market run-up over the past two years and our ongoing concerns about the economic outlook, and recent political tensions in the Middle East, I do not wish to be responsible to limited partners through another possible market crisis. After careful consideration of all relevant factors, we have determined to return all fee paying capital to investors.”

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Gold-shouldered

     

 

“Give me control of a nation’s money and I care not who makes her laws.”

 

-       Mayer Amschel Rothschild.

 

Alan Greenspan was one of the most over-rated Fed chairmen in history. (This coinage is admittedly akin to the phrase “one of the greediest bankers”; Bob Woodward even titled his biography of Greenspan ‘Maestro’ – one eagerly awaits his biography of Hitler, which will presumably be titled ‘Pacifist’.) But even Alan Greenspan was capable, very occasionally, of speaking like an honest human being, as opposed to a machine for uttering gibberish. Replying to a question about social security funding in 2005, Greenspan inadvertently nailed the fundamental problem of an inflationist welfare state:

“We can guarantee cash benefits as far out and at whatever size you like, but we cannot guarantee their purchasing power.” [Emphasis ours.]

In other words, the central bank can always create money – but there’s no guarantee it will be worth anything. Another quotation is equally astonishing in its candour. Years before he sold his soul and credibility to become a stooge for Wall Street, he wrote, in 1967, that

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

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