13 May

Coalition quotes

Posted by freethinkingeconomist in Uncategorized. Tagged: , .

From the FT’s leader Cameron changes the landscape

“On policy, understandably, there has been some give and take. This is on balance positive. The good bits of both parties’ programmes have largely survived the process intact, while some more suspect ones have been jettisoned. The coalition’s programme is strong on restoring civil liberties for instance. The Tories attractive plans to reform education remain in place, as do proposals to look at structural reform of the banking system”

This is put more strongly in Old pledges end up on the bonfire

“But both party leaders have also found the need for “compromise” to be a convenient reason to lighten the load of policy pledges that are often more cherished by party activists than the nation at large”

and by Phil Stephens in the alarmingly titled Cameron risks his career, Clegg his party

“The tortuous post-election negotiations, the wheeling, dealing and double-dealing had been nothing but a ploy to secure the acquiescence of Tory swivel-eyes and Lib-Dem sandal-wearers”

As an opponent of both nutty wings, I applaud.  As Tim Montgomerie said to Michael White on today’s Guardian Podcast, ‘It’s the inlawss, rather than the marriage, that is potentially the problem here’.  Please, someone find me a marriage photo where the groom’s family wear sandals, the bride’s all have swivelly eyes*.

Finally, to file under furious thinkers of the Left who don’t like it one bit: Seumas Milne, who writes

any idea that the new Tory-Liberal Democrat government represents a challenge to Britain’s power structure, or even a break with some of the most shopworn politics of the past decade, was swept away as the ministerial carve-up was revealed.

And please bookmark Gerald Warner in the Telegraph, his furious outpourings from the swivel-eyed side of the church are hilarious:

It may well be that is all it is. It is possible that sneaky Clegg, sniggering over having secured Gordon’s resignation, will yet waltz off on Dave’s arm. But he now has an insight into Cameron’s desperation. Like all blackmailers, he will return to demand more. As a pantechnicon delivered a large consignment of brown trousers and bicycle clips to the back door of CCHQ, Dave sold out his party by offering Clegg a referendum on the AV voting system … Dave brought all this upon himself by making his party unelectable with his modernising infantilism: the men in grey suits know that.

This is what it was all for.

* Can I really be the only person thinking of the Arrogant Worms and the excellent Liberal attitude they show in their important song, Killer Robots from Venus? Why can’t we all just get along?

13 May

Now is not a time for uber-German monetary policy

Posted by freethinkingeconomist in Uncategorized. Tagged: , , , .

The FT reports on the ECB’s seeming conversion to QE: Backlash stirs in Frankfurt.

“Germans are clear about the job of a central banker: to fight inflation, and nothing else … The conservative Frankfurter Allgemeine Zeitung described the turnaround – announced at 3:15am on Monday after a late-night meeting of European finance ministers – as “Americanisation of monetary policy”. Mr Trichet would prefer to describe it as confirming the ECB’s ability to react quickly.

Will they stop complaining about ‘Americanisation’ in Europe? They could do with an ‘Americanisation’ of their growth rates, soon.  And when will the Germans get over Weimar inflation?  Perhaps if the French start eyeing up the Ruhr’s telegraph poles, they may have a reason to worry.  But in demand-deficient Europe, inflation is surely a long way from being their big problem.

Wolfgang Munchau seems to join in, writing History has warned about slippery slope of monetisation

“The total amount of central bank money should be thus unaffected. However, we should not for a minute be fooled into thinking that such sterilisation is really neutral. If the ECB buys Greek bonds, which it did last week, and if, as seems likely, Greece will eventually default on part of its obligations, the ECB will take a very large loss. This shortfall would either have to financed through fiscal measures – a big increase in the debt of the ECB’s shareholders, notably Germany – or through the printing presses.”

Oh, people hate slippery slopes.  They so prefer gradually subsiding into low-growth irrelevance.  My view is strongly that if fiscal stances can’t be expansionary, we must get more out of monetary policy.  Read Credit Where It’s Due, it’s still what I think. Europe needs to expect strong nominal growth, otherwise all these impossible fiscal situations really will turn out that way.

Another profound enemy of monetary looseness is John Taylor:

most worrisome for the euro, and the likely reason for its remarkable reversal in the currency markets on day one, is the agreement by the European Central Bank to buy the debt of the countries with troublesome debt burdens, just days after it said it would not engage in such purchases. This agreement raises questions about the independence of the ECB …

and once again the US is set us as a bad example:

You can imagine the phone conversations between Brussels and Frankfurt. “The Fed helped the US Treasury conduct its bail-out policy during their financial crisis; why can’t the ECB help us in our bail-out?” Even the Fed’s “whatever it takes” mantra was being repeated in Brussels last weekend. In my view we are definitely seeing contagion, but it is a contagion of deviations from the independent and credible monetary policy that has served us well in the past

I just don’t get how all these people think the strength and credibility of the Euro, right now, is so much more important than the future levels of nominal growth.  I must be missing something. However, I can recognise the criticism of my support of this policy of buying national bonds, via Marginal Revolution*

“Finance ministers in the eurozone might argue that they acted to save the euro, but in reality they acted to save national bond markets – and the euro is the fall guy,” says Steve Barrow at Standard Bank.

If lots of money is printed, does this mean the euro being the fall guy?  But why is that not the case for the dollar? How unfair ..


*if you’re interested in Tyler Cowen and his uncanny genius, read this article

12 May

Two ex-SMF directors chatting

Posted by freethinkingeconomist in Uncategorized. Tagged: , .

Philip Collins and Daniel Finkelstein, discussing what might make this new coalition difficult for the Left.

They were both directors of the SMF, which also had ME as an intern (at the age of 35) in the spring of 2008.  Their current director, Ian Mulheirn, is taking them forward to exciting new places – above all, they have been comfortable doing a roster of good events at all three party conferences, something no other think tank can really do.

Well placed, I should say.

Two other great contributions to this debate about the near future of politics: Hopi Sen is admirably objective here:

The way I think of it is this: As of this moment, two thirds of voters may well support a Conservative-Liberal alliance and one third support Labour.  For us to win, we have to expand our share of support into the ground that the formerly free Liberal Democrats found so congenial. That won’t be easy for us. It is not as if the “captured” Liberal Democrats have vacated that political space, they have merelly allied themselves with another electoral wedge,

And LibDem Voice:

There will be plenty of troubles ahead for the Lib-Con government, plenty of time for Labour to exploit the difficulties the Lib Dems and Tories will face. But turn the knife too soon, and they may end up shooting themselves in the foot.

(oh, for anyone concerned: yes, I have started hitting the champagne).

12 May

What happens when the Beeb casually links to a blog

Posted by freethinkingeconomist in Uncategorized. Tagged: .

I suspect I won’t be beating this record for a while, what with there not being an epoch-defining election every week, and all that.

12 May

Growing evidence of capitalist conspiracy behind election result

Posted by freethinkingeconomist in Uncategorized. Tagged: , , .

The excellent PaulInLancs anticipated the Liberal Conservative coalition days ago, and also a capitalist-ruling class stitchup.  After first telling us that “politicians and rightwing commentators have fallen over themselves in their eagerness to talk up a ‘crisis’ which does not in fact exist”.

Tomorrow morning, though, that ‘crisis’ will exist.  The bond markets will plummet when trading opens, and city dealers will be wheeled out to say that ‘the market hates uncertainty’ over and over again, and that was is needed is a stable government able to reassure the markets that the deficit will not get out of hand.  This follows on the initial establishment of this narrative at 1am on Friday. The stock market will follow, and the FTSE will plummet by around 15% by 10am. By mid-morning, Tories and LibDems will be out before the cameras saying that the crisis that they had foreseen is coming and it’s coming fast, and that they are now working against the clock to reassure the markets that they will bring stable government, and deal with the deficit.  The deficit will be blamed on a failed Labour administration.

Paul later saw evidence of connivance from the ratings agencies as well.  Ed Conway gives the question some proportion (we’ll miss his output from the Telegraph when he goes off to Harvard):

The point, ultimately, is that if investors were to stop buying government bonds tomorrow (not that they would), it would mean the state would effectively have to shut down … Doesn’t this mean Britain is being held to ransom? Well, in a sense, yes. But this is nothing new. Back in the 1930s the Government only started cutting spending after it was refused a loan by JP Morgan. Moreover, the bulk of investors who might refuse to buy UK bonds are actually domestic buyers – pension fund and asset managers looking after our own (mainly retirement) money. In the 1970s it was an exodus of British money, not foreign cash, which really triggered the need for an IMF bail-out.

Of course, readers of Dillow will know that the reaction was hardly record-breaking, and Will Hutton amongst others conceded the City has behaved surprisingly well. Will’s piece ends up on this sunny note:

The people spoke; they wanted fresh faces and a fresh approach. The result, curiously, may be what they willed. The people even gave the rainbow coalition, for which I had hopes, a chance of forming had its protagonists had any energy. As the Lib Dems found to their consternation, they did not: there were too many obstacles. It is democracy in action, and it is great to witness. The financial markets, this time round at least, have a clean pair of hands. The people have spoken. Not the bond market.

Ah, if only it were that simple.  Conspiracies are stubborn things to uproot from the mind of the determined conspiracy theorist, and we have the internet.  I have done some googling (just as I did with Nick Clegg)  and have found some disturbing evidence that something sinister is happening.  Tracking the popularity of search terms:


I am not suffiently quick or subtle to work out what this adds up to.  But it scares me

12 May

Some spiffing quotes, what

Posted by freethinkingeconomist in Uncategorized. Tagged: , .

Gosh, I’m beginning to sound like a Tory already!  help

From Megan McArdle of the Atlantic – a wise and self-doubting piece about, well, Greece and intellectual triumphalism.  Could apply this to the whole Credit Crunch analysis:

You cannot graft rich-world policy onto emerging markets … Conservative fiscal and monetary policy… -emerges from the social and political institutions of a country; it cannot be imposed.

As Tyler Cowen says, “The fundamental cause of the financial crisis has been people and institutions thinking they are more wealthy than they are; this spread to Europe as well and now we are seeing the comeuppance.”  To which I’d add, the problem is often less the overall level of spending, than the fixed commitments … Because these obligations are very hard to adjust in downturns, their governments are, like individual debtors, more vulnerable to individual income shocks.  It also makes the coming pensioner problems harder to deal with.

As Felix Salmon says, banking crises often become sovereign debt crises, and vice versa.  There is no neat separation between “the government” and “the free market” in a financial crisis,

The fact that some moron is willing to lend you money is not a good reason to borrow it.

Underwhelming negotiation of the decade:

By afternoon the Labour team appeared to have shifted further towards the Lib Dems – they did come up with an offer on the third runway “in principle” and they seemed to come up with a better offer on increasing money for renewables “in principle”

If the Conservatives had known about Ed Balls’ attitude, would they have played harder?

Jonathan Freedland gets ahead of himself in predicting the outcome of 5 years of coaltion government.

the Lib Dems have already passed the peak of their power. They will never again have the leverage they have enjoyed this last week. Once they have signed on the dotted line, they will be at the mercy of their new Tory masters. They cannot threaten to walk away: if they do, despite the reported agreement on a fixed-term parliament, they risk triggering a general election at which the Lib Dems stand to be crushed. To use an idiom both these public schoolboys will recognise, Clegg has just become Cameron’s fag.

Shocking honesty about Labour councils in the North from Ellie:

Thatcherism destroyed the local economy (based on coal mining and steel), but in some cases the Labour-run local authorities made things deliberately worse. Sheffield City Council is widely thought to have tried to bankrupt itself in order to force a government bail-out. City funds were piled into paintings for the town hall and building Sheffield Arena (where ironically Neil Kinnock delivered his death speech in ‘92). Local rates were increased to such high levels that the poor couldn’t pay and were forced to default. Nationally this was mirrored in the rate-capping rebellion. Now they try to deny it, but party members were quite aware of what was going on. The strategy was to create huge difficulties for the Tory government, while maximizing local rage.

Read Labour history now and you’d forget why Thatcher remained so popular in the mid 1980s.

Some robust good sense from Sunny on Liberal Conspiracy:

This coalition won’t fail easily, and a lot of Labourites should be careful of being optimistic about that. Cameron and Clegg know that if their government fails soon, then a new Labour leader plus severe budget cuts would hurt them electorally. So expect this to be at least a 4-5 year parliament.

and his biggest worry

if the Con-Dem-Nation works well, then it may seriously re-align politics in a way that could put Labour out of power for a generation… If the future of politics is indeed coalition governments, then there is a real danger here that the future is anti-Labour majority than an anti-Tory majority.

Labour writers are often in the flush of unexpectedly strong tactical voting and Council results last week, which helps to set the framework for their ‘we’ll annihilate the Lib Dems’ stuff.  Maybe.  But 4 years is a long time.

12 May

A terrible dilemma

Posted by freethinkingeconomist in Uncategorized. Tagged: .

I always told myself that when the LIb Dems broke through, I would drink champagne.  I promised myself a few glasses on Thursday – if they beat 25% in the exit poll.  It never happened.

Now, they have cabinet posts, likely responsibility for electoral reform, deputy PM, likely four year fixed terms, possible AV at the next election, the Tory manifesto compromised in many ways ….

So.  Do I drink champagne at 6:30 in the morning?  It seems wrong.  Or on the District line on the way to work? Seems illegal.  I just don’t know what to do.

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