Financial Transactions Tax fails the test of reality... again

Financial Transactions Taxes (also known as Tobin taxes) are the fond friend of the banker-bashing left, believing that there are vast fortunes of money swirling around the ether that, if only they could take a tiny cut of it all, they could save the world.

It has been advocated widely by the likes of Paul Krugman, Bill Gates, Resource intensive fat capitalist dickhead hypocrite  Michael Moore, Greenpeace, Oxfam, WWF, Occupy Wall Street and Fidel Castro

So the EU proposed one, and it has been getting introduced in 11 EU Member States.

It appears to be failing to deliver ... and the Swedes would rightly say, having been there before, "told you so".

Cyprus bail out - the good, bad and the ugly

Cyprus has a stay of execution, I say that because its banks will never be the same again.  Indeed, if ever there was a case to allow full reserve banking (whereby loans = deposits, albeit with precious low returns if any), this is it.  Cypriots will want banks that exist purely to protect their money from being stolen, not banks that risk just that.  

Allister Heath has pointed out that there are some good dimensions to this deal, it is a lot better than how it was looking a week or so ago.  

The Good

- All deposits of 100,000 Euro or less are safe.  Given this was an ECB guarantee across the Eurozone, and the ECB has ensured this elsewhere, this was a minimum responsibility.  It may not be the wisest promise, but it was that. This will, at least, mean that most Cypriots have their savings protected, although plenty of businesses will get hit.

- As only two banks are in trouble (albeit two of the biggest ones), depositors for banks other than Laiki and the Bank of Cyprus, have their deposits untouched altogether.  Good.  It was a nonsense to effectively "nationalise" all bank deposits, including those of banks that are not having difficulty meeting their obligations.

- Shareholders of Laiki bank lose the lot, and bondholders get their bonds replaced by equity, as low as that will be. 

- Taxpayers are no longer solely responsible for bailing out the banks, but rather there is an orderly wind down of Laiki back, with depositor accounts transferred to an inheritor bank - the Bank of Cyprus.

In short, instead of a tax on all deposits, only depositors above the insured threshold of banks that need bailouts, get hit.  

The Bad

- Actual deposit insurance is not being triggered, rather there is just an exemption for those under 100,000 Euros (and larger cuts for those above it).  It saves taxpayers (as insurers), but it does disproportionately hit depositors when there is insurance that could be used to offset that.  Still, the state shouldn't be insurer anyway.  Allister Heath reckons it would have been better to wind down the banks completely, figure out a flat percentage of deposits across all accounts needed, and then used the insurance to recompense those under 100,000 Euros.  

-  There still isn't a legal place for basic "safe" banks to operate outside the fractional reserve banking system economically.  Many people would be happier, especially now, to have money sitting in a zero or near zero interest rate bank account that didn't face these risks.  These events ought to have accommodated that.

The Ugly

- Capital controls.  I said enough about that yesterday.  When removed, there will be grand capital flight.

- With what is about to happen, it will kill off Cyprus being a financial hub for a generation.  Just as well the country has good beaches and olives.  Maybe it will think again about rejecting the UN brokered deal to reunify the country with the Turkish occupied north.  That, along with Turkey being an obvious trading and investment partner (although the Greek Cypriot community may fear being overwhelmed), could help revitalise this country.   Many will lose jobs and find themselves floundering as a result, but they will pick themselves up.

- The rhetoric around "Russian money launderers" will haunt the EU and the ECB for many years.  It is one thing to have concerns and beliefs, another to air them without presenting evidence and without taking regulatory steps to address them.  To sweepingly act as if Russians with money in Cypriot bank accounts are all criminals is an unwarranted slur.  If there is substance in this, and the ECB cares, then there should be Eurozone wide directives to cover this.  

- Cypriot public debt will be at 100% of GDP by 2020 at best, given it is borrowing 10 billion Euro from the Eurozone to cover all of this.

- Cyprus has agreed to increase corporation tax to 12.5%, reducing its competitiveness.

Capital controls - the tool of the statist

"An economic and political disgrace" is how City AM editor, Allister Heath, describes it.

I call it theft.

Capital controls, a euphemism for banning you from taking more than a sliver of your property out of a particular country.

They are motivated by concerns over the "public good", over "the long term stability of the economy", when in fact the mere fact of introducing them speaks volumes about the latter, and is contrary to the former.

It is the logical end point of the moral turpitude of statists, whose fundamental belief is that private property, really, doesn't exist, but is tolerated and can be confiscated, controlled and shared as long as it fits the big picture, the grand plan.

The plans of politicians who think they know best how to run your life.

Cyprus has no future as a financial hub.  Confidence is utterly destroyed, as depositors, regardless of whether they individually will lose part of their savings as part of the bailout, will abandon its banks.

It's over.  Runs on banks happen because people panic about their property and their savings.  That money is their's, and they frequently worked hard and took time to make that money. 

They rightfully seek to protect it, withdrawing it from institutions that might take it from them, because money is an extension of the self.   It is the product of people's minds and labour, translated into a universal medium of exchange, and a means of storing that value.

Being able to take it out of a country is an extension of the right to leave, the right to take your life includes taking your possessions, includes your bank account.

Of course, banks are not foolproof.  In a free market, people rightfully take a risk in deposits with banks, particularly given virtually all banks engage in fractional reserve banking, lending much more than they take in deposits.  If a bank fails, then depositors should become unsecured creditors effectively being a segment of the new shareholders of the bank.

However, it is quite another thing for a sovereign state to do this, to restrict ALL capital flows out of a country.

You see the primary reason why a government does that is because it knows it has lost the confidence of its people, because it is about to steal from them in one way or another (in this case not through devaluation/QE of the kind propounded by Paul Krugman, Russel Norman and Robert Mugabe).  

It is a sign of failure, the tool of the statist and the act of a scoundrel.

Ed Miliband is an economic and moral vacuum

The UK Leader of the Opposition is empty.  His One Nation rhetoric is the antithesis of what he offers, which is a vision of "them" (the rich, which curiously excludes himself) and "us" (people on welfare, people working for government).

The man who offers envy, class hatred, regulation of private enterprise and more state housing to an economy lumbered by public debt that he denies is the fault of his very party when it was in power.

The man who uses terms of utter lies, like "bedroom tax" (there isn't one) and "tax cut for millionaires" (there isn't one, there isn't a tax on wealth), and fuels disdain and anger against entrepreneurs, private enterprise and success, by pandering to beneficiaries and state employees.

Read more here.

Cyprus in a nutshell

This is my go at summarising this.  Obviously, if someone spots something fundamentally wrong with my analysis, please leave a comment.  I don't profess to be an expert on the Cypriot financial sector.

Cyprus took a light regulatory touch to financial services, so its sector grew.

It gained a reputation for providing only the minimum level of scrutiny needed to comply with European banking rules, hence it tended to attract substantial deposits from Russians keen to keep their money away from Russian authorities.

Cypriot banks grew from this, but invested heavily in Greek public debt as a “safe” investment.

Greece approached bankruptcy, and the Eurozone (Germany) and Greece agreed on a bailout plan that meant its bond holder (those who lent money to the Greek government) would take approximately a 50% cut in their bonds.   This shared the burden between Greek taxpayers and Greece’s creditors.

Cypriot banks have been hit by this “haircut” in their investments, effectively being on the edge of folding without ongoing liquidity support.

The ECB is willing to provide some of this, but is demanding that investors in Cypriot banks take their share.  However, Cypriot banks issued few bonds, so simply demanding Cypriot bondholders take a cut wouldn’t be enough.  So the suggestion was made to take a cut from those who loaned money directly to Cypriot banks – in the form of depositors.

This runs contrary to the pan-Eurozone  guarantee for depositors up to 100,000 Euros.  

The reason given for wanting to confiscate Cypriot depositors is because “most of them are Russian” and “we don’t know where their money came from”.   Concerns that never translated into legal action, and which are at worst racist suspicions.

So now the Cypriot government faces its financial system collapsing.  It is happening now because the previous, communist led, government kept its head in the sand until the election it knew it would lose.

The Cypriot government itself does not have high public debt or a serious budget deficit.  It is not due to rampant overspending, but rather a banking sector that can’t cope with the bailout package for Greece demanding it write off substantial assets.

The Cypriot government is looking to the Russian government to save it, which from the ECB’s point of view means it wouldn’t be willing to provide ongoing liquidity, which means a real risk of a Euro exit, unless Russian support is substantial indeed (to the point where Russia would be the central banker for Cyprus, just think about that for a moment).

To get ECB support, it needs to find money from somewhere and could get it from a levy on deposits over 100,000 Euro.  

If no solution is obtained by Monday and the ECB stops providing liquidity, Cypriot banks will collapse and the Cypriot government may choose to print its own currency to cover spending, meaning a disorderly exit from the Euro by a country that – in itself – did not have a budget.  

Conclusion?

Cyprus’s financial sector is finished, regardless of what happens.   Local and foreign depositors wont trust its banks in most scenarios.

1. If Russia saves Cyprus, and it remains in the Euro, then it will likely mean a substantial withdrawal of deposits from Cypriot banks.  They will shrink, and Cyprus will have a bunch of effectively Russian owned banks operating within the Euro.  It is hard to see the ECB being willing to support this.

2. If Russia saves Cyprus, and it is forced to exit the Euro, then Cyprus will have a nearly worthless local fiat currency that does far more harm to depositors than a levy on Euro deposits.  It is over for Cyprus’s financial sector, but it will become remarkably cheap to holiday and buy land in Cyprus.

3. If the ECB saves Cyprus, along with Russia (providing the Cypriot share), then Cyprus will have a shrinking financial sector. Russians will be looking elsewhere to put their money.

4. If the ECB saves Cyprus, with a bank deposit levy, then Cyprus will see a massive run on its banks, and the financial sector will be effectively finished.  

5. If neither the ECB nor Russia bail out Cyprus, the banks will default, depositors may lose most of their money, it will be forced out of the Euro, and faces considerable civil unrest.

Who to blame?

- Greece, for being fiscally incontinent and being unable to pay back its debts.

- The Eurozone, for being unwilling to guarantee to Cypriot depositors what they guarantee to other Eurozone depositors, on grounds that it was never willing to address in the past.

- Cypriot banks, for being profligate lenders

- Cypriot depositors, for trusting the Eurozone and its government to ensure they avoid moral hazard.

-       Authors of the Euro, for not anticipating the inevitable credit bubbles a pan-economic fiat currency, driven by German economic performance, would fuel.

What to watch?

Monday.  The Cypriot Parliament and the ECB.

My bet is that Cypriots will be dealing entirely in cash in a week's time (they already increasingly are).

The Prodigal Greek has a great summary of the measures taken or soon to be taken, that will ensure this.

Things to do during Earth Hour

I loathe Earth Hour.  I called it "onanistic vileness" or rather the act of utter wankers who have the luxury to claim moral superiority, because they can stop using electricity.

In 2009 I said:

Oh yes, the sheeple in the relatively free rich world (and even the relatively unfree middle income world like China) will have a jolly ol' time switching off our lights for an hour. Makes you feel better a bit of enforced poverty doesn't it?

The Ayn Rand Institute rightly points out how perverse it is to celebrate extinguishing light:

Earth Hour presents the disturbing spectacle of people celebrating those lights being extinguished. Its call for people to renounce energy and to rejoice at darkened skyscrapers makes its real meaning unmistakably clear: Earth Hour symbolizes the renunciation of industrial civilization.

I've seen a city that has a constant earth hour - Pyongyang.  Dark, with lights in a few buildings, focused on the grotesque statues of the city's past Big Brothers, on the railway station and one or two other pockets of light.  It is dismal and dire.  To celebrate replicating this is unspeakably wrong.

Pity those who have no choice but to "celebrate Earth Hour".

Donate to LiNK - Liberty in North Korea.  Help people fleeing the darkness to experience light, heat and civilisation.

Otherwise, keep the lights on or maybe go for a drive.  Celebrate that a century ago, electric lighting was a delight, for being safer, brighter and opening up the evenings to more socialising, to reading, to enjoying more of life.    Celebrate that today, electric lighting is more reliable, safer and uses less electricity than ever before.

The future is not with those who would turn the lights out.

I bought the Sun today

I don't usually, but this is almost a work of art.  A damning indictment on a government that has failed to do enough for the economy, and is seeking to regulate the press.   Commentary and sarcasm that is all too clear.

UK budget - not one for growth

I wanted this being big tax cuts, funded by a serious capping on the welfare state, cutting of wasteful state spending and bureaucracies, supported by some privatisation.

We got this.

Small tax cuts on companies and on beer, a worthwhile increase in the income tax free threshold to £10k.  Small tax increases on other alcoholic drinks, owning a car, catching a flight and elimination of some tax credits and a mini Fanny Mae type mortgage guarantee scheme, and subsidised loans for home buyers.  There were some new exemptions on climate change obligations for some sectors, which is promising.

Overall, nothing much to see at all.  Public debt growing to close to 100%, budget deficit at levels higher than any OECD country and economic growth forecast to only be 0.6%.

No, the Conservatives wont be winning in 2015 at this rate, and no Labour offers nothing more than a bit more borrowing and a bit more money thrown at public housing and railway projects.  

Launching my UK blog

Yes, I have had enough of maintaining a dual existence in one place.  I have decided to put all of my writings on UK politics in one place, largely because that is where much of my focus now is.

Of course I am still following New Zealand politics and will write on them, and more widely here.  I will also still post short links to the UK posts here, but will not be clogging this up with UK focused material that NZ and other readers are uninterested in.  I simply couldn't go from writing about north Korea, then the NHS to whether Auckland should have an underground railway and think I had a consistency of target audience there!

So please go visit.  My latest post is on the cross-party agreement on press regulation in the UK, and the excellent editorial by City AM Editor Allister Heath, who is the UK's best and only libertarian newspaper editor.   Even if you are not interested in business and financial news, reading his editorial every day is a warm reminder that belief in capitalism, free markets and freedom more broadly, is not just held by a few.

Heath made some core points worth summarising here:

- Consensus in politics is a disaster. "Conformity stinks, it leads to freedoms being curtailed, pockets being picked and a conspiracy against the public interest";

- "There is no way that Britain's new framework would ever be possible in the US";

- The criminal behaviour of journalists was and is criminal, there is no need any new laws;

- "The many are paying for the sins of the few";

- "we have fallen out of love with freedom";

- "Freedom, ultimately is indivisible; the only reason why regulation of the media didn't happen any sooner was because newspapers were too influential.  Now that their power is waning, they are fair game, like everything and everybody else".

Cyprus is far too important to get wrong

One of the claims constantly touted by enthusiasts of the European Union is the much exaggerated claim that the EU and its predecessors "kept the peace in Europe" after two major wars.   There is an element of truth in that, simply because countries and people that trade more, travel more and do business with each other in ever increasing frequency, are less likely to tolerate the sort of mindless aggressive nationalism that is the hallmark of so much war.  There can be little doubt that free trade and movement of people and goods within the EU is good for that (although overwhelmingly it was NATO that has kept the peace in Europe, and both it and the EU failed demonstrably to do this in the former Yugoslavia in the 1990s).

That peace prize is looking a bit fractious, as the actions over Cyprus in the past few days have indicated.

Let's be clear, I think taxation is legalised theft, in any case.  More insidious is the legalised theft of state sanctioned inflation and regulated interest rates, which are currently effectively stealing savings from the public in the UK.  13% of the value of Pound Sterling has been eroded in the UK alone, by inflation, about double that if you compare it to the US$.  

The British Labour Party and Liberal Democrats both believe in a wealth tax, taking money from you because you own a particular asset over a set value.  

Now the EU, having promised that the first 100,000 Euros of deposits of everyone's bank accounts are protected by government deposit insurance, is going back on that and pushing for the confiscation of 6.7% of bank accounts located in Cyprus up to 100,000, and 9.9% on deposits above that.

Consider what you would do if that happened to you.

You'd be angry, very angry, and some of that anger might be directed towards whoever you thought was responsible.  Banks, officials, politicians.

The wealth tax is to bail out the Cypriot banks, which overextended themselves, particularly being used by many larger depositors from Russia seeking to avoid scrutiny over transactions that may be illegal in other jurisdictions.  

Of course the real answer to this would be to led the banks fail, then the deposit insurance scheme would kick in and those with deposits over 100,000 Euros would lose it all. Which is the right thing to do.  However, the problem is that Germany, indeed the Eurozone believe it must bail out banks within the Eurozone.  This effort is a clumsy attempt to put some of the cost upon Cypriots, especially clumsy because it is unique to Cyprus (Greek, Spanish, Portuguese and Irish depositors haven't had to pay), and because it sets a new precedent.

Who now believes bank deposits are safe in Greek (who believed it before?), Spanish, Portuguese or Italian banks?  There is ever chance of a run on bank deposits in some if not all of those countries, and in the Euro itself, putting those banks in jeopardy and devaluing the Euro some more.

One claim is that the basis for this proposal was that Cyprus didn't want to upset Russia, by letting the banks fail or claiming the bailout by a far larger clawback from large depositors.  I doubt whether Russian depositors will be trusting Cypriot banks from now on in any case.  

A run on the banks will expose not only the lack of liquidity in banks to give you back your money, but the inherent risk in fractional reserve banking.  That being that banks issue credit for which they have no deposits, to an order of several times the value of deposits.  When those borrowers can no longer repay their debts,  consider how that affects your ability to recover your deposits.

What next?

The law of unintended consequences may unravel in the coming days, as banks in the Eurozone periphery start to see a panic appear, as people start to take out their savings, in fear Greece, Italy, Spain or Portugal could be next, or Ireland.  Once people see queues at banks in those countries, they will join them, and there will be a snowball effect.  Their own national politicians may not be trusted, certainly the ones in Brussels wont be.  The more they get told it wont happen to them, the more they will point at Cyprus and say "actually myself and my family are more important than your empty promises", the more it will get worse and worse.

I believe the only way this can be stemmed is either to honour the 100,000 Euro deposit guarantee (and slam deposits above that level), or for Cypriot citizens to be guaranteed that amount alone (leaving foreign holders of accounts to take the hit).   The price for that would be paid by Eurozone taxpayers elsewhere, and I'll let them decide how to treat the politicians who decide better to thieve from northern Europeans than from southern Europeans.  There is only so much of this Germans will take as perpetual penance for a war that most of them were born after.

Resolution of this issue must happen within the next day or so.  Imaginations will wander, rightfully, after that.  Bear in mind Italy doesn't have a government.

Otherwise it becomes unthinkable.  Long lines of Europeans outside banks that close due to running out of banknotes, a general public becoming anxious that their savings are inaccessible.  How long before a brick is thrown, or a firearm brandished, and people demand access to vaults and safes?  

In other words, how long before the average, law abiding, middle income citizen discovers what an abject fraud it is to trust their politicians, and those in Brussels to look after them, rather than to protect people from failure?

Meanwhile, the damage is done to Cypriot banking.  Who now would place a deposit into a Cypriot bank?  What Cypriot is taking a cheque or cash and putting it into a local bank?  How many Cypriots are now changing their future banking arrangements to banks elsewhere (and how many are not in a position to readily do so?)?

Stepping back, how's that protection of peace in Europe looking now, when a small but sizeable proportion of Greeks embrace fascism it is easy to ignore, but when confidence in the Eurozone banking system plummets, does Brussels have reason to continue to prance about with this hubris about all the good that it has done?

UPDATE:  The Cypriot Parliament, which must vote on this law, wont do so until Friday.  Cypriot banks will remain closed until then.  Will this trigger panic more widely?  What would you do?

NZ Government's first full privatisation of the 21st century, unopposed

For all of the hand-wringing and gnashing of teeth of the National-led Government's minority sale of a bunch of companies that have private competitors, you'd think that Labour, the Greens and NZ First would actually be holding the stop sign against the government selling ANY businesses at all.

Given the referendum, the claims that part-privatisation is anti-democratic and other hyperboles about the programme, you'd think if you believe in the state ownership of the means of production, distribution and exchange like any socialist, you would want to stop the shrinkage of the state by all means.  The people (through the state) ought to own more and more enterprises according to any socialist, and the mere fact there is an undercurrent of "should we promise to buy them back" tells you how reactionary Marxist the NZ left has become.  So you might think.

However, I think they don't really give a damn, it's all about publicity and xenophobia.  For what is about to happen is no different, indeed this will be the first full privatisation by a New Zealand Government since the 1990s.

This little piece of news has received no comment from the Opposition at all, presumably because it is a government owned company that is doing the privatisation.  Kordia, which was once BCL, which was once a subsidiary of TVNZ and owns most of the TV and FM radio broadcast transmission sites in the country, is selling the ISP Orcon.

Orcon is in a vigorously competitive market, like Mighty River Power.  It sells services to end users, like the power companies.  

However, as Kordia is selling it, it isn't up to Ministers, so there is little political capital to be gained from opposing it, unless the Opposition wants to abolish the SOE model - which would mean it could never argue it wants to own businesses to make money for taxpayers, but rather go back to the politically directed approach of the age of Muldoon.  Yet I think there isn't even remotely that kind of coherence in the Opposition to partial privatisation. 

Chavez's destructive legacy

To the left he was a hero, a democratically elected socialist who used the oil wealth of his country to lift the very poor out of poverty and give millions a chance, up against criticism by "vested interests" who continued to tout capitalism as the answer.

To some on the right he was a communist dictator, who seized power and was running Venezuela like Zimbabwe.

Chavez ever a friend of a despot

Well both are right.

Despite a skewed electoral system, monstrous control of the media and bullying and intimidation of the opposition, it would be churlish to deny that Hugo Chavez had many supporters.  He did get elected, and it isn't hard to see why many people, granted handouts from the state, wouldn't be grateful.  When oil prices were at their peak, he used the money to pay for medical centres, welfare benefits, creating civil service "jobs" and infrastructure in poorer neighbourhoods.  While it is easy to pour scorn on all of this as being vote buying, it really is little different from what leftwing parties do in Western democracies, except Chavez did have money flowing in from the state oil companies.  He didn't need to tax the wealthy.  In that respect, it's understandable why some would think he was relatively benign, bearing in mind that other oil rich countries either keep the money largely within a tight ruling elite (Saudi Arabia, Equatorial Guinea) or put it away into a rainy day fund to pay for pensions (Norway).

Yes he did spend the oil wealth of the country on massive welfare programmes, but he also spent it on subsidising Cuba's faltering economy, he spent it on arms and he even gave it to London, in the form of subsidised diesel for London buses, as part of a deal with then Mayor Ken Livingstone.   The moral compass of both men gets tested when money that should have been for Venezuelans is transferred to one of the wealthiest cities in the world.

His economic legacy was characterised by the most fundamental error common to almost the entire left - complete neglect of the creation of wealth and an obsession with spending it.

His social legacy is that of an authoritarian state increasingly based on obedience and deference, with violence used against those who dared oppose it.  It includes one of the highest murder and kidnapping rates in Latin America, with over 21,000 a year (an average of 75 per 100,000 people, compared to 4.8 in the USA), including 300 in the first half year in prisons alone.  It was 4450 in 1998, the year before Chavez gained power.  

How that matches with claims by the left that poverty causes murder is unclear.   The regime banned private purchases of firearms a few months ago, which of course has had no effect, which given the number of illegal firearms is estimated at between 1.6 and 4.1 million, is unsurprising.   However, if you were Venezuelan would you trust the state to protect your rights?

Dennis Rodman in Pyongyang is interesting for more subtle reasons

Had anyone said a week or so ago that ex.NBA basketball player Dennis Rodman would be hugging Kim Jong Un, all North Korea watchers would be thought it absurd.

Yet it has happened.

First North Korean leader to hug an American

Now I'm not going to go into what Rodman said, Curtis Melvin's blog - North Korea Economy Watch - has the best coverage, and you should watch George Stephanopoulos's interview with him, where he takes on Rodman talking about Kim Il Sung and Kim Jong Il being "great man" and slips into moral relativism.   Rodman is at best naive, and at worst a willing idiot for a despot.  If he reads the Human Rights Watch report, accepts it and visits Kim Jong Un again to discuss it, then he truly will have made a breakthrough unheard of before.

However, what it looks like is a young dictator happy to accept a childhood hero.  Kim Jong Un loves basketball, probably from his days from being schooled in Switzerland (unlike his father and grandfather, he has not been raised away from the West).   He's just pleased to have such fun, although he will probably have been made aware of the political significance of the move.

For a start it makes the Democratic People's Republic of Korea (DPRK) look cuddly and friendly, and Rodman has been an almost perfect diplomat,  for the DPRK, in making the place look detoxified, somewhat.  The hope is it will put pressure on the Obama Administration to talk, shown by Rodman saying Kim Jong Un just wants Obama to "call him".  Seems simple right, but it is what the DPRK has wanted since 1953, it wants to sideline the Republic of Korea (ROK) in Seoul, which it considers to be illegitimate, and negotiate directly with the US, which it constantly claims as occupying south Korea.   Of course, Kim Jong Un knows this to be a nonsense, but the Kim regime's priority has always been to one-up the ROK.  Obama calling Kim Jong Un, weeks after the people of the ROK elected a new President - a woman no less - would be a huge snub to her.  A core component of US policy (and indeed Japanese and dare I say Chinese policy) is for the two Koreas to talk to each other.  The US role is to maintain a military deterrent (including nuclear) against the DPRK, as the ROK does not have chemical, biological or nuclear weapons (the DPRK has all of those).

So that wont happen.  Obama wont be calling Kim Jong Un.

The more curious element is the image above.  The DPRK is fervently racist, as described by Brian Myers in this book (although I disagree with some elements of it), with Koreans thinking they are pure and clean.  The regime has forced women who bear children of Chinese men to abort, it looks down upon non-Koreans, and has countless images depicting Americans as hooked nosed and dirty (reminiscent of how the Nazis portrayed Jews).

The idea that an African-American could touch, let alone hug a leader of the DPRK is utterly unprecedented.  The extent to which that image is disseminated in the DPRK is unclear (most north Koreans don't get television, as they don't get reliable electricity outside Pyongyang, so they will get reports from radio and newspapers).   However, while Kim Il Sung shook the hands of umpteen African dictators, the embrace given to an American sportsman would have been absurd (although he did meet Jimmy Carter and Billy Graham, they are hardly of the same ilk).

Perhaps Kim Jong Un thinks that Obama will listen to Rodman, because of racial brotherhood?  It seems a little absurd, but from a Pyongyang perspective could it be a factor?

I don't think what has just happened in Pyongyang is significant from a diplomatic point of view, I think it shows a young dictator having fun.   One who wants the outside world to come, on his terms, and wants to be noticed.  Just as noticeable is the significant boost to tourism, as there has been a dramatic increase in tours to the country.

That's a good thing, as the more exposure locals get to foreigners the better.  My hope is that if Rodman does go back, he can deliver a message from the US and ROK administrations (and he should visit the south before he visits the north again), which is one of wanting to defuse tensions and to encourage the north to actually open up and reform.   Bear in mind that absolutely nothing else has worked in the 21 years since the end of the Cold War, and it would morally wrong and futile to continue the endless cycle of talks, bribery, DPRK lashes out, sanctions, talks.

Italy's long decline

So Italians have voted primarily for the socialist, the corrupt philanderer and the comedian (whose main joke is that he isn't even standing because he has a conviction for manslaughter).   The socialist opposes austerity, the philanderer opposes it too, promising to reverse tax increases and give everyone their money back (nice try) and the comedian wants to halve the working week and give everyone free internet access.  For Italians to have bothered supporting any of these buffoons is comedy extraordinaire.

Italians don't trust politicians or bankers much, but also are averse to change.  It's why on the one hand public debt in Italy is over 120% of GDP its private debt is very low.  Around 30% of Italians don't have bank accounts, because of a history with a Lira that past government simply inflated away, so they don't trust their savings with banks.  Italians don't take our credit to pay for a holiday or a car, they save, they have tightly integrated families.  There is a lot to be said for not borrowing to consume, and the tradeoff of the intact families is a female employment rate 12% lower than the EU average.  Whether the stability of families offsets the loss of economic and human potential from low employment of women is a moot point.

However, on the government side Italy is a disaster.  It has had fiscal incontinence for many years, so needs to get spending under control.   Mario Monti was the man appointed by the European Commission to sort the country out - and he was punished for that by his party coming a distant fourth.  Not, because he is not respected, but because he was a tool of Brussels.  The European Union, the great arrogant entity that proclaims whenever it can that it kept the peace in Europe, now has on its record the imposition of rule from Brussels upon a Member State.  That wasn't going to last.

Yet Italy's problems are deep and cancerous, with endemic corruption, of which Silvio Berlusconi is only the leading figurehead for.  Of a labour market that would make unions in the UK, US, Australia and NZ groan with envy, but which effectively makes it nearly impossibly expensive to make people redundant, and so keeps so many Italian businesses just below the threshold for such a law to come into place.

It's not "your" Banksy

Who owns graffiti?

Let's say you own a building.  Yes, I know that for some this concept of property rights is rather alien, but humour me for a moment.  It's your building.  You have a wall on the property line up against the footpath or another public space.

If someone spray painted it you'd think that you had every right to do what you wish with your wall, as long as you don't put others at risk.  You could leave it, remove it/paint over it, or even remove the wall right?

Banksy Wood Green

No.  You see this is exactly what has happened in Wood Green, London.  

The anonymous artist 'Banksy' had painted this image of a child working in sweatshop conditions making bunting.  The owner of the building, a pair of property developers, cut out the wall to sell it at an art auction in the United States, sparking outrage.   Locals were outraged considering that the art was "theirs", because it could be seen publicly.

The sale was halted as even the FBI allegedly asked Scotland Yard to "investigate" according to the Evening Standard, but Scotland Yard has refused to investigate as it is not a criminal matter.

The locals who thought a wall, that they didn't own, was theirs, managed to gee up a few local politicians, ever keen to hop on a bandwagon and treat property rights as ephemeral.  Alan Strickland, a Labour councillor (big surprise) for Haringey has said he wants it returned.  Local MP, Lynne Featherstone (Liberal Democrat - another party with little respect for private property rights) has also called for it to be returned asking "will we get it back"?  Who is this "we"?  

Why do politicians think that just because a (relatively small) group of loud people demand other people's property that this is "ok"?  Do they really think that the future of graffiti on a private wall should be put to public acclaim?  Does it mean anyone can paint your external wall and if he gets a gang of locals and a couple of leftwing politicians on side, that you can't paint over it?

One of the owners points out the irony:

I cannot believe it’s over graffiti on a wall that has caused this. We had a case with one of our buildings where we had graffiti and the council told us they would fine us over £1000 if we didn’t remove it.“The council have done nothing to protect it. They’ve not helped us in any way. They’ve just caused us more problems and more problems"

So on your own property, the council fines you if it doesn't like it, but then harasses if it does?

It ought to be simple.

If Banksy (or anyone) chooses to paint on a wall of a building that he doesn't own (or without the permission of the owner), then he takes the risk that it is removed, obliterated or left as is.  Bear in mind that using someone else's property temporarily is the crime of conversion, and that the painting may be seen as vandalism.  Art it may be to some observers, but it isn't their property.  You don't have the right to tell other people what they may do with their property.

The owners were quite within the rights to ignore the baying crowd and remove the wall.  The baying crowd that didn't offer to buy it, that didn't do anything to protect the wall, that are only too willing to demand something that isn't theirs becomes theirs.   Cheered on by politicians that belong to parties that would tax the property owners every year to pay for the bloated states they support.

Not one of them offering to buy the wall themselves with their own money, they just want to regulate and interfere.

What of Banksy?  Well if he wants his art to be protected then he might approach the property owners before he paints on their walls.   Yes that "isn't the point" and is part of the anarchy that the anti-establishment loves, but property rights are important.  Because when you can't control what you own, then you don't own it.   So if he wants to be "pure", then accept that sometimes the property owners wont like it, sometimes they will accept it and sometimes they will say "thank you, that's our wall".

The end result of the welfare state culture

Truth is stranger than fiction, and the editors of the Daily Mail and The Express cannot be disappointed at the discovery of Heather Frost, 37, who personifies the caricature of a welfare parasite (although the same can be said of the feckless sperm donors who abandoned their offspring in her).  Don't worry, she is in the Daily Mirror as well.

She "struggles" to live at taxpayers' expense, in two adjacent houses in Churchdown, Gloucestershire, with her 11 children, 2 grandchildren and unemployed partner Jake.  She would love to have more children, but is sterile (due to cervical cancer), and says she is married.

She also bought a horse and keeps it for one of her daughters, at £200 a month.

Now none of this would matter if her and her kin were sustaining themselves or other people were sustaining them by choice.  I couldn't care less if she wants to breed.  

However, this is a family that costs other people money, and not through ill fortune, but by lifestyle choice.  In fact, this choice, facilitated by the generous UK welfare state, has given the woman the gall to demand more.  

She has been complaining to the council that the housing provided at the expense of others is inadequate, so the Council is now building a brand new house for the family at the price of £400,000.

A true libertarian would cancel her benefits, tell her to get the money from the kids' dads, get a job and warn her that when the house she has asked for is built, it will be sold and the rent where she currently is will go up to market rates.

It is easy to moan about this, but what is needed is answers and a broader reflection on why this happens, when it is blatantly goes against the values of most of the population.

Quite simply, the incentives are set up to encourage this.  

Money and housing is offered in exchange for breeding, without employment and without a call upon the other party responsible for the breeding.  The more breeding, the more money and the bigger the home.  The quality of parenting (which would appear to be at least questionable) is irrelevant.

Defenders of the status quo on the left would hold their hands up and say "what else can you do", and claim these cases are so rare that it is wrong to destroy or reform a system that makes these cases news because they are rare.  Yet these very same people will protest and harass companies that legally seek to minimise their tax bills, and wonder why they do so?

After all, if you invested your hard earned money in a business, would you want a penny of it going to the likes of Heather Frost? 

The culture bred by the welfare state is this one of entitlement, which isn't just about expecting the Council to give you a new house for nothing, but raising children who expect to never have to work, who are resentful of those who have worked and have things they want, and who believe that it is right to raise kids the same.  Her eldest (21) already has a child of 2, who lives with them all.  

Consider the effect of promoting this culture has on business, employment, crime and society as a whole.  Indeed the left ought to consider how it breeds undying resentment amongst the broad mass of people who resent being the host to the parasitical claims of those who choose to be unproductive.

The only answer to this culture is to stop guaranteeing people every growing income for breeding and housing to accommodate it.   Would Heather Frost have kept breeding if she knew she wouldn't get more money or a bigger house to accommodate the children?  She claims that if she could have more children, she would. Maybe she would have named the fathers and they would have had a portion of their income taken to help pay?  If she had been denied more money and housing for breeding, would the social services system let her raise the children in such poverty or take them away so they could be fostered or adopted?  

There are some relatively gentle responses that take us down the path of more individual responsibility.

Doctors' attempt to tackle obesity is middle class statism

There is nothing new about the latest report from the Academy of Medical Royal Colleges calling for state intervention to prevent people getting fat.  It demonstrates the fundamental error of people who are well intentioned, and intelligent, moving beyond their core expertise of medicine, into public policy and human behaviour.

For example, virtually none of them realise that the price of food overall, including fruit, vegetables, meat, dairy products and fish would fall, if the quotas and tariffs imposed by the Common Agricultural Policy were abolished (which do not apply to highly processed sugary foods made in the EU).  However, that requires an understanding of public policy beyond health into trade.  Bear in mind the largest UK recipient of EU agricultural subsidies in recent years is sugar refiner and retailer Tate & Lyle.

The doctors also seem to have ignored the Danish fat tax failure, unless they think the problem was taxing fat, not sugar.   Danes introduced a classless fat tax, which of course meant gourmet cheeses and butter got hit the highest, and many Danes simply took to fat tax evasion trips into Germany to stock up on their favourite foods.  Doctors in the UK presumably think a sugar tax could only target the products they disapprove of (not be based on all simple sugars in products) and would avoid encouraging people to shop internationally (Northern Ireland would be home to a new black market in smuggled Coca Cola).   Policy experts? Hardly.

You see the key obesity problem is not the lack of hectoring, lack of information or lack of laws to make people do what they want, but a culture of irresponsibility and a lack of medical understanding as to why people behave in ways that make them overweight.  What is particularly galling is the implication that it is only certain foods, perceived to be "junk" consumed by the poorer classes, that are the problem.  In fact, if people predominantly ate the rich, butter intensive foods of some celebrity chefs, in particular their butter and sugar laden desserts, they would also be obese.  However, it is perceived that the people who will bother to make such foods or eat out, know how to look after themselves.  This battle against obesity is one about class.  For the wealthy man who loves steaks, Beaujolais, chocolate mousse and fine cheeses is not the target of the hectoring doctors - even though such a person equally faces a risk of heart attack as the poorer man who loves fish and chips, chocolate and beer.   Yet it is abundantly clear from the communications behind these reports that it is the latter that is targeted, presumably because the latter person is not thought to be competent, but the former "understandably enjoy delicious high fat high sugar foods".

Most of the proposals outlined reinforce a culture of irresponsibility, and the hectoring culture whereby doctors think people will do what is "right" if only they keep telling them to do so.  The implicit message is that it is only one group that is irresponsible, and it is not those doctors socialise with.

So I'll rank the proposals from least to most acceptable based on qualitative measures of promoting responsibility and preserving individual freedom.

DPRK commences another round of bad cop, good cop

As was fully expected, Kim Jong Un has shown off that just because dad died, the DPRK still can pack a nuclear punch.  It follows the satellite launch in December of Kwangmyongsong 3-2, which is widely thought to have also been a display of rocket technology might that could be used to launch missiles.

Youth Hero Motorway approaching Pyongyang

It's useful to largely ignore the hyperbolic Western media on this, driven partly because the DPRK has understandably being caricatured as some weird insane little country with a silly leader who does crazy things.  I understand that caricature, but it is deceptively simplistic.  Weird dictatorship, bad man who likes showing off his military might, but as this week's Economist reports, the reality on the ground in the country is quite different.   For example, despite the rhetoric, it is comparatively easy (though not cheap) to travel to the DPRK.

You see, the DPRK has gone through a cycle of provocation, isolation, face saving dialogue, engagement and then provocation, since Kim Il Sung died.  It doesn't demonstrate a genuine desire to wage war with its neighbours, rather it is a technique to extract booty from them, like a truculent child who wants attention, and has a tantrum when you stop giving it any.

Trolley bus in Kim Il Sung square

You can't blame Kim Jong Un, because it worked for his father.  

Five big issues - five government responses - five libertarian answers

The UK has had high profile news items all week, so I thought I'd quickly summarise the issue, what the government said and what it should have done...

The issues being:

Gay Marriage

EU Budget

NHS deaths

Horsemeat

Paying for long term care of the elderly

NHS kills thousands due to neglect - no one held accountable

The United Kingdom's state religion - the Anglican Church NHS

A foreigner visiting or moving to the UK discovers soon after arrival that, unlike any other country, there is a remarkable pride and enthusiasm over its state owned, operated and (pretty much) fully taxpayer funded health service.  The initials NHS are more than just a state institution or a public service, but hold a near sacred status in the UK public zeitgeist about healthcare.  You saw it in the London 2012 Olympics Opening Ceremony, directed by the leftwing Danny Boyle, who decided to celebrate the NHS as something distinctly British to be proud of.

It seems, given that universal health care is pretty much universal in the developed world  (even the US has only had a small minority excluded from health care), a trifle odd.  Setting aside the issues of the United States, there are no fundamental issues of access to health care elsewhere in the developed world, even though it is difficult to find other countries that adopt the NHS model - whereby the users never pay for anything (except nominal prescription, dental and optical services fees for some), where there is little choice of provider (your choice is dependent on where you live and you cannot travel to select a different primary health provider) and funding flows from a centrally planned and directed system to mostly state owned providers.

It declares that:

Since its launch in 1948, the NHS has grown to become the world’s largest publicly funded health service. It is also one of the most efficient, most egalitarian and most comprehensive.

If it does say so itself!

A core mantra is "the NHS remains free at the point of use for anyone who is resident in the UK".  Setting aside the rather loose approach it takes to charging non-residents or

It's proud of its size, which it shouldn't be, as it speaks volumes about what is fundamentally wrong with it:

The NHS employs more than 1.7m people. Of those, just under half are clinically qualified...Only the Chinese People’s Liberation Army, the Wal-Mart supermarket chain and the Indian Railways directly employ more people