Calls in the UK to stick up for capitalism

For too long those of us who have stood up for free market capitalism have tended to wonder why it seemd quite lonely.   With the exception of a handful of think tanks, the voices in favour of less government and more freedom have been few and far between.  Most of the media seems to be inhabited by the "what is the government going to do about it" school of questioning regarding any issue or situation that comes along, precious few ask "when will the government get out of the way".

So it is gratifying that in the UK, at least, two voices have come out in the past day in favour of capitalism and less government.

The first comes from Sir Terry Leahy, former Chief Executive of the largest supermarket chain - Tesco.  He is no libertarian and he wasn't advocating stripping back the state like I would, but writing in City AM he said:

"As a believer in the free market, and someone who trusts people, in my eyes taxes are still too high.  Insufficient incentives exist in the UK to encourage investment, hard work and job creation.  The ambition to steadily cut corporation tax is laudable.  This, though, should be part of a much wider programme of tax reduction, which does not imperil plans to cut the deficit or spook the markets, but gives employees, employers and investors more money to do with as they wish."

More of their own money of course.

"what is needed in the UK: a rebirth of capitalism. Business cannot sit idly by and expect politicians to do this alone.  If we have the courage of our convictions, business people need to get stuck into the debate, taking this message not just to the media but elsewhere, including schools.  Every student should be taught about wealth creation and entrepreneurship."

Quite.  Business people have for far too long stood by and let politicians on the left push anti-business and anti-capitalist agendas.  The chimera of "corporate social responsibility" has been used to shroud the idea that fundamentally business and capitalism is "bad", and that it needs to compensate society for what it does.  Utter nonsense.  More recently the idea of "green business" and "triple bottom line accounting", have been spawned by those pandering to the ecological-left, in the hope that it will chase away threats of more taxes and regulation, when all it does is surrender the intellectual argument to them.  There is no harm in seeking to be more energy efficient, to gloat about how environmentally friendly you are and the like, but to surrender the intellectual argument that in fact - your business creates wealth, makes people better off, satisfies consumers and employs people - all through voluntary exchange - something government fails to do, is a disaster.

It parallels the businesses who embrace corporatism, who think "government relations" is about seeing what favours can be granted to their sector, whether it be reduced competition, more subsidies, regulation of competitors, taxing of competitors - rather than encouraging government to get out of the way, except when it is about protecting property rights and contract enforcement.

For Leahy to say this is welcome, but the other promoter of capitalism is more bewildering, although one might hope encouraging.

It's the Chancellor of the Exchequer George Osborne.  He said businesses need to fight back against anti-business sentiment that "dominates current political discourse".  He was quoted by City AM saying "If you are not out there, engaged in those arguments, then you are going to leave the field open to those people who want to fill that space, and who argue that companies... have got to pay more tax".   He wants businesses to retaliate against "the politics that says it's perfectly acceptable for the state to take half of all national income".

Naturally I agree, but isn't this his job too?

Shouldn't he be arguing in favour of not just simplifying planning law, but by scrapping it in favour of private property rights?

Shouldn't he be actively cutting all areas of state spending, not ringfencing the Soviet style NHS with half-hearted reforms that incentivise more contracting out, not ringfencing aid to developing countries?

Shouldn't he be abandoning the "Green Investment Bank" boondoggle, not waste money on an unprofitable (and uneconomic) high speed railway, abandon green taxes on electricity generation and be winding back and abolishing the legion of regulators for so many sectors?

Shouldn't he be leading the charge against the ban on new airport runway construction by the private companies that own London's three biggest airports?

In other words, shouldn't he be the government's chief advocate of capitalism, less government and freer markets (let the Liberal Democrats argue the contrary)?

The morality and the empirical evidence of what capitalism has enabled should be getting shouted from the rooftops, especially when the UK media is dominated not by Rupert Murdoch and News Corp, but the state owned BBC - itself almost entirely funded by the forcible extracted extortion system known as the TV licence.

North Korea's bad? The Sun thinks it's about circus animals

Regular readers will know I have a particular interest in North Korea (aka DPRK).  The reason being that it is, in my view, the most totalitarian regime the world has seen for any extended length of time, having now existed for 64 years, and is now the only successful three generational personality cult.  It is, as one writer described it, as if George Orwell’s novels “1984” and “Animal Farm” were taken not as warnings, but as instruction manuals.  Moreover, I’ve been there, although I am legally bound to not publish anything regarding that visit, and it is in the interests of my guides (who were exceptional), for me to do just that.

The sheer horror of the all pervasive denial of individual freedom and rejection of any objective consideration of reality, in favour of an “official view” is difficult to get across.  It is dehumanising, debilitating and life is cheap there.  It has all but scrubbed capitalism away, with private property rights virtually non-existent beyond a few personal chattels, with all employment defined and prescribed by the state.  Where you live, what job you do and your spare time are all almost entirely determined by others, and is a mixture of chance, favour and whim.   For those who insult the personality cult heads, or are deemed to be counter-revolutionary, the future is grim for them and their entire families.  If a man is said to have said something illegal, or folded a newspaper the wrong way (creasing an image of one of the leaders), or the like, it is to the gulags that he goes, with his wife or girlfriend, his parents, siblings and children.

You see in the DPRK, children can be political prisoners.  Forced to live in prisons high in the mountain valleys, from babies.  They receive rations that are starvation level, those who survive do so by eating bugs, mice and other things they can forage or hunt for.  Many are physically abused, some sexually abused, when old enough they are forced to work from dawn to late in the evening, every day.  It is one step removed from Nazi concentration camps, in that it isn’t gassing used to eliminate them, simply hard work, cold and malnutrition.

That horror isn’t easy to visit in the DPRK, for obvious reasons.  However, DPRK watchers have been adept at mapping, in great detail, where such camps are, with a brilliant Google Earth overlay.  For actual visitors to the DPRK, the horror is more subtle.  It isn’t in the power cuts, the propaganda, the relatively barren streets, crumbling infrastructure or the regimentation, it is what is not so obvious.  For there is a surfeit of videos and pictures of the DPRK’s key spectacles, none of which is that new.

It is the lack of children playing spontaneously, for their before and after school and weekend time is all taken up by state organised clubs and associations, all designed to promotion loyalty to the leaders, the party and the state, including dobbing in their parents for not being sufficiently loyal.  It is the orphanages where infants are shown off singing and dancing a song like “Kim Jong Il is our father”.  It is the constant climate of fear among citizens about who sees them, who listens to them and what will be said.  People who have had much history and information about the outside world kept from them, and what they do get is frequently heavily distorted.  People who are anxious to know about the outside world, to understand and to be free of fear.  Of course you never see those who are taken away, imprisoned, tortured or simply starving to death because of a regime that imprisons them and steals from them all to maintain a true 1% elite of privilege, gained by force, birth-right and fraud.

So what did Sun journalists Alex Peake and Simon Jones think was most important to focus on?  The treatment of circus animals.  The two of them lied their way into the country for a rather asinine story, probably wrecking future business of the tour company Lupine Tours, and quite possibly risking not only the end of the career, but also possible imprisonment of their tour guides.  A bit of research with DPRK experts (and there are a number of noted academics) would have told them the real cost of their “story” lies with others.

Now I’m all for thwarting dictatorships and embarrassing them, I’m particularly keen on getting more information into them and engaging with people who live there.  I’m also interested in raising the profile of the most serious atrocities of such regimes.  For the DPRK it must be the use of Stalinist type Gulags to imprison and enslave the children of political prisoners (though one can count the banishing of the disabled, uncounted public executions of political prisoners and the mass starvation of millions whilst the leadership dined like oligarchs).

However, for the Sun, it no doubt figured its readers were more interested in finding a country where they don’t know Michael Jackson is dead (hardly surprising, since the moon landings were never ever reported, and the Holocaust isn’t commonly known to have happened either), and where circuses involve the undoubted cruel treatment of bears and baboons.

Sad though it is, the treatment of the bears and baboons is not unusual outside Western Europe, and would also be found in many former Soviet Republics and China.  Quite simply the cultural norm of treating animals with compassion is alien to many cultures, and hardly a surprise for a state which retains structures and systems little changed from the ones the USSR transplanted onto it in the 1940s.

However, for the Sun to regard this to be the real tragic story of the DPRK is a travesty.   Although I would not be surprised if the human hating fraternity called PETA thinks the treatment of bears is more of an issue than the treatment of humans in the country, and that compassion for animals in the UK tends to rank higher than that for people.

I don’t belong to the feeding frenzy of hate-mongers who think any media owned by Rupert Murdoch is somehow evil – far from it.  However, this sort of “journalism” is not only rather facile, but at best is not useful, and at worst counterproductive.

For a start, if it means less people get to visit the place and expose it to foreign ideas and questions, because Lupine Tours is shut out of the market, then that is unfortunate.   I expect Lupine Tours to sue for breach of contract (presuming it was clever enough to include a contract that restricted the journalists).

However, the likely reaction of the DPRK is going to be more simple.  It will stop including the animal circus on tours visited by Westerners.  It wont save the animals.   However, it will give the impression that this is what matters the most – the treatment of circus animals.  It shouldn't be.

You see the impression most people have of the place is ludicrous dictators and nuclear weapons, with big monuments, mass regimentation and all other sorts of spectacles.  The unadulterated evil behind it all is largely ignored, particularly by the likes of Amnesty International and the leftwing protest movement - all too keen to damn the USA on its treatment of Islamist terrorist suspects, but never raising a protest against the torture of children by the DPRK.

A far more useful article would have sought out defectors, and discussed what they saw and experienced, and talked about the gulags with children in them.   This is what must be raised, again and again – the gulags must be opened up, letting the ICRC in and get closed down.  Children should not be political prisoners – ever (even though, in reality, virtually everyone in the DPRK is a political prisoner).

Better reporting on the DPRK is here in the Economist, about the horrors of the gulags, pointing out it is easier to lampoon the regime as freaky than to confront the true horror of the place.

This video of a starving orphan girl in the country is far more harrowing and disturbing than grotesque circus animals.   Although, I doubt PETA really thinks so.

Envy, lies and the gutter of politics

If you want to know what Ayn Rand meant when she described the "drooling beast" in The Fountainhead, one need only look at the events of the past few days in the UK.  For in those days the Labour Party, Liberal Democratic Party and much of the media circled on the government appointed chief executive of the Royal Bank of Scotland (RBS) - Stephen Hester - whilst he was out of the country on holiday - because of reports he was to receive a bonus of just under £1 million in shares.

A witch-hunt of envy, hatred and smearing appeared, as MP after MP called on the government to intervene in the decision of the board of the company to breach his employment contract.  They sniffed blood, goaded on by the leftwing press and media, with the extreme leftwing "Occupy" movement displaying its usual ineptness of analysis by blaming RBS for the budget deficit.   It ended when Mr. Hester returned home from holidays to find his image and name all over the media, and him feeling like a pariah, understandably, and deciding to refuse it for the sake of a quiet life.  The braying left cheer on a small victory, but their true colours are shown not for their stupidity, but their clever, fact-evading, power-hungry bating of class warfare and old fashioned envy in their pursuit of populism.

In 2008, the British Labour Government decided to rescue the RBS, which was weighed down under debts and investments that were going to cause it to go to the wall.  The reason to save it was not to protect depositors, for a deposit guarantee system already existed to ensure anyone with less than £75,000 in deposits had them protected.  No, it was because Gordon Brown wanted to save the jobs, investors and the debtors to the bank, and he feared that letting it fall was worse than saving it.  So he did, by the government pouring in billions of pounds it didn't have, to essentially buy a majority stake in the bank.

That stake was put into an arms-length company so it would be run as a commercial enterprise, and Stephen Hester, previously chief executive of British Land (and having had a successful banking career before then), was appointed CEO with a salary of around £1 million, with bonuses if he successfully turned the company around.

The ownership of RBS and the appointment of Hester had all been by the Brown government.  Until this year, his salary and indeed his previous bonuses - under government ownership - had not been a political football.  This year it has been, and it is all because of a new fever of class envy, stoked hypocritically by Ed Miliband and the vampiric Labour Party, keen to lie, smear and hound for the sake of cheap headlines and gutter press coverage.

RBS has been turned around, in terms of its balance sheet.   It is now profitable, whereas it had lost billions when he had joined.   In other words,  Stephen Hester has been responsible for leading the bank into a state where it financially self sufficient.   Through his leadership, taxpayers have been saved many more billions of pounds - which helps put his £1 million salary in perspective, and indeed the around £960,000 bonus - in shares - that would only be available in a year's time.  Particularly when you consider that the salary and bonus are subject to 50% tax.  

Yet when it came out that he was likely to get this bonus, out came the wolves.   What easier way to stire up anger and envy than to point out to the lumpen proletariat half truths and distortions.  

So what were these half truths?

- "Why get a bonus for leading a bank that needed bailing out"? The fact that he was appointed BY the Labour Government AFTER the bailout to rescue it was blanked out.  You see the standard leftwing view is that they are all guilty - bankers are, after all, the scapegoats for everything.

- "This comes straight from the poor who are suffering from the cuts".  Unadulterated nonsense. It comes from a bank that is making a profit.  Taxpayer money is only from the investment, which of course was a decision by the government of the day.  

- "The bank hasn't delivered on lending to small businesses".  Well yes, maybe it hasn't loaned as much as politicians wanted it to,  but hang on.  Wasn't the fact that it had overstretched itself a primary reason why it was thought of as needing bailing out in the first place?  Do you want a bank that lends prudently, is profitable and safe, or do you want a risk-taking bank that might get burnt?  For financially illiterate (and power and attention seeking) politicians this contradiction is ignored and willfully evaded.

- "The share price is lower than when it was bailed out".  Yes it is.  However, this is common across the banking sector and reflects two trends that are outside Stephen Hester's control. One is the announcement of new heavy handed regulation that imposes significant costs on the banking sector (which politicians approve of) and the Eurozone crisis, which was caused by the sorts of overspending practices the Labour Party speaks with a forked tongue about (cuts are bad, except we know we need to do them, but wont say how, but the Tories must be doing bad cuts).

- "The government as major shareholder can "do something"".  Well yes, it could, it could sack the board and override its decisions.  However, if you were a private shareholder of the bank would you keep your investment in such a politicised bank?  What else would politicians do to it?  Forget that Labour happily let Hester get his salary and bonuses after he joined, it's just decided in 2012 to pursue him.  Government interference in a board of a bank set up specifically to run commercially so it could be privatised would be contrary to how it had been set up.

- "It was because of people like him that we now have a deficit crisis".  No it's not.  The budgetary crisis in the Eurozone, US and elsewhere is because of statist politicians addicted to spending money they aren't collecting in taxes.   This enormous lie is becoming part of the leftwing storyline about the crisis, and needs to be confronted head on as often as possible. 

What was left out?

- The success in turning around the financial results of the bank, and the scale of it.  What nasty little vindictive Labour MP could turn around a paper stand let alone an enormous bank?  Bear in mind these are people who gleefully supported Gordon Brown selling gold when it was the depths of its price and voted for ever increasing budget deficits.   The ignorance is palpable.

- Half of the bonus goes to the Treasury in tax.  Without the bonus the Treasury is not better off.

The government did badly out of this, politically, because it noted that his bonus was half that of last year's and because it insisted that interference would be more damaging (and it would have been).  It wasn't helped that the Chairman decided to forgo his £1.4 million bonus, but more appallingly this was all going on whilst Stephen Hester was on holiday overseas - so was unaware of the campaign of aggressive envy going on back in the UK.

So he has decided now to forgo his bonus, because he feels like a pariah.  What he has learned is that this is the price you pay for politicians selecting you, in good faith, to do a job, and do it well.  The same politicians who backed him to the hilt when they approved of his selection and his employment contract, are now baying for his blood, like the nasty, power hungry vindictive hypocrites that they are.

He could have told them to stick their job and that as far he is concerned they can go to hell, as he could walk into a job elsewhere with ease and without the hassle of petty little MPs surrounding him like hyenas.

As Allister Heath of City AM said today, "nationalising RBS was a monumental error; no bank must ever (be) bailed out again", but the real problem is that the bailout has changed the cultural and philosophical debate around capitalism and the role of the state.

In 2012 that debate will be central to politics.  At the moment it is characterised by the largely ignorant opposing capitalism but largely clueless about what else to do, but also an almost equally inept business sector incapable of arguing the moral as well as the empirical case for capitalism.

What the Stephen Hester bonus issue has shown is that politicians on the left are sinking their teeth into the old Marxist rhetoric of class and envy, with much of the press and media keen to ride on the back of it all.   By contrast, the politicians on the right are almost entirely incompetent and incapable of responding with anything other than some quiet arguments about practicality.

This year there needs to be a sound, loud, confident and intelligent fight for capitalism, or these sorts of mindless attacks will come again and again. 

By the way, you're no more likely to find intelligent and consistent moral defences of capitalism at Davos than you are in Pyongyang.

Hedge fund manager puts socialists on the spot

Last night on BBC's Newsnight, a hedge fund manager, Hugh Hendry participated in a discussion about how he is speculating on Greece defaulting on its debt. He was joined by Joseph Stiglitz, a US economist, and Spanish Ambassador to the UK, Carles Casajuana.

Many on the left blame the likes of him who in speculating on Greece's public finances, when what he actually is doing is exposing the real risk. He is doing it with his own money and money of those who have chosen to trust him to manage.

That is the fundamental difference.

He has bet millions on the Euro, betting on it dropping if Greece defaults. As he says, if he is wrong, he and his investors lose. He expects nobody to bail him out. If he succeeds, it will be because he is right.

Why is he in a position to do this? Because the Greek governments, democratically elected for years, have been both lying about the public finances and been lax about getting those who elect them to pay for what they want.

However, the discussion on Newsnight last night was simply beautiful.

Stiglitz claimed there should be more borrowing and spending, and it is "absurd" to bet on a default. Hendry said simply:

"Look what happens - you get into difficulty and these guys over here [pointing at Stiglitz and Spanish Ambassador to the UK, Carles Casajuana] say, "hey we don't like it."

"Suddenly the truth hurts! Suddenly we want to abandon the truth. Suddenly speculation becomes a pejorative term!"

In other words, the politicians and some economists want reality evaded, the truth of the Greek government's inability to see that constant borrowing is unsustainable, is something they don't want to know - because what it really means is that spending must be cut, drastically.

Then he got threatened by the weasel who is the Spanish Ambassador who said "we're coming to get you".

He replied: "I see you champagne socialists when I travel business class, and the reason you're up in arms now is because you've got yourself into a crisis and cannot get out of it. So you're looking for scapegoats".

Indeed. The unaccountable reality evaders, statists both on the left and right, wont confront the truth that they are trying to defend mortgaging future taxpayers with their profligacy of today.

If the European Union decides to pillage taxpayers to save its members from default, then it will deserve the backlash that will be inevitable. Blaming entrepreneurs for betting with their own money for the failings of government is a lame attempt to cover up massive incompetence and failure by governments to spend within their means. Indeed, it would demonstrate once and for all the anti-business, anti-capitalist and pro-statist agenda of the European Union, except this time taxpayers are unlikely to stand for the machinations of those who like to spend their money for them.

Let Greece default, let Portugal, Spain and others follow.

Meanwhile, watch Hendry's excellent performance here and see the difference between someone who has made a success of his life and taken risks, compared to those who have spent their lives living off the back of others:



UPDATE: Here is Hendry again, for UK viewers only (through BBC iPlayer) pulling apart Poul Rasmussen, leader of the Party of European Socialists. The start is 22 minutes into the programme...

http://www.bbc.co.uk/iplayer/episode/b00rdynp/Newsnight_09_03_2010/

So what would Obama's proposal have prevented?

Nothing, in the UK in any case.

Allister Heath in City AM - the UK's only consistently pro-capitalist newspaper - says:

Barack Obama’s plan to ban banks with retail arms from those activities – endorsed by shadow chancellor George Osborne – would have done nothing to prevent the crisis; not a single bank that got into trouble since 2007 would have been saved had those rules been in place.

Why?

Northern Rock, HBOS, Bradford and Bingley and the Dunfermline did not engage in prop trading. They lent to people who couldn’t repay, assumed property prices wouldn’t fall, relied on money markets for funding rather than deposits, and purchased securitised sub-prime debt as a “safe” high-yielding investment, often tucked away in off balance sheet vehicles. They held too little quality, liquid capital as a buffer against losses.

So you see it's a mirage. What about RBS?

It was over-leveraged, bought vast amounts of sub-prime securities, lent willy-nilly to unsound borrowers and blew a fortune buying ABN Amro, suffering massive goodwill write-offs. RBS made every mistake in the banking book; it would have been doomed with or without Obama/Osborne.

The Tories are jumping on the bandwagon for political reasons. It makes them look like they aren't beholden to rich capitalists in the City of London, and helps attract the envy vote across the country. At the same time the British government, to its credit, is NOT jumping on the bandwagon. Gordon Brown, for all his faults, is smart enough to not frighten the sharemarkets even more by blundering into nodding in unison with Obama.

Funny though how those on the left who would decry the UK following in step with the US when it was Blair and Bush, now want Brown to follow Obama. Funny that it isn't about making your own decisions, but about making decisions they agree with.

A Guardian poll showed nearly 100% support for doing so, but then who reads the Guardian besides those who think the state should intervene in more, except when it comes to overthrowing nasty dictatorships in the Middle East. So of course it has articles saying "yes Obama", as does the Independent and even the Telegraph is conditionally supportive.

It is deeply unfortunate that many who understand the financial sector are typically without much knowledge of public policy or political philosophy. Indeed, the reverse is true with many political pundits, bureaucrats and journalists not understanding the financial sector.

In the meantime too many are prepared to blame anyone but themselves, and to find solutions that are about addressing symptoms not causes.

Obama's grab for populism

Commentators across much of the political spectrum have lauded President Obama's hardly coincidental announcement that he is going to regulate the US banking sector on a grand scale.

It came less than a day after voters in Massachusetts gave the Democrats, including Obama and indeed government a bloodied nose. This was largely due to the ham-fisted attempts by Obama, but most disturbingly by the indisputably corrupt forces in both the House and the Senate, to reform healthcare. Instead of taking a breath, Obama decided to go on the front foot and wage war against what has been portrayed as public enemy number one by the left - the banking sector.

The message was simple:

- The banking sector caused the recession (untrue);

- The government was forced to bail out the banking sector as a whole because of its own failings (mostly untrue)

- The banking sector is full of people who earned a lot of money doing the wrong things (partly untrue);

- Time to punish them all and stop it happening again.

What he didn't say was:

- The banking sector took risks because of the fiat money of the Federal Reserve effectively encouraging such behaviour;

- The Federal government through Fannie Mae and Freddie Mac funded a boom in housing investment including loaning to those who couldn't sustain the borrowing;

- Hundreds of thousands of Americans borrowed far too much money making foolish investment decisions;

- Bad banks could have been allowed to fail and it is time to have a fundamental review of the entire monetary system.

The crisis came about because loose money, combined with rules requiring a portion of lending to risky borrowers, saw a bubble of lousy investment in property. It was a bubble seen in many countries, and it has only partially burst. Had it fully burst there would have been hundreds of thousands of more mortgagee sales across the US, UK, Europe and elsewhere. It would have hurt those property owners, but it would have opened up enormous opportunities for many others to buy homes and engage in the sector.

No. Obama is completely uninterested in this. He is far more interested in gaining kudos from the popular masses for bashing bankers. He is "doing something" to divert attention from the Massachusetts result, whether it is right simply wont be understood by most in the media (who have little understanding of economics or finance), and 99% of the public.

So is he not justified, will his measures make a difference? Alastair Heath at City AM thinks not:

Was the financial crisis due to the fact that some banks own private equity firms? No.

Would Lehman have been saved by the restriction on size or any other of the proposals? No. Just one firm, Bear Stearns, a pure investment bank which would not therefore be covered by the new rules, was destroyed because of its ownership of a hedge fund which invested in sub-prime mortgages.

Would any of these rules have protected Northern Rock or HBOS? No.

Did the losses racked up by the state-sponsored Fannie Mae and Freddie Mac mortgage giants have anything to do with prop trading or hedge funds? No – and neither did the failure of Wachovia, Washington Mutual, Countrywide or the over 100 US banks and many others around that world that have gone bust.

In truth, banking losses were caused by bad property loans – and the purchase of this sub-prime debt by other banks and funds in the belief that they were safe. Wall Street was crippled because it was so leveraged and didn’t hold enough high quality, truly liquid capital. AIG insured packages of sub-prime debt through credit default swaps but didn’t set capital aside in case things went wrong.

Obama’s pseudo-remedies completely miss the point.

Heath believes banks should have living wills and it should be made abundantly clear to banks and to depositors that governments wont bail them out again. Banks' creditors and debtors would need to learn to pay more attention to what is behind their assets. In other words, a deal needs to be struck whereby the state turns it back.

However, this cannot be while fiat money continues to be manufactured by central banks at interest rates barely above zero. What is happening right now is a new series of asset bubbles because of it, with property picking up again in London, share prices getting an unholy boost because bank deposits offer nothing, and the cycle starting once again.

It is most telling and disturbing that Conservative Shadow Chancellor George Osborne supports Obama's proposals. A man who hasn't a clue about the banking sector seeking to show his solidarity with the "common folk" when to get votes (when in fact he has never had a real job, and lives primarily off of vast inherited wealth). City Am notes that Obama's proposals would hurt RBS, now primarily taxpayer owned, showing Osborne's foolishness in speaking in such a kneejerk manner.

However, what's being cultivated is not solutions to problems that are primarily about how individuals react to incentives, but envy. Bankers are public enemy number one, and the foolishness of some, who were paid very well, is a fertile breeding ground for hatred of the whole sector.

It's a sector that bores most, that is largely not understood, and ignorance breeds suspicion. Be sure that few politicians will point out that both the Obama and the Bush Administrations (and Clinton before) all bear much responsibility for the monetary policy, and the investment regulatory environment that inspired and rewarded irrationality.

Sadly, what all of this shows is how incapable democracy is at handling complicated public policy. Politicians are mostly clueless, the media similarly so, those who do understand are often accused to seeking to protect vested interests, and most media seeks sales based on massaging public anger. Few will dare profile the average people who took out self certified 120% mortgages at the peak of the property boom and ask them why they took such risks, yet they too contributed to it all.

However, Obama dare not ever say that banks shouldn't be forced to lend to people who are a bad risk, nor that the Federal Reserve system be subject to a fundamental review. It's blame banks, whether they received taxpayer largesse or not, were foolish or not.

The main winners from this will be those countries that don't follow in line - I expect Zurich, Geneva, Hong Kong, Singapore and Shanghai will all be looking for opportunities to attract more of the financial sector from the West.

UK weekend papers highlights

Well despite the doom and gloom, the major UK weekend papers remain first class, so here are some of the highlights as I have found them this weekend:

David Aaronovitch in The Times questions the moral tut tutting of the churches against spending by the working classes, which he sees as language showing concern about the corrupting effects of "luxury", which in the past was used to damn department stores, hire purchase, mail order and credit cards.

Presumably those who damned consumerism of the past should be basking in the joy of the recession with "I told you so". Buy Nothing Day this year should be a breeze for far too many.

Hugo Rifkind delightfully pokes fun at Malia and Sasha Obama in the Times (hmmm how many will find this offensive then) with "Our Week" (hey last week he did George Bush). Wonderful stuff like:

"We’ve been unpacking, and watching the video from last week’s Children’s Inaugural Ball. We met the Jonas Brothers, who are our favourite pop group. They promised that they would dedicate a song to both of us.“You’d better,” we said, “or else we’ll have you sent to Guantánamo Bay.” The Jonas Brothers started laughing at this, but we kept staring at them until they stopped laughing again. We need a bit of practice at this, but Mom told us that she was very proud. Friday Daddy has closed Guantánamo Bay. Mom said he had to, so we’re trying not to be cross."

Mark Henderson in The Times reports on trials of stem cell therapy to treat age related macular degeneration, the leading cause of blindness. It looks most likely that this can be carried out by President Barack Obama laying his palm on the forehead of the afflicted (yes ok maybe not).

Patrick Hosking in The Times reports "The Case Against Brown" arguing that the British PM is far innocent from blame for the current recession (which this week saw a 1.8% annualised decline in the UK economy to December 2008). As he points at bankers constantly, blame can be attributed towards Labour's monetary policy fueling the housing bubble, the almost constant budget deficits through the "good years" and how he made hiring people more difficult and less attractive.

Andrew Porter in the Daily Telegraph reports on proposals for the UK government to impose a tax on broadband users to compensate the film and music industry for breach of copyright. In other words, the entertainment sector can't be arsed taking its own steps against thieves.

James Kirkup in the Daily Telegraph reports, disapprovingly of course, that in the UK only 53% of convicted illegal drug sellers get custodial sentences, the remainder get fined or a caution. Now that's not legalisation, but it is hardly surprising that for most in this retail sector the legal risks are low compared to the financial benefits.

Charles Moore in the Daily Telegraph reports on the filthy collusion between the banks and the government, crony capitalism as he calls it, and the nightmare of the creeping bank nationalisation in the UK.

UK press mostly cheering for Obama

The lead in the Times says the campaign has been dignified "This is a contest that could so easily have featured distasteful hints about race or nasty gibes about age. It could have centred on the outlandish remarks of Obama's pastor the Rev Wright or his occasional meeting with the terrorist William Ayers. Instead Senator McCain has shown admirable restraint, Senator Obama admirable dignity."

The Times also notes the worst endorsements the candidates ever got. McCain's must be the KKK, whereas Obama's would be Hamas.

Mick Brown in the Daily Telegraph talks of how Obama won so many over.

Simon Heffer in the Daily Telegraph warns that McCain is the safer option regarding foreign policy. "Mr Obama is a confection; he is an image, a brand, a lifestyle. He has the talents of the thespian, less obviously those of the executive." "Mr McCain, who understands well how foreign powers and military operations work, would have a much more informed discussion with his advisers. Mr Obama would be starting from a position of near total ignorance, and on a matter of life and death."

The lead in the Daily Telegraph is concerned about Obama "What we do know of his policies is not encouraging - higher taxes, protectionism, a bigger role for the state, particularly in health-care. For those who believe that the United States' greatest strength - from which the whole world benefits - is the can-do individualism that fuels its boisterous free market economy, Mr Obama presents a worrying prospect." and McCain has blundered badly "this time round he has allowed himself to be diverted into a negative game-plan that combines ugly ad hominem attacks on Mr Obama with the specious claim that only the Republicans represent "real America". So on balance prefers McCain "His ill-considered choice of running mate appeared not only wilful but also defeatist because it seemed designed simply to shore up the Republican base, rather than reach out to a wider electorate. Yet on the big issues, Mr McCain is by far the sounder candidate. He is a tax cutter, a believer in small government, a zealot for free trade. He may have made something of a fool of himself with his grandstanding during the banking crisis, but he was not alone in that (though Mr Obama wisely kept his counsel)."

Jonathan Freedland in the Guardian has been seduced by the star "If voters reject McCain today they will also be rejecting that McCarthyite brand of politics, embracing Obama's insistence that, at a time when the problems facing America are so big, it makes no sense that its politics are so small"

Clintonite Sydney Blumenthal in the Guardian talks about the end of the Republican era, though says next to nothing about Obama, and talks utter nonsense about the US economy.

Johann Hari in the Independent says this is about transformation. Transcendence of race (true), the end of passive government (it never existed), the end of the culture war of the conservatives vs everyone else (perhaps), the end of US unilateralism (probably not). Again another Obama fan.

The lead in the Independent fawns over Obama. "Indisputably, he has also had a gentler ride from the media than Mr McCain. But gifted politicians make their own success. Over the past two gruelling years, we have learnt a great deal about Mr Obama. He is formidably intelligent."

The Daily Mail bemoans the BBC sending 175 people to the USA to cover the election, although I wonder how much coverage the BBC is onselling at a profit.

Polly Toynbee was wrong about Gordon Brown

but she wont admit it. Her latest column in the Guardian calls for Gordon Brown, who she once saw as being the true Labour leader (she went off Blair), to be replaced.

However, pass on the article. It's the usual bunch of leftwing Keynesian tripe about increased taxes and spending more money on those who haven't earned it. Go to the comments section. There is true magic there. My favourite is this from "Cloutman":

Another great article Polly. Marvelous to see such an eloquent demonstration of the old saw - 'the convert is the greatest zealot'. You're really starting to hit the nail on the head - your ex-hero Gordon Brown is indeed as much use as a third buttock. As you have now come to recognise, you absolutely were 100% wrong with all that guff you used to write about how wonderful he was.

And I'll let you into a secret. You know all that other stuff you write about poverty and inequality? That's all bloody tripe as well.

UK company makes record profit, makes BBC gloomy

So what was the lead item on BBC breakfast news on TV this morning? It was about Royal Dutch Shell making the biggest profit of any UK company in history. Now in Japan, South Korea, Hong Kong, Singapore or even China, this would be something celebrated, an enormous success. However not for the BBC on TV, the manufactured story was “are they ripping us off?”.
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Now the BBC isn’t stupid. It knows that a profit figure of £14 billion means little unless you have the context of the value of the company. After all, if the assets are worth £500 billion, it isn’t great, if the assets are worth £50 billion it is a tidy profit indeed. However the socialist minded British public see profit like a lottery win – not a return on investment. The BBC didn’t disclose the current market capitalisation of Shell. Secondly, it didn’t reveal where the profit goes. This isn’t clear yet, but presumably some will be reinvested capital and much will be dividends to shareholders, many of which are financial institutions with pensions, deposits and other funds that affect the wealth of many people. Keeping vague about this ensures that many think that it just means a few people living the life of Uncle Scrooge or Montgomery Burns, whereas Shell has generated a profit that will benefit plenty.

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There is a bigger question about reserves and whether discoveries and current production can keep up with demand, which is what the Daily Telegraph focused on.

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One thing the BBC did report was where the profit came from – exploration and discovery of new fields, the wholesale market for crude and refined products. It wasn’t retail at the pump, where the margins are closer to 1-2p per litre (noting than in the UK around 70p is tax). This doesn’t stop the leftwing union Unite stating calling it obscene – when what is truly obscene is the extent to which taxes on fuel fund big government at Westminster. Of course Unite doesn’t produce anything itself, it calls for a tax to add to the money that the state takes from oil customers, like far too many socialists Unite worships the fist of the state over the choices of consumers and shareholders.
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So there you go, big British firm makes a hefty profit and it is held in suspicion. The UK wonders why so many people have a poverty of ambition while a culture of envy is cultivated, and the thieving hand of the state is largely ignored.

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Of course given that by owning a TV set in the UK you are legally obliged to pay for the BBC, under threat of fine and criminal prosecution, regardless of whether you watch or listen to any of the BBC's content - I would wonder why the BBC can't answer why it can judge Shell, when its customers don't get forced to buy its products, but the BBC forces people who aren't its customers to pay for all of its products? Presumably TV and radio are more important than energy.