We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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An article about the psychiatric assessment of Norwegian mass murderer Anders Behring Breivik got me wondering about a couple things, one entertaining and the other, not so much:
“The psychiatrists warned that Mr Breivik was likely to attempt further attacks, including suicide bombings”
Suicide bombings? Plural? As it has been claimed he worked alone, I am curious how he could carry out more than one suicide bombing.
But less flippantly, I cannot help wondering if the only reason this coldly calculating man is being deemed ‘insane’ is that is the only way the Norwegian state never ever have to let him out, given that Norway apparently has no ‘life sentence’ in which ‘life means life’… so the only way to put him away forever is to declare him insane and thus lock him up in a loony bin until he dies.
He may well belong in a small room for the rest of his life but using the much loved Soviet, Russian and Chinese approach of expedient psychiatric assessment to achieve it may reveal a lot about modern Norway.
The names on the list of his ministers – most of which were unknown to members of the Italian general public – showed that Monti had failed in his attempt to involve party representatives. His cabinet was made up exclusively of non-aligned specialists.
“The absence of political personalities in the government will help rather than hinder a solid base of support for the government in parliament and in the political parties because it will remove one ground for disagreement,” he said.
The Guardian speaks of the absence of “party representatives” in Italy’s government. The Times (behind a paywall) is more frank: Italy ditches democracy as row blazes over how to save the euro.
A new row blew up between France and Germany yesterday over how to save the euro as Mario Monti, Italy’s new Prime Minister, appointed an all technocrat Cabinet that does not include a single elected politician.
…the more likely possibility is that there will be asymmetric shocks hitting the different countries. That will mean that the only adjustment mechanism they have to meet that with is fiscal and unemployment: pressure on wages, pressure on prices. They have no way out. With a currency board, there is always the ultimate alternative that you can break the currency board. Hong Kong can dismantle its currency board tomorrow if it wants to. It doesn’t want to and I don’t think it will. But it could. But with the Euro, there is no escape mechanism.
Suppose things go badly and Italy is in trouble, how does Italy get out of the Euro system? It no longer has a lira after whatever it is – 2000 or 2001 – so it’s a very big gamble. I wish the Euro area well; it will be in the self-interest of Australia and the United States that the Euro area be successful. But I’m very much concerned that there’s a lot of uncertainty in prospect.
Professor Milton Friedman interviewed by Radio Australia, 17 July 1998
Incoming email from an acquaintance:
I just saw Robert Peston on the BBC 1 News at 10pm. He was recommending that the ECB come to the rescue of Italy and Greece on the ground that it is the only EU institution “capable of creating unlimited resources”. Not unlimited money; unlimited resources! It’s magic.
Somebody should Occupy the BBC.
A BIT LATER: I just googled “ecb unlimited resources”. Alas, plenty of hits. Try it. Peston is only expressing a general mood. A general mood of complete insanity, but a general mood.
What will happen to the Euro? I am not asking “what should happen”, but what will happen. Take this opportunity to put your predictions on the internet, and later be hailed as a true prophet or derided as a false one.
Ambrose Evans-Pritchard weighs in the Daily Telegraph with thoughts about Greece, southern Europe and the fact that so many countries, such as Italy, Portugal and Greece, cannot cope with the euro. The logic of this, the article seems to imply, is that these nations should revert to their previous national currencies.
For reasons that some regulars at this blog will recall, I think this idea of reverting to purely national currencies is simplistic, and not just because the practical logistics of switching back to pesetas, liras or drachmas will be painful (for example, there is the issue of repaying euro-denominated debt). A national fiat currency, such as the old Italian lira, is still a form of state-issued monopoly money, liable to be abused and printed in vast amounts. Evans-Pritchard talks about the need for affected nations to be able to devalue their currencies so as to boost exports. But if you devalue – ie, print more of it – your currency, then the price of imported goods soars. Greece, for instance, imports a lot of things and is not a major exporter of goods or services, apart from some agriculture and so on. Devaluation may be good for Greece’s important tourist trade, but not so great in terms of keeping a check on inflation.
Detlev Schlichter, champion of what he calls “inelastic money”, has scorned the idea that reverting to national fiat moneys represents a step forward for the debt-laden countries of southern Europe.
Here are two paragraphs:
“One frequently gets the impression from reading the mainstream media that Greece has a monetary policy problem and not a fiscal problem. This is incorrect. Yet many commentators seem to argue along the following lines: This crisis is due to the straitjacket of the single currency with its one-size-fits-all monetary policy, or at least aggravated by the constraints of this system. Greece would have more “policy options” in dealing with its troubles if it had control of its own national currency.”
“Then there is, connected to this, an underlying – and not very flattering – notion that the Greeks are somewhat unfit to live and work in a ‘hard money system’, which presumably the euro is. The Greeks, this seems to be the allegation, like borrowing and spending too much. I am paraphrasing here but this is certainly the underlying tone of the narrative. The Germans and Dutch and French can live without the constant aid of conveniently cheap national money – but the Greeks can’t.”
These countries’ appalling fiscal problems would not be altered one jot by the quick fix of switching one transnational form of fiat money in exchange for a national form of fiat money. What these countries need is honest money that retains its value over time. I get the impression that were Greece, for example, linked to the old Gold Standard of the pre-First World War variety (which worked relatively well for its constituent members until the war destroyed it), Mr Evans-Pritchard would be objecting to that also. But the problems of these countries cannot be resolved by nation-state fiat funny money. Mr Evans-Pritchard, for example, suggests that the “PIIGS” countries need the equivalent of a 40 per cent devaluation against, say, Germany and France. Under a gold standard and a regime of small governments and flexible labour markets, no such a drastic shift would occur. Real wages in certain uncompetitive sectors would decline, and wages in more competitive ones would rise. Take the case of Greece: under a stable monetary system, Greece’s tourist industry would be able to compete splendidly so long as its costs were controlled. And this leads to the core of the issue: flexible rates of exchange between different fiat money systems appeal to those who don’t want to undertake the more painstaking route of curbing government, encouraging free markets in labour, etc. Devaluation will always appeal as an easy way out.
Schlichter has more thoughts on the recent attempts by EU states to shore up the euro.
Update: Of course, I can imagine some defenders of devaluation arguing that this reduces the real incomes of people in a country, which makes that nation more competitive, hence achieving the same sort of result as a decline real wages under the conditions of a fully flexible labour market. The problem is that the former approach makes no distinction between sectors or businesses. Also, the history of post-war Europe does not suggest that devaluation is much of a cure for deep-seated economic ills. The decline in the value of sterling in 1967 did not arrest Britain’s relative decline; when West Germany had a strong deutschemark in the 1970s, it was economically strong. True, the fall of sterling from the exchange rate mechanism in 1992 coincided with an improvement, but then again, the UK’s fiscal position was in relatively good shape and the UK labour market did not have some of the burdens of today.
‘Why Britain Should Join the Euro’ – a pamphlet by Richard Layard, Willem Buiter, Christopher Huhne, Will Hutton, Peter Kenen and Adair Turner, with a foreword by Paul Volcker.
One of the authors, AdairTurner, now Lord Turner, is interviewed in today’s Observer, which is where I saw the link. He has changed his mind a little since 2002, when the pamphlet was written, but not to an unseemly extent. Now Chairman of the Financial Services Authority, he is concerned about the current situation but remains confident that “sensible decisions are going to be made”.
So there you are then. Cheer up!
The principal argument I used to put which the pro Euro Labour, Liberal Democrat, CBI and TUC forces found difficult to counter was the simple proposition that joining the Euro was like taking out a joint bank account with the neighbours. You were likely to ruin a good friendship with them, when you fell to arguing over the size and use of the overdraft. This unfortunately sums up the Euro crisis. Greece, Spain, Italy and Portugal want to use the common overdraft or borrowing ability to excess. The Germans do not want to help pay the interest and sustain the joint credit rating, but they are being drawn more and more into doing just that.
– John Redwood.
I like the joint bank account analogy.
It would (will?) be interesting to hear what our own Paul Marks has to say to in answer to this, from Ambrose Evans-Pritchard:
Judging by the commentary, there has been a colossal misunderstanding around the world of what has just has happened in Germany. The significance of yesterday’s vote by the Bundestag to make the EU’s €440bn rescue fund (EFSF) more flexible is not that the outcome was a “Yes”.
This assent was a foregone conclusion, given the backing of the opposition Social Democrats and Greens. In any case, the vote merely ratifies the EU deal reached more than two months ago – itself too little, too late, rendered largely worthless by very fast-moving events.
The significance is entirely the opposite. The furious debate over the erosion of German fiscal sovereignty and democracy – as well as the escalating costs of the EU rescue machinery – has made it absolutely clear that the Bundestag will not prop up the ruins of monetary union for much longer.
Clearly, Evans-Pritchard had in mind commentary like this (Paul Marks yesterday):
It is the end – not just the end of any prospect that people will really face up to their problems (rather than scream for endless bailouts), but also the end for any pretence that modern government is in any real sense “democratic”. It is not a sudden emotional whim of the people that has been ignored – it is the settled opinion (conviction) of the people, which has been held (in spite of intense propaganda against it) for a long period of time, that has been spat upon.
Evans-Pritchard, however, says this:
Something profound has changed. Germans have begun to sense that the preservation of their own democracy and rule of law is in conflict with demands from Europe. They must choose one or the other.
Yet Europe and the world are so used to German self-abnegation for the EU Project – so used to the teleological destiny of ever-closer Union – that they cannot seem to grasp the fact. It reminds me of 1989 and the establishment failure to understand the Soviet game was up.
So, have things changed, or have they not?
I agree about the USSR parallels in all this. But Evans-Pritchard’s reportage also reminds me rather of that vote of confidence that they had in the House of Commons, which Neville Chamberlain “won” in 1940, but actually lost.
I remember once speculating, here, there or somewhere, that one of the many things that could reasonably be said to have caused Word War 2 was the failure of any sort of German Parliament to meet – circa 1939, and say, in the manner of a British Parliament: No! No more of this! That time, the idea was for Germany to conquer Europe (and much else besides) with armies. Now the plan is and has long been for Germany to buy Europe, and give it to … EUrope. But the price is again proving ruinous and the object being purchased is a crock.
This time, the means are surely still in place, as they were not in 1939, for Germany to say: No! But, did they? And if not, will they? Over to you, Paul Marks.
LATER: Detlev Schlichter agrees with Paul, using the word Götterdämmerung. Germany, he says, is finished.
He also says this:
And one final word to my English friends. No gloating please about the clever decision to stay out of the euro-mess. You have the same thing coming your way without the euro. The coalition’s consolidation course is apparently so ruthless that every month the state has to borrow MORE, not less. Even official inflation is already 5% but pressure is growing on the Bank of England to print more money. See the comical Vince Cable yesterday, or Martin Wolf, the man with the bazooka, in the FT today. Since 1971 the paper money system has been global. Its endgame will be global, too.
Indeed.
The German people (like the British people and the American people) are overwhelmingly against the bailouts. But their opinion (like the opinion of the British and American peoples) has been ignored in the past – and vast sums of money have been spent.
Today was a vote over whether or not extra hundreds of billions are to be spent – and to be spent by an European Union executive agency with arbitrary powers. At least 70% of the German people were against this – in spite of the intense propaganda of the establishment media.
Yet only 85 members of the German Parliament voted to stop it.
It is the end – not just the end of any prospect that people will really face up to their problems (rather than scream for endless bailouts), but also the end for any pretence that modern government is in any real sense “democratic”. It is not a sudden emotional whim of the people that has been ignored – it is the settled opinion (conviction) of the people, which has been held (in spite of intense propaganda against it) for a long period of time, that has been spat upon.
“Vote them out”.
How? Both the governing CDU and the opposition SPD voted for endless bailouts and arbitrary executive power.
The fallacy at the heart of this crisis is that every financial problem has a political solution.
– Jeff Randall He’s talking about the euro’s problems, but the same fallacy is at work nearly everywhere.
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We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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